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

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

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

Potential Tax Revenue

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 Price elasticity % change in consumption % change in government revenue Impact of a 10 per cent increase in cigarette tax, given different price elasticities of demand

The potential to increase taxes on cigarettes in Jamaica (with ε p =-0.5) The starting point Impact of tax increase of 14 April 2005 EU minimum tax burden

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