Gvt Prejudiced Of Tax As Cartels Smuggle Into Zim’s Alcohol Market
It’s nightfall, the streets are getting congested as nightlife roars in Mbare, one of Harare’s oldest townships.
Two heavily laden vehicles, a Suzuki bakkie and a Toyota Hiace van, come to a sudden halt to receive instructions from one member of the syndicate on where to stop as the drivers tread carefully in this covert operation.
At one of the old dilapidated flats, they stop and a group of youths offload covered cases of counterfeit whiskey inside.
“That’s far you can go,” I’m told by one, Tawanda, who offered to furnish me on how this brisk business works.
“The vehicles have at least 100 cases of whiskey bottles and we have several warehouses where our agents come and collect for distribution,” he said.
According to Tawanda it’s the first of maybe four more deliveries to be made on this particular evening.
This consignment is coming from Mozambique and is ferried by cross border bus and truck drivers who bribe immigration officials.
To evade paying taxes, including the 2 percent tax on all electronic transactions, the syndicates conduct transactions in hard cash, American dollars to ensure there is no paper-trail.
A 2019 OECD report titled, Trends in Trade in Counterfeit and Pirated Goods, Illicit Trade notes that Illicit trade in fake goods is a major challenge in an innovation-driven global economy with a negative impact on the sales of affected firms, the broader economy as well as public health, safety and security.
It further states that organised criminal groups are now involved in these activities using profits from counterfeiting operations to fund other illegal activities.
“Counterfeiters operate swiftly in the globalized economy, misusing free trade zones, taking advantage of legitimate trade,” it says.
According to Global Finance Integrity, common reasons for illicit inflows are tax evasion and for financing the illegal activities of international criminal networks engaged in human trafficking and smuggling of arms, drugs and valuable minerals.
The Counterfeit whiskey comes in a range of prestigious brands such as Red Label, Jameson Irish Whiskey, Blue Label, Grants, Best and Vodka among others.
The whiskey is much cheaper than authentic local and international brands.
In the streets of Harare, a bottle of counterfeit Best Whiskey is sold for as little as US$ 4 (ZWL$ 160) as compared to ZWL$ 280- the price of the same authentic product in retail stores.
But Zimbabwe is facing serious cash shortages in both its local and foreign currencies and this has become another source of foreign currency leakages for the country.
“The manufacturer of counterfeit whiskey is strongly linked to cartels mostly from Asian countries who have found a market in Africa’s rising middle class. It is less risky than selling drugs” Anti-Counterfeit Watchdog Zimbabwe, executive director, Betty Mapwashike told 263Chat.
Brown-Forman, the makers of Jack Daniel’s whiskey, estimates that 30 percent of alcohol in China is counterfeit; hence the Asian giant has become a major global distributor.
In 2017, Namibian authorities impounded a haul of 95 000 bottles worth US$ 1.5 million of counterfeit Johnnie Walker Whiskeys and Vodka heading to Zambia and Zimbabwe.
But these covert operations are vexing local authorities and huge amounts in potential tax revenue is being lost, the Zimbabwe Revenue Authority (ZIMRA) says.
Admittedly, ZIMRA says the smuggling of whiskey into the country is rampant much to the limited capacity it has to contain or quantify how much of it enters.
But Mapwashike warns of serious health hazards it poses, following three deaths that took place in December last year after consumption of fake Jameson Whiskey.
“This whiskey contains methanol, a highly toxic substance,” she said.
In June last year, ZIMRA intercepted over 200 crates of various alcoholic spirits at Nyamapanda Border coming from Mozambique during one of its highway patrols.
There are fears that this is just an understated sample of the magnitude of smuggling of alcohol into Zimbabwe and the potential tax revenue losses are immense.
Zimbabwe has 32 illegal entry points, at which contraband is easily smuggled, a 2018 report by local industry lobby group, Confederation of Zimbabwe Industries reveals.
“While smuggling does occur through porous borders and through illegal activities, ZIMRA is not in a position to provide accurate statistics on smuggling as we do not have records on what has been smuggled,”
ZIMRA Head Corporate Communications Francis Chimanda said.
Recently, the tax collector said the government is losing close to US$1 billion every year through contraband.
Compare the figure to 2019 total tax revenue of ZWL$ 23.2 billion which translates to nearly US$ 1.5 billion at prevailing 16.5 percent exchange rate at the close of the year, the country is losing out on two thirds of total tax earnings through smuggling.
Nevertheless the effects of these activities are starting to bite local alcoholic spirits manufacturers.
The country’s biggest lager maker, Delta Beverages’ revenue during the quarter ending September 2019 fell by 2 percent to ZWL$ 1.5 billion while alcoholic spirits maker, AFDIS volumes fell 50 percent as imbibers skewed towards cheaper counterfeit whiskey.
This story was produced by 263Chat. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in partnership with the Institute for the Advancement of Journalism. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.