South Africa:Cigarette ban could force 11 million smokers to seek illicit traders, industry warns

Government’s decision to ban cigarette sales during the coronavirus lockdown period will unintentionally give rise to illicit trade in tobacco as smokers are highly likely to end up buying from underground traders selling illicit products, SA tobacco manufacturer British American Tobacco South Africa (BATSA) warned on Saturday.

In its view, this would result in a setback for the recent strides made by government to try and clamp down on the illicit tobacco trade.

Earlier this week, SA Revenue Service commissioner Edward Kieswetter said it would have to “start from scratch” in its efforts to find a service provider that can help it clamp down on illicit cigarette trade. He said revenue collections for the 2019/20 tax year include taxes on cigarettes which grew 9.3% to R127 billion.

BATSA has 78% of the market share of the legal cigarette market in SA. It sells its cigarettes through 50 000 outlets in the country. In 2019, BAT South Africa contributed R13 billion in total taxes, of which R10 billion was tobacco excise.

“[The ciragette sales ban] will unintentionally force 11 million smokers to go outside of their neighbourhoods in search of outlets willing to defy the ban, as we’ve seen in some media reports,” BATSA says in a statement.

“This would lead to greater movement of people and more interactions than if smokers were able to buy cigarettes at their nearest legal outlet at the same time as buying all their other essential goods.”

While the company says it supports governments effors to curb the spread of the coronavirus pandemic, it would like to see practical and enforceable solutions implemented.

“We recommend that smokers be allowed to purchase cigarettes as part of their purchases of essential goods at a supermarket, grocer, petrol forecourt and spaza closest to their home,” urges BATSA.

Furthermore, the company is concerned that a recent lifting of restrictions on the movement of non-essential freight across the country’s borders, actually opens the door to the smuggling of illicit tobacco as this is one of the ways through which these cigarettes reache the SA market, according to BATSA.

“While we support the need to facilitate continued trade, we are deeply concerned that allowing cargo imports, on the one hand, while preventing local manufacturers such as BAT from manufacturing or selling their own products, on the other, will further penalise local manufacturers, to the benefit of illicit imports,” it says.

It also points out that BATSA exports to some countries which are not currently under lockdown.

The Fair Trade Independent Tobacco Association (Fita), also urges government to reconsider the nationwide prohibition of the sale of cigarettes.

It said in a statement on Saturday that it fully supports a recommendation by the Democratic Alliance (DA) to national government for the unbanning of the sale of “non-essential” goods in retail stores that are currently trading.

It hopes more clarity will be provided after a government meeting apparently set to take place on Saturday. Fita believes the benefits of such a step would far outweigh the negatives. It too acknowledges that the lockdown measures have been put in place for a good reason.

Yet, it feels a need to provide government with more input in this regard on proposals which, in its view, would better suit trading in the current situation.

“It is also of great concern that there have been increases in incidents of break-ins and thefts from shops and storage facilities which stock these so-called ‘non-essential’ goods,” states Fita.

“We have no doubt that this, in turn, will feed underground markets and overload an already struggling and overloaded criminal justice system were the perpetrators to be apprehended by law enforcement agents.”

Like BATSA, Fita foresees that, out of desperation, people will contravene the lockdown regulations in order to obtain goods deemed as “non-essential”.

“Those involved in the illicit trading of these goods have exploited the ‘gap in the market’ and are supplying citizens who are now resorting to acts of criminality to obtain these goods at all costs,” says Fita.

“Uplifting the ban would, amongst other things, bring more money into the state coffers, stimulate the economy, and decrease the psychological impact on South Africans of the lockdown period.”

Last year SARS issued a tender to find a service provider for production management of a “track-and-trace” solution that would be used to monitor the movement of cigarettes from production to sale. This is to ensure that no tax revenue would be lost to SARS through the illicit economy.

News24 reported that on Thursday Police Minister Bheki Cele warned that the police will crack down on businesses selling cigarettes in the Western Cape. This after the DA-led Western Cape government lifted it on Wednesday, saying cigarettes may be sold during the lockdown, but only together with essential goods. Cele emphasised that the ban on cigarette sales is nationwis.

Source:https:fin24.com/