POLOKWANE – More than 40 commercial farmers and 150 upcoming farmers in Limpopo may fall victim to the illicit cigarette industry.
Christo van Staden, Managing Director of Limpopo Tobacco Processors (Pty) Ltd said small-scale farmers have received notice from cigarette giant British American Tobacco South Africa (Batsa) that it will no longer source raw tobacco from them. As a result, thousands of farm labourers may lose their jobs.
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Tobacco is often planted on sandy soil, which may not be suitable for other crops.
Van Staden said the sale of illicit cigarettes by manufacturers, who evade excise duties, are undercutting its market and in a bid to curb losses, Batsa said it might have to source its tobacco more cheaply from suppliers in countries such as Zimbabwe.
Batsa currently has an agreement with Limpopo Tobacco Processors (LTP) to supply raw tobacco in a deal that aims to support farmers, particularly those identified as emerging.
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LTP supplied nine million kilograms of tobacco to Batsa last year and is predicting a crop of 11 million kilograms this year, Van Staden said, should Batsa start sourcing tobacco from other countries, between 8 000 and 10 000 farm jobs will be lost.
He said his company will also close its doors, as at current levels of demand, it is extremely difficult for the business to remain profitable. The value of its contract with Batsa is around R90 million per annum.
LTP’s five-year contract with Batsa, signed in 2016, is valid as long as Batsa’s cigarette sales do not fall below R10 billion.
Batsa recently revealed in a letter to LTP that its sales have decreased from R15-billion in 2016 to R11,5-billion in 2018 because the market was saturated with illicit cigarettes.
If the government does not act against the illicit industry Batsa forecast that its sales could fall to R9.5-billion.
Van Staden said many factories in Gauteng does not declare their full production, and sometimes up to 75% of production is not declared and no VAT, excise duties and tax are received by government for this illegal cigarettes.
In a report on illicit cigarettes for the period 1 April 2017 to 31 March 2018, the Directorate for Priority Crime Investigation (Hawks) said 61 cases was reported in Limpopo, while North West led with 112 cases opened.
Batsa has been in South Africa for more than 50 years and buys 90% of locally produced tobacco leafs, producing more than 27 billion cigarettes sold locally (75% of local cigarette market) and in 22 other countries.
