Retail group Spar says the ban on cigarettes during South Africa’s hard Covid-19 lockdown in 2020 has had a long-term impact on sales.

This was highlighted in the group’s unaudited interim results for the six-month period ended March 31, 2021, which were released on Tuesday May 25.

Spar data shows alcohol sales have been hit hard by national bans imposed last year. However, these sales recovered significantly when the restrictions were relaxed.

By comparison, cigarette sales have remained subdued – even after the ban was lifted.

“Spar’s highs continued to be affected by the reduction in retail hours and the loss of trading days, in fact losing 72 trading days, or about 40% of the available trading days during that time,” he said. he declared.

“Although the liquor trade started to recover in the last quarter, the impact of lost trading days caused wholesale liquor sales to decline 7.8% for the period. In a related category, the cigarette trade has been severely affected by the initial restrictions on the sale of cigarettes. “

Count costs

Tobacco sales were banned between March 25 and August 17, 2020 as part of the government’s response to the Covid-19 pandemic.

Cooperative Governance and Traditional Affairs (Cogta) Minister Nkosazana Dlamini-Zuma argued that the ban eases the burden on hospitals and reduces the prospect of contagion from cigarette sharing.

In response, critics pointed to an explosion in black market sales and declining tax revenues for the national treasury.

At the time of the ban, conservatively estimated, between R 4.5 billion and R 6 billion were lost in excise taxes on tobacco products, while 300,000 jobs were at stake. The research – which now includes the NIDS-CRAM survey – shows that the impact on smoking habits was minimal.

Bernard Sacks, tax partner at Mazars, said the long-term impact of cigarette (and alcohol) bans on tax revenues in South Africa is almost incalculable.

“The excise duty that SARS was unable to collect due to the product bans is estimated to be around R13 billion – but that’s only part of the picture. This figure excludes possible VAT losses which, although difficult to calculate, are expected to amount to several billion rand.

“While excise taxes are only imposed when this product is manufactured and sold, stopping the sale of alcohol and cigarettes also stops all economic activity along the value chain,” he said. -he declares.

For example, raw materials are not sold, nothing is spent on transport, and packaging is not produced.

“In the end, the ripple effect of removing just a few products from the market translates into an incredible loss of tax revenue, amounting to several hundred million Rand lost every month,” he said. declared.

At the time of the tobacco ban, analysts reported that R35 million in taxes were lost every day.

Read: Department of health submits recommendations for tougher lockdown in South Africa