The impact of illicit trading of tobacco products specifically cigarettes is reflected on the loss of revenue by the country and negatively affect government spending to develop the tobacco industry further and also affects the country’s health budget, since smoking has serious health implications.
Illicit tobacco trade is usually described as the supply, distribution and sale of smuggled genuine, counterfeit or cheap white tobacco products. It is usually based on the idea of sourcing the product cheaply to sell in a higher-priced market.
The companies that participate in illicit tobacco trade usually import their tobacco leaf from foreign countries at a much lower price than that offered by the local tobacco producers and this hinders the success tobacco producers especially the smallholder farmers while also decreasing the demand for local tobacco leaf’s.
Two classes of tobacco are produced in South Africa – flue-cured and air-cured tobacco. Flue-cured tobacco is mainly used for cigarettes and air-cured tobacco is mainly used as pipe tobacco, snuff and RYO (roll your own) cigarettes.
The Tobacco Institute of Southern Africa estimated that there are approximately 336 emerging tobacco farmers whose only source of business is the legal industry.
Moreover, the tobacco farmers generate about R640-million annually with about 181 commercial farmers and approximately 155 emerging farmers within the industry were about 35 000 people depend on it to make a living in deep rural areas.
Therefore, this clearly shows the negative impact of illicit tobacco trade both on emerging farmers and the economy especially in terms of job creation since South Africa is faced with a challenge of creating sustainable jobs and businesses.
The tobacco industry creates jobs from primary agriculture; tobacco products manufacturing, tobacco products wholesalers and retailers, and the informal traders.
Due to the lockdown and ban of selling of cigarettes, the entire value chain of the South African tobacco industry has lost income and some people even lost their jobs and livelihoods, while the illicit trade is thriving.
The continuous ban on selling of tobacco products and cigarettes will not only affect the country’s revenue but will also result in the collapse of the legal tobacco industry coupled with loss of jobs and businesses.
The country is already battling to create jobs and alleviate poverty in rural communities therefore it is important for more focus to be channelled in industries with the potential to meet such objectives.
Historically it has been evident that the tobacco industry because of health risks is very vulnerable, with the industry suffering a great loss during the introduction and implementation of tobacco control regulations when the advertisement of tobacco products were banned.
Township businesses should also be closely monitored in order to prohibit the illicit cigarette sales because monitored wholesalers and retailers do not have such illicit cigarettes. Health risk of people using these illicit cigarettes should also be considered as most users are usually not fully aware of the health implications associated counterfeit cigarettes.
Tobacco manufacturers must reconsider importing most of their tobacco leafs in favour of supporting local producers.
Moreover. to avoid the same worst-case scenario in taking place in a different industry, government should protect and support local smallholder farmers while also creating national awareness campaigns around the importance of purchasing locally produced commodities.
This will assist consumers make conscious decisions not only based on preference when making a purchase.