Nothing better illustrates the rank amateurishness of ANC economic and industrial policy than the decision by British American Tobacco South Africa (BAT) last week to shut down its cigarette factory in Heidelberg.
Ever since former cabinet minister Nkosazana Dlamini Zuma was granted God-like powers by President Cyril Ramaphosa to indulge her narrow-mindedness in what South Africans could and could not consume during the Covid pandemic, the writing has been on the wall for local tobacco. She banned sales of cigarettes and alcohol in a country forced to endure great hardship in its mostly tiny shelters. The bans opened the way for illicit alternatives.
Finance minister Enoch Godongwana was blunt in his mini budget last November. “South Africa faces a problem of illicit trade that threatens our economy, endangers consumers and robs the fiscus of billions in revenue. According to the South African Revenue Service, since 2020 the government has lost about R40bn in excise revenue to the cigarette black market,” he said.
And the front-page lead in Business Day last Friday was brutal: 75% of the local cigarette market now is controlled by criminals (“Closure of BAT factory puts 35,000 jobs at risk”, January 16). As recently as 2014 local legal producers had almost that much of the market.
Tax receipts then were almost R13bn (almost the equivalent of a one percentage point VAT increase) and despite many increases in the duties on tobacco products they are around just R8.3bn today. A calamity sharpened by the likelihood that more people here smoke more now than ever before.
Not only will the BAT factory closure cost 4,000 jobs around Heidelberg, but another 30,000 will go in the Limpopo farms that supply it with tobacco, the people who transport it and the people who sell it.
Worse is the ripple effect. Not only will the BAT factory closure cost 4,000 jobs around Heidelberg, but another 30,000 will go in the Limpopo farms that supply it with tobacco, the people who transport it and the people who sell it.
The ANC has never appreciated how economies are joined together. In its fever to keep Eskom alive it allowed electricity tariffs to rise almost 1,000% under its command, forcing many industries to shut down, move away or just not bother doing business here.
Now, as the last two ferrochrome furnaces here were about to shut down in December it scrambled to concoct a plan to slash Eskom tariffs for the furnaces — once the world’s biggest source of refined chromite ore ― by more than half.
And it’s been going on forever as one conceited ANC minister after another comes up with a sure-fire way to fold the private sector into the often bizarre fantasies that pass for policy under this government. About 15 years ago the then department of trade & industry instructed Eskom not to buy steel from ArcelorMittal South Africa (Amsa) because it wouldn’t bend the knee to the state and charge lower “developmental” prices for its steel.
Then Lakshmi Mittal did a secret deal with then president Jacob Zuma, prices fell and the Eskom ban was lifted. Now, predictably, inevitably, Amsa is itself on its knees. It shut down its huge Newcastle integrated long steel plant last year, and the last blast furnaces in the country at the Amsa flats plant in Vereeniging are more than likely not long for this world.
Competition laws (also run by the department of trade, industry & competition) were then introduced to encourage, you know, competition, which would grow the economy. But they never have. Instead, every time an industry gets into trouble the government exempts it from the very laws it once insisted were going to be the new drivers of growth and wealth.
Dlamini Zuma won’t have to pay back the R40bn Godongwana implied her smoking bans in 2020 have cost the economy, but it would be nice to know she, and Ramaphosa, at least have some regrets about what they did and that, just possibly, the people in office today might begin to wonder whether they might have been wrong for a very long time.
• Bruce is a former editor of Business Day and the Financial Mail.
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