South Africa: a case study

Tobacco Economics

Von Thomas Schwarz

The "Tobacco Products Control Bill" developed by South Africa’s Health Minister Nkosazana Zuma faces unexpected problems. The legislation that would ban all tobacco advertising, including the sponsorship of sports and other public events, was passed by the South African Parliament in early December 1998, but in January, President Mandela sent the Bill back to Parliament...

Rapidly increasing tobacco consumption in many parts of Africa lead to an epidemic of tobacco related disease and death which will overtake AIDS in terms of cumulative deaths by the year 2010. In South Africa, the overall smoking rate for adults above 16 years of age was 31% in 1990, with more recent figures rising to 34% which represents approximately 7 million South African smokers.

The anti-smoking Bill adopted by the South African Parliament in December 1998 is influenced by the tough Australian anti-smoking laws and WHO recommendations. The stringent new Bill was welcomed by anti-smoking campaigners, but slammed by the tobacco industry as "draconian". It bans smoking in public places including factories, offices, restaurants and shopping malls as well as on all public transport. It also outlaws all tobacco advertising and sponsorship of sporting events and the sale of cigarettes to anyone under 16 years of age... and it has been sent back to Parliament by President Mandela.

A spokesman for the South African President said the legislation needed "refinement to remove possible infringements of the constitution and other ambiguities". However, President Mandela agreed that the objectives of the Tobacco Control Amendment Bill were constitutional and that in principle the regulation of advertising and smoking in public places would not infringe the Bill of Rights.

The Economics of Tobacco Control in South Africa

As a case study, the South African legislation process unveils the economic hard-core behind tobacco control in a country with limited resources. This is an area where a lot of research is still to do.

In 1996, the South African Medical Research Council and the University of Cape Town (UCT) began collaborating on research project on the economics of tobacco control in South Africa. According to Iraj Abedian, the project leader and an economics professor at UCT, this initiative was based on the premise that "the debate around tobacco control, both in South African and globally, has to take into account the economic issues surrounding the topic." He also states, that "whilst the public health aspects of smoking remain paramount, economic arguments pose immediate challenges to governments world-wide. Concerns over job losses, loss of tax revenue, and in some instances the loss of foreign exchange earnings are real problems for governments. This is particularly so in the developing countries."

Abedian and his colleagues found that the adjusted price of cigarettes in South Africa has dropped over the past 24 years and that the government is now earning less than half of its former revenues from cigarette excise taxes. Any job loss due to an increase in cigarette excise taxes and a subsequent reduction in tobacco consumption would not hurt the economy. In fact, money not spent on cigarettes could help to fuel job growth in other industries such as recreation, entertainment, and education.

Moreover, the UCT team showed that, contrary to claims by the tobacco industry, advertising plays a significant role in prompting people to smoke. Econometric models reveal that a 1 % increase in advertising expenditures will increase consumer demand for cigarettes by 0.18 - 0.24 %. This suggests that anti-tobacco advertising is a significant factor to reduce consumer demand.

Sources:

Mogkadi Pela, The Economics of Tobacco Control in South Africa, in: IDRC Reports magazine in January 1999

Action on Smoking and Health, GLOBALink Tobacco, Weekly European News Bulletin (http://www.ash.org.uk )

Smoking and Health Action Foundation, Tobacco News Online