SA’s ban on cigarette sales caused major disruption to tobacco market – study

The national ban on the sale of cigarettes during the hard Covid-19 lockdown in 2020 did not cease the sale of cigarettes, rather it caused major disruption to the tobacco market.

That is according study by the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town.

The paper was published this week in the Nicotine & Tobacco Research peer-reviewed journal.

The study’s authors assessed how the ban affected the cigarette market from a sample of smokers by comparing the price, consumption and competitive landscapes before March, during the hard lockdown and after the sales ban.

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It found that despite the high levels of illicit trade in the local tobacco market, the government’s decision to ban the sale of tobacco products in March 2020, as part of its Covid-19 response, had unintended consequences.

The ban lasted five months between 27 March 2020 and 17 August 2020.

Government implemented the measure on the presumption that smokers were more likely to develop severe illnesses from Covid-19, and thus place extra pressure on the health system.

240% price hike

Despite the national sales ban, the study found that most smokers in South Africa did not only continue smoking, but prices increased by over 240%.

The illegal cigarette sales also further entrenched an already large illicit market in the country.

“Purchases shifted away from the normally dominant brands of the multinational tobacco companies to local/regional producers.

“The covariates of price changed substantially during the sales ban, the most pronounced being inter-provincial effects. After the ban, the market shifted back to its pre-ban state, with an overall increase in the price of 3.6%,” the paper stated.

Excise tax

Had the government substantially increased the excise tax – rather than banned the sale of tobacco products – it would have achieved a similar public health outcome, the study found.

The government would have also received more revenue and presumably not furthered the entrenchment of the illicit market by opting to impose the excise tax.

The ban inadvertently benefited manufacturers who were previously disproportionately involved in illicit activities.

“Historically, the cigarette market in South Africa was dominated by multinational corporations, with British American Tobacco (BAT) having more than 90% of the market share in the early 21st century.

“However, after 2010 smaller regional cigarette producers have entered the market, gradually reducing the market share of the multinationals.

“The new entrants undercut the multinationals’ retail prices and sold a large proportion of their products through informal outlets, such as street vendors and spaza shops.”

Compiled by Thapelo Lekabe 

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