Transit fraud is a form of smuggling that involves abusing the transit system to evade customs duties and taxes. Transit system is a trade facilitation tool that allows goods to move across borders without paying duties and taxes at the point of entry, provided that they are destined for another country and are not consumed or used in the transit country. Transit system is beneficial for traders who want to reduce their costs and time involved in cross-border trade, as well as for transit countries who want to facilitate trade flows and enhance their competitiveness.
However, transit system can also be exploited by unscrupulous traders who declare their goods as being in transit to another country, but in fact consume or use them in the transit country, or divert them to the local market. This way, they avoid paying customs duties and taxes, and gain an unfair advantage over their competitors. Transit fraud also deprives the transit country of its legitimate revenue, and undermines its fiscal and economic stability.
Zimbabwe is a landlocked country in Southern Africa that relies heavily on transit system for its trade. Zimbabwe imports and exports most of its goods through its neighboring countries, such as South Africa, Mozambique, Zambia, Botswana, etc. Zimbabwe also serves as a transit country for goods moving between other countries in the region. Therefore, transit system is vital for Zimbabwe’s trade performance and integration.
However, Zimbabwe also faces a serious problem of transit fraud, especially in the fuel sector. Fuel is one of the most imported commodities in Zimbabwe, as the country does not have sufficient domestic production or refining capacity. Fuel is also one of the most expensive commodities in Zimbabwe, due to high taxes and levies imposed by the government. Therefore, fuel is a lucrative target for smugglers who want to make huge profits by avoiding customs duties and taxes.
According to some reports (e.g., 263Chat, 2021; The Zimbabwean, 2021), the Zimbabwe Revenue Authority (ZIMRA) recently intercepted three transit fuel trucks in Chirundu that were allegedly smuggling fuel into the country under the pretense that it was Zambia-bound. The trucks had declared fuel at Forbes Border Post in Mutare en route to Zambia, but were found to be carrying water instead of fuel at Chirundu Border Post. The drivers were arrested and charged with fraud, while the clearing agent involved was suspended.
According to ZIMRA’s Head Corporate Communications Francis Chimanda (quoted by 263Chat), this was not an isolated incident, but part of an organized crime network that operates as follows:
- The smugglers scout for ports in the region with the weakest controls, where they can declare falsely low values or quantities for their fuel imports.
- The smugglers obtain transit documents and seals from ZIMRA or other authorities, and place them on their trucks.
- The smugglers offload and sell the fuel in Zimbabwe at higher prices than the official market prices.
- The smugglers load the trucks with water and proceed to Chirundu for the acquittal process, where they remove the seals and present their transit documents.
- The smugglers enter Zambia where they drain the water and buy cheaper fuel for delivery to their customers.
This way, the smugglers avoid paying customs duties and taxes in both Zimbabwe and Zambia, and make a hefty profit from their illegal activities.
ZIMRA has been trying to combat transit fraud by leveraging on technology and data matching. ZIMRA uses an Electronic Cargo Tracking System (ECTS) to monitor the movement of sealed transit trucks across the country. The ECTS uses GPS devices that are attached to the trucks and transmit real-time information on their location, speed, route, etc. The ECTS alerts ZIMRA if there is any tampering with the seals or deviation from the designated routes. ZIMRA also uses data analysis tools to identify any anomalies or discrepancies in the declarations or documents of transit trucks.
However, ZIMRA’s efforts are not enough to curb transit fraud, as smugglers are constantly finding new ways to evade detection and prosecution. Therefore, ZIMRA needs more support and cooperation from other stakeholders, such as:
- Other government agencies, such as police, immigration, intelligence, etc., who can provide security and enforcement assistance to ZIMRA.
- Other regional customs authorities, such as SARS (South Africa), MRA (Mozambique), ZRA (Zambia), BURS (Botswana), etc., who can share information and coordinate actions with ZIMRA.
- Other international organizations, such as WCO (World Customs Organization), UNCTAD (United Nations Conference on Trade and Development), OLAF (European Anti-Fraud Office), etc., who can provide technical assistance and best practices to ZIMRA.
- Private sector entities, such as transporters, agents, importers, exporters, etc., who can comply with the customs regulations and report any suspicious or fraudulent activities to ZIMRA.
Transit fraud is a serious threat to Zimbabwe’s trade and economy, and requires a concerted and comprehensive response from all stakeholders. By working together, Zimbabwe can enhance its trade facilitation and revenue collection, and protect its national interests and security.
- 263Chat (2021). ZIMRA Busts Fuel Transit Fraud Scam. https://allafrica.com/stories/202107270804.html
- The Zimbabwean (2021). ZIMRA busts fuel transit fraud scam. https://www.thezimbabwean.co/2021/07/zimra-busts-fuel-transit-fraud-scam/