Johann van Loggerenberg outlines the dangers of tobacco wars

Basil Baloyi (not his real name) grew up in central Johannesburg in the 1970s.

He had been hustling and making deals all his adult years. Life was tough and he never really knew where his next meal or income would come from. Things changed for him somewhat when he was offered a job by a private security firm engaged by a multinational tobacco firm in early 2013. He realised his employers weren’t too worried about doing everything by the book, and that suited him as much as it suited them. He was going to get paid in cash at all times. The multinational didn’t want to leave traces of their funding, so the money would be paid to the security company, who in turn had a system to pay its agents in cash. He was now a spy and undercover operative, ostensibly helping the private security outfit to combat illicit tobacco scams. A contact, referred to as his “handler”, was assigned to him. They would meet from time to time at coffee shops or in restaurants. Life was suddenly not so hard.

Two tobacco manufacturers worried Baloyi’s “handler” tremendously. One had been in the market since the early 2000s — Gold Leaf Tobacco — whereas the other was one of the new kids on the block — Carnilinx. With their own “cheapie” brands of cigarettes, they were steadily eating into the smokers’ market, and this was a cause for concern for his clients. The more Gold Leaf and Carnilinx gained market share, the less income there was for his clients. Something had to be done about them, and Baloyi was going to help. Sitting at a table in an unassuming sidewalk café in the centre of the city, the handler and Baloyi were having lunch while discussing their next steps. Sipping his cool drink through a plastic straw, the handler told Baloyi, “Gold Leaf is a problem. They’ve grown over the years, they have a huge market in the country nowadays. We need to deal with them.” Baloyi just nodded and listened.

“We’ve come up with a plan. We need to sow discontent among the management at Gold Leaf and staff. This is where you come in,” said the handler. Baloyi just listened. “We think that if we can steal some of the stock, just a few cartons here and there, in a way that will make Gold Leaf’s management think their staff are involved, it is likely that they will begin to behave in a way that may just cause the staff to revolt.”

Baloyi understood. He needed to get close to workers at the Gold Leaf factory and get them to help him steal cartons of cigarettes. Just enough that it would flag on the stock control system of Gold Leaf.

The rest was predictable. Clearly the managers would suspect staff and call in the police and soon enough all the staff would be treated as suspects. This would no doubt lead to protests and arguments and disrupt the manufacturer. It was a clever but devious plan.

Baloyi wasn’t in a rush. He had plenty of other deals on the go anyway. He would hang out at the taxi rank near the factory at closing hours. Baloyi knew if he hung around, pretending to be a commuter for long enough, people would begin to recognise his face and perhaps even speak to him. Sometimes as the passengers sat in the taxi homeward bound, Baloyi would chat with the workers, asking them about the factory, trying to get a feel for who was who and looking to find any titbit of information that might also be passed to his handler for some extra cash. Sometimes he was lucky, sometimes not.

One afternoon, early in 2013, a woman in a taxi mentioned to her co-worker that she was battling to pay for school shoes for her kids.

The multinational tobacco company didn’t want to leave traces of their funding

Baloyi overheard this and studied the woman closely. He had found his mark. From that day on, he would make sure that he hung around long enough until this woman stood in line for a taxi, and then he would join the queue and travel in the same vehicle as she did for a few days. He would greet her courteously and she would greet him back. A few days later, Baloyi brought with him a cash voucher for a retail outlet that sold school shoes. As they were all seated in the taxi, he spoke up loudly and asked who wanted the voucher for which he had no use. He made sure to sit near the woman on that day. Her eyes lit up when he spoke, and she immediately began to talk to him. “I really need that my brother, I really need that.” Baloyi smiled and gave the voucher to her. When Baloyi got off, she smiled at him, waving the voucher at him as if saying thank you. Over the next few days, Baloyi made sure to meet the woman at the taxi stand. By now they were becoming friends.

Baloyi then made his next move. He told the woman he wished to buy some cigarettes but found the wholesale price exorbitant. “Would you mind selling me just one carton from the factory at a discount?” he asked. At first hesitant, she thought back to the time when the man had come to her rescue when she needed school shoes for her kids. One carton wouldn’t make such a big difference in the bigger scheme of things at the factory. “Which brand were you looking for?” she asked. “Voyager Light, please, my sister. Just one carton.”

That afternoon, as both got into the taxi, she took the seat next to Baloyi. Out of her bag she lifted a carton of Voyager Light and handed it to him. He made for his wallet in the back of his jeans, but she stopped him. She put her hand out, signalling it wasn’t necessary.

Balyoi made as if to resist, and then left it at that after her protestations. He had her now, he thought.

The very next day at the taxi rank, Baloyi changed tack. This time he wasn’t so friendly anymore. This time, he demanded from her a whole carton of Voyager Gold. She put up a brave face and tried to resist, but when he began to threaten to report her to her employer, she backed off. After all, what is just one carton of cigarettes when millions are being made weekly? So, she capitulated and that same afternoon Baloyi had a carton of Voyager Gold handed to him.

Baloyi now moved into overdrive. The next day she brought him two cartons of Chicago cigarettes. Not only was he spreading his demands across the Gold Leaf brands, but he was upping the volumes too. This continued …

It is anybody’s guess how many times this sort of thing had occurred before and at how many of the smaller local tobacco factories. The story of Baloyi is but one of many more such tales.

What we do know, because the evidence was ultimately presented before the High Court, is that Baloyi was paid by his handler on Wednesday, 17 July 2013, for a job well done.

How effective this scam was is anybody’s guess. One source that I spoke to about this practice told me a very interesting story. He said that, at times, when there was pressure on the handlers and spies to deliver “results” in order to justify their exorbitant fees, they would “plant” cartons on unsuspecting small shops and informal traders, selling them for almost nothing, only to arrange for a “bust” soon thereafter. Sometimes the bust would lead to media publicity or a criminal case being opened. All in all, the impression would be created that Gold Leaf and Carnilinx, in these instances, were selling their cigarettes at below market value, probably because they were illegally manufactured or made from smuggled tobacco. It was a win-win situation for their competitors. My source suggested that a variation of this scheme was to plant stolen stock in the cargo of unsuspecting small traders and dealers as they were exiting or entering South Africa through border posts. A tip-off or sniffer dog would pick up on the hidden stock, and the result would be another “bust” and some corresponding media attention, creating the impression that Gold Leaf or Carnilinx stock was being smuggled into or out of the country. In this handy way, two birds would be killed with one stone.

* Van Loggerenberg is the author of Death and Taxes and co-author, with Adrian Lackay, of Rogue: The Inside Story of Sars’s Elite Crime-busting Unit. He was an investigator at Sars from 1998 to 2015 when he resigned after being targeted, with former Sars boss Ivan Pillay and others, by elements seeking to capture and disable the revenue service. He is now a private tax practitioner and consultant.