By Ramotswedi Rammutla 16 July 2020
Mahikeng: The ban of tobacco since the beginning of lockdown in March was put in place to reduce complications for smokers and secondary smokers, should they contract the corona virus. The Fair Trade Independent Tobacco Association, TIFA has taken government to task through the courts to fight against the ban. Government has stuck to their convictions and will not allow it even after they allowed alcohol sales which were suspended again on Sunday by President Cyril Ramaphosa. This has resulted in a R400 billion lost in the mainstream value chain of the industry.
According to a 2018 Ipsos Tobacco market study report, illegal cigarettes accounted to 33% of all sales made in South Africa. These are cigarettes in the informal market which makes up 42% of the informal market. “As of 2019 the minimum collectible tax on a pack of 20 cigarettes was R17.85 making any pack selling for less than this suspect of being illegal” said a British American Tobacco (BAT) statement. Local producer Golden Leaf Tobacco (GLT) producers of South Africa’s top selling brands RG and Savannah sells at between R10 and R15 a packet and had a 73% share of the market with the other four producers only a combined 27% share. BAT only made 0.9 % in sales while GLT had 76.1 % indicated the report.
The realities on the streets are that cigarettes have continued to be sold in the black market, in South Africa allowing illicit trade to boom as prices increase by over 300%. At the start of lockdown, brands belonging to the big tobacco brands were the first to feel the pinch as they went up. Dunhill Courtleigh the best selling of the brands went from R3 a single cigarette to R6 within days of the ban. By the second and third week of lockdown the cigarettes went up to R10 a cigarette. This lasted until they were unavailable in the black market; RG brands that were sold for 50 cents to R1 took the same route with them reaching the R3 mark within the first week. They reached a peak price of R5 by the end of March. The price fluctuated until the lockdown was eased to level 3 on June 1, which saw a decrease to a flat rate. Those products are now being sold for R4 a unit with some selling them at R3.50. This means a packet of the cheapest cigarettes is now being sold at between R70 and R80.
These sales are not taxed and have seen traders making a considerable amount of money from the product alone. Traders have confirmed that they have not stopped selling them because of the prospects in that trade and the high demand. This was the same pattern that followed the alcohol ban which saw prices sky- rocket with a normal 750 ml beer being sold at around R40 a bottle. The cheapest brands by South African Breweries were being sold at around R350; a case of 24 bottles, 340ml and 440ml being sold from R350 to R450. This has become the norm for those unable to quit.
As the alcohol prices peaked and went extremely high, the supply of retail brands was at its minimum in the black market; the same thing happened where we witnessed home- brewed African beverages becoming the new top sellers in the informal market. This has raised questions of whether the ban has had any impact in how the disease spreads or the increase in number of cases because the sale of these products did not stop.
The North West province had the highest percentage of sales of “Tobacco” products below minimum collectible tax at 52.2% followed by the Western Cape at 50.3%, Limpopo 48.9% and Gauteng at 44.8%. Cigarette and alcohol sales remain banned in South Africa as Coronavirus cases go over the 300000 mark and deaths to 4000 plus.
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