Gold Leaf and Carnilinx must explain their role in the illicit tobacco trade

The truth is out. Now we all know who is driving South Africa’s illicit tobacco trade. And it’s time they went to jail.

Thanks to the research published this week by IPSOS, an independent market research company, South Africa now has documentary evidence of the scale of the illicit tobacco trade – and we now know, for sure, who stands at the centre of it.

As SATTA, the voice of the legal tobacco industry, we are not surprised that the names of the usual suspects appear in the IPSOS report. It is brands registered to Gold Leaf Tobacco Corporation (GLTC) and Carnilinx that are the main culprits, selling their products at prices that only indicate one thing: they are so cheap that they cannot possibly be paying tax.

These companies – which dress themselves up in organisations like the so-called Fair Trade Independent Tobacco Association (FITA) and the South African Tobacco Organisation (SATO) – cannot remain silent in the face of IPSOS’ evidence that:

• Three out of every four retail outlets are selling a pack of 20 cigarettes below the Minimum Collectible Tax Rate (MCT) of R20.01, which is set by law.
• GLTC brands make up HALF of the products selling below the MCT.
• Almost 50% of Carnilinx brands were on sale at less than the MCT.

There is only one conclusion to be drawn from the IPSOS research: Gold Leaf and Carnilinx form the core of South Africa’s illicit tobacco trade. They are part of an elaborate criminal network that is involved in smuggling, tax evasion and other forms of criminal activity. And they must be brought to book. It is time for them to explain their role in the illicit tobacco trade.

SATTA has repeatedly spoken out about the threat posed by the illicit tobacco trade to consumers, the legal tobacco industry – farmers, processors and manufacturers – and to the national fiscus.

The Government lost more than R13-billion in taxes during the lockdown and opened up the space for the smugglers. At this stage, we have to ask SARS and the law enforcement agencies: What are you doing?

What are you going to do about this new evidence of the criminal networks who are robbing the country
blind? When are you going to act?

Enough is enough.

It is time for South Africa’s excise and law enforcement arms to come up with a package of solutions for
dealing with illicit tobacco that includes the following four action points, at the very least:

1. Ensuring all tobacco companies comply with the SARS regulations on production counters at cigarette
   factories. There should be no exemptions, particularly when it comes to Gold Leaf and Carnilinx. If
   they don’t comply, they must be shut down.
2. Ratifying the World Health Organisation protocol on illicit trade, to give teeth to the national effort
   against illicit tobacco products.
3. Introducing a comprehensive track and trace system so that law enforcement agencies and SARS
   officials can trace the journey of illicit tobacco products.
4. Embracing the concept of a Minimum Price Level for cigarettes – for example, a minimum price of R26 or R28 for a packet of 20, so that consumers and law enforcement agencies can identify tax-evaders and zero in on the crooks.

Finally: SATTA would like to put on record that it fully supports calls for a national commission of enquiry into the illicit tobacco trade. There is more than enough evidence that this is now a national crisis, and a detailed investigation is necessary to bring to book, once and for all, the companies whose names appear so prominently in the IPSOS report.

We feel compelled, however, to put on expose the sheer hypocrisy of FITA when it comes to getting to the bottom of all this illicit trading, and its view on an official inquiry.

On the 1 st of March, FITA was quoted on News24 as saying it “would welcome an inquiry, adding that this was likely the best outcome to find the real traders of illegal cigarettes”.

On the 9 th of March, an hour after the damning IPSOS research was released, FITA hastily backtracked. In a statement quoted on News24, FITA said there was no need for what it calls “a costly and protracted” commission of inquiry which, in its view, will only serve to waste taxpayer money and time.

We note FITA’s sudden “concern” for the taxpayer, whose members have been robbing the fiscus blind for years. But SATTA’s position is clear: Let’s see FITA, and its mutant offspring SATO, take the oath at a commission of enquiry and do some explaining – particularly when it comes to paying their taxes.

Queries contact:

Zachariah Motsumi
Spokesperson, SATTA
Mobile: 083 216 8842