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Pacific Cigarette Company (PCC), formerly known as Savanna Tobacco Company, has been at the forefront of transforming and innovating the tobacco industry in Zimbabwe for over 23 years.
Africa’s second-largest indigenous tobacco company and Zimbabwe’s first locally-owned cigarette company has, from its inception, worked towards the localization of the tobacco industry for the benefit of the Zimbabwean people. PCC was the initiator and driver of contract farming in Zimbabwe, which has empowered +150 000 black farmers and ensured that the tobacco industry reached new heights following its collapse during the land reform programme.
Another innovation the company piloted in 2005 at the height of the foreign currency challenges in Zimbabwe was the introduction, in partnership with the Reserve Bank of Zimbabwe (RBZ), of toll manufacturing to survive the introduction of the 50% foreign currency surrender requirements on exports. The foreign currency surrender policy threatened the survival and viability of many businesses and livelihoods in Zimbabwe. Through toll manufacturing, PCC and other businesses were able to source raw materials from their customers, ensuring their sustainability, while complying with the RBZ’s 50% foreign currency surrender requirements.
The then Reserve Bank Governor promoted toll manufacturing as a durable business model for companies facing similar foreign currency challenges.
Since then, the toll manufacturing model has been our accepted raw material funding model, removing the need for PCC to finance the working capital for export raw materials.
In June this year, without any notice, ZIMRA performed a spectacular U-turn that undermined the stability of the business and deemed the raw materials funded by our customers as income, subject to VAT.
They also levied an arbitrary markup and interest and penalties on PCC for the tax assessment period 2018 to 2020, to which we have objected. The issued tax assessments against the company impose tax liabilities amounting to US$19,315,233.82 and ZWL79,845,954.36.
ZIMRA, also, without any notice, garnished all PCC’s bank accounts. Next, ZIMRA took the unprecedented step of instructing the company’s customers to pay ZIMRA any monies owed to PCC, effectively closing off all the company’s income streams. In an effort to get the garnish lifted, PCC submitted a payment plan proposal while awaiting the determination of the objection which payment plan was rejected by the Tax Authority.
At law, the company has an obligation to pay the assessed taxes notwithstanding that it is challenging the tax assessments. ZIMRA’s unprecedented actions on false tax violations have regrettably placed PCC in an insolvent position, forcing the company’s directors to place the business under voluntary business rescue to safeguard the interests of all creditors and stakeholders, whilst the company continues to try and amicably resolve the matter with the tax authority.
PCC applied to be placed under voluntary business rescue on the 2nd of October 2023 and the Master of the High Court has as of the 4th of October 2023 appointed Mr. Reuben Mukavhi of Rubaya-Chinuwo Law Chambers Legal Practitioners as the corporate business rescue practitioner.
PCC welcomed the appointment of Mr. Reuben Mukavhi and is confident that the business will be able to trade back to solvency while it works to resolve the tax dispute.
“Through its world-class manufacturing capability and innovation, PCC, directly and indirectly, supports hundreds and thousands of livelihoods in Zimbabwe. It is a company founded on strong entrepreneurial principles and with an unambiguous commitment to the development of Zimbabwe and its people. As an ethical corporate citizen, we remain steadfast in our dedication to sustaining jobs, serving our customers, delivering to all our stakeholder needs, and are committed to working with the tax authority to find an amicable solution to the impasse,” PCC said in a statement.
