Cigarette ban ‘spectacular failure’; extra cash for every EC job saved; grounded SAA guzzles R10bn; SA on UK rich list

By Jackie Cameron

* The cigarette ban has been a ‘spectacular failure’, with nine out of 10 smokers breaking the law during lockdown and the illicit trade flourishing, according to in-depth research by University of Cape Town (UCT) experts. In a survey of 12,000 smokers, members of UCT’s research unit on the economics of excisable products found the following:

  • The price per cigarette increased by an average of 4.4% each day during the 13 days that the survey was conducted. This meant that the average price of cigarettes was 53.3 percentage points higher than they were in the pre-lockdown period on the last day of the survey, compared to the first day of the survey;
  • The price increases differ substantially across the provinces, with the Eastern Cape, Limpopo, Mpumalanga and North-West Province experiencing lower increases in the price and the Free State and the Northern Cape experiencing higher increases in the price;
  • Smokers who live in rural areas have experienced substantially higher increases in the price during lockdown than smokers that live in more populated areas (e.g. suburbs, townships and informal settlements);
  • Smokers who purchase their cigarettes through WhatsApp groups, other online platforms, family and friends, and essential worker acquaintances have experienced a larger increase in the cigarette price post-lockdown than smokers who purchase their cigarettes at spaza shops and the (few) formal retailers;
  • The ban has undone the progress the South African Revenue Service had made in stamping out illegal cigarettes and given illicit traders a foothold “where they previously could not compete on a quality basis”; and
  • The prohibition has created a boom in the informal retail sector, with two-thirds of smokers now buying cigarettes from spaza shops and the like instead of from formal retailers, made street vendors a key source of cigarettes for 26% of smokers, and created a thriving black market that revolves around friends and family, WhatsApp groups and “essential worker” acquaintances. (Here are more details on the survey on South Africa’s cigarette ban)

* The Eastern Cape plans to offer employers R10,000 for every manufacturing job saved. For each job saved in manufacturing, the Eastern Cape provincial government will reward companies with R10,000, reports HeraldLive.co.za. This proposal was included in premier Oscar Mabuyane’s Covid-19 containment and mitigation plan, which he presented to President Cyril Ramaphosa at Livingstone Hospital on Thursday, says the newspaper. The premier said the bonus scheme was among the incentives the provincial government could offer companies to retain jobs in the province. The Eastern Cape had been bleeding jobs even before the national coronavirus lockdown, with the unemployment rate climbing three percentage points to 39.5% between October and December 2019, says the Port Elizabeth news outlet.

* SAA continues to suck up billions of taxpayers’ funds, even though it is grounded and being managed by business rescue specialists. Reuters reports that SAA has spent just under R10bn since it entered business rescue, a form of bankruptcy protection. It quotes the business rescue practitioners. The troubled national airline, which has not made a profit since 2011 and is dependent on government bailouts to remain solvent, entered business rescue in December in a last-ditch bid to save the company.

* As the Covid-19 pandemic risks dragging Africa into the worst economic recession on record, governments from Ghana in the west to Rwanda in the east have started to ease restrictions, reports Bloomberg. In South Africa, which has the continent’s highest number of confirmed infections, the government is taking the gradual approach – on May 1 it began relaxing one of the world’s strictest lockdowns in place since March 27, notes the news agency. It points out that, with thousands of small businesses at risk of collapse and the central bank expecting the economy to shrink 6.1% this year, business leaders and mining companies are asking the government to reconsider its rules and accelerate the easing of restrictions. The country’s largest platinum miner, Sibanye Stillwater, urged President Cyril Ramaphosa this week to let mines run at full capacity in order to avoid a complete shut-down. Even though miners have been allowed to restart operations with half their normal workers, that isn’t sufficient, Chief Executive Officer Neal Froneman said. “We are causing more harm by constraining the economy than we are impacting positively on Covid-19,” he is quoted as saying. “We have gone too far now, we now need to get the economy to start up.” The real emergency may not be the virus, but the fallout from the pandemic, Leena Koni Hoffmann, associate fellow of the Africa program at Chatham House in the UK, said, according to Bloomberg.

* Covid-19 has shaken up stock markets and wiped out asset values for many, but wealthy South Africans still feature on the UK’s rich list. These include Nicky Oppenheimer, whose family – including his sister and nieces – has donated generously to SA efforts to prop up the economy and help the poor, and short-term insurance entrepreneur Douw Steyn and first African in space Mark Shuttleworth. South Africa’s richest man, Nicky Oppenheimer and his family have moved up two places to 23, even though the Oppenheimers actually saw a drop in their fortunes in pound sterling terms. Their wealth is estimated at around £5.6bn. The Sunday Times recognised that the 74-year-old mining magnate had “stumped up a billion rand to help his homeland’s businesses cope with the coronavirus lockdown, saying he was spurred to take action by his grandson Sam, points out The Citizen. The Sunday Times said of Douw Steyn, 67, and his family that they are at number 150 on the list, with £950m, an increase of £50m and a rise of 12 places on their list. Steyn City is described as “one of the largest residential developments in South Africa, with 2,000 workers building 730 apartments, a lagoon, malls and a school at the 2,000-acre estate”. Shuttleworth, the tech pioneer who cashed in and used funds to become the first African in space, came in at 269, with £500m. Shuttleworth, you will recall, emigrated to reduce his tax liability in South Africa.

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