The benefits of smoking

Johannesburg - South Africa currently faces some of the gravest economic challenges of recent times, with a growing clamour for resolution of crises affecting several critical sectors.

As our government seeks to persuade investors that South Africa is open for business, it is perhaps opportune to consider how some of government’s best intentions to resolve societal challenges can have unintended consequences for business confidence.

At the same time, it is important to consider what business brings to the table and how much it is worth to the economy to ensure that appropriate market infrastructure is in place and that regulation encourages, rather than hinders, economic growth and job creation.

Tobacco can be a polarising subject and meaningful debate about the best route to greatest balanced benefit is all too frequently lost in polarising argument. We recognise that health concerns around the use of tobacco products are legitimate. But we believe the best way forward relies on balanced, evidence-based regulation of what is a legal product, while taking into account the significant economic contribution that the sector brings to South Africa.

We already bring a lot to the table, as a newly published report by Quantec Research shows. British American Tobacco is the largest tobacco manufacturer in South Africa and the second-largest listed company on the JSE, employing over 2 100 people. Our value chain sustains over 72 000 jobs, including 25 000 in spazas, house-shops, taverns and other retail outlets which sell our products, some 5 800 tobacco farming jobs, as well as tens of thousands of jobs in sectors ranging from transportation to business services. Most of these jobs are within small, independent black-owned businesses.

Our economy-wide contribution to South Africa’s GDP amounted to R18.4 billion in 2015, or 0.52% of the country’s GDP. We raised R14.5 billion in tax revenues – or 1.52% of government’s total income – enough to pay for 93 700 low-cost homes. Since 2013, National Treasury has collected more than R43 billion from the production and sale of cigarettes we produce.

Growing environmental and commercial pressures have, though, reduced this contribution over the past three years and placed significant pressure on the viability of our Heidelberg factory in Gauteng, where we are one of the largest employers in the province. We have been forced to shed over 700 jobs, which has, in turn, had an adverse knock-on effect on our value chain – for example, the number of retail jobs sustained by our operations has decreased by over 10 000, while the number of farming jobs has been reduced by some 1 500. The overwhelming majority of these jobs were at small and medium-sized enterprises. Such declines also clearly reduce government’s tax take, reducing the amount of money available to redevelop our economy and support delivery of the National Development Plan.

While external business challenges will always exist, it is critical that when new measures to regulate tobacco are considered, the significant economic contribution of the sector is remembered and the potential unintended consequences of extreme policies on this contribution are taken into account.

Learnings from other countries demonstrate that public health objectives can be delivered through balanced, less extreme approaches, while at the same time protecting economic livelihoods across the value chain. Given the current state of the economy and the fact that thousands of people and small businesses – directly or indirectly – rely on income generated from tobacco, such an approach is perhaps even more important here in South Africa.

It is critical, therefore, that government conduct a robust regulatory impact assessment, based on widespread consultation across the value chain, to identify and fully understand potential risks, as well as how to mitigate them.

Tobacco is a legal product, responsible for sustaining tens of thousands of jobs across the country and generating billions of rands in much-needed tax revenue. We have an obligation to conduct our business responsibly and we fully embrace our duty to do so.

A whole-of-government approach to policymaking, where public health objectives as well as other national priorities of economic growth, job creation and social inclusion are factored in, is therefore critical.

Zoueihid is the chief executive officer of British American Tobacco SA

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