Zim losing millions to cigarette smuggling

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By Talkmore Gandiwa

At least USD$120 million is lost annually through cigarettes smuggling to South Africa and other countries in the region due to corruption and porous borders, an investigation has established.

Interviews and interactions with government officials and observations at the country’s port of entry suggest that Zimbabwe was losing the million to the illicit trade which is fuelled by greedy and corruption.

Gift Mugano, a member of the Reserve Bank of Zimbabwe’s monetary policy committee said the country was a market for illicit cigarette trade.

Mugano said, what the country was losing through cigarette smuggling was alarming and this constitutes money laundering.

“So if you look from the angle of what value of gold the country is losing per year, its 1.2 billion through gold illicit flows, then you will be forgiven just to imagine that we are losing more than US$120 million every year in cigarette smuggling,” said Mugano.

“These cigarette illicit flows are happening under the cover of tight protection,” said Mugano who is also the professor of economics at the Ezekiel Guti University.

“If you followed the gold mafia documentaries by Aljazeera, tobacco and cigarettes were used as an instrument for smuggling gold and to launder the money,” The Reserve Bank of Zimbabwe monetary policy committee member said.

Zimbabwe Revenue Authority (ZIMRA) head of Corporate Communications Francis Chimanda also confirmed that smugglers are using both designated ports of entry and illegal crossing points to evade authorities.

He said smugglers at the ports of entry, they falsify information of the goods they would be transporting.

“Smugglers use illegal crossing points where man-made boats/ferries are used to cross the Limpopo River,” said Chimanda.

“The detections done so far show that cigarettes are being smuggled from Zimbabwe to South Africa, ZIMRA takes these seriously and works closely with their neighbouring countries to reduce incidents of smuggling,” he said.

He said the Zimbabwe revenue body was deploying drones along the border corridor to monitor smuggling.

“ZIMRA has installed Cargo scanners at the ports of entry to detect any hidden consignments. There are also joint patrols, roadblocks and operations with partner law Enforcement agents such as the Police and the Army,” Chimanda said

Zimbabwe, due to its status as one of the leading tobacco growing countries in the continent, is home to leading cigarette manufacturers such as British American Tobacco (BAT), Pacific Cigarette Company and Gold Leaf Tobacco.

BAT Zimbabwe has a strong portfolio of long-standing brands balanced across consumer segments and price points. Their brand portfolio includes Dunhill, Luck Strike and Rothmans which they export to South Africa and Zambia mainly and they have to pay 20% of the value being exported plus USD$ 5 per 1000 sticks as export tax.

This has caused some companies to smuggle their cigarettes to other countries through the porous borders.

BAT, failed to respond to the questions citing that they require more time to fully explore into the questions and respond.

“We have internal processes that govern responses of this nature,” said the company in a statement.

According to the South African Revenue Services, the most smuggled brands include Remington Gold, Chelsea and Royal Express.

The Remington Gold brand is produced by Gold Leaf Tobacco linked to businessman Simon Rudland.

Although Rudland did not respond to questions regarding his brands being smuggled into South Africa from Zimbabwe, he was recently quoted saying he was not involved in any smuggling business. He said this after he was implicated in the Aljazeera Gold Mafia documentary.

Pacific Cigarette Company (PCC) denied the allegations of being involved in cigarette smuggling and alleged that its brands were the least smuggled.

“PCC has noted an upsurge in counterfeiting of our brands in the last few years which is naturally of great concern to us. We engage in ongoing efforts to counter our brands being counterfeited and smuggled as it presents a significant loss to PCC,” read part of the response from the Cigarette manufacturer.

The investigations revealed that fuel tankers, truck drivers and small scale smugglers are making a killing from shipping the cigarettes from Zimbabwe to South Africa.

Most of the traffickers use the Beitbridge Border Post and they pay varying amounts depending on the quantity of the cigarettes being smuggled.

According to the investigations, trucks are being paid R100 and R300 per box to smuggle cigarettes through the border while those who use the Limpopo River charge between R50 to R100 per box.

From that amount, officials are paid no less than R40-R150 per box to allow easy passage by smugglers.

South Africa provides the largest, most profitable, and therefore most important consumer market and cigarette production hub for most smugglers.

According to the Atlantic Alliance research paper (2019), smuggling routes have been constantly shifting depending on the enforcement regime, a feature that complicates policy and enforcement response for many countries.

“Fuel tankers and trucks were once used to smuggle cigarettes across the Beitbridge border, making use
of the balance of trade discrepancy between the two countries.” Atlantic Alliance noted in their report.

Truck Drivers said corruption was rife at the border post and smugglers greased the palms of officials to smuggle their tobacco.

“It’s simple to bribe Zimbabwean authorities because of the challenges they face and their salaries. Everyone is struggling to survive, as we all know. The situation in South Africa is different. Even attempting to bribe an officer might result in your arrest,” said the truck driver.

“When everyone is asleep for those who use the River, runners physically carry their cigarettes across the Limpopo River to South Africa on their backs in “shangani” (plastic bags),” said the truck driver

Zimbabwe earns between USD$800 million to USD $1 billion annually from exports of both cigarettes and tobacco.

According to interviews and investigations, the country witnessed a surge in illicit cigarette deals when South Africa imposed a strict anti-smoking law in response to covid-19 in 2020.

The ban led to official cigarette dealers in South Africa being shut out of business and opening the market to the smuggling syndicate.

According to the National Income Dynamics Coronavirus Rapid Mobile Survey for 2021, suggests that during the time of the ban, between USD$ 300 million and USD$ 500 million was lost by South Africa in taxes supposed to be earned by the government from the smuggled tobacco products while three hundred thousand jobs were lost.

Zimbabwean tobacco is farmed by more than 170,000 largely small-scale farmers and utilized as a flavor by international cigarette manufacturers.

After gold, exports of tobacco and its products are the second-largest foreign currency earner for Zimbabwe, accounting for around 19%.

Industry players have opposed regulatory controls at every turn that would include extensive tracking and tracing of tobacco products throughout the value chain.

In an effort to profit from currency gains, economist Eddie Cross said; “syndicates may have intensified smuggling as a result of the declining value of the Zimbabwean dollar. As of-late inflation rates and exchange rates have skyrocketed resulting in  the general population being vulnerable to brutal poverty.”

Zimbabwe’s cigarette industry has not been spared from the economic challenges that have bedeviled the country generally.

Hana Ross, the project’s principal researcher at the University of Cape Town, asserts that if South Africa begins to regulate the black market for tobacco, “we would see a huge change in behavior with many people trying to quit (and some succeeding), many smokers cutting back on their daily cigarette consumption, and many young people not starting to smoke.”

According to the Tobacco Institute of South Africa, 60% of the country’s illegal cigarettes are from the region and Zimbabwe accounts for 38%.

In an interview, minister for Home Affairs, Kazembe Kazembe said his department was putting up a new technology to deal with corruption at border posts.

“We have been working on the integrated system called the online management border system. Everything comes back to the integrated system that’s the key. Immigration has finalized the procurement of the online border system,” Kazembe said.

“This is a system that integrates all the border posts through technology, system and operating procedures. The technology will include smart borders whether it’s a road border or an airport.  This system will come with what we call smart gates. Also, we have introduced also drowns that operate along the border post,” the minister said.

 

“This story was produced by [The Anchor). It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.”

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