There’s no smoke without ire in the big tobacco business

One of the first things Nkosazana Dlamini-Zuma did as health minister was to get tough on smoking — the ANC’s first big fight was with big smoke. Soon after 1994, South Africa introduced far-reaching and far-sighted anti-smoking legislation which helped to reduce the number of smokers from 5.8 million to 2.7 million. Since then, the ANC government has got progressively more muscly with smokers, who now have to do a half-marathon at work to get to a spot where they can smoke after new regulations were passed further increasing the perimeter for smoke-free zones. One of the last things Dlamini-Zuma did as she completed her attempted run at the ANC presidency last year was to deny that illicit cigarette kingpin Adriano Mazzotti had funded her campaign, although the story was made more difficult to bat away by the photographs of him grinning alongside her.

Cigarettes are big business in South Africa, and, because prices are so high, there was an effective prohibition by price, so a bootleg industry has grown fast. You can buy packs of cigarettes for as low as R6 on the streets — any pack sold for less than R17.85 is regarded as illicit.

One of the ways the newcomers have grown to such dominance is by proximity to power: Mazzotti is a master. In addition to images of him cuddling up to Dlamini-Zuma, there is another photograph that circulates widely of him dining out with EFF leader Julius Malema.

ATM, a regional KwaZulu-Natal manufacturer owned by Yusuf Kajee, has long earned political protection by courting politicians. Former president Jacob Zuma’s son Edward owns or owned shares in ATM, and he has used his surname to protect his business partners, who have reached a market penetration of 1.7% with the brand called CK. The big player in the illicit tobacco trade which the old established (and taxpaying) industry complained this week is eating — or smoking — its breakfast is Gold Leaf Tobacco Corporation.

GLTC has no overt political connections, but its owners, Ebrahim

Adamjee and the Zimbabwean millionaire Simon Rudland, have had several run-ins with the law. Adamjee says GLTC is being targeted by

British American Tobacco South Africa, which he alleges is protecting its dominance from new and black players in the industry. BAT SA is

South Africa’s second-largest listed company and is a subsidiary of the British multinational.

Gold Leaf’s RG brand is on track to become market leader after a 4 000-outlet survey of cigarette sales by Ipsos released this week showed that it is the second-best seller to Peter Stuyvesant, BAT SA’s No 1 selling brand.

The established industry is represented by the Tobacco Institute of Southern Africa, which released the study into the illicit cigarette economy this week. It says the R54.3-billion industry is imperilled by the illicit cigarette economy, which is turning tax-paying tobacco into a stompie. Its estimates are that a smoking eight billion sticks are illicit, which means that SARS is losing R7-billion this year alone.

This is the figure that caught the headlines this week, but before SARS was captured and destabilised, in part by the very tobacco industry it was trying to ensnare, its calculations showed that base erosion and profit shifting were costing the fiscus an additional R3-billion to R5-billion a year.

SARS sources say they had 15 criminal cases in the pipeline against various big tobacco industry players for, among other crimes, tax evasion, money laundering, racketeering and corruption.

Tobacco is a complex industry, and while this week’s study sought to paint a picture of an old and compliant industry versus a new and illicit one, the truth is far more complex. One thing you will learn about reporting cigarettes and politics: there are no angels.

The truth is more complex than the picture painted in the study