Press release FITA July 2018

Press release – FITA – for immediate release

FITA is aware of a particular “strategy” that has been circulated by an organization which
represents foreign interests and which misleadingly claims to represent the legal tobacco
sector in South Africa and some of its members. Amongst other things, this “strategy”
specifically states that the intention is to “target” FITA members, and to do so by among other
things “Securing regional and national front page headlines” and to “influence the
media…” FITA is therefore not surprised by the sudden rush of media enquiries that are being
directed to it. These tactics smack of old apartheid regime activities and the media should be
aware of the fact that they are being targeted as mediums to carry propaganda as part of a
“strategy” that is designed to malign FITA members.

The tobacco industry per se, as a whole, is a shrinking sector in the economy. This is largely
attributable to government’s efforts over the past 15 years to curb smoking and the
consumption of other tobacco products.

Around 1999 about 27% of total adults in South Africa smoked. That translates to about 50%
of 42 million. That translates to about 5.8 million smokers. At this time, the multinationals
occupied about 80% of this market. This translates to about 4.6 million smokers of
multinational brands. Smokers were more brand conscious than price conscious.

By 2015, the total number of adult smokers were around 11% of the population of about 50
million people. This translates to about 25 million adults of which 11% smoked. That
translates to about 2.7 million smokers. By this time FITA members (who are all local
manufacturers) had entered the market and were beginning to offer cheaper brands. This led
to a loss of market share for the multinationals. Smokers became more price conscious due
to increased excise year on year.

The total base of smokers went from 4.6 million to about 2.7 million. This means the
multinationals lost massive market share. Needless to say, they needed to vilify the new
entrants so as to lead them to shut down or be harassed.

FITA and its members’ general view is that any efforts by government to ensure that the
playing fields are levelled in South Africa should be welcomed.

Having stated this, it is also 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. This calls for
a need to look at corporate income tax, STC, VAT, PAYE, personal income tax, SDL, UIF, import
duties and excise 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. 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, 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. There is also more than sufficient evidence in South
Africa which points to British American Tobacco and their inordinate influence over law
enforcement officials. British American Tobacco supposedly appointed law firm Norton Rose
Fulbright to “investigate” these allegations in South Africa as far back as 2016. They also
appointed law firm Slaughter & May to do the same in other parts of Africa and elsewhere.
Yet their reports and findings have remained under wrap and away from public scrutiny
despite several requests for the release thereof. Because of their proximity to senior law
enforcement officials and their close relations, none of these allegations appear to have ever
been investigated and prosecuted by our law enforcement agencies. This must be questioned.
For a multinational to direct a handful of law enforcement officials to do their bidding by
executing raids under false pretences, causing damage to property and intimidating workers
at a local manufacturer is one example. This is another side of “state capture” that is less
considered and reported on in the media. Why is that? Who is protecting who? If such law
enforcement officials travel to the United Kingdom at the cost of a multinational, why are no
questions asked? If a law enforcement official signs a receipt of a corrupt payment made by
a multinational in exchange of commercially sensitive information of a competitor, why the
silence? When FITA’s boardroom is bugged and the recordings shared between a
multinational and law enforcement officials without the necessary legal approval, why don’t
our law enforcement agencies act on this? When a FITA member’s intercepted
communications are shared with a multinational, why does nobody ask how this could
happen? One tobacco company has been complaining about a multinational illegally tapping
their phones as early as 2003. Evidence by way of confessions was provided to the law
enforcement agencies, and yet there have been no consequences. It is these types of
practices that should demonstrate to the public that whatever is being advanced publicly by
the multinationals needs to be looked at from a particular perspective. There is much more
to the industry than what meets the eye.

FITA is perfectly aware of the problems faced by the tobacco industry as a whole and urges
the media to consider all aspects that lead to losses to the economy and to not become the
public relations arm of some.

FITA would urge journalists to be aware of these tactics and to resist being abused for ulterior
purposes. FITA is perfectly aware of the problems faced by the tobacco industry as a whole
and urges the media to consider all aspects that lead to losses to the economy and to not
become the public relations arm of some.

Issued by the Fair-trade Independent Tobacco Association: 5 July 2018

For queries kindly contact Monique Vogel t: 011 044 5355; e: Monique@fita.co.za

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