It was an emphatic “no” when ministers were asked on the eve of the second wave of SA’s national lockdown whether the ban on the sale of cigarettes would be lifted.
This has been a sensitive topic for the country’s 11-million smokers, of whom many had only stocked up enough to get them to April 16, when the lockdown was originally meant to end.
Tobacco was not classified under the regulations, gazetted by the government, as essential goods.
The World Health Organisation (WHO) has said that smokers are likely to be more vulnerable to Covid-19.
On April 9 President Cyril Ramaphosa announced a two-week extension of the lockdown, which was implemented to curb the spread of the Covid-19 virus, until the end of April. During his announcement he said some of the regulations put in place would be reviewed, giving hope to some that the ban would be lifted.
Despite the anxiety among smokers about how they are going to get to the end of the month, the argument that has been put forward is how much the ban is costing SA’s economy.
The Fair Trade Independent Tobacco Association (Fita) on Friday announced that it would go to court to fight the ban imposed by government. Fita is arguing that the ban has consequences for the tobacco industry value chain, which includes farm workers, factory workers, informal traders and many who rely on tobacco for a living.
The coronavirus has caused panic and fear across the globe and brought economies to a standstill. SA’s lockdown has compounded the country’s own economic problems, with small and medium enterprises (SMEs) at risk of shutting down.
Tax Justice SA, an NGO campaigning to stop the illicit economy and return billions in lost tax to the people, said that in the first two weeks of the national lockdown the ban on tobacco sales had cost the country R490m in cigarette excise duties.
Corné van Walbeek, professor at the School of Economics and the director of the Research Unit on the Economics of Excisable Products at the University of Cape Town, said the amount given by Tax Justice SA was “roughly correct”.
“Taking account of the pre-lockdown purchasing spike, the loss of R490m during those two weeks of lockdown looks reasonable.”
The government expected to collect about R14.5bn in excise taxes in 2020/2021, so a two-week proportion is about R558m, he said.
While the loss on tobacco products is substantial, Van Walbeek said that from a total revenue perspective it is “small change”.
“The lockdown is a catastrophe for the government. I suspect that the government would feel lucky if they can keep the loss of revenue due to the pandemic at less than R100bn,” he said.
The SA Revenue Service (Sars) said that during the financial year to March 2020, it had collected R13.9bn in terms of locally manufactured cigarettes.
On how much money the tax agency is expected to lose due to the coronavirus lockdown, Sars said it had not received any directive to relax any provisions of the Customs and Excise Act in relation to the payments of excise duties. Therefore it requests that all revenue due must be paid as per the prescribed due dates in terms of legislation.
There is also the claim that the ban on the sale of tobacco products is fuelling the illicit cigarette trade.
There have been a number of arrests by the police during the lockdown.
Former Sars official Johann van Loggerenberg, who wrote a book on the tobacco industry with an emphasis on illicit trade, said those who were selling illegally and under cover were “having a roaring trade”.
He said photos he had seen from the police arrests showed that the cigarettes that were being seized were clearly illicit cigarettes not usually available in the local market or mostly brands that were commonly known as “cheapies”.
“These people never pay proper taxes. They are actually expanding [now], because people who used to pay tax cannot manufacture, import and distribute. Smuggling rings are expanding massively and they are stepping into the gap.”
Other organised crime syndicates that were more involved in selling drugs have expanded their range of products to include cigarettes. And small entrepreneurs who before lockdown were selling other things are now selling illicit cigarettes.
Van Loggerenberg said all of this placed an additional burden on the police and Sars, which should be focusing on general law enforcement, the lockdown and the movement of goods and people, but are now preoccupied with looting, theft, smuggling and roadblocks.
This increases the cost of policing and increases costs for the prosecuting authority and Sars, at a time when money needs to be rerouted to fighting the coronavirus pandemic.
Van Walbeek, however, said it is impossible to say that there has been a sudden spike in the illicit market because of the lockdown.
He said that according to the tobacco industry any tobacco control intervention would increase illicit trade. “The evidence for this claim is patchy at best and always self-serving.”
What Van Walbeek and Van Loggerenberg both agree on is that the ban on cigarettes is gratuitous, especially when citizens can still buy sugar products. “If cigarettes are not a necessity, why are we allowed to buy chocolates?” asked Van Walbeek.
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