The South Africa Tobacco Transformation Alliance (SATTA) has launched a national campaign to draw attention to the almost 300 000 livelihoods that are at risk if government continues with its ban on the sale of cigarettes during the Covid-19 lockdown.
The ban on cigarettes sales has now been in place for more than 120 days. During the same period, illegal tobacco sellers have been making millions of rands a day selling smuggled cigarettes to South African consumers. This has resulted in a loss of approximately R4-billion in tax revenue for the South African Revenue Service (SARS).
“The only winners here are the tobacco smugglers and the illicit salespeople,” says SATTA chairman Shadrack Ntando Sibisi. “It is totally unacceptable that a legitimate, taxpaying business sector should be taken to the brink of ruin in such a way.
“Farmers are suffering, as are tobacco processors. Farmers cannot plant with certainty as long as the ban is in place, and tobacco processors are in the dark as to when they can resume activities again. The same applies with manufacturers — the knock-on effect hits the entire value chain.
Criminals in illicit trade are getting filthy rich, while the tobacco ban destroys the livelihoods of honest South Africans.#TheBanMustFall #LiftTheBanSA #LockThemUp@PresidencyZA @DlaminiZuma @the_dti https://t.co/qjHCshAPex
— Tax Justice South Africa (@TaxJustice_SA) July 20, 2020
Listen to the people, these farmers are struggling to make ends meet. This ban is affecting their families and livelihoods. Play your part by adding your name here https://t.co/fTcu4DGkv1 and encourage lawmakers to act. #SaveOurJobs #LiftTheBanSA pic.twitter.com/aK2OYF4UZc
— LiftTheBanSA (@LIFTTHEBAN_SA) July 26, 2020
“Legal tobacco manufacturers have also been adversely impacted. This has led to reduced services of long-standing contracts with suppliers and distributors.”
“Equally, retailers are suffering — in particular, spaza shop owners and small traders, who make the bulk of their profits from selling single cigarettes. They have been unable to trade legally since March, and their livelihoods are at stake.”
SATTA’s research has shown that more than 296 000 people are involved in economic activity across the entire tobacco value chain, and all are directly under threat from the government ban on cigarettes sales.
“Breadwinners are not earning an income, they cannot feed or clothe their families, and they cannot afford to send their children to school,” says Sibisi. It is a disastrous situation, and it has been created by the government without any convincing evidence that a ban on smoking will in any way help to combat Covid-19.
“South Africa is the only country in the world that has banned cigarettes. There is no justification for it, and we call on government to immediately lift the ban and allow cigarettes to be sold in the same way as before the lockdown.”
UCT study shows that the ban on the sale of cigarettes has been ineffective in getting people to quit smoking. The study also shows an increase in the sharing of cigarettes due to the ban on tobacco products. #LiftTheBanSA #SaveOurJobs #CigaretteBan https://t.co/E77NR9s5WD
— LiftTheBanSA (@LIFTTHEBAN_SA) July 27, 2020
'Economic dignity' is not achieved by wilfully destroying honest jobs, impoverishing decent citizens and diverting billions to criminals in illegal trade.#TheBanMustFall #LiftTheBanSA #LockThemUp@PresidencyZA @DlaminiZuma https://t.co/rJddGTcRid
— Tax Justice South Africa (@TaxJustice_SA) July 27, 2020
SATTA has been joined in its campaign — dubbed #LiftTheBanSA — by a number of other stakeholders in the sector. The Black Tobacco Farmers Association (BTFA), for example, is fully behind the campaign, and says its membership — almost 200 black tobacco farmers — are “on the brink of extinction”.
“We are unable to plan or plant; we are unable to harvest or sell. Soon, our businesses will go down the drain,” says BTFA. “Government must immediately lift the ban and allow cigarettes to be sold in the same way as before the lockdown, before it is too late.”
Limpopo Tobacco Processors (LTP), the biggest single supplier of tobacco leaf to domestic buyers in South Africa, has also called for the ban to be lifted.
“Our operations have effectively been put on ice because of the ban. This has jeopardised the economic future of our members and is threatening thousands of jobs across the tobacco value chain,” the organisation says. “We are also concerned at the massive growth in the cigarette black market during the lockdown. According to our calculations, approximately R36-million in tax revenue is being lost every day because of the ban on sales.”
Additional support for the campaign has come from Soweto Business Access (SBA), an advocacy group for economic upliftment in township and villages since 2015.
“We are alarmed at the rate at which the underworld syndicates are now brazenly and openly taking over the tobacco retail sector due to the lockdown regulations,” says SBA. “We urge the government to protect societies from these syndicates by immediately lifting the ban on the sale of cigarettes.”
Disastrous economic impact
In an interview with BusinessTech, Bernard Sacks, tax partner at financial services company Mazars, pointed to recent estimates that SARS has lost around R3.5-billion in uncollected excise duties on this one product class since March. However, that is an underestimate, he said, as it does not take VAT into account. “According to my estimate, Treasury is probably losing out on around R320-million in uncollected VAT per month. In total, SARS is therefore losing in the region of R1.5-billion per month.
“Again, this is not even the complete picture, since the loss is even greater when you include factors such as the uncollected fuel levies, manufacturers’ and supporting businesses’ corporate profits, and personal income taxes that this industry normally generates.
“We are looking at about R13-billion to R15-billion if this continues until the end of the year,” said Sacks.
If the ban (together with the alcohol ban) is “upheld until the end of the year, we are looking at total losses upward of R30-billion, estimates Sacks. “Once again, that figure is solely a calculation of lost excise duties and VAT — it does not take other lost taxes into account. This shows us just how hard these product bans are hitting the country on a fiscal level.”