Disaster for businesses in South Africa – new smoking laws putting thousands of jobs at risk
Businesstech - Staff Writer
Tobacco industry stakeholders say newly proposed smoking laws for South Africa introduce extreme and inappropriate penalties for businesses in the country and will kill thousands of small businesses and the jobs they provide.
The new Tobacco Products and Electronic Delivery Systems Control Bill is currently open for public comment. The bill was tabled before parliament in mid-December 2022 and has undergone extensive reviews and consultations.
The bill effectively outlines new regulations and prohibitions for tobacco smoking and electronic cigarettes or vaping.
A survey conducted by Clippa Sales and Casa Tabacs among more than 200 specialist tobacconists in South Africa – representing 1,769 stores which directly employ 3,194 people – has indicated overwhelming opposition to the new bill.
The bill’s proposed regulations include a complete ban on the display of all tobacco and related products across all retail channels, even in specialist tobacco stores – sparking concerns across the industry.
The ban includes the display of cigarettes, cigars, e-cigarettes, vapes, hookah pipes and heat-not-burn devices. In the case of specialist tobacconists, tobacco and vaping are typically the only products they sell.
“While the Tobacco Bill creates significant trouble for all tobacco products retailers, it is clear from the research into specialist tobacconists that proposing a total ban on displaying the only products they sell in their stores is an existential risk to their businesses. These are legal products that are only sold, by law, to those over the age of 18,” said Clippa Sales Director Alex Jacovides.
According to the survey, 98% of respondents, all small businesses operating across the country, disagreed with the display ban, with 99.5% saying it would severely impact their business, threaten their sustainability and place thousands of jobs at risk.
Additionally, 75% said the bill would criminalise hard-working legal businesses, while 86% said it would damage the lives of employees who depend on small businesses, especially in these exceptionally tough economic times.
According to Diane Bravo – the owner of specialist tobacco retailer Casa Tabacs – a display ban at specialist tobacconists will force companies to close their doors, impacting the fiscus and, most importantly, jobs.
Of more concern, however, is that the bill prescribes a penalty of 10 years imprisonment and, or a fine for displaying a single packet of cigarettes on the counter, even by mistake. 99.5% of respondents said the penalty is extreme, inappropriate and severely damaging to small businesses.
According to Jacovides, bans don’t work, and the government should have learnt this hard lesson during the Covid-19 tobacco ban – but obviously, it didn’t.
“People under 18 don’t shop at specialist tobacconists, where the age limit is already strictly enforced. What is required is education and enforcement of the current laws, not another blunt legislative instrument,” he said.
96% of respondents believed the display ban would have the same impact as the Covid-19 tobacco ban, which led to a massive increase in the sales of illicit tobacco products. 80% said the display ban would further entrench the illicit tobacco market.
The illicit trade’s market share currently stands at around 60% of the total tobacco market in South Africa. While it was high before Covid-19, the tobacco ban significantly increased illicit trade’s market share to the point where it now far exceeds that of legal tobacco companies, said Bravo.
“This alone should show that bans lead to unintended consequences. In this case, the ban will damage legal businesses while opening the floodgates for illicit traders,” he added, posing a significant risk to South Africa’s fiscus.
Business Leadership South Africa estimated that the tobacco bans during the lockdown cost the government as much as R35 million a day in lost excise and other tax revenues.
Throughout the 20-week sales ban, it is further estimated that the government lost approximately R6 billion in excise duties on cigarette sales.
Making things worse is that the bill also proposed standardised or plain packaging, where all brands of cigarettes and related products must look the same.
“This makes them easy to counterfeit, which is going to drive crime and lawlessness in our country further and entrench the organised criminal networks that have grown and prospered since the Covid-19 tobacco ban,” said Bravo.
The specialist tobacconists said that they must be exempted from the ban, as has been the case in other countries.
“It’s time our government lived up to its promise of creating an enabling environment for small businesses and allow us to continue to contribute meaningfully to the economy and the creation of jobs.
“The survey results indicate that the proposed tobacco bill will have serious negative consequences for specialist tobacconists and our employees. We are calling on the government to consider the economic impact of this bill and engage with the sector to find a balanced and sensible approach to tobacco regulation in South Africa,” said Bravo.
The Portfolio Committee on Health has opened the Tobacco Products and Electronic Delivery Systems Control Bill for public comment.