17 April 2020
We have been receiving a lot of queries, submissions and, messages of support from far and wide in relation to the ban on the sale of cigarettes during the lockdown period, with many seeking to establish what our next steps are going to be in relation thereto.
Over the last few days we have been consulting with our legal team and we have come to the decision to approach the courts for the appropriate relief vis-à-vis the ban on the sale of cigarettes. This decision was not taken lightly and we had hoped that a logical solution in the best interests of all concerned would be arrived at without the need for litigation.
From the outset we wish to state that FITA and its members fully support all efforts by the state to implement whatever mechanisms considered prudent in the pursuit of compliance, national order, and ensuring the safety of its citizens during the lockdown period in order to combat the current pandemic we face. We agree fully with government that all reasonable steps necessary to ensure that we fight this virus to the best of our ability should be taken.
The uncertainty around the current restrictions and whether or not the lockdown period would be extended beyond the current end date left us with little choice but to take such a drastic step. We tried long and hard to engage with government on this issue but our pleas rather unfortunately fell on deaf ears.
The simple truth is that the current situation cannot be endured for much longer by the various role players along the tobacco industry value chain without severe consequences for all. This includes farm workers, factory workers, informal traders, and the many other ordinary South Africans who rely on the tobacco industry for a living, and whose livelihoods are currently at stake. Allowing the current situation to continue indefinitely will in all likelihood lead to job losses and/or loss of income for many along the tobacco industry value chain.
Many factors led us to arrive at this decision, and we had previously voiced all these issues to government and its various departments to no avail.
We face a situation where people are getting assaulted and murdered for cigarettes. Citizens are resorting to acts of criminality in order to procure cigarettes. Citizens are also moving all over the country and across the border into neighbouring countries, as has been reported, in order to purchase inter alia cigarettes and alcohol. This is completely against the objective government sought to achieve when implementing the lockdown period and the accompanying ban of the sale of certain goods.
We are also seeing the illicit trade flourish whilst the legitimate tobacco industry is prevented from participating. This, in our opinion, is to the detriment of the fiscus, the tobacco industry across the value chain, and South Africans at large in that our country is currently in dire need of funds it could access from industries such as ours.
The receiver of revenue also does not benefit from the abovementioned unlawful transactions. SARS collected just under R 13 billion in excise from the sale of cigarettes for the financial year 2018/19. That figure is sure to have gone up in 2019/20 with the bolstering of the enforcement units at SARS, which have increased compliance within the industry. This, together with the levying of excise on cigarette alternative products such as heat not burn products, was sure to have this figure increase substantially during the current financial year. Government is therefore losing, according to our estimates, in the region R 1.5 billion a month on excise alone with the ban on the sale of cigarettes in place. When you factor in VAT, corporate income tax and other tax types the figure becomes even greater. This at a time when we are already dealing with huge deficits in as far as our tax collections are concerned with the recent announcement that SARS collected R 66.2 billion less than estimated for the last financial year.
The exponential growth of the illicit trade will also undo all the hard work done by government and industry in combatting this issue, and potentially result in the criminal syndicates behind it growing their resources and networks, making it difficult for the legitimate industry to play on equal ground once the ban on the sale of cigarettes and other tobacco products is lifted.
The long and short of this all is that the regulations have not stopped people from buying cigarettes during the lockdown period. People are sourcing cigarettes and other goods from underground markets to the detriment of the fiscus. They are also in this regard acting contrary to government instructions that citizens are to avoid excessive movement which we have been advised leads to a higher possibility of the spread of the coronavirus.
We have never advocated inaction or negligence. Reducing the rate of infection is a laudable goal. Our mere request is that government authorise, at a minimum, the distribution and sale of cigarettes at retail stores, spaza shops and filling stations where citizens are currently permitted to purchase what has been classified as essential goods. This would give the economy a much-needed boost and avoid a situation where our citizens, out of desperation, contravene the regulations of the lockdown en masse.
We have previously voiced our opinion on government’s decision to ban the sale of cigarettes and are other goods which were classified as non-essential during the lockdown period. It certainly left us with a feeling of unjustness that no reason was ever advanced to industry on the rationale behind this decision. There was also no engagement with industry whatsoever in relation to this issue, as was done with many other key economic sectors according to public announcements made by government officials.
We therefore regret that we have had to take such a step however, we feel that government has left us with no other possible alternative.
Issued by Sinenhlanhla Mnguni, Chairperson, Fair-trade Independent Tobacco Association, 17 April 2020
