Evan Blecher and Corné Van Walbeek

School of Economics
University of Cape Town
South Africa

Tobacco Control and Research in Developing Countries:

Lessons from South Africa and Jamaica
 Aim of this presentation

Indicate the role of anti-tobacco groups in

implementing policy change in developing countries

Medical and economic arguments

Indicate what tobacco control interventions work best

in developing countries

Look at how research can influence policy

 Tobacco control in South Africa

Prior to 1990 South Africa did not have any tobacco

control strategy/policy

Cigarette consumption increased threefold since

1960s
Cigarettes were 40 per cent more affordable than in
1970
No legislation or health warnings of any sort
Airlines introduced restrictions on smoking in late
1980s
 First hesitant tobacco control steps

The National Party government had very cordial

relations with the tobacco industry

Pressure from opposition, the ANC and empirical

evidence forced NP government to impose tobacco
control legislation in 1993
– Health warnings on packaging and advertising material
– Restricting smoking on public transport

This pressure levied NGO and researchers

 The democratic transition of 1994
African National Congress came to power
– No historical ties with the tobacco industry
– Strong primary health care focus
– Had the political will to act

June 1994:
– Government announced intention to raise taxes to 50 per
cent of retail price
– Rationale: public health
– Tax increases phased in over a number of years
 Concerns about the excise tax increases
1. It might reduce total government revenue
(in constant 2000 cents)

400 5000

(R million, 2000 prices)

Real excise revenue
Real excise rate

4000
300
3000
200
2000
100
1000

0 0
1961

1977

1997
1965

1969

1973

1981

1985

1989

1993

2001

2005
Real excise rate Real excise revenue
More concerns about the tax increases
2. It would lead to increased cigarette smuggling

“In my chairman’s Address of August, I stated that we had conclusive

proof that huge quantities of cigarettes, without the required health
warnings, are available in the South African market. We warned that
smuggling was out of control.

In 1993, in a law-abiding country like Canada, smuggled cigarettes

increased to over 40 % of the total market. As in South Africa, this was
due to high levels of excise duties. The Canadian Government lost tax
revenues and, due to the availability of cheaper smuggled products,
consumption did not decrease. The Canadian Government subsequently
reduced their excise duties. Today the incidence of smuggling in Canada is
almost zero.”

Open letter to Nkosazana Zuma, Minister of Health, by Johann Rupert, chairman of

the Rembrandt Group
 The 1999 Legislation

Aim of the legislation

– Protect non-smokers from ETS
– Protect children

Main elements of the legislation

– Ban all tobacco advertising and sponsorship
– No smoking in all enclosed workplaces and other public
places
– Includes public smoking restrictions in the hospitality industry
(restaurants, bars, etc)
– Restricts sale to children
Cigarette prices and cigarette consumption

1200 2000
1800
Real price per pack of 20
( in constant 2000 cents)

Cigarette consumption
1000 1600

(millions of packs)
800 1400
1200
600 1000
800
400 600
200 400
200
0 0
1964

1972
1960

1968

1976

1980

1984

1988

1992

1996

2000

2004
Real price of cigarettes Consumption of cigarettes
 The role of researchers and lobbyists
In SA the fight against tobacco was led by the medical
community
– Medical Research Council (MRC)
– National Council Against Smoking (NCAS)

1988 and 1992: Reports by the Medical Research

Council
– Considered the medical evidence
– Importantly, estimated the economic cost and benefits of
tobacco
– Challenged government to act
 Tobacco control and economics

Industry cannot argue against the medical evidence

Typical tobacco industry responses

– “We are an important industry in terms of employment and
contribution to GDP”
– “We are the most heavily taxed industry and contribute
massively to government revenue”
– “Don’t kill the golden goose”

Economic, rather than medical or epidemiological,

arguments were required to counter these industry
arguments
 Economics: The Evidence

Government has allowed real excise tax to decrease

– Result: loss of potential revenue

Price elasticity of demand is around -0.6

– Implication: tax increases raises government revenue and
decreases consumption

Limited econometric evidence that advertising

increases cigarette consumption
– But 1999 legislation nevertheless banned tobacco
advertising
 R millions (constant 1995 prices)

1000
1500
2000
2500
3000
3500
4000
4500
5000

500

0
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984

Potential total tax revenues

1985

Year
1986
1987
1988
1989
1990
1991
1992
Potential Tax Revenue

Actual total tax revenues

1993
1994
1995
1996
1997
1998
1999
2000
 Tobacco control in Jamaica

Some observations
– Per capita consumption of cigarettes in Jamaica is
relatively low and has been decreasing since 1970s
– Most cigarettes are sold as single sticks
– Strong tobacco control commitment by Ministry of
Health
– Huge government debt places tax revenue issues
above health issues
Keeping both the Ministries of Finance and
Health satisfied
Impact of a 10 per cent increase in cigarette tax, given
different price elasticities of demand
Price elasticity % change in consumption % change in government
revenue
0.0 0.00 10.00
-0.1 -0.52 9.43
-0.2 -1.04 8.86
-0.3 -1.56 8.28
-0.4 -2.08 7.71
-0.5 -2.60 7.14
-0.6 -3.12 6.57
-0.7 -3.64 6.00
-0.8 -4.16 5.42
-0.9 -4.68 4.85
-1.0 -5.20 4.28
-1.1 -5.72 3.71
-1.2 -6.24 3.14
-1.3 -6.76 2.56
 The potential to increase taxes on
cigarettes in Jamaica (with εp =-0.5)

60
Percentage change in government revenue

50

40

30
from 2004 levels

The starting point

20
EU minimum tax burden
10

-10
Impact of tax increase of 14 April 2005
-20

-30
45

47

51

55

61

65

69

71

79
49

53

57

59

63

67

73

75

77
Total tax burden on cigarettes (tax as percentage of average retail price)
 Industry responses to tax increases
Intention of tax increase is to
1. Increase government revenue
2. Reduce consumption

Cigarette manufacturing industry increases wholesale

price by more than the increase in the excise tax
Result: greater decrease in cigarette consumption
than originally expected
(Similar trend was found in SA)
Cartoon in Gleaner, 15 April 2005
Lessons learnt from South Africa and
Jamaica
Lack of finances should not prevent effective tobacco
control lobbying
One or two people can have a huge impact
Economic arguments weigh heavily
Sustained increases in the excise tax is the most
effective tobacco control tool, especially in developing
countries
The press can be a valuable ally in promoting a
healthy lifestyle
 What can we do with economics?

Econometrics – demand analysis

– Price elasticity
– Potential tax revenue (Laffer curve)
– Income elasticity of demand

Cost benefit analysis

Policy Analysis
– ETS & advertising bans

Employment studies (SAC & Input/Output)

Some ideas about cigarette affordability
It is not all about prices
What about income?
This brings in a simple concept: affordability

Blecher and Van Walbeek, Tobacco Control, 2005

Price as a proportion of income

Conclusion: Need to consider tax increases in line with

increases in income as well as inflation just to keep the status
quo
Blecher and Van Walbeek, Tobacco Control, 2005