Government efforts to curb smoking by banning cigarette sales could backfire with a high likelihood of a price war between producers once the lockdown is lifted, a new study suggests.
A new report by the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) predicts a price war when the sales prohibition is lifted and ‘multinationals … aim to get some of their market share back and the non-multinational companies … aim to hold on to their markets’.
The report is based on a study of smoking behaviour during the lockdown. Cigarette and tobacco sales have been prohibited since the end of March – but the illegal trade has flourished.
The REEP study says the ban has created an incentive for producers to sell products illegally.
The report says: ‘Manufacturers will find it difficult to resist this temptation, especially because so many companies are selling cigarettes, despite the sales ban. Given the tobacco industry’s long record of involvement in illicit trade, it is likely that they will divert cigarettes, ostensibly destined for the export market, to the local market.’
Multinationals had been hardest-hit and, once the ban was lifted, a price war could ensue.
‘Their markets have been captured by local companies and, to a lesser extent, by imported cigarettes, significantly reducing their market share. We predict that, once the sales ban is lifted, there will be a price war, in which the multinationals will aim to get some of their market share back and the non-multinational companies will aim to hold on to their markets.’
Lower prices would make smoking cheaper. Under lockdown, prices had soared by an average of nearly 250%, with wide regional variations, ranging from 379% in the Western Cape and 367% in the Northern Cape to 152% in Gauteng and 123% in Limpopo.
Before the lockdown, 77% of cigarettes purchased by survey respondents were manufactured by multinational tobacco companies, including British American Tobacco, Philip Morris International, Japan Tobacco International and Imperial Tobacco, but, by June, this had dropped to 18%.
It was reported from the Eastern Cape that a courier truck carrying Covid-19 specimens was hijacked in Port Elizabeth on Monday, and that the possibly highly infectious samples were missing.
News24 reported that the National Health Laboratory Services (NHLS) had warned the robbers and the public not to touch the samples.
The unknown number of bio-hazard samples were contained in 40-litre cooler boxes, said provincial NHLS manager Tabita Makula. The truck had been commissioned to collect samples from facilities in the region.
Cases grew in South Africa yesterday by 8 170 to a cumulative total of 381 798 (with 208 144 recoveries). Deaths rose by 195 to 5 368.
Deaths in Gauteng rose to 1 042 followed by the Western Cape (2 717), the Eastern Cape (945) and KwaZulu-Natal (459).
In other virus-related news
- After four days of talks, European Union (EU) leaders agreed on a €750bn post-coronavirus recovery package involving grants and loans to counter the impact of the pandemic in the 27-member bloc. The deal centres on a €390bn programme of grants to member states hardest hit by the pandemic. Italy and Spain are expected to be the main recipients. A further €360bn in low-interest loans will be available to members of the bloc. The summit, which began in Brussels on Friday morning, lasted more than 90 hours and became the EU’s longest since a five-day meeting in 2000. The package will undergo further negotiation by member states, and need ratification by the European Parliament;
- Iran reported 229 deaths in the past 24 hours, its highest daily toll so far. Health ministry spokeswoman Sima Sadat Lari said the number of deaths now stood at 14 634. There are 278 827 infections across the country;
- Brazil’s death toll passed 80 000 on Tuesday. Two Brazilian government ministers said on Monday they had tested positive, adding to the list of officials with the disease. One of them was Citizenship Minister Onyx Lorenzoni, a close ally of President Jair Bolsonaro, who also has tested positive;
- Spain reported a marked rise in infections over the past two weeks, health ministry data showed, putting the country’s emergence from lockdown in jeopardy. There are now 27.39 cases per 100 000 people in Spain, compared with 8.76 cases per 100 000 people on 3 July.