The illicit trade of tobacco products is destroying the legal tobacco value chain, putting the jobs of 10 000 emerging and commercial farmers at risk, according to tobacco producers. “Our industry is under siege, both from illicit traders who not only sell cheap cigarettes but also procure leaf outside our borders,” said Limpopo Tobacco Processors managing director, Christo van Staden. According to AgriSA, tobacco volumes have already been on the decline since 2012 and, by 2016, had dropped by over 2 million tonnes. “It will be very difficult to justify further investments in tobacco production in South Africa while volumes are in decline due to the illicit trade,” said British American Tobacco South Africa (Batsa) head of External Affairs, Joe Heshu. “The illicit tobacco trade constitutes 47% of the total market and its rapid growth shows it to be a clear and direct danger to the legal industry,” he added. “So serious is the threat posed by illegal trade to the legitimate industry that more than 1 800 direct jobs and 587 hectares of tobacco leaf (1 878 tonnes) have already been lost since 2012 – and this trend looks to be on the rise,” Heshu told FTW. According to economist Mike Schussler, the impact of such heavy job losses on Limpopo alone would be “huge” as there aren’t many formal jobs outside of government in the province. Agriculture and transport is one of the biggest employment drivers in Limpopo. “The gross impact will be very big. I do not have a value figure as that would take a lot of time,” he said. ”In provinces with already high unemployment, the impact will be even bigger and business and consumer confidence will also take a knock.” “Job losses of any variety can be devastating in a developing economy such as South Africa, and this impact is magnified in rural economies where tobacco farming occurs,” added Heshu. Van Staden pointed out that proposed regulation changes announced by the Department of Health in 2016 – requiring plain packaging and retail display restrictions for all tobacco products – would put further strain on the local tobacco farming sector. Batsa – which procures over 85% of all tobacco leaf grown in the country – pointed out that plain packaging regulation amendments would only fuel the “already substantial” black market and illegal trade of tobacco products. Heshu said that illegal trade in cigarettes had increased by nearly 30% following the introduction of plain packaging in Australia in 2012. “South Africa lost R5 billion in 2015 alone, and in excess of R25 billion over the past five years due to illicit trade,” said Heshu. “If this increased by 30%, illicit trade could cost the economy an additional R6 billion.” “It is estimated that National Treasury will lose as much as R10 billion in excise revenues for the current fiscal year due to unpaid duties from illicit trade.”
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The illicit tobacco trade constitutes 47% of the total market.
