Tobacco group wants government to set minimum price for cigarettes in South Africa

As South Africa prepares for Finance Minister Tito Mboweni’s medium-term budget speech this week, it becomes increasingly clear that the country needs a new post-Covid-19 approach to the tobacco industry, said Zacharia Motsumi, spokesperson for South Africa Tobacco Transformation. Alliance.

The alliance represents approximately 11,000 tobacco growers, processors and manufacturers in five growing provinces who are committed to supporting industry transformation.

Motsumi said if drastic action is not taken quickly, the more than 150 black tobacco farmers who struggle to make a living in rural South Africa will soon close their doors.

He said the government’s ban on the sale of cigarettes during the coronavirus shutdown has devastated the industry, after the legal sale of cigarettes and other tobacco products was banned for nearly five months.

“But perhaps the biggest loser from the Covid-19 pandemic has been the national tax authorities. As a result of the foreclosure, it is estimated that excise revenue for the current fiscal year will fall by 32%, while R13.7 billion in excise revenue will be lost to the illicit market, ”he said. -he declares.

“However, there is absolutely no doubt who were the biggest winners: it was the shady characters who sell illicit cigarettes. They were already making money before Covid-19, but the lockdown was a godsend for them. “

Motsumi said there are now two ways for the government to increase excise revenue from the sale of tobacco products.

  • Increase in legal sales volumes; Where
  • Increase excise duties on tobacco products.

Motsumi said that acting to increase sales will increase the amount of income, which in turn will keep the price of tobacco products at affordable levels.

The second option, however, will reduce the amount of legal tobacco products sold and therefore decrease the amount of income. “It will also open up, we have no doubt, more and more space for illicit traders,” he said.

This means that this option – not increasing the excise duty on cigarettes, keeping prices at current levels – is by far the best option, he said.

“This can be done by the National Treasury which is not increasing excise duties now, but adheres to its 40% excise incidence policy for cigarettes.

“At the same time, law enforcement must directly tackle the illicit trade in cigarettes, which has strongly impacted our value chain. It’s no secret that SARS is currently struggling to arrest and bring to justice those responsible for the illicit trade. “

Minimum price

To add “teeth” to the government’s efforts, the South Africa Tobacco Transformation Alliance proposes that the National Treasury adopt a “minimum price level” (MPL) for cigarettes. which has had significant success in other parts of the world.

This would allow law enforcement agencies and consumers to recognize illegal cigarettes purely on the basis of their affordability – which is the most obvious sign that excise duties are not being paid, Motsumi said. .

“For example, if the Treasury adopts a MPL price level of R28 for all cigarette retail sales, all cigarettes sold below this price would clearly not comply with the tax given the amount that must be paid in excise duty, ”he said.

“As a result, law enforcement agencies can apply immediately on the basis of a solid legal basis and consumers would be assured of the legality of their purchase. “

Motsumi said an MPL strategy should be backed by a deterrent criminal sanctions regime that includes heavy fines and jail terms for traders who break the law.

This would allow law enforcement to seize illicit cigarettes in the most effective and efficient manner, based on the law, he said.

Read: Cape Town wants to raise cost of alcohol under tougher alcohol laws

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