New smoking and vaping laws another own goal for South Africa
The new Tobacco Products and Electronic Delivery Systems Control Bill could lead to a decline in tax revenues, hurting the already embattled South African fiscus.
The Bill aims to reduce the prevalence of tobacco use and nicotine dependence in South Africa.
Key amendments to the Bill and policy include the following:
- The Bill seeks to provide legislative and policy changes that will change the following:
- Indoor public places and certain outdoor areas will be determined to be 100% smoke-free;
- The sale of cigarettes through vending machines will be banned;
- Cigarette boxes will have to have plain packaging with graphic health warnings and pictorials;
- A total ban on display at point-of-sale; and
- The regulation and control of electronic nicotine delivery systems and no nicotine delivery systems.
Standardised packaging
Yolandi Robbertse and Zimkhitha Mhlahlo from Webber Wentzel said introducing standardised packaging and labelling would ultimately damage the fiscus.
Under the new regulations, all products must have uniform packaging, with no brand elements, such as trademarks or logos, allowed to be displayed.
The packaging can only include limited information like the brand and product names and other approved details such as the manufacturer’s information and health warnings.
Robbertse and Mhlahlo said that standardised packaging has been opposed in several countries, including Australia and the UK, and South Africa will be no exception.
In 2011, the Commonwealth Parliament of Australia introduced the controversial Tobacco Plain Packaging Act, 2011 (PPA), which required all cigarettes to be sold in uniform dark brown packaging with graphic images of the effects of smoking on the body.
Although the constitutionality of the Act was challenged in the Australian High Court, it was held to be in line with the Australian constitution.
Challenges to the constitutionality of the UK’s standardised packaging regulations also proved unsuccessful.
The experts said that the use of standardised packaging is likely to create vehement opposition, with it argued that standardised packaging impermissibly impacts trademarks.
These trademarks are crucial to preserving the brands’ originality and influencing consumer loyalty.
The experts noted that the Explanatory Memorandum to the Tobacco Bill states there will be no financial implication for the State due to the amendments.
“Many would argue that this is simply not true: if the legislative framework damages the profitability and sustainability of the tobacco industry, it will directly impact the national fiscus,” they said.
Illicit trade
They also highlighted that the new Bill will help grow the illicit tobacco industry, which will do the opposite of what the legislature intended.
According to a report, Transnational Alliance to Combat Illicit Trade (TRACIT) Organised Crime, Corruption, and Illicit Trade: Spotlight on South Africa, illicit trade results in tax losses of nearly R100 billion per year, including tobacco.
“The pandemic provided wide opportunities for illicit traders to significantly expand their operations as government lockdowns, bans, and other restrictions disrupted markets and created shortages,” the report said.
“In the case of alcohol and tobacco, government-imposed bans enabled criminal groups to exploit the situational supply shortages and entrench and expand their positions in illicit markets.”
SARS also warned that the ban on alcohol and tobacco products during the lockdown would allow criminal networks to expand their operations, which will take years to reverse.
Business Leadership South Africa said South Africa lost as much as R35 million per day in lost excise and other tax revenues following the tobacco ban during lockdown.
Minister’s powers
Robbertse and Mhlahlo also noted that the Minister would have wide-ranging powers to prescribe regulations in terms of packaging and how retailers will have to comply with the total ban on displays at points of sale.
“It is unclear what these regulations will look like, as they will be at the Minister’s sole discretion. This creates significant uncertainty for the industry,” they said.
“While legitimate health-related considerations may underpin some of the proposed mechanisms, it remains to be seen whether the more draconian measures are proportional in their impact.”
“There will, however, be an inevitable tension between the economic impact of these measures and the public health interests they purport to serve.”
Stakeholders can submit public comments by Monday, 4 September 2023, after the Portfolio extended the deadline by a month.
The Portfolio Committee on Health has also started in-person consultation meetings this week, with the first meetings in the North West.
Read: The latest crime stats for South Africa – everything you need to know
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