Tobacco industry players meeting in South Africa for the inaugural Africa Tobacco Industry Conference have expressed concern with the rise of trading in illicit tobacco cigarettes, saying the trade is a threat to jobs.
The conference running from July 12-13 which Tobacco Association of Malawi (Tama) president, Abel Masache Kalima Banda, attended highlighted the need for transformation in the sector to stop the malpractice.
Banda, who is also vice-president of the International Tobacco Growers Association (ITGA) shared notes on how the continent can learn from Malawi on promoting sustainable tobacco supply chain in commercial and smallholder farmers.
In his presentation, he pointed out that tobacco is key sector in as the leaf provides 50 to 60 percent of export earnings, contributes 13 percent to the gross domestic product (GDP) and gives 25 percent to the tax base.
Industry players at the meeting expressed worry that the fact that a pack of 20 high quality cigarettes can be sold for less than a dollar (between K300 to K750), means taxes are not being paid.
South Africa is one of the world’s biggest markets for illicit cigarette sales.
In a statement released on the eve of the conference South African-based Fair-Trade Independent Tobacco Association (Fita) said it fully supports any effort by States and affected industry stakeholders to curb smuggling and the illicit trading in cigarettes.
“We feel that smuggling, although a problem pales in comparison to the vast amounts of profits which leave our shores as a result of the local tobacco industry being monopolised by foreign owned multinationals,” reads in part the statement.
Fita strives towards equal opportunity and fair trade in the tobacco industry. Collectively, members aim to contribute to national economies and increase employment.
According to Tobacco Institute of Southern Africa (Tisa), so profitable is the illicit trade that tobacco products are the world’s most widely smuggled legal product today.
“The illicit trade in tobacco products is a multi-billion-dollar business, fueling organised crime and corruption, as well as robbing governments of the much-needed tax money.
“Internationally 330-660 billion cigarettes a year are illicit —smuggled, counterfeit or tax-evaded. This is six to 12 percent of world consumption, losing governments $20-40 billion a year in taxes and tobacco companies $5-10 billion,” a report on Tisa website reads.
Malawi loses about $30 million (about K12.6 billion) annually through illicit tobacco trading, according to 2013 figures obtained from the Tobacco Control Commission (TCC).
The illicit tobacco trading involves the production, importion, exportion, purchase, sale or possession of tobacco goods which fail to comply with legislation.
The estimated $30 million loss represents eight percent of total tobacco yearly earnings.
Government through the Malawi Revenue Authority (MRA) put in place cigarette tax stamps to promote lawful trade, minimise smuggling and protecting local industries.
The efforts also help protect consumers from consuming unbranded and counterfeit cigarettes that pose health risks.
Tobacco continues to anchor the country’s economy despite continued global threats such as the anti-smoking lobby and the World Health Organisation’s Framework Convention on Tobacco Control (WHO-FCTC) guidelines which seek to abolish tobacco farming.
The crop directly employs 12 percent of the Malawi population.