TELITA SNYCKERS: BAT’s schizophrenic U-turn: a ploy to get the foxes to guard the henhouse?

After 141 days of SA’s tobacco ban, which saw levels of illicit trade in tobacco rocket, British American Tobacco SA (BAT SA) is now urging the government to step in and eradicate the illegal sale of cigarettes.

The company, headquartered in London, has also called for the government to urgently ratify the World Health Organisation’s illicit trade protocol, which would include implementing a track and trace system, so packs can be traced back to their origin.

Introducing traceability to cigarette packs has long been on the cards. As far back as 2007, the SA Revenue Service (Sars) signalled that it intended to introduce more appropriate measures to securely mark and track tobacco products.

It undertook to do so again in 2010, 2013, 2016, 2017 and 2018. It tried to launch a secure marking programme in 2019. But guess what: the tender was delayed. Three times. Until it was ultimately cancelled.

Why did this happen? In large part, because BAT – the same company now clamouring for the introduction of a track and trace system — was extremely vocal in its opposition to the plan, through the Tobacco Institute of Southern Africa (Tisa).

After the tender was published, no fewer than 18 articles appeared in the media, arguing that “the new system had been rushed”; it “would capture only the legal market”; and it would “drive illicit trade up further”. The articles accused Sars of “wasting billions of rands”.

The media onslaught was relentless — and the loudest voice was that of Big Tobacco.

Now all of a sudden, BAT believes this is a good thing.

Let’s be clear – SA absolutely should ratify the illicit trade protocol, and it absolutely should introduce far stronger supply chain control measures for tobacco products.

The boom in illicit cigarettes never would have happened had we had appropriate controls and enforcement capacity in place to begin with. As a country, we have virtually no insight into production volumes, and have to take cigarette manufacturers at their word.

It’s easy to simply not declare a batch; set up a covert factory the taxman knows nothing about; or run entire unmapped contraband towns (as BAT has allegedly been doing in the Democratic Republic of Congo).

We do not, in any notable way, monitor the tobacco supply chain. We do not compare how many filters or cigarette papers a company buys against the number of cigarettes declared. There is, in fact, no way to track where the packs go once they are sold, or to trace packs found on the market back to where they came from.

Manufacturers are under no obligation to use “know your customer” policies or to apply due diligence checks to the people they do business with.

Instead, we are plagued with archaic excise administration systems that cannot adequately compensate for the integrity risks that are inherent in any highly manual system that only checks a small percentage of consignments, for a commodity that poses a very high risk.

Nor, in fact, do we really regulate the purchase or import of tobacco manufacturing equipment. (Right now, you can readily buy state-of-the-art cigarette machines online from sites like Alibaba.com for $1.5m to $3m).

So why is BAT now, schizophrenically, demanding traceability? Especially since, less than a year ago, it was so vocally opposed to the very same initiative?

Not too long ago, in 2013, BAT was accused of bribing a politician in Kenya to make sure a cigarette track and trace tender was not awarded to an independent service provider. And in Uzbekistan, the company reportedly tried to persuade the government to introduce a tax stamp traceability system for smaller manufacturers, while arguing it should be exempted.

So here is how this will probably play out: BAT will likely urge the government to act with some resolve. It will likely tell the government it needs a traceability system, but that an independent system would take too long to implement and would be too costly.

Then, it will likely tell the government that it has its own traceability solution ready to roll out. And when that happens, that’s when the foxes begin guarding the henhouse.

*Snyckers, an independent illicit trade expert and former SA Revenue Service executive, is the author of an exposé released in May on the role of big tobacco in fuelling illicit trade ‘Dirty Tobacco: Spies, Lies and Mega Profits’