With a skip in our step, South African smokers exhaled a jubilant sigh of relief this morning, 18 August 2020.
This, all due to a once simple and mundane process of going to a shop to buy cigarettes, now returning to some remembrance of life prior to the lockdown.
However, while the ending of the ban on tobacco sales brought a sense of normality back to our day to day lives. As well as re-opening the near brink of collapse trade and subsequent plethora of businesses, that rely on various stages of the tobacco industry. From farmers to tuckshop owners, for many South Africans, the legal tobacco trade equals life.
For the legal tobacco industry, however, the drama is far from over.
The tobacco giant, British American Tobacco South Africa (BATSA) has issued a statement, stating the government needs to step in and ratify the World Health Organisation’s (WHOs) Illicit Trade Protocol. A step which will help eradicate the now booming, illegal cigarette trade.
The fact that billions in taxes have been lost, along with the explosion of the illicit tobacco trade, which is further impacting the revival of the legal tobacco industry, BATSA is set to take on the Fair-Trade Independent Tobacco Association (FITA).
“BATSA made its call as the company confirmed comprehensive independent research that shows cigarette brands mainly associated with the ‘Fair-Trade Independent Tobacco Association’ (FITA) have completely taken over the market over the past five months of the sales ban,” BATSA explains.
In its statement, BATSA says the Research Unit on the Economics of Excisable Products (REEP) under the directorship of Professor Corné van Walbeek at the University of Cape Town (UCT) has been tracking cigarette sales during the lockdown.
Professor van Walbeek and his researchers established, from 23 000 respondents, that almost all smokers (93%) were able to purchase cigarettes during the ban.
However, the brands they have been purchasing have changed dramatically. This is even though it has been established that some retail outlets improperly sold legally obtained and taxed cigarettes out of their own stores during the lockdown.
Professor van Walbeek confirmed that: “British American Tobacco (BAT) has taken the biggest knock as a result of the sales ban.”
The extent of the damage to the legal industry which previously collected and paid R35m per day in taxes is laid bare by the findings of the REEP report. It shows:
- According to BATSA, the ‘market share’ of BATSA products has dropped from 48.0% prior to lockdown to 8.7% in June.
- One in three (33.7%) cigarettes bought during the ban were purchased in retail outlets, including formal shops, petrol stations and spaza shops.
- Prior to the ban, BATSA owned six of the top ten selling brands in South Africa. It now states, it now has none.
“The brand, RG, from the Zimbabwean-owned and controlled Gold Leaf Tobacco Corporation (GLTC) has exploded in sales over the course of the lockdown,” BATSA said in its statement.
Furthermore, BATSA claims at 11.6% of the market, this one brand saw approximately 10 million cigarettes purchased every day during lockdown at prices that were up to five times higher than prior to lockdown despite no tax being paid.
FITA says that it rejects BATSA’s claims and its one-sided interpretation of the UCT’s REEP research, regarding the sale of cigarettes during the lockdown.
FITA then goes on to further claim that none of its members benefitted from the sale of cigarettes, while the ban on tobacco products was in place.
As BATSA and FITA prepare to get into the ring, it seems the negative implications of the ban are set to leave its mark on the tobacco market and the economy for some time to come.
Author: Quinton Boucher
Edited: Calvin Swemmer
