The Zimbabwe Herald suggests that Zimbabwe could be losing millions of dollars in unpaid taxes due to rampant smuggling of cigarettes into South Africa, investigations by this paper have revealed.Between 2014 and 2015, local customs officials seized nearly 2 500 cartons worth around $500 000 in taxes, according to the Zimbabwe Revenue Authority.
Figures from the South African side are staggering, showing a wide discrepancy in the value of confiscated contraband between the two neighbouring southern African countries.
The South African Revenue Service told The Herald Business that it had seized R87 million (US$6,2 million) worth of Zimbabwean cigarettes since 2014, or 95 million sticks.
This will likely be worth millions of dollars in evaded tax in Zimbabwe, but the ZIMRA director for legal and corporate services Ms Florence Jambwa said the figures were difficult to determine because smuggling was an underground trade.
South Africa, however, says it loses an estimated R40 million (US$2,9 million) to cigarette smuggling each year, on the average, more than half of it Zimbabwe-related.
And this is just from what is on public record. Customs officials from both countries admit the figures could be higher. Both are also greatly incapacitated to detect illegal trades quickly.
“It is difficult to measure the levels of smuggling as this is an underground activity mostly done through undesignated entry points,” said ZIMRA’s Jambwa, by email.
“The value of the potential loss cannot be easily ascertained,” she said, failing to provide an estimate.
Tax analyst Mr Tendai Mavhima said the figures from ZIMRA represent only a small portion of the actual amount of money Zimbabwe is losing to trafficking of cigarettes.
“The disparity in figures (ZIMRA and SARS figures) indicate there are problems in controls on either side, which may result in the revenue and tax losses from both countries being understated,” he said by telephone.
Zimbabwe is the world’s fifth largest producer of tobacco after China, the USA, Brazil and India.
The country produces flue-cured Virginia tobacco, considered to be of extremely high quality and flavour, according to a report on Zimbabwean tobacco companies by local stockbroking firm, IH Securities.
As such, Zimbabwean tobacco ends up in many top cigarette brands across the world, it says.
It is especially popular in China, the largest importer of Zimbabwean tobacco, and in South Africa, the country’s largest trading partner.
In South Africa, Zimbabwean cigarettes are on demand for two key reasons: high quality and affordability.
It costs just $1,50 for 20 sticks in Zimbabwe compared to $3,20 for the same number of sticks in South Africa, according to estimates by regional economic bloc, SADC.
The South African Revenue Service (SARS) said: “Cigarette clientele opt for cheaper cigarettes. The high supply and demand for illicit cigarettes creates the market for it.”
South Africa imposes very high taxes on cigarette imports – about 80 percent meaning many Zimbabwean dealers choose to export illegally.
SADC says illegal dealers supply nearly two thirds of the number of cigarettes smoked by South Africans.
In 2011 alone, at least 4 billion cigarettes smuggled into South Africa originated from Zimbabwe, it says.
The undeclared cigarettes are usually concealed in trucks, buses and other vehicles destined for South Africa by organised cartels, said Florence Jambwa of ZIMRA.
Sometimes the cargo is shipped at undesignated points on the porous border between the two countries. Source: Zimbabwe Herald
Hong Kong Customs mounted a special operation at Lok Ma Chau Control Point to combat organised cigarette smuggling activities. About 1.1 million sticks of suspected illicit cigarettes with a market value of about $3.1 million and duty potential of about $2.2 million were seized. A 52-year-old male driver was arrested and the vehicle used for conveying the suspected illicit cigarettes was detained.
Customs officers here the other day intercepted an incoming container truck declared to be empty at Lok Ma Chau Control Point.
After X-ray examination and thorough inspection by Customs officers, about 1.1 million sticks of suspected illicit cigarettes in 83 carton boxes were found inside a false compartment of the container. The cigarettes were sorted and packed according to orders placed with a view to quick delivery to buyers.
A Customs spokesman said today (June 5), “The operation showed the effectiveness of the enforcement strategy, especially the escalated enforcement actions against smuggling activities at source. Customs will continue to carry out stringent enforcement action against all illicit cigarette activities.”
Under the Import and Export Ordinance, smuggling is a serious offense. The maximum penalty is a fine of $2 million and imprisonment for seven years. Source: CustomsToday
Relatives of President Robert Mugabe are being linked to illegal tobacco smuggling networks suspected of bringing more than $48 million in contraband through South Africa’s borders, reports NewZimbabwe.com.
Harare-based Savanna Tobacco is owned by a prominent Zimbabwean businessman, Adam Molai, who is married to Sandra Mugabe, one of Mugabe’s nieces. Molai has previously worked with Sandra as co-director of the Zimbabwe Tobacco Growing Company. Savanna has allegedly moved tons of illegal tobacco into South Africa.
The company’s main brand, Pacific cigarettes, has been found in concealed consignments by police in South Africa and abroad, according to two private investigators who track tobacco busts and work for the industry to counter the trade in illicit tobacco. The products have been linked to a huge tobacco smuggling operation whose base in South Africa was shut down in 2010 by the South African Revenue Service (SARS), which is engaged in a crackdown on the country’s illegal tobacco markets.
Images taken at the scene of two busts in South Africa and one in Zimbabwe show the extent of the smuggling operation. SARS has refused to confirm or deny whether it is investigating Savanna, citing the confidentiality requirements of the Tax Administration Act.
The frequency of the busts, the methods used and the quantities of illegal Pacific cigarettes found have led sources close to the investigations to claim that Savanna has been centrally involved for at least four years. It also increases suspicions that Zimbabwe is using smuggling to keep its economy afloat. Mugabe has openly supported Savanna. A year ago, he accused rival British American Tobacco (BAT) of spying on Savanna and hijacking its trucks. “If this is what you are doing in order to kill competition and you do it in a bad way, somebody will answer for it,” Mugabe warned.
Boxes of cigarettes that can be made for as little as R1.50 are easy to slip into the local market to avoid the R13 tax a box. Whereas popular brands of cigarettes can retail at R35 a pack, illegal cigarettes sell for between R4 and R12 a pack. With margins approaching 1000%, the illicit trade has become one of the largest elements in organised crime in South Africa.
According to research commissioned by the Tobacco Institute of South Africa, which is predominantly funded by BAT, 9.5billion illegal cigarettes with a street value of about R4-billion were smoked locally last year.
Savanna has captured almost 10% of this market, according to the institute, with about 700 million of its illegal cigarettes smoked last year. Pacific’s illegal cigarettes are sold mostly on the streets of Cape Town.
In one of the biggest busts in October, 1.6million Pacific cigarettes were found hidden on a train in Plumtree. Pacific cigarettes have also been seized at the Beitbridge border post near Musina and in Boksburg, on the East Rand, during busts in November. Trucks were found carrying Pacific cigarettes in concealed compartments.
This month, a consignment of Pacific cigarettes was found hidden behind electronic goods on a truck in the Western Cape. Similar busts have been made in Mozambique and at a border post between Zambia and Namibia, according to private investigators.
Evidence from the Plumtree train bust showed that the smuggling route had its origin as Savanna’s factory in Zimbabwe and South Africa’s black market as its destination. In the Plumtree bust on October 12, Zimbabwean police confiscated 40 tons of illicit Pacific cigarettes that had come from Bulawayo. The train was said to be carrying gum poles.
Records reveal that between September 2012 and August 2013 at least 23 shipments with 44 wagons of “gum poles” had followed the same route. A number of these consignments appear to have arrived at the South African business PFC Integration. According to an investigator who has studied the operation, PFC is “not into the gum pole business at all”.
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