Metro Rate Cards

Tobacco price doubles

July 27, 2020 4 min read

4 min read

MASERU – Scarcity of tobacco has attracted skyrocketing prices amid Covid-19 impact on the business between Lesotho and the neighbouring South Africa.

…leaving low income groups vulnerable

Since South Africa introduced a ban on the sale of tobacco when it imposed national lockdown that also led to the closure of almost all border gates it shares with Lesotho, it has become difficult to access cigarettes imported from SA with normal prices.At the beginning of the national lockdown that commenced in April in Lesotho, most ordinary smokers relied on low-priced illicit tobacco sold by street vendors on the pavements of the country’s towns.

But stalls selling these wide ranging brands mostly smuggled from South Africa soon ran out of stock, following closure of borders separating the two countries.According to Morabe Monyakane, an economist and public speaker, that pushed for businesses to take advantage of the high demand in the market by raising prices of remaining genuine brands that are still in  circulation.

“For example; a carton of Peter Stuyvesant (10 boxes of 20 sticks in each box) used to sell below M500 but now it goes for unregulated price of between M950 and M1 200. A loose stick that used to be M3 is now sold for M5 and M6 varying with places.

“The pinch of this excessive charge is mostly felt by the poor because the illicit tobacco trade often has the biggest impact on individuals in low socio-economic groups, as these smokers are most sensitive to prices.

According to Morabe Monyakane, an economist and public speaker, that pushed for businesses to take advantage of the high demand in the market by raising prices of remaining genuine brands that are still in, “Even with these high prices, addicted smokers fail to give up, and inaccessibility to cheaper cigarettes leaves their families financially compromised. The government was also losing money in uncollected tax on illicit cigarettes while the tobacco industry was suffering from unfair competition,” he indicated. 

In a statement of March 2, the British American Tobacco (BAT) which is a leading tobacco and nicotine products group said it is estimated that illicit tobacco products make more than 15 percent of the total tobacco products in Lesotho. BAT further showed that the Lesotho government lost about M17 million from illicit cigarette sales in 2019 alone.

“Cigarettes will be smuggled from all over the low taxed jurisdictions within the region, including South Africa and sold in the informal markets of Lesotho. The government is set to lose at least M93 million per annum in taxes,’’ the company also warned.

In 2018, the Lesotho Revenue Authority (LRA) confiscated 38 boxes of RG cigarettes containing 380 000 sticks worth over M1.1 million at the Maseru Bridge. RG was reported as an illicit cigarette as it is usually sold below the M20 threshold of the packet of cigarette.

The cigarettes that were confiscated were smuggled by hawkers and were not declared. No excise duty was paid either, LRA said in a statement. The illicit trade in tobacco products poses a serious threat to public health because it increases access to tobacco by making cigarettes more affordable.

People who otherwise might have quit smoking continue to smoke, and people who might never have started smoking initiate a habit that will cause them harm, and that they are likely to regret in the future, warned International Agency for Research on Cancer. When he was the Minister of Finance, Dr Moeketsi Majoro who is now the Prime Minister had said, “The problem the country is faced with is that of taxpayers who are already paying for medical expenses arising from tobaccorelated illnesses”.

Enjoy our daily newsletter from today

Access exclusive features and newsletters, along with previews of new media releases.

Metro News Digital

Get Your Online Newspaper

He spoke of the government’s proposed tobacco levy to discourage people from smoking. “The levy is the government’s belated attempt to begin to share the costs of dealing with tobacco-related medical expenses and possibly to lower tobacco use within our people,” he said. However, in their statement, BAT had argued that the proposed tobacco levy will enable massive lucrative opportunities for smugglers whilst punishing taxpaying enterprises.

Legal and external affairs manager of BAT, Nelson Jeque said, “The levy will push up the pricing of legal cigarettes thereby creating bigger opportunities for illegal industry in Lesotho.” The firm’s main argument was that Lesotho was paid a lot of money from the SACU pool in 2018/19 Financial Year – 35 percent of the country’s revenues.

“The cigarette sales within SACU contributed over M15 billion of the total SACU revenue pool. A levy of 30 percent on cigarettes will mean that the price payable on a pack of 20s cigarettes that are legally sold in Lesotho increases to M53.50 per pack. Meanwhile, the illicit cigarettes will remain at M20 per pack,” attested Jeque.

Other experts showed that, since illicit cigarette trafficking is also a cross-border issue, a regional strategy for affected countries is needed. It should provide for joint law enforcement operations, intelligence sharing and better legislation to curb the production and smuggling of illicit cigarettes. This would enable a concerted effort from the region to tackle this growing form of organised crime.

Share this story


Loading Question

Related Stories