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UCT academic accuses local cigarette firms of making a fortune during tobacco ban

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“The behaviour of the tobacco industry during the lockdown has been nothing short of disgraceful … the fact is that tobacco companies have been actively selling in the illicit market.”

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UNIVERSITY of Cape Town academic Corne van Walbeek has accused all South African cigarette makers of breaching the contested prohibition on tobacco sales imposed by the government in response to the Covid-19 pandemic.

“The behaviour of the tobacco industry during the lockdown has been nothing short of disgraceful … the fact is that tobacco companies have been actively selling in the illicit market,” he said on Thursday at the release of the South African chapter of the 2020 Tobacco Industry Interference Index (TIII) hosted by the National Council Against Smoking.

Van Walbeek, the director of the Research Unit on the Economics of Excisable Products (REET), penned the foreword to the index. He said 90 percent of cigarettes sold since March 27, when the ban took effect, were of brands produced locally, giving the lie to the claim by industry groups that the black market was flooded with counterfeit products.

“More than 90 percent of cigarettes sold during lockdown were of brands that were in South Africa before the lockdown, produced by known South African companies,” he said.

“Of course the tobacco industry is going to say something to the effect of ‘these have been counterfeited’. That is typically rubbish, there is relatively little counterfeit trade in South Africa, at least before lockdown, and there is nothing to suggest that there is going to be significant counterfeit during lockdown.”

He conceded that although the assumption was that cigarettes currently trading illicitly in South Africa were produced locally after the lockdown was imposed on March 27, “we do not know that” for a fact.

The government in May allowed cigarette companies to resume export production and trade experts have said this gave them cover to circumvent the sales ban by exporting excess volumes that were then smuggled into the South African black market.

Van Walbeek’s remarks were based on information REET gathered over two weeks in June when it interviewed 23 000 smokers.

He has called for the prohibition to be lifted because it has proven woefully ineffective in curbing smoking. The unit’s findings have been cited by the tobacco industry in two separate court challenges to support their arguments that the prohibition fails the legal tests of rationality and necessity.

If the ban did not prompt smokers to quit in large numbers, they contend, it bore no rational link with government’s objective of preventing them from falling severely ill with Covid-19 and overwhelming health facilities, he said.

A further obstacle for government is the absence in science of an established link between smoking and more severe infection.

Van Walbeek again delivered a broadside at the Fair-trade Independent Tobacco Association (Fita), which represents seven local cigarette makers, saying it had benefited more from the 140-day-old ban than any other industry player and increased its market share to around 60 percent.

Fita was the first tobacco group to launch a court bid to overturn the ban. It was unsuccessful in the North Gauteng High Court and is seeking leave to appeal the judgment in the Supreme Court of Appeal. British American Tobacco South Africa (Batsa), the country’s biggest cigarette maker, challenged the ban in the Western Cape High Court where judgment was reserved last week.

“The fact that Fita instituted the court case is especially ironic in that their members have been the main beneficiaries of the sales ban. Fita members have greatly increased their market share and have increased the price of their product by nearly 500 percent on average,” Van Walbeek said.

He ventured that, though the association was appealing the court a quo’s dismissal of their case, “the evidence strongly suggests that their loss in the high court can best be described as a ‘sweet loss’,” because of inflated prices to the thriving on the black market.

He was equally scathing of Batsa, suggesting that its loss of market share was a case of “reaping what it sowed” in the past in terms of excessive pricing and complicity in the now discredited narrative of an investigative “rogue unit” within the South African Revenue Service (SARS).

He ascribed Fita brands’ perceived edge in the black market over Batsa to their “better developed links with the informal sector”.

The index provides an overview of 2019 and found that government has had greater success in countering attempts by the tobacco industry to undermine policy, mainly because SARS had regained its investigative capacity since the rogue unit allegations were laid to rest.

“These concerted efforts by SARS to mitigate against tobacco industry interference has positively resulted in lowering the score of the Tobacco Industry Interference Index (TIII) from 72 in 2018 to 58 in 2019. This is a positive indication that government has strengthened tobacco control.”

The government is considering lifting the ban on tobacco sales along with that on alcohol trading to stem the loss of jobs, tax revenue and private sector investment to the economy facing its biggest contraction in 90 years. However, it is reliably understood that key Cabinet ministers are opposing the move.

Batsa declined to comment, and Fita failed to do so by the time of publication.

The index is published by the Global Centre for Good Governance in Tobacco Control (GGTC). It faults South Africa for still falling below the World Health Organization’s guideline of taxing tobacco products at a minimum of 70 percent of the retail price.

Since the ban began, there have been calls for taxes to be hiked to 80 percent but the industry has countered that it would further boost illicit trade.

– African News Agency (ANA)