SA’s proposed tobacco regulations risk jobs

Optimism is high, and everyone is hoping for a bumper season, with benefits for employment and the economy. Memories of the pandemic are fading quickly, but there are lessons to be learned from our government’s often high-handed response to Covid-19.

We have not yet recovered from the unintended consequences of absurd government regulations, which didn’t make any impact on the pandemic, but instead wreaked havoc with people’s livelihoods.

Who can forget Minister Patel’s bizarre lockdown clothing rules? For a time, until government reversed some of the most absurd regulations, South African retailers were banned from selling sandals, and could only sell “closed toe” shoes, and likewise with sale of short-sleeved shirts, unless they were promoted or displayed to be worn under jackets or jerseys. We couldn’t buy hot pies, or cooked Woolies chickens.

Then came the bans on the sale of liquor and tobacco, which ultimately led to the closure of Sturks tobacco shop on Greenmarket Square, after 226 years in operation. The country’s oldest tobacco store, established in 1793, was an institution that sold cigarettes, tobacco and all other related items to patrons. As the owner of Sturks, with no revenue or income, I had no choice but to tragically shut up shop.

The five-month tobacco ban also had a devastating consequence for the country’s cash-strapped fiscus, as smokers were forced underground to buy their cigarettes. The direct result of this was an explosion in the illicit trade in cigarettes.

These cigarettes are called illicit because the manufacturers evade the payment of excise taxes to SARS. So smokers still managed to buy product, but government lost billions in tax. Unfortunately, the effects of the tobacco ban, which was finally lifted in August 2020, have been irreversible and have entrenched the illicit trade which is now sitting at approximately 54%, according to Professor Corné van Walbeek from UCT’s Research Unit on the Economics of Excisable Products (REEP).

Revenue

This loss of state revenue, because of illicit tobacco sales, is estimated to be in excess of R12 billion per year. One can only imagine what the lost fiscal revenue could have been used for by our government to improve services, and the lives of struggling South Africans.

But the lessons offered by Covid-19 appear to have been forgotten by government, as Cabinet has now signed off on the new Tobacco Products and Electronic Delivery Systems Bill.

Let’s look at some of the provisions in the bill, and the unintended consequences of these proposed new laws.

First, the bill will ban the display of all tobacco products, including harm reduction products such as e-cigarettes and vapes, even in a specialist tobacco store! The bill will also introduce plain packaging, so all products will look the same.

We know it will not stop users purchasing products, but it will remove any brand differentiation, and so people will simply switch and buy the cheapest products, adding further fuel to the already massive illicit market, and further reducing excise tax revenue for government. In addition, counterfeiting, which is not currently a massive issue in South Africa, will increase significantly, especially since there will be no particular markers on the box to assure customers that they are purchasing the real products.-Fin24