BAT jobs, tax data just more smoke, mirrors

HOW do you convince yourself that you are doing good? You can stand in front of the bathroom mirror and shout motivational affirmations, but your kids will question your sanity. You could do some research which shows how good you are. Or, even better, outsource the research to a credible third party. You have to pay, but you get to frame the questions to give you the outcome you desire. Then you issue a press release, brief the media, avoid awkward questions and end the day with an enhanced image.

The tobacco industry has played this game for decades.

British American Tobacco, which is trying to buy the balance of the shares in Camel maker RJ Reynolds that it doesn’t already own, this week ran its annual PR drive to cement its credentials as a good corporate citizen in South Africa. The statistics are impressive. It employs 2 200 people in South Africa, mostly at a manufacturing facility in Heidelberg from where it exports many of its products, so it also generates foreign exchange on locally beneficiated products. Tick.

Add a suitable multiplier effect to the number of people you employ, show that you acquire goods and services locally and before long you can claim that your presence in the market helps to keep 72 000 people employed. Some R6-billion a year in procurement goes to black-owned suppliers — and here is the clincher, it pays 25% of all excise duties to the fiscus, some R14-billion a year.

If you stop there, BAT provides compelling reasons why it should be encouraged to manufacture and trade. But nothing is that simple.

First, the claim that it “pays” 25% of all excise duties. It doesn’t. It is an agent for the South African Revenue Service in return for its regulated right to sell its products. It is the smokers who pay R15 on every box of cigarettes they buy. The manufacturers collect that money for the National Treasury.

Companies such as BAT have long since given up trying to play down the dangers of smoking. They admit that their product is harmful. We have come a long way from the ’50s ad campaigns that announced “More doctors smoke Camels than any other cigarette”.

The industry has always claimed to have research justifying its business model, but BAT doesn’t or won’t release data showing the cost of the effects of its products on the country’s economy.

The government is making it as difficult as possible for people to smoke. Draft legislation proposes a ban on smoking indoors, not even in designated areas, banning vending machines and regulating e-cigarettes. The industry is under siege and the timing of BAT’s latest research findings appears to be an attempt to force Health Minister Aaron Motsoaledi to backtrack. Why clamp down on an industry that does so much good?

The Treasury needs to urgently use some of that excise revenue to fund research into the real cost of smoking to the economy. There were attempts in the ’80s to scientifically quantify the costs of smoking and the Health Economics Unit at the University of Cape Town is eager to update that research. Without the data, how can the state effectively regulate a dangerous product? A 2007 study by the SA Medical Journal showed that in 2000, 44 000 South Africans died of tobacco-related diseases — third out of 17 leading causes of death after sexually transmitted disease and blood pressure.

If you give the cigarette industry the benefit of the doubt and assume smoking rates have declined and fewer people are dying and reduce it to, say, 36 000, it still means that one person dies prematurely in South Africa every year for every two jobs BAT claims to support.

BAT’s business is legal and its tax morality is not in question.

But without fully understanding the cost to the health system of smoking, how can we hope to appropriately tax it to ensure that a bad habit doesn’t burn a bigger hole in the national balance sheet?

Whitfield is a public speaker on the political economy and an awardwinning financial journalist, broadcaster and writer