Threat to SA’s growers

South Africa is at risk of losing its tobacco-growing industry if British American Tobacco Southern Africa (Batsa) switches to buying tobacco from overseas, according to a story in the Business Day.

Batsa recently notified the country’s only tobacco processor, Rustenburg-based Limpopo Tobacco Processors (LTP), that it might have to consider buying foreign tobacco should the illicit tobacco industry gain further traction.

Christo van Staden, the MD of LTP, was quoted as saying that the move would put the existence of his company in doubt.

“With an estimated global over-production of tobacco leaf expected this year and declining markets, it will be impossible for LTP to find alternative markets for these huge volumes of tobacco,” Van Staden said.

According to the story, Batsa said it was considering the switch because of the deteriorating market conditions for the tax-paying portion of the industry.

In December 2018, research firm Ipsos said cigarettes selling for less than the tax of R17.85 per pack owed to the SA Revenue Service had grown market share by more than 25 percent, from 33 percent to 42 percent in three months.

It was not spelt out why Batsa would find it necessary to switch to buying tobacco from overseas if illicit tobacco products increased their share of the domestic market, but presumably it believes that it can buy tobacco cheaper from elsewhere.

Van Staden said his short-term request to the Government was not to impose any further increases in excise taxes on cigarettes in 2019, because that would simply make the non-tax-paying products even cheaper by comparison with legal products.

LTP buys and processes most of SA’s tobacco crop from about 100 commercial farmers and about 150 emerging farmers. The industry is said to employ 10,000 farm workers with 35,000 dependents.