Sharp Cigarettes Legal in South Africa

Ipsos` latest study of the tobacco market shows that the trade in illicit cigarettes has increased significantly despite promises of repression by the South African Revenue Authority (Sars). The illicit tobacco trade not only deprives the government of much-needed tax revenue, but also damages South Africa`s social fabric in many ways, with the government`s NCD health strategy being the most affected. Other studies conducted outside South Africa have shown that the proceeds of illicit trafficking support other criminal activities such as trafficking in human beings, terrorism and corruption, alongside various examples of criminal activities related to illicit trafficking. Measurement errors can also occur in that people did not answer honestly whether they could buy cigarettes for fear of being taken or how many cigarettes they smoked, because there may be stigma associated with smoking in certain demographic and cultural groups.27–29 We may also encounter distortions arising from the fact that: that smokers who were motivated to participate and complete the survey may have had stronger views about the ban or were most affected by the ban than the average smoker. The illicit tobacco trade is not only a threat to our business, but also a more serious national and social threat: that of organized crime. Instead, the illicit cigarette market in South Africa is heavily dominated by licensed local tobacco manufacturers who do not declare all their manufactured products to the South African Revenue Service (SARS). It is estimated that more than 90% of all illicit cigarettes in South Africa are produced locally, in highly visible factories in some of our largest metropolises. Smokers in higher income brackets still paid more for cigarettes during the ban, but the magnitude of the difference narrowed (the richest smokers paid 8.3% more for cigarettes than the poorest, up from 13.8% in the pre-ban period). Descriptive statistics show that prices rose sharply during the ban, followed by a sharp drop in prices after the ban.

In this section, we use regression analysis to estimate the effects of different covariates on cigarette prices (Supplementary Table 1) and how these effects differ over the three time periods. For the Preban period, we report 2SLS results, while for the other two periods, we report OLS results, as we did not find endogeneity in these regressions. Abramjee said that due to government restrictions, all cigarettes currently sold were likely produced on the black market. Decisive action must be taken. The creation of the SARS Illegal Economy Unit is a step in the right direction. South Africa must also ratify the World Health Organization Protocol on Eliminating Illicit Trade in Tobacco Products and establish an effective and independent track and trace system for cigarettes. The issue is serious and urgent. Compared to the period before the ban, there were large differences in the coefficients of the price covariates during the ban. During the ban, smokers who smoked more cigarettes per day paid more for their cigarettes; A 1% increase in consumption was associated with a 0.04% increase in prices.

Multinational brands were still more expensive than non-multinational brands, but the magnitude of the price difference became smaller, with multinational prices only 17% more expensive than non-multinational brands. For the legal cigarette market, illegal trade, which according to market leader BAT South Africa (BATSA) already accounted for around 33% of all cigarettes sold in South Africa before the ban, has reached a new unprecedented level. « With very weak government enforcement during the ban, the legal industry adhered 100% to the ban, but this gave illegal actors a golden opportunity to take over 100% of the market during this period, » says Francois van der Merwe, adviser to the South Africa Tobacco Transformation Alliance. An incredibly low price is often a gift for illegal cigarettes, Abramjee said, but due to lockdown restrictions, illegal dealers have increased their prices. Our results do not take into account the proportion of smokers who may have substituted other tobacco and/or nicotine products. To the extent that other tobacco products have been replaced, the public health benefits reported by respondents who quit smoking may be overestimated. Moloto says the South African government must act to stop the flow of illegal cigarettes before the problem worsens further. BATSA and JTI called on the government to ratify the ITP without delay.