Illicit cigarette sales: Gloves off as Fita, Batsa trade blows

As tobacco sales become legal again, the Fair Trade Independent Tobacco Association (Fita) has lashed out at a statement issued by rival British American Tobacco SA (Batsa) on Monday afternoon.

In its statement, Batsa seemingly took a broad swipe at its rivals within Fita, quoting from an academic report and ostensibly suggesting that specific brands could have benefited during the tobacco sales ban.

In response, Fita hit back saying they “reject with the contempt that (the statement) deserves”.

Context

Batsa issued a statement on Thursday afternoon quoting earlier research conducted by the Research Unit on the Economics of Excisable Products (REEP) “under the directorship of Professor Corné van Walbeek” in the University of Cape Town (UCT).

The research looked at cigarette and tobacco availability during the sales ban under lockdown levels 5 to 3.

In the statement, Batsa referenced elements of the research that indicated that some competitors could have gained significant market share while it was unable to operate normally.

Batsa representatives are yet to respond to The Citizen’s questions regarding their statement. However, it is understood that the organisation was apparently trying to highlight the potential detrimental effects of a continued illicit tobacco economy.

Read Batsa’s and Fita’s full statements at the end of this article.

The Batsa statement, quoting the research report, singled out one brand early on: “RG, from the Zimbabwean-owned and controlled Gold Leaf Tobacco Corporation has exploded in sales over the course of the lockdown.”

According to the statement, at “11.6% of the market this one brand (RG) saw approximately 10 MILLION (sic) cigarettes purchased every day during lockdown at prices that were up to five times higher than prior to lockdown despite no tax being paid”.

It also singled out another brand Fita represents: “Before the ban, Batsa had a market share that was 32 times larger than the Fita member, Best Tobacco. The REEP report shows during the month of June, Best Tobacco was already bigger than Batsa.”

Also read: Tobacco wars escalate as Batsa takes broad swipe at Fita members

Fita calls foul

In response to the Batsa statement, Fita did not mince its words: “We reject with the contempt that it deserves the statement by… Batsa and its one-sided interpretation of the UCT’s REEP research unit report into the cigarette sales during the lockdown period.”

Fita chairperson Sinenhlanhla Mnguni told The Citizen that while the UCT report did not paint Batsa “as the victims, they now seek to paint themselves as (victims) to the public at large and we see this as nothing more than another attempt by the multinational to deflect attention away from its well-documented shenanigans and to once again try to direct law enforcement agencies towards its competitors like it has done traditionally, not only in South Africa, but across the globe”.

Mnguni also added that Fita members in no way benefitted from the sales ban: “We also reject any assertions that Fita members have in any way benefited from the ban in the sale of cigarettes during the lockdown period.”

He added that selective analysis of the sales by micro enterprises like spaza shops and the preoccupation of law enforcement agencies on “instances of smuggling and illegal manufacturing” created a scenario that is exaggerated “for purposes of advancing the interests of multinationals such as Batsa.

“The challenge for law enforcement agencies is to approach the industry in a more holistic fashion, which should include looking at practices such as transfer pricing, aggressive tax avoidance schemes and the like.”

Fita did not pull any punches in the long running feud between the independent tobacco manufacturers and multinational firms: “One has to question why none of the very serious allegations of industrial espionage, corruption, money-laundering, illegal entries into premises of FITA members, illegal tracking and bugging and spying to mention a few, have yet to receive any meaningful attention by the state and mainstream media.”

Legal fight

Both Batsa and Fita took government to court in separate applications to have the tobacco ban set aside during higher lockdown levels.

Batsa’s court challenge of the ban hinged on its supposed unconstitutionality, and they told the Western Cape High Court that the harm caused by the ban far outweighed the benefits to the public health system.

In a separate case, Fita argued that the ban on the sale of cigarettes was harming both the industry and individuals, and the reasoning behind it was irrational.

Obey the law

Quoting Johnny Moloto, Batsa’s head of external affairs, its statement said that tax “is only paid by people and companies who obey the law.

“South Africa now has a tobacco market that is controlled by people who don’t obey the law.

“The ban on legal sales has been the greatest gift ever given to tobacco smuggling criminals. Increasing the rate of excise, that they don’t pay anyway, would be the cherry on top…

“Our company has not shipped a single cigarette to South African retail or wholesale customers since the ban came into effect in March. This is why we, as the previously largest tobacco company in the country, are barely a footnote in the REEP reports now,” Moloto said.

Also read: Booze and tobacco bans gone for now, but FITA continues legal fight

“Furthermore, we co-operate fully with Sars (South African Revenue Services) and have Sars officials in our facility in Heidelberg on a daily basis controlling and monitoring production and export shipments.”

Fita in turn had the following to say: “We also reject any assertions that Fita members have in any way benefited from the ban in the sale of cigarettes during the lockdown period. All our members’ exports during the period under the lockdown period within which exports were permitted were at all times strictly supervised and controlled by officials of the Sars.”

Read the statements below:

Fita statement on Batsa’… by on Scribd

Batsa’s statement on li… by on Scribd

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