The tobacco industry’s hypocrisy on illicit trade

By Allen Gallagher, Mateusz Zatonski, Tom Hird and Lekan Ayo-Yusuf

9 Jul 2020

The tobacco industry has used the illicit tobacco trade – a problem it has itself fuelled – as an argument to rally against South Africa’s tobacco ban. This is a clear example of the industry’s deceitfulness and focus on profit at any cost to health.

South Africa’s lockdown period in response to the Covid-19 pandemic included a temporary ban on the sale of tobacco and alcohol products. South Africa was one of a handful of countries to take such measures. The tobacco industry has been highly critical of the ban, with large companies like British American Tobacco South Africa (Batsa), Phillip Morris South Africa (PMSA), and Japan Tobacco International (JTI) as well as smaller local tobacco companies urging the government to reverse the ban while instituting legal actions against it.

In addition to claiming that the ban would force consumers to defy the lockdown, and damage the state budget, Batsa, JTI, PMSA and The South Africa Tobacco Transformation Alliance (of which Batsa is a member), have argued that the ban will increase South Africa’s illicit tobacco trade. The illicit tobacco trade can be defined as any practice prohibited by law which relates to the production, shipment, receipt, possession or distribution, sale or purchase of tobacco, and is acknowledged by both industry and independent data as being a significant problem in the country.

After on and off threats of legal action against the government over the ban, Batsa and JTI have taken the government to court to oppose the ban. The Fair Trade Independent Tobacco Association (Fita), which represents 80% of licensed tobacco manufacturers in South Africa, most of which are local and smaller manufacturers, also took the government to court to have the ban overturned. Fita’s affidavit for the court case argued that “the prohibition has well-recognised negative results in the form of increased illicit trade”. While Fita’s legal challenge was recently dismissed by the High Court in South Africa, the outcome of Batsa and JTI’s challenge has yet to be decided.

The government is now in a difficult situation, working to defend the ban against the industry’s legal challenges which, if successful, would create a worrying precedent of the industry successfully overturning tobacco control measures in South Africa. Recently, Minister Nkosazana Dlamini Zuma of the Cooperative Governance and Traditional Affairs Ministry, which is responsible for the regulation of the Disaster Management Act, responded to the legal action, doubling down on the importance of the temporary ban and arguing that South Africa’s illicit trade problem has been around for decades and cannot be attributed to the ban alone.

However, in early May 2020, the South African Revenue Service (SARS) collated data related to the illicit market which indicated that the illicit economy was growing under the lockdown and early reports suggest that some consumers have been able to access tobacco during the ban via informal markets. Regardless of the ultimate impact of the ban on South Africa’s illicit market, the tobacco industry’s use of this argument has been duplicitous, to say the least.

Were the industry really concerned about illicit trade, it would take effective measures to control its supply chain and not oppose government efforts to implement effective policy to address illicit trade. This has not been the case.

The tobacco industry’s actions have repeatedly demonstrated that it is neither committed to addressing South Africa’s illicit trade problem nor a trusted source on the topic.

For example, the industry has aggressively opposed the best tool for monitoring illicit trade – SARS’ tender process for a tracking and tracing system. This would have been a means of controlling illicit trade by tracking tobacco products through the supply chain and would have made it possible to track the impact of the tobacco ban on South Africa’s illicit trade. Instead, the tobacco industry criticised SARS’ efforts to deploy this effective tool.

The original announcement of the tender process received extensive criticism from the, now defunct, Tobacco Institute of Southern Africa (Tisa), an organisation whose members included Batsa, PMSA, Japan Tobacco International and Imperial Tobacco. Tisa described the tender as a “rushed process” which would “impose excessive and impractical regulatory burdens on small retailers” and “only encourage retailers to sell illegal products”. After extensive delays, the tender has since been cancelled and Fita has argued that this is due to the influence that transnational tobacco companies have over the government.

To add salt to the wound, during the lockdown, SARS issued a regulation requiring counting devices to monitor cigarette production. This is a measure which the industry has recommended in recent months and is a far cry from the implementation of a robust tracking and tracing system. Unsurprisingly, SARS’ adoption of this approach rather than comprehensive tracking and tracing of tobacco products has been welcomed by both Tisa and Fita.

This is the latest in a number of successful attempts by the tobacco industry to undermine SARS in South Africa, and in the extensive history of the tobacco industry facilitating illicit trade across Africa. SARS even had a project established specifically to address South Africa’s illicit trade which led to BAT becoming the subject of in-depth audits, although the investigation was later quashed due to BAT interference.

Batsa has not appeared to have stopped producing cigarettes during the ban, with SARS reportedly raiding a BAT factory which continued to produce cigarettes during the ban. The company would have an incentive to continue producing goods for the South African market. Evidence from the recent survey conducted by the Research Unit on the Economics of Excisable Products at the University of Cape Town indicates that there has been a huge switch away from transnational tobacco company brands during the lockdown with most brands purchased since the ban having been produced by local tobacco producers in South Africa.

Were the industry really concerned about illicit trade, it would take effective measures to control its supply chain and not oppose government efforts to implement effective policy to address illicit trade. This has not been the case.

Rather, just like in the past, the tobacco industry’s actions have been largely limited to using illicit trade as an argument against tobacco control measures. For example, Tisa paid social media influencers to promote the #TakeBackTheTax campaign, which drew on narratives about illicit trade, to oppose the Control of Tobacco Products and Electronic Delivery Systems Bill. Often the only evidence to support these narratives came from industry-funded research which, when compared with independent data, consistently overestimated the scale of illicit tobacco – as Tisa did in South Africa for years.

The tobacco industry’s behaviour during South Africa’s lockdown is another example of its already documented duplicity throughout the Covid-19 pandemic. The tobacco industry is far from a trustworthy voice as its primary focus is on protecting its ability to sell its deadly products rather than on protecting the health of its consumers. DM

Allen Gallagher is a research associate in the Tobacco Control Research Group at the University of Bath, a partner in STOP, a global tobacco industry watchdog. His current research focuses on problems and practices in the illicit tobacco trade, and their implications for public health.

Dr Mateusz Zatoński is a Research Fellow in the Tobacco Control Research Group at the University of Bath, a partner in STOP, where he develops research projects investigating tobacco industry influence on public health policy at global, regional and national levels.

Dr Tom Hird is a Research Fellow in the Tobacco Control Research Group at the University of Bath, a partner in STOP, a global tobacco industry watchdog. He conducts research to understand and address the commercial determinants of health, in particular to support governments and advocates in efforts to expose and counter tobacco industry interference in tobacco control policy.

Professor Lekan Ayo-Yusuf is a nationally and internationally well-recognised tobacco control expert and currently serves as the Deputy Vice-Chancellor for Research and Postgraduate Studies at the Sefako Makgatho Health Sciences University (SMU). He is also the Director of the Africa Centre for Tobacco Industry Monitoring and Policy Research (ATIM) – a WHO-recognised Observatory on tobacco industry monitoring in Africa.

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