Mystery surrounds South Africa's upcoming budget announcement, with fiscal policies regarding vapes and tobacco products likely under scrutiny. But with little concrete information available, wihat could change in the coming weeks? Kurt Yeo joins us on GFN News to explore these regulatory changes and South Africa's current problematic approach to safer nicotine products.
Chapters:
0:00 - Coming up on today's programme 0:55 - Surprises in store in upcoming budget! 2:22 - Blanket taxation causes consumer headache 3:57 - The real impact of illicit market in South Africa 5:47 - What can consumers do? 7:40 - Can South Africa shift its illicit market?Transcription:
00:05
Joanna Junak: Hello and welcome! I'm Joanna Junak and this is GFN News on GFN.tv. South Africa is awaiting its 2025 budget speech, which was initially scheduled for February 19, but has been postponed to March 12. The forthcoming budget speech is expected to provide clarity on the government's fiscal policies concerning tobacco and vaping products. The increase in excise duty on tobacco products is one of the key budget topics. Kurt Yeo, co-founder of Vaping Saved My Life, is joining us today to share more insights on this topic. South Africa is awaiting the 2025 budget speech. What impact might the budget announcement have on the tobacco and vaping industries in the country?
01:18
Kurt Yeo: Well actually we don't really know Joanna. We're all waiting with bated breath and surprise. We need to acknowledge that in June 2023 was when the tax for the first exiles on vaping products was introduced and this will be the second increase. since that introduction of the tax. What their percentage is, we're not sure, but given the situation that we see in South Africa, where we are finding it very difficult to generate revenue from other taxes, given the social and economic impact of a whole host of things. I'm really concerned that we will see a very, very big increase on these products. But I'm hoping that our involvement in the discussions has persuaded them to keep it at least within the inflation range. But it's very difficult to tell at this stage.
02:23
Joanna Junak: and which specific tax-related decisions are most problematic for vape producers and distributors?
02:31
Kurt Yeo: Well, as you well know, the current tax is on e-liquids and it's per volume irrespective of the nicotine content, whether it's a zero-nic or right up to a 50-milligram e-liquid. the price is based on the pure volume of the entire content or container. And currently we are sitting at three random four cents per mole. So effectively what that does is that anything that's to do with the free base market larger volumes almost doubles or sometimes more than doubles the price of those products. So effectively what that does is that literally brings local producers who do not make disposables yet within the country. The only thing that they can produce is e-liquids within large containers, and typically those containers fetch anywhere between a 30 mole to 120 moles. So the pressure on local production is significant. However, based on the volume of the containers, imports are now becoming a prolific alternative or at least a product that's in the market. So we've seen a lot of movement towards disposable products rather than open system products. And that's a big concern for local producers.
03:58
Joanna Junak: So what does a balanced approach to tobacco taxation mean from the perspective of wave producers?
04:06
Kurt Yeo: Well, I've always advocated that there should be no exiles on vaping products in the South African context. The reason behind that is because South Africa has a very large population of smokers. We're currently sitting around 11 million smokers in the country. So it equates to almost a third of our adult population are smokers. The big issue around this is that 60% of cigarettes consumed in South Africa are illicit products. So they fetch a far lower price because there's no tax on these products. So if we're not going to introduce exiles on vaping products, it will definitely make that bridge too wide or too big for individuals who are smoking. to move over to safe alternatives like vaping purely based on the price mechanism. The idea around this balanced approach is to focus more on collection of taxation on their cigarettes and In the meantime, keep vaping products as affordable as possible within South Africa, so it makes it easier for these individuals to smooth from a harmful product like cigarettes, which we all know, to a less harmful product like e-cigarettes or vaping products. And the only way we can really do that, given the context of South Africa and its economic situation, is to have those products more affordable and given the Randall exchange because all of our products most of our hardware or in fact all of our hardware is imported that with the Randall exchange rate makes it incredibly unaffordable for the majority of smokers in the country.
05:47
Joanna Junak: And how should policy makers determine taxation levels based on the harm of different tobacco products?
05:55
Kurt Yeo: Well, as I've said, is that because we know these products are less harmful, we shouldn't then consider these products to be free from excess. And we need to, unfortunately, have our government, which they have unable to do so, is to distinguish that these products are different. They're different in their risk. They're different in the harms they present. But unfortunately, in South Africa, our local governments or our government as a whole have not distinguish the difference between combustible tobacco and non-combustible tobaccos. They all see it as the same thing. So when we look at or we try approach the governments or government departments, we try to highlight the fact that there is a significant difference here. And there should be considered more of a solution rather than just another tobacco product. But unfortunately, we're not seeing that level or not seeing that traction grab hold yet. So we are hoping that in time, given all the data that we've seen from other parts of the world that will convince our government that this is probably a better route, is regulate these products differently from tobacco. They still need to be regulated. And at the same time, if they see that there is an advantage of these products, which we now know, allowing people to move to safe alternatives, then maybe we can convince them that the exercise on these big, big, big, big, big, too premature. Obviously, when we get to a different stage of our evolution in tobacco control and harm reduction, where we start seeing more vaping and less smoking, then the discussion around exercise can be brought in. This is what I would consider a more appropriate approach.
07:41
Joanna Junak: And the last question to you, Kurt, what made the potential consequences of this proportionate taxation on vaping and tobacco products be?
07:51
Kurt Yeo: So if we are on the same trajectory, or if we see the same trajectory as what's been happened over recent years, is that if we continue with this path, South Africa has a very well-established illicit and black market, given the fact that we have excessive exercises, we have very little enforcement, And given the fact that we had a 2020 sales ban on tobacco, alcohol, and vaping products, these channels of illicit products and black market products are well established. So if we see any kind of movement regards to excessive excess taxes or restrictions and preventing regulated or regular environments and businesses participating in this, the demand is not reduced. All that it's going to do is move people to these black markets, to these illicit markets. And unfortunately, the risk associated with that is obviously seen throughout the world is that it follows a whole host of other crimes, as well as the standards and safety of these products are now questionable because we don't have control of those sources.
09:02
Joanna Junak: Thank you, Kurt. That's all for today. Tune in next time here on GFN TV or on our podcast. And for your chance to present your science at this year's Global Forum on Nicotine Conference, don't forget to check out GFN Science Lab over on our official website. Thanks for watching or listening. See you next time.