Press release FITA 11 July 2018

Press release – FITA – For Immediate Release

We have previously stated our view on the illicit trade issue. Whilst the Fair-Trade
Independent Tobacco Association (“FITA”) fully supports any effort by the state and affected
industry stakeholders to curb smuggling and the illicit trading in cigarettes, we feel that
smuggling, although a problem, pales in comparison to the vast amounts of profits which
leave our shores as a result of the local tobacco industry being monopolised by foreign
owned multinationals who control over 80% of the market in a country where
transformation is said, by government, to be imperative.

We previously expressed our view that if one seeks to understand the fiscal risks to the
economy, you shouldn’t restrict your views to excise taxes and illegal tobacco alone. One
needs to look at the entire sector, across all tax types and along the value chain holistically.
One then needs to look across the value-chain, from the agricultural sector, to the importers
and manufacturing, to retail and wholesale and exports. Different unlawful and illegal
practices manifest in different ways across this spectrum. It is only then that one will be able
to determine the complete set of risks in the industry. As things stand, and as they have
been looked at over the years, the multinationals dictate the public perception. They do this
by lobbying at policy levels, financing and directing law enforcement agencies by pretending
to be innocent victims, aggressive media and marketing campaigns, biased research papers
and industrial espionage, all in contravention of the World Health Organisation’s Framework
Convention on Tobacco Control to which South Africa is a signatory. The result is that there
is an extreme focus on losses of excise only, and the perception that illegal tobacco and
manufacturing is the sole risk in the industry. One needs to compare apples with apples. If
you compare a relatively new manufacturer that is wholly owned by South Africans, such as
FITA members, with a multinational like for example British American Tobacco South Africa
(“BATSA”), you will get a much skewed picture. There has been more than sufficient
empirical evidence worldwide which points directly to questionable practices of
multinationals in corruption, money-laundering, aggressive base erosion practices and
industrial sabotage.

In this regard we would like to take the public back a few years.
1. In May 2014, a full-scale audit commences at BATSA;

2. In a prospectus issued in May 2014 to raise £15-billion, British American Tobacco
Plc (“BAT Plc”) said: “SARS has challenged the debt financing of British American Tobacco SA and reassessed the years 2006–2008 in the sum of R600-million.”i ii

3. Included in the audit were the expenses paid to security company Forensic
Services Security (Pty) Ltd (“FSS”);

4. FSS employed primarily former Apartheid regime policemen, and its primary
function was to spy on all of BATSA’s competitors, most of whom, if not all, were
or are FITA members, and to obtain confidential information through the
employment of various contacts within the South African Revenue Service
(“SARS”) and the South African Police Service (“SAPS”). In essence FSS’ primary
function was to deploy the investigative skills of its employees together with
backup from cooperating corrupt SAPS and SARS officials in order to disrupt the
business of BATSA’s competitors;

5. FSS was paid around R 50 000 000.00 per year by BATSA for these services;

6. The aforementioned audit would therefore have enabled SARS to audit the
complete “SIN database” of spies and agents working covertly for BATSA to spy
on its competitors, and the payments made to said agents;

7. This would have resulted in implicating members of the Tobacco Task Team
which included representatives from BATSA, the Hawks, Crime Intelligence, the
State Security Agency (“SSA”) and the National Prosecuting Authority (“NPA”).
For example, BAT Plc paid an all expenses trip to the UK for the SSA’s Chris
Burger. A simple example, but a key one. If you know who he is and where he fits

8. This would’ve exposed inter alia corruption and money-laundering;

9. It is also crucial to remember that this aforementioned audit was only for the
financial years 2006 to 2008. The full-scale audit only commenced in May 2014.
That R 600 000 000.00 would also only have reflected the capital amount due.
Not interest and penalties. But it gives a sense of the values involved.

10. What then happens? The much publicised purge at SARS is then initiated at the
end of May 2014 after a complaint by an intelligence operative, who happens to
be on the payroll of BATSA, is submitted via e-mail to SARS;

11. What then happens to the full-scale audit? It apparently vanishes into thin air;

12. A lot of questions remain unanswered in respect of BATSA’s own conduct
pertaining to tax compliance. Perhaps SARS can shed light on the above.

We therefore wish to urge the media, as the main source of information to the population
at large, to consider all aspects that lead to losses to the economy, and to not allow
themselves to be misled by certain role players in the tobacco industry who are only
concerned with lining their already deep pockets.

Issued by the Fair-trade Independent Tobacco Association: 11 July 2018
For queries kindly contact Monique Vogel t: 011 044 5355; e:


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