We need to reject trade in illicit goods

2017-09-10 06:00
Bongumusa Makhathini

Bongumusa Makhathini

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We see them at almost all major intersections: hawkers peddling the latest movie in DVD format or that hit single that is not yet on the shelves.

Have you noticed how they are willing to accept any price for their merchandise, including as little as R5 for material that should ordinarily cost hundreds of rands?

Before you buy goods from them, ask yourself these questions:

- How is it that they are selling the latest release even before it hits the shelves?

- How did they get hold of this material?

- Why is it being sold at such a ridiculously low price?

- Is the artist – the creative mind behind the work – deriving any benefits from these cheap knock-offs?

The answer to the last question is an emphatic no.

These are illicit products that are reproduced in bulk, normally by organised crime syndicates, and sold on the black market to informal traders and anyone who wants to make a quick buck. Not only are these counterfeit products illegal, they also rob the artists of the intellectual property, their creativity and their main source of income. This is theft on a grand scale.

Think about cigarettes and other products that are illicitly produced and traded on the black market. The same principle applies, but the effect goes even further. One of the biggest challenges with illicitly traded products is that taxes, such as excise duties and VAT, are not paid by the criminal syndicates manufacturing these goods. This costs government billions in tax revenue – money that could be spent on healthcare and education.

Hardest hit by this crime is the tobacco industry. Health considerations dictate that higher excise duties are charged on tobacco products to discourage consumers, especially youngsters, from smoking.

Illicit tobacco products are not declared for excise duty purposes and do not comply with the country’s stringent tobacco regulations.

This means that consumers of illicit products do not really know the contents of the cigarettes they are buying and smoking.

Illicit tobacco products can cost as little as R6 for a packet of 20 cigarettes. The low price makes illicit cigarettes easily accessible to young people, defeating government’s efforts to discourage smoking among this demographic.

South Africa has a huge problem with illicit cigarettes, which account for approximately 34% of the market. One local manufacturer has seen volumes decline from 22 billion to 17 billion cigarettes. This has resulted in a net loss of 600 jobs. The economy cannot afford further job losses and the fiscus takes a significant hit in tax revenue from cigarette manufacturers.

A challenge

This battle against the sale of illicit cigarettes, like other illicit products, cannot be won by the industry alone. It requires a partnership between communities, government and business.

The realities of high income inequalities in South Africa cannot be ignored in this fight. While many people, in principle, do not want to support illegal trade, the financial pressures they face make it impossible to take a moral stand.

This is a challenge for all industries affected by this scourge, and we should consider ways of working with communities to address it.

If these businesses can even slightly alleviate the financial strain ordinary South Africans face, the affected communities would give their full support to the fight against illicit trading.

Perhaps it is time that those industries affected by illicit trade collaborate with government to ensure there are consistent messages throughout the year to remind the nation of the impact of the sale and purchase of illegal goods.

The fight against illicit trade must be understood in the context of overall crime prevention and combating strategies. It is not an isolated struggle, but calls for a specific and concerted effort by all.

Government departments such as social development and health ought to work with the private sector on programmes designed to make a deep impact on the scourge.

If we are to dismantle the engine that keeps the parallel, illegal industry alive, law enforcement agencies such the SA Revenue Service and the police ought to establish special units to fight illicit trading.

There must be a drive to develop a new culture that rejects all forms of illegal trade and any form of corruption.

The problem of illicit trade creates yet another opportunity for business to come up with better solutions to the problem, beyond merely preserving their profits.

If revenue figures associated with illicit trade are anything to go by, there is clearly a huge mountain to climb.

Cracking the syndicates involved will require solid partnerships between the public and private sectors.

Time is running out.

Makhatini is director of legal and external affairs at British American Tobacco Southern Africa

Read more on:    business  |  economy

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