BATSA tells court of R2bn revenue loss
• CEO of BATSA recounts in affidavit how government snubbed industry despite submissions
British American Tobacco SA (BATSA), the local division of the world’s second-largest cigarette producer, says it has lost revenue of more than R2bn due to the ban on the sale of tobacco products during the nine-week lockdown. The devastating effect of the continued ban on the company’s revenue was detailed in court papers filed in the high court in Cape Town, where BATSA is challenging the government after failing in its attempt to lobby for the legal sale of tobacco products.
British American Tobacco SA (BATSA), a division of the world’s second-largest cigarette producer, says it has lost revenue of more than R2bn so far due to the ban on the sale of tobacco products during the lockdown.
The devastating effect of the continued ban was detailed in court papers filed in the high court in Cape Town, where BATSA is challenging the government after failing in its attempt to lobby for the legal sale of tobacco products.
The ban has also led to a loss of tax revenue and has boosted illicit cigarette sales. The SA Revenue Service (Sars), which is expecting a huge revenue shortfall for 2020/2021, had expected to collect R14.5bn on excise taxes for tobacco over 12 months.
BATSA CEO Andre Joubert, in a founding affidavit filed on Monday, said the company was expected to suffer similar revenue losses in the future if the ban continued.
The company, supported by Japan Tobacco International (JTI), and groups and organisations representing the tobacco value chain countrywide, wants the court to declare the government’s regulations prohibiting the sale of tobacco products unconstitutional and invalid, and to have it reviewed and set aside.
Joubert said the national fiscus is losing out on billions of rand in excise duties and that
BATSA on its own usually collects and pays about R214m weekly in excise revenue to the fiscus, or more than R900m monthly. He said BATSA had held off on approaching the courts in the hope of being given an opportunity to engage with the government about the ban.
When the government called for public submissions on the regulations, before moving to level 4 of the risk-adjusted strategy, BATSA sent six submissions outlining why the sale of tobacco products should be allowed.
This was before the government backtracked on the announcement made by President
Cyril Ramaphosa that tobacco sales would be legal under level 4 of the lockdown. The decision was reversed days after the announcement.
One of BATSA’s submissions details the positive effect lifting the ban would have on the entire value chain, which includes 50,000 retail outlets being able to once again sell tobacco and vaping products, and how it would ensure job security for the thousands of employees in the tobacco industry in SA.
Joubert said the company had explained to the government that if the ban was extended it would be likely to result in foreclosure of a number of operations, such as farming, processing and local production.
It would have a strong effect on the revenue of local suppliers, distributors, retailers and wholesalers. It would also negatively affect BATSA’s sustainability programme for 10,000 informal retailers and result in the illicit cigarette trade completely replacing all legal tobacco and vaping products.
BATSA’s other submissions deal with the assertion that there is insufficient evidence to draw any firm conclusions on the relationship between smoking, vaping and Covid-19 to justify the extended sales ban, and that there is a need for a clear communication strategy over social distancing and the risk of sharing any goods that could worsen the spread of the virus, which applies equally to sharing utensils or a bottle of water.
Despite the submissions, the government did not revert to the tobacco industry before deciding to maintain the ban.
On May 22, BATSA directly made submissions to Ramaphosa on why tobacco products should be sold during level 3, but the company has not yet received any reply.