UCT study stubs out argument for continued cigarette ban
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Cape Town - A second study done at the University of Cape Town has found that the price of bootleg cigarettes has soared further still during eased lockdown conditions and that the ongoing ban has proven to be a bonanza for the black market, with negligible public health benefit.
The researchers argued that the extension of the ban beyond level 5, or the country's "hard lockdown", had been misguided and that it should be lifted immediately.
They found that as a mechanism to bring smokers to quit, the ban had outlived its limited use, with 70 % of those who gave up having done so before May 2; in other words, during lockdown level 5. A study done on the first five weeks of the ban showed that only 16% of smokers had managed to give up then.
Professor Corné van Walbeek, the director of the Research Unit on the Economics of Excisable Products at UCT, said: “The intended lockdown benefit of people quitting smoking was mostly realised in lockdown level 5. The percentage of respondents who quit subsequently has decreased to little more than a trickle.”
In addition, the number of respondents who said they now regularly shared cigarettes had increased from 1.7% to 8.9% as the price of cigarettes increased by some 250% compared with pre-lockdown market prices.
"The average price per cigarette was R5.69, or R114 (US$6.92) per pack of 20. Some respondents reported prices as high as R300 per pack of 20 or R3,000 per carton of 200 cigarettes. This is significantly higher than the 90% increase in cigarette prices observed in an earlier survey in May 2020."
The study was conducted over two weeks in early June, with 23,000 respondents interviewed online. It was funded by the Bill and Melinda Gates Foundation, the World Health Organization and the South African Medical Research Council, among others.
In summary of their study, the research team said the ban was undermined by the evidence they found.
"The authors argue that the intention of the sales ban, in terms of smokers quitting and reducing spreading Covid-19 through cigarette sharing, is undermined by the fact that so many people are still smoking cigarettes and by the increased occurrence of cigarette sharing.
"They conclude that the extension of the ban beyond lockdown level 5 has been misguided, and recommend that the ban be lifted immediately. The sales ban has stimulated the already large illicit market. Illegal distribution channels have become more entrenched, which will have lasting public health and economic consequences."
The study found that whereas before the imposition of the ban, formal retail outlets accounted for 53% of tobacco sales, this had now shrunk to 0.3%. Most cigarettes were now traded through "informal channels", including spaza shops and street vendors who accounted collectively for 36% of ongoing sales.
The researchers said that for every month that the ban, which came into effect on March 27, continued, the government would lose at least R1 billion (US$61 million) in revenues.
Moreover, the formal tobacco market has been greatly destabilised, and this would have consequences, including a potential price war that would drive the price down to pre-lockdown levels.
“The tobacco sales ban during the lockdown has thrown the cigarette market into disarray. The market has completely changed," Van Walbeek said.
"Whereas previously multinationals dominated the market, their share of sales has decreased to less than 20% among the people who were sampled. Most of our respondents have been forced to switch brands, a large proportion of which are produced by local manufacturers."
He added that more than half of all cigarettes bought by those interviewed in the survey were brands from companies in the the Fair-Trade Independent Tobacco Association (Fita) stable, including the Gold Leaf Tobacco Corporation, Carnilinx and the Best Tobacco Company.
British American Tobacco had dropped to fifth place in the market, with its brands only representing 9% of those purchased by respondents.
"Manufacturers that were previously operating in the shadow of the multinationals have greatly increased their market share amongst the survey respondents. It seems likely that there will be a price war after the sales ban is lifted," the researchers said.
"The multinationals, with the support of their foreign-based principals, would want to regain some of their market share. Their local rivals, probably buoyed up by the profits earned over the lockdown period, would want to hold on to their new market share… prices are likely to drop below their pre-lockdown levels."
It is estimated that there are up to seven million smokers in South Africa. Both Fita and BAT South Africa are challenging the ban in court.