25 January 2024
By: Lloyd Phillips
Business is going from bad to worse for the legal tobacco industry in South Africa and criminals are winning all the way.
The more the legal tobacco industry tries to become more sustainable and socially and environmentally responsible, the more determined the government seems to thwart these efforts.
This allows the illegal tobacco trade to increasingly flourish and costs the country tens of thousands of job opportunities and billions of rand, all in an economy already on the brink, says Zacharia Motsumi, spokesperson for the South African Tobacco Transformation Alliance (Satta).
“Last year was a very difficult year – probably the worst in the 120-year history of the tobacco industry,” he says. “Until 2022, the major threat was the unchecked increase in the illegal sector, with its sales currently estimated to constitute up to 70% of the total South African market.
“The new threat is the possible approval of the bill on the control of tobacco products and electronic delivery systems recently tabled in parliament. If this becomes law, it will make life even easier for the illegal sector. It will further change the nature of the market and disrupt the business operations of many stakeholders, including spaza shop owners and informal traders.”
Francois van der Merwe, a director of Limpopo Tobacco Processors (LTP), the sole supplier of cured Virginia tobacco leaves to local buyers, agrees. He says since the imposition of the ban on the sale of legal tobacco products during the Covid-19 pandemic in 2020, “the government has managed to hand over the entire tobacco market to criminal syndicates on a silver platter”.
From 2019 to 2023, consumption of legal cigarettes in South Africa decreased by almost 42%. Consequently, local annual tobacco production in this period decreased from 10 million kg to 5,8 million kg, About 36 000 jobs in the legal tobacco industry were lost and more than 150 new black tobacco farmers lost their markets. The National Treasury lost potential revenue of more than R72 billion.
Up to 37 billion cigarettes are consumed annually in South Africa but Van der Merwe says only about 13 billion are legal. Satta and LTP believe the steps needed to protect and promote the legal tobacco industry include a serious reconsideration or suspension of the “draconian” and “thoughtless” tobacco control bill.
The government must fully consult the legal tobacco industry and seriously consider its proposals on tobacco-related legislation, say the organisations. Much stricter action must be taken against the illegal tobacco industry. And the government must support the legal tobacco value chain, especially emerging black farmers, and support its transformation.
A more constructive approach should help shape the future of the legal tobacco industry. “The government frequently talks about the importance of developing black farmers. Here is an opportunity for it to put its words into action,” says Motsumi.
Van der Merwe says the government must tackle the illegal tobacco trade before considering legislation aimed at reducing tobacco consumption for health reasons. This will allow the legal tobacco industry to make its valuable contribution to the economy.
“If the government fulfils its constitutional mandate and duty, levels the playing field and protects legitimate value chains, there is a bright future for the tobacco industry in South Africa.”
