Illegal tobacco trade ‘may reduce economic harm of ban’

Economic damage to South Africa from the current cigarette ban, which is thought to include the loss of billions of rands in excise tax, will be partly mitigated by economic activity from the growing illegal cigarette trade.

This is one of the statements included in court documents lodged by Cooperative Government and Traditional Affairs Minister Nkosazana Dlamini-Zuma to keep the 12-week ban on the sale of cigarettes and tobacco products in place, opposing a second court bid to resume legal trade.

Her 500-plus page affidavit contains a wide array of facts, analyses and opinions to retain the ban – which has been criticised by the tobacco industry as harmful to jobs, not effective in stopping smoking, and not supported by evidence.

The main focus of her argument in retaining the temporary ban is that emerging research supports the view that smoking leads to more severe cases of Covid-19, and that the ban is necessary as a precautionary measure to safeguard South Africa’s healthcare system. Dlamini-Zuma’s affidavit was recently lodged in a case brought by the country’s largest tobacco manufacturer, British American Tobacco South Africa (BATSA), and other tobacco groupings to have the ban undone.

This case is distinct from a challenge launched by the Fair Trade Independent Tobacco Association (Fita), which was argued in court last week.

Judgment in the Fita case has not yet been handed down.

The respondents in the case lodged by Batsa and the groups are Dlamini-Zuma, President Cyril Ramaphosa and the National Coronavirus Command Council.

Dlamini-Zuma argues that the economic impact of the ban would not be as severe as the scenario outlined by the applicants.

Citing a study by Genesis Analytics, she states: “(A)n ironic feature of the impact of the ban is that to the extent illicit trade in cigarettes grows, the adverse economic impact of the ban will be reduced.”

She said any analysis which predicted “maximum economic damage” from the cigarette ban is “on the face of it not credible” – due to the economic activity from the illegal cigarette market.

‘Economic damage’ from cigarette ban is ‘not credible’