In the coming weeks, tobacco companies will argue in court that their products should be sold under lockdown regulations. The government has so far disagreed, citing what it says are studies showing that smoking increases the risks associated with contracting Covid-19. It argues that a ban is needed to keep people out of hospitals.
Co-operative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma explained the then reasoning in April, saying: “When people zol, they put saliva on the paper… And when they share that zol … they are moving saliva from one to the other.” Her reasoning has since made its way into remixed songs that pop up across social media.
But, behind the scenes, an increasing amount of attention is being given to the illicit cigarette market that has exploded thanks to the ban on selling tobacco legally.
Samantha Filby, the coauthor of the report “Lighting Up The Illicit Market: Smoker’s Responses to the Cigarette Sales Ban in South Africa”, said the ban is “feeding an illicit market that will be increasingly difficult to eradicate”.
The research says 16% of smokers quit during the lockdown. It also says that 90% of those who did not quit are still buying cigarettes, indicating the scale of the illegal market.
Filby said multinational tobacco companies have probably lost some money and that the local producers may have made more money during the lockdown, because of their increase in market share and the huge hike in prices. She also said the government could have lost about R1.1-billion a month in revenue.
The same research unit released a study in 2019, which found that, by 2017, one out of three cigarettes smoked in South Africa was illicit. In 2018, survey company Ipsos found that illicit prices are 73% cheaper than on the legal market.
The loss of tax revenue has meant stamping out illegal sales has long been a focus for the South African Revenue Service. Last year, it instituted a civil process to recover R200-million it said was lost to the fiscus through the illicit tobacco trade.
But, although cigarettes do bring in a great deal of money, Filby said that the revenue from potential excise taxes on tobacco products should not be “exaggerated”, because they contributes only 1% of total revenue, although it does not make “economic sense to not collect this revenue”.
The World Health Organisation said last month that smokers are more likely to develop a severe case Covid-19, compared to non-smokers. This is the situation the government says it is trying to avoid with its ban. But in the courts papers, British American Tobacco South Africa (Batsa) said that there is not sufficient evidence to support the link between smoking and Covid-19. The company — supported by Japan Tobacco International, as well as groups and organisations representing the tobacco value chain countrywide — wants the ban to be declared unconstitutional and invalid.
Batsa also claims that the prohibition of the sale of tobacco is harming its customers’ emotional wellbeing, because many use these products routinely — like having coffee in the morning. The company said it has lost an average of R322-million a week during May.
On Tuesday, the high court in Pretoria found that the regulations in level four and three of the lockdown were unconstitutional. But it purposefully did not address the tobacco regulations because of the court case next week. The court however suspended the setting aside of the regulations pending the state’s review of some of the regulations.
Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian.