The ‘toxic’ tobacco trade

MASERU – On the pavements of many of Lesotho’s towns, police and ordinary people take turns to buy cigarettes from street vendors.
In the capital city, Maseru, stalls sell brands ranging from RG, Sharp, Red and Black, Sun, Blessing and Sahawi, mostly smuggled from South Africa.

Cigarettes illicitly coming from outside the country and sold on the streets have remained a serious problem for both the government and businesses that are forced to compete with street vendors who sell the cigarettes on the cheap.
The government is losing money in uncollected tax on illicit cigarettes while the tobacco industry is suffering from unfair competition.

Vendors who spoke to thepost said the cigarettes are smuggled into the country from South Africa stashed in large bags containing tons of second hand clothes.
They claim to have specific customs officers they work with to ensure the consignments pass through the borders undetected.

On the streets, the cigarettes go for way below the legal threshold of M20 per box of 20 sticks.
The same pack goes for between M30 and M39 on the official market.
In its 2020/21 budget proposals, the finance ministry proposed a 30 percent levy imposition on tobacco.
A statement by the British American Tobacco (BAT), which is a leading tobacco and nicotine products group, sees this as being more of harm than a cure.

The company distributes Peter Stuyvesant, Dunhill, Craven A and Pall Mall which are sold below M30 per pack
In a press statement released on March 2, BAT said the proposed tobacco levy “will enable massive lucrative opportunities for smugglers whilst punishing taxpaying enterprises”.
‘‘The levy will push up the pricing of legal cigarettes thereby creating bigger opportunities for illegal industry in Lesotho,” the Legal and External Affairs Manager of BAT, Nelson Jeque, said.
The firm’s main argument is that Lesotho was paid a lot of money from the SACU pool in 2018/19 Financial Year – 35 percent of the country’s revenues.

The cigarette sales within SACU contributed over M15 billion of the total SACU revenue pool, said Jeque.
Jeque said a levy of 30 percent on cigarettes will mean that the price payable on a pack of 20s cigarettes that are legally sold in Lesotho increases to M53.50 per pack. Meanwhile, the illicit cigarettes will remain at M20 per pack.
He said it is estimated that illicit tobacco products make more than 15 percent of the total tobacco products in Lesotho.

Government lost about M17 million from illicit cigarette sales last year, he said.
Jeque said it is projected that the levy will increase the illicit cigarettes market in Lesotho to about 40 percent of the total market by 2021.
Cigarettes will be smuggled from all over the low taxed jurisdictions within the region, including South Africa and sold in the informal markets of Lesotho.
‘‘Government is set to lose at least M93 million per annum in taxes.’’

In a statement in November 2018, the LRA said it had confiscated 38 boxes of RG cigarettes containing 380 000 sticks worth over M1.1 million at the Maseru Bridge.
RG was reported as an illicit cigarette as it is usually sold below the M20 threshold of the packet of cigarette.
The cigarettes that were confiscated were smuggled by the hawkers and they were not declared. No excise duty was paid either.
Sibongile Dangala (not her real name) sells RG, Peter Stuyvesant brands and clothes. She says they buy the RG cigarettes in Gauteng in South Africa.
“I sometimes buy RG straight from South Africa together with the clothes that I am selling,” Dangala says.
She says they buy ten boxes of RG at M150 while some range at M140.

When they get to the border gate, Dangala says they hide the cigarettes in their stock or sometimes go straight to the border gate but to counters manned by their syndicate members.
She said some police officers demand anything from M120 to M150 to look the other way.
Dangala says they do not only sell the boxes to street vendors, with a single carton going for M200.
The risks are many, says Dangala, but the profits make the job irresistible.
‘‘The money quickly multiplies,’’ says Dangala.

The Minister of Finance, Dr Moeketsi Majoro, says they have not yet implemented any measures to reduce illicit cigarettes in the market since they have not imposed the new levy.
‘‘When the levy is in place and tobacco-related crime spikes, we will then announce corrective measures,” Dr Majoro says.

However, Dr Majoro says the problem they have is that taxpayers are already paying for medical expenses arising from tobacco-related illnesses.
The levy is the government’s belated attempt to begin to share the costs of dealing with tobacco-related medical expenses and possibly to lower tobacco use within our people, he says.

Refiloe Mpobole