British American Tobacco (BAT) has warned that cigarette sales are likely to fall in the second quarter, with trade, consumer stocks and revenue growth taking a hit in the country as the government this week reneged on its promises to reopen the market under phase 4 of the coronavirus (Covid-19) lockdown regulations.

The group said it expected global trade to decline by at least 5 percent, maintaining its previous forecast that the US market would also ease 5 percent during the period.

“This, together with some delayed launches in new categories, means we expect results to be weighted to the second half,” said the maker of Lucky Strike and Dunhill cigarettes.

On Wednesday, Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma said the government backtracked on its decision after it received over 2 000 submissions from the public opposing the sale of tobacco products,.

On Friday,  BAT’s local unit, BAT South Africa (BATSA), hit back at Dlamini-Zuma, giving her until 10:00 tomorrow (CORR) to reverse the ban or face legal action.

BTSA accused Dlamini-Zuma of being unreasonable and maintaining the ban for ulterior purposes.
“The reasons advanced by Minister Dlamini-Zuma for the reversal of President Ramaphosa’s decision are both wrong in law and in science.  Aside from the number of submissions, the Minister speculated that poorer people sharing cigarettes could be more likely to pass the virus to each other,” BATSA said.

“This deliberately ignored the fact that sharing cigarettes with someone from outside your own household is impossible if the government’s own social distancing guidelines are being adhered to. Also, a prohibition based on the fact that something can be shared by citizens would be, logically, extended to practically any foodstuff or cutlery, or shaking hands.  None of this is regulated. They are practices rightly addressed by education.”

FTITA, which represents 80 percent of licensed cigarette manufacturers in southern Africa, said said the ban had led to the mushrooming of illicit cigarette sales during the lockdown, costing the fiscus R36 million a day.

BATSA  said sales growth would be at its lower end of its guidancelowest this year as the coronavirus pandemic created uncertainty over its business prospects.

The group said while Covid-19 would affect its sales in the second quarter, the outbreak had had a limited impact on consumer demand so far.

Last year, the group contributed R13bn in total taxes, R10bn of which was tobacco excise.

Sars said the ban on cigarettes and alcohol would cost the fiscus at least R1.5bn.

Sars Commissioner Edward Kieswetter told Parliament on Thursday the under-recovery of excise duties from beer for the month to date erased decreased bystood at R664m, wines at R300m, spirits R300m and cigarettes nearly R300m.

“We cannot claim, as a country, that we are on top of it (illicit cigarettes sales),” Kieswetter said. “At a time like this when the legal sale is not permitted, it encourages the trade of these products in the illicit economy.”

The Tax Justice South Africa (TJSA) also slammed the ban of cigarrete sales.

TJSA founder Yusuf Abramjee said the government knew that the illicit economy was flourishing. “Earlier this week, a report by the Human Sciences Research Council found that one in four informal settlement residents have been able to buy cigarettes, and illegal traders have been cashing in nationwide,” Abramjee said.