A customer at Saverite Supermarket in Sunnyside bulk-buys cigarettes. Picture: Thobile Mathonsi African News Agency (ANA)
The tobacco industry could lose close to 29 000 jobs if the Tobacco Control Bill was passed in its current form with sweeping new restrictions that could only benefit the illicit sector even further, according to new research conducted by Oxford Economics, in a report released yesterday.
The independent economic advisory firm estimates a further decline of 28 704 jobs supported by the sector.
The research found that 35 991 tobacco industry jobs had already been lost between 2019 and last year, primarily due to the rapid growth of the illicit sector, which it said now made up 63% of cigarette sales.
The research conducted by the global research organisation Oxford Economics and commissioned by the South Africa Tobacco Transformation Alliance (Satta) also provided some detail on the contribution that the tobacco industry made to the country’s gross domestic product (GDP).
It said the tobacco industry’s gross value added (GVA) to the country’s GDP was R48.4 billion in 2019 but had dropped to R44.7bn last year.
Oxford Economics believed there would be a further R7.5bn decline in the tobacco industry’s GVA contribution to GDP if the Tobacco Control Bill was passed in its current form.
Although overall tobacco consumption was not expected to change as a result of the legislation, it said the bill was likely to result in a migration of legal sales to illicit.
It said many of Satta’s members lived and worked in the rural areas, and it was there, particularly on black-owned farms, that the impact of the illicit sector’s growth had been felt the hardest.
More than 100 black tobacco farmers had already gone out of business or left the sector.
Satta said that while it respected the government's initiative in tobacco control, they were urging consideration of the wider implications. The organisation said introducing certain measures, such as plain packaging, might inadvertently bolster illicit networks and counterfeiting, further risking the livelihoods of tens of thousands of people.
“What is equally baffling is government’s inability – or downright refusal – to see how counter-productive the new legislation will be for the national fiscus. Because of the massive decrease in legal tobacco sales, revenue collection from tobacco sales has dropped significantly. According to the Oxford Economics research, illicit cigarette sales shaved more than R20bn off the national fiscus last year alone, and R72.2bn from 2020 to 2022.”
The report said the research came at a time when the government was caught in a vicious circle and needed to do whatever it could to increase tax revenue to avoid a punishing austerity programme and massive cuts to government services while at the same time it was considering new tobacco legislation that would open up even more space for the illicit sector and decrease tax revenue even further.
In light of these findings, Satta stressed the importance of a comprehensive understanding of the industry value chain and the impact the bill would have, before progressing with the draft legislation.
This meant that an independent socio-economic impact assessment, undertaken and debated in the National Economic Development and Labour Council (Nedlac) was essential – a point that Satta had already made in its submission to Parliament, and which it intended to repeat when oral hearings were conducted in Parliament.
Satta spokesperson Zach Motsumi asked what the government and the country had to gain with this bill as, according to them, it would increase illicit trading, reduce revenue and not reduce smoking due to lower illicit prices.
“In the interests of the national fiscus, the tobacco industry and the thousands of people who rely on it for an existence, Satta calls for a holistic review of the Tobacco Control Bill,” Motsumi said.
According to a GlobalData South Africa Tobacco Products Market Report Overview published in December last year, the South African tobacco market size was R39.2bn in 2021.
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