South Africa’s tobacco industry under threat

tobacco

Tobacco farming in South Africa (SA) is under threat due to an increase in the distribution and selling of illegal cigarettes.

Tobacco farming had been severely affected by the 2015 drought and South Africa has lost around 2 million tons in production since 2012.

Christo van Staden, Managing Director of Limpopo Tobacco Processors (LTP), says the drought had affected them a great deal, but the illegal trade in cigarettes is damaging the industry even more.

“We’ve emerged from the devastating drought of 2015 and yields are improving, but we face an even greater threat in the form of the illicit trade, which robs the legal industry of income and puts all the jobs and livelihoods in the tobacco value chain at risk,” says Van Staden.

Rudolf Otterman, LTP Chairperson, says production reached 13.5 million tons of tobacco in 2012, followed by a decrease to o 11.3 million tons in 2016.

British American Tobacco (BAT) estimates that 47% of SA’s tobacco market is controlled by illicit players, costing the economic up to R9 billion a year in uncollected taxes as production volumes are concealed from the authorities and escape taxation.

Joe Heshu, BAT Head of External Affairs, said that the illegal trade of cigarettes has severe implications on the economy and employment, mainly in the agriculture sector.

Also read:
Malawi farmers shun tobacco crop
Zambian tobacco producers want VAT exemption to stay competitive

“It is not just the annual turnover in processed tobacco of more than R600 million a year that is under threat, it is the job security of everyone in the value chain, from farm workers and commercial farmers, small-scale farmers in our highly successful emerging farmers initiative, people employed by tobacco processors, and at our production facility in Heidelberg and distribution and retail staff, not to mention the indirect jobs that this industry supports,” said Heshu.

An economic impact assessment conducted by Quantec, showed that BAT alone contributed more than R18 billion to South Africa’s gross domestic product in 2015, while its operations generated more than R14 billion in tax revenue and supported more than 72 000 jobs.

“If government continues to do nothing we will soon find ourselves in great difficulty to continue farming and manufacturing in South Africa,” Heshu said.

share this