Minister Tito Mboweni urged to address the contributions of fledgling industries to the fiscus
Honourable Finance Minister Tito Mboweni,
THE VAPOUR Products Association of South Africa (VPASA) represents manufacturers, wholesalers and retailers of vapour products in South Africa. We work with key stakeholders to develop legislation and standards for the vapour product industry and to ensure consumers have access to appropriate and relevant information related to vapour products.
We are writing to express our concerns on the proposed excise for electronic vapour products (EVP). It is our understanding that this excise will considerably increase the retail price of EVP. The implementation of excise on the scientifically proven less-harmful alternative to smoking will increase the price of the product to South Africans and make it less accessible to millions of smokers. There is a high probability that current vapers will be pushed back into smoking and those attempting to find a less-harmful alternative will be less likely to move away from tobacco.
As such, the increase in transaction prices will deter current consumers who use EVP as a harm-reduction alternative to cigarettes from buying EVP and possibly returning to their use of tobacco products. This will, therefore, increase the number of smokers and, possibly, the number of individuals who suffer from diseases caused by prolonged exposure and use of combustible tobacco products.
Furthermore, the vaping industry in South Africa consists mainly of small to medium enterprises (SMEs) who, through the imposition of an excise, will face a detrimental impact on their businesses.
Additionally, if sales of these products decrease, it will heavily impact the number of individuals the EVP industry now employs. According to a 2018 impact study by EIU Canback, the EVP industry has created more than 4 000 jobs in the retail and wholesale sectors. This number is set to increase to 10 000 by 2027.
In the past, you have proposed mitigating labour laws for the benefit of small business and VPASA, therefore, urges you to oppose introducing excise for EVP, at least for the first few years so as to ensure the growth of this relatively young industry. Another positive result of this includes smokers of combustible tobacco products turning to vapour products as a less-harmful alternative to cigarettes and, in turn, decreasing the pressure on the proposed National Health Insurance.
VPASA would like to request from the Ministry of Finance:
- As has been the case in the UK and the EU, a moratorium period of three years to allow for a better understanding of the category and growth of a harm-reduction product in South Africa (VPASA will commit to work with the Ministry during this period to undertake the appropriate market studies and, consequently, devise the appropriate taxation framework and regime for vapour products);
- Ensure that no excise is imposed on vaping at this point pending the finalisation of the studies listed under point one; and
- Ensure that all tobacco-containing products in the country are taxed equally. This would, without a doubt, provide the government a much higher revenue than placing a tax on vapour products at this stage.
VPASA is available to engage and assist in ensuring appropriate legislation where it concerns vapour products and to provide informed research on the impact EVP has on fiscal and health policies.
We thank you for your thoughtful consideration of this important matter and look forward to hearing your proposals in the 2020 Budget Speech.
Asanda Gcoyi, CEO,
Vapour Products Association of South Africa (VPASA)