Cigarettes racket spawns billionaires

Racket spawns billionaires


The Herald



By Patience Nyangove

CIGARETTES are keeping many Zimbabwean vehicles on the road and turning some
well-connected businessmen into overnight billionaires.

At the other end of the market, a surprising number of shopping-bag traders
make millions a month.

Both the billionaire oil traders and the lady on the bus with a shopping bag
are smuggling cigarettes from Zimbabwe into South African Customs Union
(Sacu) countries - South Africa, Botswana, Namibia, Swaziland and Lesotho.

They sell them there, then buy goods in short supply in Zimbabwe for resale,
thus making a huge profit on both legs of their trading journeys.

At the heart of this smuggling racket is the massive price difference
between cigarettes manufactured in Zimbabwe and those made in Sacu, thanks
to sharply contrasting taxation levels. Cigarettes are about eight times
more expensive in South Africa and its Sacu neighbours than in Zimbabwe.

And Zimbabwean cigarettes are regarded as of good quality. The price is low
because of the much lower taxes. Most countries now charge very high taxes
on tobacco, not to raise revenue, but to make discourage the smoking habit
of its proven serious health effects.

Of course, no one actually gets eight times as much as they paid for a box
of Zimbabwean cigarettes when they smuggle it across the border. South

African smokers willing to pay the full price will buy legal cigarettes.

But there are plenty of dubious and dishonest traders in South Africa - with
Nigerian immigrants well represented, if rumours doing the rounds are true -
who will pay R60 for a carton of 200 Zimbabwean cigarettes -- about four
times the Harare supermarket price -- with no questions asked.

But the smuggler need not despair. He can still double this money from the
dubious trader on returning to Zimbabwe if he buys something that is scarce
in Harare and either for which is chargeable very light Zimbabwean duty or
which can easily be smuggled back home.

Fuel has become a favourite of the big-time smugglers despite its bulk,
thanks to Zimbabwe's policy of charging just 5 percent import duty and
allowing anyone to bring in a maximum of 2 000 litres a time without any
questions asked.

A trader first has to buy about 100 cartons of cigarettes, which will cost
around $30 million in most supermarkets and garages. These then are
concealed in empty tanks on a tanker or drums on a truck and smuggled into
South Africa or Botswana.

Sacu charges R50 a carton duty -- or an incredible R1 for every four
cigarettes -- so no one wants to pay this.

The smuggled cigarettes are sold for around R6 000, which is enough to buy
around 2 000 litres of diesel or petrol which can be taken back in the
tankers and trucks -- legally now -- into Zimbabwe.

The trader just needs a few extra cartons to take care of the hamburgers for
lunch and the modest fuel duty at the border post.

That fuel can be sold in a private deal for $240 million, a rather
spectacular profit on the initial $30 million outlay; and the trip can be
undertaken three times a week.

Those with connections and licences can handle larger volumes, say 20 000
litres, of fuel at a time, bought with 1 000 cartons of smokes. This sees
$300 million turn into $2,4 billion in two days, and explains the discovery
of cigarette-laden tankers at Plumtree.

At the other end of the market is the cross-border trader, smuggling, say,
10 cartons, costing $3 million, into South Africa, selling these for R600,
buying a radio and lunch, and then selling the radio on return to Zimbabwe
for more than $20 million. The only overhead is the bus fare.

The margins are not quite as good as the cigarettes-out/fuel-in trade, but
do provide a significant income.

The most popular brands for smuggling are Remmington Gold, Kingsgate,
Newbury and Berkeley.

The R60 for a carton is only an average price. Depending on how many others
are smuggling that day and which brand is chosen, the South African receiver
will pay anything between R30 and R130 for a carton of 200.

Remmington Gold, the cheapest, fetches between R30 and R100, but then the
carton only costs $220 000 to $240 000 in the Zimbabwe supermarket.

Peter Stuyvesant, an international brand made under licence in Zimbabwe,
costs about $700 000 a carton in Harare, but can be sold for anything
between R120 and R130 down south.

Small-scale smugglers also pack cigarettes on trips to Britain, where a box
of 20 costs almost four pounds, leaving plenty of room to negotiate a good
price for both smuggler and smoker.

But the bigger consignments of smuggled Zimbabwean cigarettes are sent via
South Africa.

Some Zimbabwean cigarettes have even found their way into Iraq, carried from
South Africa by some of the more dubious types travelling to that country.

South African Police Services spokesman for Limpopo Province, Superintendent
Ailwei Mushavhanamadi, said they had so far managed to arrest a considerable
number of Zimbabweans for smuggling cigarettes.

Arrests are made on a daily basis, but it seems that only a small fraction
of the smugglers are actually apprehended.

Moreover, even those caught will just pay a fine, go back home and try again
after buying a new supply.


The offence of tobacco smuggling, while very profitable, is not in the
serious category of trafficking narcotic drugs like mbanje (cannabis) or
cocaine. Imprisonment is not mandatory although a South African court can
impose a maximum sentence of 10 years. But so far caught smugglers have been
paying the R5 000 admission of guilt fine.

The Zimbabwean authorities, who are not really losers in this smuggling
racket, are now co-operating with the Sacu states.

Zimbabwe Revenue Authority (Zimra) investigators recently intercepted at the
Plumtree border post three fuel tankers, belonging to a company called
Mozangola with South African registration number plates, stuffed with
cigarettes worth more than $8 billion destined for Botswana.

The smugglers paid a $800 million fine and forfeited the tankers and
cigarettes to the State.

At Beitbridge border post, Zimra officials intercepted over 277 boxes of
contraband Remmington Gold cigarettes loaded on a South African-registered
truck towing a fuel tank.

The truck, which was coming from Zambia, was being driven by a Zambian
identified by the police as Godfrey Shamboko, 42.

The contraband had been loaded in Harare.

On arrival at the border post, the truck was taken to the Zimra container
depot for inspection through scanning, leading to the discovery of the
cigarettes.

Another driver, who has since been identified as Musekiwa Nyamadzawo, a
Zimbabwean, was also intercepted at the border post a few days later with
180 cartons of Remmington Gold stuffed under cotton in a truck destined for
South Africa.


Nyamadzawo bolted from the scene, leaving the truck behind. He is still at
large.

Zimra corporate communications manager Ms Priscilla Sadomba said they
encountered numerous cases of cigarette-smuggling syndicates every month.

"We already have baggage scanners and container inspection equipment at
Plumtree border post. Resources permitting, Zimra would want to have
scanners at all entry points," she said.