The country’s largest cigarette manufacturer British American Tobacco South Africa (Batsa) will legally take on the government for not lifting the ban on tobacco sales, as SA eases into alert level 3.
Beleaguered Batsa says it has made countless efforts to constructively engage with the government since the ban came into force in level five of the Covid-19 induced national lockdown.
This included making detailed submissions, along with other interested parties, to various ministers as well as directly to the Presidency.
“To date, no formal response has been received from the government, and Batsa has also not been included in any of the government’s consultation processes so far,” it says.
But now with the support from Japan Tobacco International (JTI) as well as groups and organisations representing the tobacco value chain across the country – including consumers, tobacco farmers and retailers – it will on Friday recommence urgent legal proceedings to challenge the government’s decision to extend the ban on tobacco sales during alert level 3.
Batsa’s argument is that the banning of tobacco as a legal product will have dire consequences, as 11 million smokers will opt to purchase illicit cigarettes thus “robbing the government of much-needed excise tax contributions.”
According to the South African Revenue Service, the estimated loss through the illegal cigarette trade for the 2015/16 financial year was R6 billion.
The University of Cape Town’s REET unit says Treasury’s losing R35 million in vital revenue from excise taxes every day that the ban on cigarette sales continues.
In 2019, Batsa contributed R13 billion in taxes, of which R10 billion was tobacco excise. It has a 78% market share of the legal cigarette market in South Africa.
Batsa head of external affairs Johnny Moloto says the company has stated its support for government’s lockdown measures, which were put in place to have time to prepare the health system for the anticipated surge in Covid-19 infections.
He says that based on the Presidential address on May 13 this objective has been achieved, as the government said it would engage in consultations to prepare the country for a further easing of the lockdown and a gradual opening of the economy under alert Level 3.
“Given the situation, and the lack of any response from the government despite our ongoing efforts to engage with them, we are now commencing urgent legal proceedings,” Moloto says.
“The government’s continued ban on legal tobacco sales is threatening the survival of the legal tobacco sector and the livelihoods it directly supports. It has only succeeded in significantly growing a massive and nationwide illegal industry at the direct expense of law-abiding businesses, citizens and taxpayers.”
He says prior to the national lockdown Batsa was the largest manufacturer of tobacco products in the country, therefore it “owes” it to its consumers, customers, suppliers and employees to do everything possible to protect the local legal tobacco trade and to get the prohibition of tobacco products lifted as a matter of urgency.
Tax Justice South Africa founder Yusuf Abramjee expressed his dissatisfaction with the government’s continued stance to not lift the tobacco ban.
“We are disappointed. The government continues to lose out on millions of rands in taxes. The continued ban does not make sense. The illicit trade is booming. Criminals are making big money and they are making more cash by the hour. Most smokers are still getting cigarettes,” Abramjee says.
The World Health Organisation earlier this month said: “A review of studies by public health experts convened by WHO on 29 April 2020 found that smokers are more likely to develop severe disease with Covid-19, compared to non-smokers….Smoking impairs lung function making it harder for the body to fight off coronaviruses and other diseases.”
Minister of Cooperative Governance and Traditional Affairs Dr Nkosazana Dlamini-Zuma explained in a council briefing that the tobacco ban was implemented to protect public health and decrease the potential strain on SA’s health system.