Had the government significantly increased the excise tax in 2020 instead of banning the sale of tobacco products, it would have achieved a similar public health outcome, generated more revenue and probably not further entrenched the illicit market.
< p>This is according to a new study conducted by Kirsten van der Zee, Samantha Filby and Prof. Corné van Walbeek of the Research Unit on the Economics of Excisable Products (Reep) at the University of Cape Town.
Their research found that the 20-week national ban on cigarette sales in 2020 during the Covid-19 lockdown has severely disrupted the SA market.
“The ban came unintentionally Benefiting manufacturers previously disproportionately involved in illegal activities. Even after the ban was lifted, these manufacturers were able to increase their market share. The ban may have further entrenched SA’s already large illicit market. Our findings show that a temporary ban on cigarette sales has unintended consequences,” they said.
Their paper, published Monday in Nicotine & Tobacco Research, confirmed that while cigarette sales are illegal, most however, smokers had access to them, but at a vastly inflated price.
“The sales ban skewed the market’s branding mix mostly in favor of local companies previously accused of feeding the illicit market,” they said.< /p>
The government imposed a ban on the sale of tobacco products in March 2020 as part of its response to the Covid-19 lockdown. The ban was lifted almost five months later.
The study found that most cigarette smokers continued to smoke during this period, and cigarette sales were widespread despite the comprehensive sales ban.
“Cigarette prices skyrocketed, with reported prices increasing an average of 240%. Before March 2020, cigarettes were selling for an average of R33.40 per pack of 20, but by June 2020 the average price for a pack had risen to R113.80.”
The ban also put past behavior on hold established brand profile upside down by SA.
“Prior to the ban, brands from multinational companies such as British American Tobacco, Philip Morris and Japan Tobacco International accounted for more than three quarters of the survey market. By June 2020, however, many consumers had switched to brands from local or regional manufacturers, such as RG and Caesar. At that point, local brands accounted for 75% of the market in the sample.”
Researchers found that while most of these market effects were reversed after the ban was lifted, the effects were sustained.< /p>
In a survey conducted a month after the ban on sales was lifted, researchers found that prices were 3.6% higher than before the lockdown began.
“The Multinationals have retained their position as market leaders, but with a significantly lower market share than before the sales freeze began. Based on the surveys, the market share of the multinationals has dropped from 77% before the ban on sales to 64% after the ban was lifted.”
Prior to the lockdown, illegal cigarettes were estimated to account for 25% or 30% of the total cigarette market in SA.
“The widespread sale of cigarettes during the ban, the development of new supply chains and the ongoing brand renewal may have further entrenched the already large illicit trade market.”
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