(5 minutes read)
· The Fair-Trade Independent Tobacco Association (FITA) feels during the lockdown their products were completely overtaken by those who sold cigarettes in black market
· Batsa, it appears has taken the biggest hit. Its market share dropped from 48% before the lockdown to 8.7% in June
· Batsa warned that any aggressive increase in excise on tobacco will only exacerbate the control illegal producers have on the market
· Despite the ban being lifted, the tobacco industry will continue with its legal battles fearing the government might make a U-turn on its decision, and partly to establish where the law stands on the matter
The Fair-Trade Independent Tobacco Association (FITA) feels during the lockdown their products were completely overtaken by those who sold cigarettes in black market. The British American Tobacco South Africa (Batsa), the largest cigarette maker in the country also endorsed this view and claimed that illicit tobacco products entered into the country through pores borders had pushed the locally made products. The association has called on the government to urgently ratify the World Health Organization’s (WHO’s) Illicit Trade Protocol to help eradicate the sale of illegal cigarettes. South Africa signed the comprehensive set of international rules of WHO seven years ago. However, the country has not formally ratified the agreement.
According to FITA, the University of Cape Town’s Research Unit on the Economics of Excisable Products (Reep), under the directorship of Professor Corné van Walbeek, has been tracking cigarette sales during the lockdown. Based on the feedback received from over 23 000 respondent smokers (93% of the sample), it can be concluded that smokers were able to purchase cigarettes during the ban from illegal sources. In the process, they had changed their brands, switching over to brands that were available in the black market.
Batsa, it appears has taken the biggest hit. Its market share dropped from 48% before the lockdown to 8.7% in June. Batsa owned six of the top 10 selling brands in South Africa before the ban. But none of those brands are top selling cigarettes now, the company points out. The extent of the damage to the industry is estimated to be R35 million a day.
Batsa says that before the ban, its market share was 32 times larger than Best Tobacco, another FITA member. In June Best Tobacco’s market share was already bigger than Batsa’s, according to the Reep report. Batsa warned that any aggressive increase in excise on tobacco will only exacerbate the control illegal producers have on the market. Despite the ban being lifted, the tobacco industry will continue with its legal battles fearing the government might make a U-turn on its decision, and partly to establish where the law stands on the matter.
