Tobacco association fears industry might collapse as sales ban sees boom in illegal cigarette trade

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Durban – The illegal cigarette trade was thriving due to the ban on legal sales and may lead to the collapse of the legitimate industry, tobacco firms have said.

The continued ban forms part of the state’s regulations governing the Covid-19 lockdown and has been in place since March 27.

Fair Trade Independent Tobacco Association (Fita) said the illegal cigarette trade was one of the main reasons it was contesting the ban in court.

Last week, Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini Zuma said the decision to allow cigarettes to go back on sale had been reversed by the National Command Council (NCC).

This came just days after President Cyril Ramaphosa had said the ban had been lifted.

Ramaphosa this week sought to dismiss suggestions the U-turn on tobacco sales pointed to a power struggle within the NCC on Covid-19, and said it was a collective decision.

Fita chairperson Sinenhlanhla Mnguni said yesterday the thriving illegal trade would result in the collapse of the legitimate tobacco industry even after the lockdown and would affect the economy badly.

“South Africa has historically had a problem with illegal cigarette traders. However, during the lockdown, it has grown in magnitude. People are still smoking on the same level that they were before the lockdown,” said Mnguni.

He said this was concerning because the question remained about where these cigarettes were coming from as all manufacturers in the country were closed and sales prohibited.

“The SA Revenue Service (Sars) is not currently able to leverage off and collect much-needed revenue. Sars collects roughly R15 billion annually on cigarettes and other tobacco products.”

British American Tobacco SA, the local division of the world’s second-largest tobacco firm, said on Wednesday it had decided not to launch a legal challenge to the ban on cigarette sales.

It said the decision was informed by a response it had received from the government, and would instead pursue further talks with the government on lifting the ban.

“Having considered the response from the government and noting President Cyril Ramaphosa’s public statement of Monday, May 4, as a business we have taken the decision not to pursue legal action at this stage but, instead, to pursue further discussions with government on the formulation and application of the regulations under the Covid-19 lockdown,” the company said.

It also said “the significant rise in the illicit trade of tobacco during the lockdown period continues to be of great concern and threatens the livelihood of many who depend on legitimate businesses to sustain themselves”.

Finance Minister Tito Mboweni has publicly said he opposed maintaining the ban, which has, so far, with the ban on alcohol sales, cost the state R1.7bn in lost revenue.

Tax Justice South Africa, led by outspoken activist Yusuf Abramjee, said the ban on the sale of cigarettes did not make any sense as illegal traders were pocketing millions of rand daily.

“The illegal cigarette trade is thriving. These traders are selling in townships, parking lots, and some shopkeepers are selling for them. This goes to shows how desperate people have become,” he said.

Professor Jannie Rossouw, the head of the School of Economic and Business Sciences at University of the Witwatersrand, said the country’s economy would suffer from the ban in the long run.

Rossouw said the moment the government banned something, the illegal market thrived.

He said illegal sales had been ongoing for years, but nothing had been done to curb that trend.

“It is really a bridge too far to expect that the government could do something about the illegal traders during this period.

“The outcome of this ban may be that people continue buying illegal cigarettes if the ban goes on for a very long time, and worse, even after lockdown,” he said.

The Mercury

By Sakhiseni Nxumalo and ANA

Credit: www.iol.co.za

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