Placing illicit tobacco firmly in the spotlight, one week before the budget, the company that manufactures an alleged illicit brand, has launched two R50 million defamation actions.
A press release issued on Thursday by the #TakeBackTheTax campaign provides details of these defamation suits launched by Gold Leaf Tobacco Corporation (GLTC). GLTC is the exclusive licensee and manufacturer of RG, the brand alleged to be illicit.
Formed in 2018 in response to the escalating illegal cigarette crisis, #TakeBackTheTax is an initiative of the South African Tobacco Institute of South Africa (TISA). Anti-crime activist Yusuf Abramjee joined the campaign in September 2018 as its official spokesperson.
GLTC has launched the actions against the global research house Ipsos and Abramjee. The summons refers to a media release by #TakeBackTheTax in which it is stated that “the biggest selling brand in South Africa, RG, is an illegal brand”.
The media release that made these claims was issued on November 27, 2018. This was the date of release of the Ipsos report, which showed that “illegal cigarettes have now captured over 42% of the South African informal trade, and are available in three out of every four shops in the country”.
An Ipsos Tobacco Market Study (commissioned by the TISA), was conducted in 2018. It involved auditing a representative sample of 2 058 retail outlets twice in a six-month period. The methodology was peer reviewed by local and international research experts and academics. Ipsos claims that its study is the most robust scientific analysis, of the multi-billion rand illegal cigarette market ever carried out in South Africa, and therefore cannot be ignored.
The Ipsos study was based on the premise that a pack of cigarettes on which all the required taxes had been paid, could not be sold for less than R17.85 per pack. If a pack of cigarettes was sold for less than this amount, this was an indication that the required taxes had not been paid.
The Ipsos research showed that almost 80% of all GLTC’s brands in the market were selling for below the minimum allowed price of R17.85 per pack. The press release concluded: “…which only means one thing; they are not paying taxes – effectively breaking the law and robbing South Africa of billions of rands in lost taxes”.
The Ipsos study also revealed that GLTC’s RG brand was the biggest brand in the market, selling for an average price of just R10 per pack. This is significantly below the minimum taxes owed.
The study revealed that South Africa is losing over R8 billion per year in taxes, which are not paid (evaded) on illegal cigarettes. The study was carried out in order to quantify the nature and extent of the illegal cigarette trade in the country.
Not daunted by this defamation action, the latest press release refers to GLTC as “a prominent player in the South African illegal cigarette market”.
Abramjee and Ipsos regard this defamation action in the same light as American “SLAPP” suits (a strategic lawsuit against public participation) where large companies attempt to silence and intimidate activists by levelling costly defamation suits against them. A SLAPP suit would typically relate to libel, slander or restraint of business.
The release asserted that Abramjee is firmly committed to fighting the scourge and impact of the illegal cigarette trade, and #TakeBackTheTax stands firmly behind the Ipsos research and its spokesperson
Abramjee says as a result of this legal action, #TakeBackTheTax now looks forward to a transparent and robust legal process that will compel manufacturers dealing in illegal cigarettes like Gold Leaf Tobacco to finally answer to the law.
“These defamation suits are simply a ruse to deflect from the real crisis in the sector and to intimidate activists, like me, into silence,” said Abramjee. “This legal action conversely also offers a real and unique opportunity to transparently and openly ventilate and thoroughly test the facts. We look forward to this process.”
In the communication, it is stated that the #TakeBackTheTax campaign is aimed at encouraging government to act urgently in addressing the illegal trade.
Indirectly, this defamation action places Sars under increased pressure to tackle and curtail illicit tobacco sales, and bring the guilty parties to book.