Cross-border rice smuggling: a big hole in Ghana’s revenue kitty

7th October 2013 News

Source: Graphic Online

In May, last year, Ghanaians were shocked when an investigative reporter, posing as a rice dealer, vividly exposed the existence of powerful, syndicated rice smuggling cartels operating along Ghana’s long and porous border with Cote d’ Ivoire.

The evidence of active, brisk, unimpeded and, particularly, lucrative smuggling of rice through Ghana’s western land borders is almost proverbial but has now become rather too damning to ignore.

Investigative journalist Aremeyaw Anas Aremeyaw’s audio-visual footage of live smuggling operations at various points of the western border confirmed the voluntary connivance of uniformed public officials engaged in smuggling transactions involving several convoys of truckloads of rice, ready to be shipped into Ghana – free of tax, free of quality control checks and free of VAT ….while fat, illicit payments are made to individuals and into private pockets. The state on the other hand, loses a whopping GH¢69 million every year to this seemingly harmless activity along our land borders with Cote d’Ivoire.

A big hole in kitty!

An estimated 100,000 metric tonnes (about four million bags) of rice are smuggled into Ghana from Cote d’Ivoire every year. Rice smuggling has long been observed to be a regular and lucrative activity along Ghana’s entire western frontier with Cote d’Ivoire, of which Kwamesiekrom, Gonokrom and Kofi Badukrom are reported to be key smuggling depots; while Enchi, Sampa, Nkrankwanta, Elubo, Debiso and Dadieso are known as significant ‘trade routes’ for rice smuggling.

Through these points and routes, some 25 to 35 truckloads of rice cross the borders on a daily basis – evading import duties and VAT – and travel to various parts of Ghana.

Cote d’Ivoire is known to import far more rice than Ghana, and it is on record that last year the country’s rice import grew by as much as 19 per cent.

The Incentives

But perhaps, the biggest incentive to rice smugglers is the high duty differential between the imports of Ghana and those of Cote d’Ivoire.

There is currently a huge differential of 28 per cent between Ghana’s rice and rice from Cote d’Ivoire, and this is naturally unsupportive of the business of legitimate importation in Ghana.

It is indeed of great interest that in 2011, while Ghana imported 450,000 metric tonnes of rice, Cote d’Ivoire imported almost twice that quantity – 800,000 metric tonnes.

Then last year, (2012) as Ghana imported 496,000 metric tonnes, Cote d’Ivoire imported 950,000 metric tonnes.

It may be an unfortunate cliché to suggest that a large chunk of the Ivoirien import is destined to arrive in Ghanaian markets through the back door, but attention needs to be drawn to the enabling fact that Cote d’Ivoire importers currently enjoy a significant duty advantage of lower import duty stocks.

The obvious impact of this is that apart from the massive losses in tax revenue incurred by the state, legitimate rice importers in Ghana appear doomed to suffer losses if, in the long run, they will not fold up their businesses altogether.

For the importer in Ghana must contend with a 20 per cent import duties, 15 per cent VAT and a 4.5 per cent levy, totalling 37 per cent, while his counterpart in Cote d’Ivoire pays much lower as import duties or levy; except a mere VAT component of 2.5 per cent.

A Ministry of Information report released early this year discloses that due to the difference in the duty scheme, the price of perfumed rice in Ghana has increased by 34.5 per cent.

The Crime Scenes

While recommending that the state must do everything to discourage rice smuggling at our land borders, we may also hasten to regard the various destination markets where the smuggled rice always ends up as another relevant crime scene.

In Accra, all one needs to do to encounter smuggled rice is simply to take a walk through popular food markets like those in Okaishie, Agbogloshie, Kaneshie, Nima and Madina; in Kumasi, one only has to visit the Adum Central Market, and in Takoradi, do a casual detour of the Market Circle. Like the markets in Accra, Kumasi and Takoradi, the main markets in Cape Coast, Sunyani, Tarkwa and Obuasi are all flooded with ‘un-customed’ rice from Cote d’Ivoire.

And how might one tell smuggled rice from legitimate rice imports? Very easy!! Smuggled rice will always sell cheaper on retail than the rice which passed through our ports.

Also, you would realise that somehow, dealers in smuggled rice either do not have the time or perhaps do not really care a hoot about removing or concealing tags and labels which come in the French language.

Plucking the hole

If the government cannot waive duties and levies on local rice imports, then the best alternative left for Ghana is to ban cross-border importation of rice altogether. After all, Cote d’ Ivoire is a consumer and not a producer of rice.

In order to fight a selfish multi-million cedi enterprise of this magnitude, it may be alright to attempt to police the known ‘trade routes’; however, past experience (and thanks again to Anas) have shown that our frontiers are notoriously too porous to police effectively.

Whereas physical patrols, which I believe are 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 this illicit business.

Stockists, wholesalers and big-time retailers of legitimately imported rice always have VAT Receipts or at least purchase invoices covering their consignments.

As we hear from members of the Rice Importers Association of Ghana, it is impracticable for dealers in bootlegged rice to produce any relevant documentary evidence of purchase or transaction.

In other words, smugglers consider it a taboo to issue out documentation because it could lead revenue inspectors to their doorsteps.

Considering the effect of rice smuggling on government revenue, on the local import business, on quality control and general food security, there can be no question about the need for the government to move swiftly to stamp out this illicit trade.

Internally, since smuggled rice is so easily identifiable, one would wish that the revenue agencies like VAT and the IRS are empowered to regularly conduct inspections on relevant purchase invoices and VAT receipts of dealers on the market.

In that direction, the Importers Association may make itself useful by assisting in educating operatives of the Ghana Revenue Authority on how best to detect rice which, although was not harvested from the Aveyime farms, never arrived in Ghana through any of our designated ports.