Smoke and Mirrors: Can South Africa’s cigarette tax collector save itself?

By Arnaud Gallet - 18 July 2018 at 11:27 am
Smoke and Mirrors: Can South Africa’s cigarette tax collector save itself?

It’s a story with all the hallmarks of a supermarket tabloid: sex, betrayal, spies and smuggled cigarettes. Yet the turmoil at the South African Revenue Service (Sars) has resulted in a very real crisis, centering on a deluge of illegal cigarettes which, according to a new report, have cost the country over half a billion dollars in lost revenue. Now Sars is battling to rebuild public trust and reinstate the investigators purged by its former boss Tom Moyane, who faces two damaging public inquiries. Whether the agency can deal with the aftermath and restore public trust remains to be seen.

Last week’s report, carried out by Ipsos, claims Sars’ dysfunction is costing South Africa around 7 billion rand (roughly $510 million) a year in unpaid tobacco taxes and condemns Moyane for his alleged mismanagement of the agency. Specifically, the authors center on Moyane’s decision to close a number of key units after allegations of a rogue operation, headed by former investigations chief Johann van Loggerenberg, emerged in the media. These units included Project Honey Badger, a team dedicated to improving tobacco tax revenues. The Ipsos report suggests the disbanding of this team, together with Moyane’s suspension of Sars’ factory inspections, enabled three unscrupulous tobacco firms to flood home-based shops in South Africa’s townships with ridiculously cheap cigarettes.

The report is just the latest bit of bad news for Moyane, an ally of former president Jacob Zuma who has been painted as a lackey at best, an accomplice at worst. Moyane’s supporters may claim his decision to gut Sars was a justified response to scandal; Van Loggerenberg resigned of his own accord after conducting an affair with Belinda Walter, a lawyer described in some quarters as a ‘triple agent’, and it has been claimed that his ‘rogue unit’ was doing everything from spying on senior politicians to running a brothel.  Yet Moyane’s critics say these claims are bogus and were simply a pretext to get rid of Sars’ brightest officials and free Zuma from the burden of scrutiny. New president Cyril Ramaphosa suspended Moyane earlier this year and brought two separate disciplinary inquiries against him, and the Ipsos report has added fuel to the fire by naming a company which counts Zuma’s son Edward among its directors as a major source of illegal cigarettes.

Of course, the report should be taken with a rather large helping of salt. It was funded by the Tobacco Institute of Southern Africa (Tisa), which represents major tobacco firms and itself faces accusations of malpractice. These same firms have been repeatedly fined for global complicity in tobacco smuggling and, in South Africa, have ploughed a huge amount of money into blocking regulations to tighten up the industry. Some even allege that Walter was spying for British American Tobacco, one of South Africa’s most dominant market players, when she embarked on her affair with Van Loggerenberg. Perhaps it’s no coincidence that all three manufacturers blamed for selling illicit cigarettes in the report are small, disruptive vendors. One of them, Gold Leaf, has already launched counter-accusations, claiming it is in fact BAT that is peddling the dodgy smokes.

Yet none of this backbiting is easing the pressure on Moyane, as a raft of his former Sars colleagues come forward against him in the twin inquiries, with repeated accusations of bullying and incompetence. Former chief operations officer Barry Hore has claimed that Moyane manipulated revenue figures and that his reign cost the South African public purse at least R142 billion. Van Loggerenberg’s former boss, Gene Ravele, has given his own testimony, telling the Sars inquiry that the inspection of cigarette companies was abruptly terminated by Moyane’s right-hand man, Jonas Makwakwa, and this had directly led to the tax crisis. Moyane and Makwakwa both deny any wrongdoing.

Meanwhile, Sars’ attempts to salvage its reputation continue apace. The agency has announced plans to reconstitute a number of teams dismantled by Moyane, including the one focused on contraband cigarettes. Acting commissioner Mark Kingon is targeting a 20% rise in tax revenue and launched a new service charter, laying out a set of minimum standards South African taxpayers can expert. There’s been extensive talk of fresh mindsets, of digging out criminal activity and ridding Sars of the ineptitude that has dogged it for years.

Yet the task facing Kingon and his fellow Sars officials appears mountainous at this point. They must not only tackle festering corruption in the tobacco industry, but also eradicate the rot that has been allowed to grow within Sars’ own walls. Moyane may be gone, but the problems he’s left behind will likely take years to fix.

Arnaud Gallet

Arnaud Gallet

Arnaud is a French freelance writer with an African heart who has lived in 10 different Sub-Saharan countries in the past decade. He is currently based in Paris.

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