British American Tobacco South Africa (Batsa) will be looking for avenues to urge lawmakers to enforce existing tobacco legislation as a means of stamping out the rise of illicit cigarette trade instead of passing the proposed wholesale new laws.
This comes as the Department of Health has proposed a new law that bans the display of all tobacco products, including harm reduction products such as e-cigarettes, vapes and heat-not-burn products, at retail level, even in specialist tobacco stores.
The Tobacco Products and Electronic Delivery Systems Control Bill was tabled before Parliament in December 2022, starting the process of getting proposed changes for smokers and the tobacco industry into law.
The tobacco trade in South Africa has experienced dramatic shifts since the Covid-19 tobacco ban as the SA Revenue Service and law-enforcement agencies struggle to keep pace.
Batsa argues that the unconstitutional 2020 tobacco sales ban resulted in an explosion of growth for the illicit market and this has continued even after the ban on tobacco sales was lifted.
The largest tobacco manufacturer in South Africa has lost around 40% of its cigarette sales over the same period as the illicit market accelerates.
This has resulted in the company laying off at least 30% of its workforce than it had pre-Covid, with a further 200 retrenchments in the pipeline.
Batsa therefore is of the view that the proposed legislation would restrict legal tobacco traders even further and simply hand over the market to illicit traders who do not comply with existing legislation.
Batsa general manager Johnny Moloto on Friday took Business Report on a tour of the company’s factory in Heidelberg for an in-depth look at how illicit trade was affecting their operations as they are continuing to decommission cigarette-manufacturing machines and lay off staff.
Moloto said they wanted to enlighten the government about the impact of the illicit tobacco trade and share best international practices to solve these challenges.
He said the industry could see an improvement if the government enforced existing legislation, improved border controls, introduced a minimum retail sales price, ratified the protocols to eliminate illicit trade in tobacco products and implemented track-and-trace systems.
“Our view is that currently you do have a Tobacco Control Act that is not being properly enforced. It's something that we've been calling for, for quite a while now, to say that you already have tools at your disposal. Start with that,” Moloto said.
“We are not sure (that) if you move to a much more stringent type of legislation, how is that going to change the situation, because it’s not about the legislation, it’s about its enforcement.
“We are moving to a much more stringent type of regulation that doesn’t give us any confidence that you’ll be able to actually deal with the current challenges that you have.
“So that is our concern in terms of this bill. It goes a step way too far without proper consultation. It’s being rushed through with no a proper socio-economic impact assessment.”
According to Batsa, illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market, raking in more than R24 billion which is a huge loss in excise revenue for the government
This illegal trade has severely impacted the sustainability of the legal tobacco industry and is allegedly a source of funds for criminal organisations in South Africa.
“The illicit trade robs South Africa of billions of rand in much-needed tax revenue, and the impact of this is now clearly being seen on legitimate businesses, their operations, and unfortunately the livelihoods of those in their value chains,” Moloto said.
“Legitimate businesses cannot operate competitively if the country’s laws are not enforced.”
Moloto said they believed that every stakeholder had a role to play to make sure that the legitimate industry fights against illicit trade and remains compliant.
“We are not anti-regulation. In fact, we believe regulation is the cornerstone of a good functioning state because it allows everybody to know the rules of the game and play by the rules of the game, and the government can be the referee,” he said.
“But at the moment, we are not seeing any referee nor any regulations. The government has to clean up the market, it has to take control of the entire tobacco market, both legal and illicit, to make sure that once you have that, what gaps are you trying to close.”
BUSINESS REPORT