Getting rich from SA’s cigarette ban
In Zimbabwe, there’s a legend called “Wella”, who made R4m overnight. People found out about his windfall after a video he posted on social media earlier this month went viral. In it, he’s showing off wads of R200 notes. Last week he was a nobody, he says, but now his wife will drive a R300,000 car. “It’s all my money!” he adds.
Not that it was earned legally. Wella is said to have made the money by selling 200 boxes of contraband cigarettes in Joburg. That’s 10,000 cartons, or 100,000 packs of 20 cigarettes. With restrictive Covid-19 lockdown measures in place, the border between SA and Zimbabwe closed for all but essential travel, and SA headed into the 18th week of a ban on the sale of tobacco, many hustlers in the border town of Beitbridge are chasing Wella’s record. Not all have been as successful. For example, police in Limpopo arrested four men en route to Musina last month. They were in possession of 4,040 cartons of cigarettes, with a street value of about R1m.
“They were just unlucky,” says a Beitbridge supermarket owner who has himself started dabbling in the illicit trade to keep his legitimate business afloat. “I’m sure they have been successful on numerous occasions.” Zimbabwe police spokesperson assistant commissioner Paul Nyathi tells the FM that the government is concerned by the rise in illicit trade between the two countries, which comes with the threat of more Covid-19 infections and cases that can’t be traced.
“In a crackdown on border jumpers, police in Beitbridge arrested 10 people [two weeks ago],” he says. “They are being charged for smuggling and breaching Covid-19 lockdown regulations.” On the SA side of the border, Brig Motlafela Mojapelo says the police have roped in the army for reinforcement.
“In Musina a box with 50 cartons fetches R10,000. There’s a profit of R4,000,” Mojapelo says, adding that prices in Joburg are higher. Sources in the trade tell the FM the racket runs from political elites, to army and police officers, down to the ordinary people involved in the trade.
“You have those with access to wholesale — they buy the cigarettes straight from manufacturers,” a source says. “For example, this week a box of Remington Gold procured at $260 (about R4,400) is sold to people in Beitbridge for $290. With each box comes a $30 profit locally. From a truckload, they can make a profit of $6,000 in just an hour at no risk, because they don’t cross into SA.”
Smugglers in Beitbridge then use any one of more than 200 illegal crossing points into SA to move the cigarettes into the country. They charge R700 to move a single box across the border.
“From that, we pay border patrol and make a profit,” says a border crosser, adding that it’s high risk because if you’re caught, your vehicle is impounded.
‘A mafia enterprise’
In Musina, the boxes pass to middlemen, who have links to bigger buyers in Joburg. “When the cigarettes are transported to inner SA, there are three or so cars that accompany the main vehicle, checking for any possible danger on the way,” says another source. If, like Wella, you bypass the couriers, the Musina buyers and the security detail, you can score big. But it’s not encouraged.
“Everyone has a part to play,” the source says. “There’s no need to be greedy — this is a mafia enterprise.” Cigarette companies in Zimbabwe declined to comment on the issue, but one executive, speaking on condition of anonymity, says selling cigarettes locally doesn’t make business sense. There’s a ready market for Zimbabwean tobacco products in SA — and the price cigarettes fetch there is much higher. “The only local inputs in a pack [of cigarettes] are the tobacco and the packet. The rest, like filters, stems, flavours and even the crispy plastic outside the pack, is imported. Not to mention machinery and spares. So clearly, with the current forex shortage there are bound to be shortages on the local market,” the executive adds.
Other brands are manufactured in SA and exported to Zimbabwe as a finished product. But “importing and selling in the local currency makes no sense”, he says. It’s an explanation that dovetails with the claim by illicit trade expert Telita Snyckers that some cigarettes manufactured in SA and earmarked for export are smuggled back into the country. It’s big business. Last year, the illicit cigarette trade cost SA R8bn in lost revenue, according to the Tobacco Institute of Southern Africa. But that was before Covid. Africa Check reports that in April — the first full month of lockdown — excise taxes on tobacco sales were down by more than R36m a day compared with April 2019.
It means Zimbabwean tobacco smugglers are keeping a close eye on legal action around the tobacco ban — including cases brought by British American Tobacco SA and lobby group the Fair Trade Independent Tobacco Association. Having the ban remain in place is, after all, an advantage for them.