Research shows 28000 jobs at risk because of new tobacco laws

The research found that 35 991 tobacco industry jobs have already been lost between 2019 and 2022, primarily due to the rapid growth of the illicit sector, which now makes up 63% of cigarette sales.

If the Tobacco Control Bill is passed in its current form – with sweeping new restrictions that will only benefit the illicit sector even further — Oxford Economics estimates a further decline in jobs supported of 28 704 jobs.

The research — conducted by the global research organisation, Oxford Economics, and commissioned by the South Africa Tobacco Transformation Alliance (SATTA) — also provides some startling detail on the contribution that the tobacco industry makes to the country’s Gross Domestic Product (GDP):

• The tobacco industry’s gross value add (GVA) to the country’s GDP was R48.4 billion in 2019 — but had dropped to R44.7 billion in 2022.
• Oxford Economics believes there will be a further R7.5 billion decline in the tobacco industry’s GVA contribution to GDP if the Tobacco Control Bill is passed in its current form.
• Although overall tobacco consumption is not expected to change as a result of the legislation, the Bill is likely to result in a migration of legal sales to illicit.

Many of SATTA’s members live and work in the rural areas, and it is here – particularly on black-owned farms – that the impact of the illicit sector’s growth has been felt the hardest. More than 100 black tobacco farmers have already gone out of business or left the sector.

While SATTA respects the government’s initiative in tobacco control, we are urging consideration of the wider implications. Introducing certain measures, such as plain packaging, might inadvertently bolster illicit networks and counterfeiting, further risking the livelihoods of tens of thousands of people.

What is equally baffling is Government’s inability — or downright refusal — to see how counter-productive the new legislation will be for the national fiscus. Because of the massive decrease in legal tobacco sales, revenue collection from tobacco sales has dropped significantly. According to the Oxford Economics research, illicit cigarette sales shaved more than R20-billion off the national fiscus last year alone, and R72.2-billion from 2020 to 2022.

The research comes at a time when Government is caught in a vicious circle: it needs to do whatever it can to increase tax revenue to avoid a punishing austerity programme and massive cuts to government services – while at the same time it is considering new tobacco legislation that will open up even more space for the illicit sector and decrease tax revenue even further.

In light of these findings, SATTA stresses the importance of a comprehensive understanding of the industry value chain and the impact the Bill would have, before progressing with the draft legislation. This means an independent socio-economic impact assessment, undertaken and debated in the National Economic Development and Labour Council (NEDLAC) is essential – a point that SATTA has already made in its submission to Parliament, and which it intends to repeat when oral hearings are conducted in Parliament.

SATTA spokesperson Zach Motsumi says: “It is clear that the tobacco industry is already on the precipice of extinction, and that the Tobacco Control Bill could tip it over the edge once and for all. If that happens, it will entrench criminal networks that will be near-impossible to destroy, take additional billions out of the national fiscus, and fundamentally undermine the tax revenue targets required to avoid a national austerity programme — which will have, as its victims, the poorest of the poor.

“What have government and the country to gain with this bill as it will increase illicit, reduce revenue and not reduce smoking due to lower illicit prices? In the interests of the national fiscus, the tobacco industry and the thousands of people who rely on it for an existence, SATTA calls for a holistic review of the Tobacco Control Bill.”