The new gold

2014-03-24 08:00

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The trade in illicit cigarettes counts among its alleged role players convicted drug dealers, self-confessed assassins and even a president’s son.

It’s an unassuming and cut-price commodity that ­ultimately goes up in smoke.

Yet every year, local mobsters earn fortunes in ­illicit proceeds by ferrying tons of these goods from places like Brazil and the Middle East across our ­porous borders.

Many more tons are trucked across our northern frontiers in false compartments or water tanks, or ferried in crates and boxes across the Limpopo River.

But unlike a gram of cocaine or a rock of crack, punters don’t need to meet their pointy-shoed west African candy men in dark alleys to get it.

It is sold openly in corner cafés, by street vendors and at your local supermarket.

The trade counts among its alleged role players convicted drug dealers, self-confessed assassins and even a president’s son.

It’s no wonder that illicit cigarette smuggling is referred to as the “new gold”. Profit margins approach 1?000% in the industry, which has become one of the largest in local organised crime.

“There has been a definite shift in focus by syndicates towards the illicit tobacco industry,” says SA Revenue Service (Sars) spokesperson Adrian Lackay.

Why the concern?

Experts warn that tobacco smuggling doesn’t just deprive the state of taxes and duties, it often masks other crimes, including money laundering and fraud, and it even involves murder.

A customs official working on a massive five-year-long ­illegal tobacco investigation into 12 companies and individuals was shot and killed in 2011 at his home in Durban.

A year earlier, a Sars official was shot and wounded.

“It also extends to discrediting law enforcement officials investigating their cases and trying to manipulate the criminal justice system,” says Lackay.

“It is far more lucrative than other criminal enterprises – the costs of production and transportation are far lower, it is much easier to dispose of goods and the risk if detected is significantly lower than the trade in narcotics.”

In most instances where illicit tobacco is confiscated, the culprit pays a fine and might even get his goods back.

Over the past three years, the trade has cost Sars an ­estimated R12?billion in unpaid taxes and custom duties.

Sars’ crack unit

In the past four months, the taxman’s fightback has kicked into overdrive.

Last November, Sars issued a warning to 12 cigarette ­importers and manufacturers, telling them they were being investigated and ordering them to cooperate. A month later, it seized tons of tobacco imported from Brazil that was ostensibly destined for Swaziland.

In January, customs confiscated nearly 50 tons of tobacco in five containers in Port Elizabeth. Those too were fraudulently declared as being destined for Swaziland.

Between December and January, Sars confiscated R400?million in illegal tobacco products and registered 15 criminal cases with the Hawks.

Sars reported that in the 2012/13 financial year, it ­conducted more than 2?500 seizures yielding 138?million ­illegal cigarettes worth about R65?million.

Much of the Sars probe into the tobacco industry is conducted by the Tax and Customs Enforcement Investigations unit. This unit has in the past 10 years recovered, or is busy retrieving, an estimated R10?billion in unpaid taxes from South Africa’s most notorious gangsters and tax evaders.

Trains from Zimbabwe

About half of the illegal tobacco products are smuggled from Zimbabwe into South Africa.

Zimbabwe-based Savanna Tobacco, which is owned by Adam ­Molai, who is married to one of President Robert ­Mugabe’s nieces, has allegedly trafficked tons of tobacco into the country.

Mugabe is openly supportive of Savanna and has accused rival British American Tobacco of spying on the company and hijacking its trucks.

Savanna’s main brand is Pacific, an estimated 700?million cigarettes of which were sold illegally in South Africa last year.

Last October, Zimbabwean police confiscated 40 tons of Pacific cigarettes on a train destined for South Africa. The train was supposedly carrying gum poles.

According to reports, at least 23 shipments with 44 wagons of “gum poles” had followed the same route between ­September 2012 and August 2013.

A number of these consignments appear to have arrived at the premises of PFC Integration – one of the companies Sars is now investigating.

Sars has raided PFC several times. It is headed by ­controversial businessman Paul de Robillard, a close business associate of President Jacob Zuma’s son Edward.

Edward Zuma and De Robillard are directors of Fastjet Holdings, a low-cost air carrier that has not yet been able to get off the ground.

The third director of Fastjet is Yusuf Kajee, who, Sars sources say, is a central figure in the illicit cigarette trade and the subject of a widespread investigation into tax ­evasion, money laundering and fraud.

Kajee owns Amalgamated Tobacco Manufacturing (ATM), which has been raided several times.

He has described the raids as nothing but harassment and has accused Sars of running a smear campaign against him.

Edward Zuma was a director of ATM until November 2011 and a shareholder until March 2012.

Neither Kajee nor Zuma responded to requests for comment.

Kajee and Sars have been at odds for a long time.

The tobacco kingpin has accused Sars of attempting to spy on him and of harassing his workers.

In turn, Lackay says the tobacco industry was fraught with rumours, accusations and active attempts to discredit ­people, businesses and institutions.

Sars group executive for tax and customs enforcement investigations Johann van Loggenberg said in a letter in ­December last year that it had evidence that ATM at the very least manipulated processes and procedures, and was at worst fraudulent and corrupt.

Sars has found that ATM last year declared the manufacture of 972?000 cigarettes, or about 15?800 boxes.

But Sars found evidence that 3.8?million cigarettes, or 190?000 ­boxes, were manufactured.

The illicit cigarette trade has attracted other notorious underworld figures.

Convicted drug dealer Glenn Agliotti has reportedly used his mastery of the import-export game to subvert custom procedures, and facilitate the smuggling of drugs and contraband cigarettes.

Kebble killer in on the act

Several of murdered mining magnate Brett Kebble’s ­assassins now work for tobacco companies allegedly ­involved in the illicit trade. Kebble triggerman Mikey Schultz works for Carnilinx, widely considered to be the largest local tobacco manufacturer.

Mikey Schultz

Sars is investigating Carnilinx for tax evasion and money laundering.

Although Carnilinx vehemently denies any wrongdoing, Sars accused it of spying on investigators in an attempt to halt its tax probes.

Sars opened a case against Carnilinx, its five directors and a private investigator Carnilinx allegedly hired to spy on and ­intimidate Sars investigators.

The new gold

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