Cross-border rice smuggling - A big hole in Ghana's revenue kitty

Thu, 10 Dec 2009 Source: GNA

A GNA feature by Christian Akorlie

Accra, Dec. 10, GNA - In May when a newspaper reporter boldly posed as a rice dealer and relayed to the public the existence of powerful syndica= ted rice smuggling cartels operating along Ghana's long and winding border wi= th Cote d'Ivoire many must have played it down as yet another prank by an overzealous journalist.

But the evidence was far more damning than can simply be swept under=

the carpet. Audio-visual attachments of smuggling transactions showed the=

voluntary connivance of uniformed public officials in smuggling transacti= ons involving convoys of truck-loads of rice about to be shipped into Ghana -=

free of tax and free of VAT.

Let There Be Rice!

These illicit operations are said to be a regular and lucrative tren= d along Ghana's western border of which Kwame Sie Krom, Gono Krom and Kofi Badu are said to be the main smuggling depots.

It is not clear what "preventive" measures have been put in place si= nce these incredible revelations; but it appears we are a long way off from preventing smuggled rice pouring into our markets.

The nationalists amongst us may worry about what such massive inflow of illicit rice on our markets can do to our dream of nurturing our own local rice industry as we encourage the consumption of home-grown rice. On the other hand, however, our economists have good reason to be alarmed at the= huge revenue lost by government through the smuggling of just a single consumable commodity. Ostriches on our Markets In earnest, does anybody who is concerned and who, for that matter, is nosing around with eyes open, really need the smoking-gun kind of evidenc= e such as was so vividly transmitted from Kofi Badu Krom? We would be looking for the evidence rather too far from the real "crime scene" - the evidence of an illicit trade of this proportion canno= t possibly be tracked at the border. Without suggesting that the smuggling operations at our western bord= ers are in anyway pardonable, it must be admitted that as far as smuggled ric= e is concerned, the real crime scene from which any investigation must begi= n is the open marketplace.

Just take a walk through popular food markets like those in Okaishie= , Agbogbloshie, Kaneshie, Nima and Madina in Accra; if you live in Kumasi, just visit the Adum Central Market and in Takoradi do a casual detour of the Market Circle.

These markets are crammed with various varieties of rice from the Iv= ory Coast. How do we tell legitimate rice imports from the smuggled ones? Tha= t's easy! They are simply cheaper on retail than the rice which passed throug= h our ports and the dealers either do not care or perhaps have no time to remove or conceal tags and labels which come in the French language. Brands like Chine Perfume Rice, Better Perfume Rice, Eagle American Rice and Uncle Sam Fragrant Rice, which did not pass through Ghanaian por= ts are stocked in large volumes for sale on the open markets. There is every=

indication that this has gone on for several years. It is now estimated that close to 150,000 metric tonnes of smuggled rice finds its way through the borders onto our markets each year.

What is most frightening is the volume of revenue lost by the Ghana government to the smugglers and their accomplices on and off the marketplace. If it is true that 150,000 metric tonnes of rice (which translates into about six million bags) is smuggled in without tax, the government could be losing a whooping GH¢30 million to GH¢36 million to smugglers each year.

It is suggested that a key incentive for the booming trade in illici= t rice is the differential in tax rebate between rice imports in Ghana and imports in the Ivory Coast. Whereas there are no duties on rice imports in both Ghana and the Ivo= ry Coast, the value-added tax on rice imports in Ghana happens to be 10 per cent higher than in Ivory Coast which charges only 5 per cent VAT on rice imports.

The logic here, dreaded by Ghanaians for whom rice is a staple food and also by legitimate rice importers in Ghana is that, is if a tax different= ial of just 10 per cent has been enough to spawn such a lucrative smuggling industry, what would happen once the duty on rice were re-instated? Indeed, various views have been expressed after government announced=

its intention to restore the levies and duties on rice. While many praise= d government for a rather bold decision, others believe re-introducing the levies now was ill-timed. Mr John Awuni, President of the Ghana Rice Entrepreneurs Association= , thinks that recent developments in the global rice markets do not warrant=

the re-introduction of levies and duties at this time. Indeed, there are fears that global rice prices might increase, following poor harvest in the major rice producing countries, particularl= y Thailand and India, and that it could heighten smuggling of the commodity=

from Cote d'Ivoire as businessmen seek to take advantage of price differentials. At the Makola Market, rice traders blame increased smuggling of the commodity on the waiving of import tax in Togo, Benin, Cote D'Ivoire, Burkina Faso, and Senegal. This, they said, had led to the smuggling of r= ice from these countries into Ghana. Indeed, the Government of Ghana has to take a proactive step to che= ck rampant smuggling of rice into the country and also stern action against hoarders, profiteers and smugglers. Failure to do this would have a negative impact on the country as th= e government would lose more revenue.

They suggested to government to consider waiving import tax on rice or a drastic reduction in the rate. "We simply need to follow the footstep of our neigbouring countries.= It is a sure way of dealing with the menace of smuggling," they said.

Nipping the trade in the bud

Smuggled rice will always sell far cheaper on the market than legitimately imported rice - otherwise there will not be any reason to engage in the trade in the first place, except if we should find ourselve= s in a situation of acute shortages on our markets. To fight a selfish multi-million cedi enterprise of this magnitude, it may be alright to attempt to police the known "trade routes". However, experience has shown that our frontiers are notoriously too porous to pol= ice effectively. Whereas physical patrols already on-going need to be intensified, serious attention must be paid to the internal supply-chain for smuggled rice - this is what makes the marketplace the functional crime scene in t= his illicit business. Stockists, wholesalers and big-time retailers of legitimately import= ed rice always have VAT receipts or at least purchase invoices covering thei= r consignments.

As gathered from Members of the Rice Importers Association of Ghana,= it is impracticable for dealers in smuggled rice to produce any such officia= l documentary evidence of purchase or transaction. In other words, smugglers consider it a taboo to issue out documentation which will literally lead any revenue inspector to their doorstep. Since smuggled rice is so easily identifiable, one would wish that revenue agencies like VAT and the IRS are empowered to regularly conduct inspection of relevant purchase invoices and VAT receipts of dealers on t= he market. The Association could be handy in educating officers of the Internal=

Revenue Service, the Value Added Tax and even the National Revenue Board on how best to detect rice which, although was not harvested from our Aveyim= e Farms, never arrived in Ghana through any of our official sea ports. 10 Dec. 09

Columnist: GNA