Government policies, though most of them are well-intentioned, are known to generate unintended consequences — South Africa’s cigarette ban of 2020 is no exception. On the demand side, behavioural economics predicts that the proportion of income that smokers spend on cigarettes is unlikely to budge. On the supply side, past literature provides a convincing case for the rise of illicit cigarette trading. In reality, we have observed both economic principles at work. Unsurprisingly, few South Africans would give up on smoking even if that seems to be the ultimate yet implicit goal of the South African government. Cigarette ban — a badly designed smoking cessation program
SA cigarette ban — A “smoking cessation program” no one asked for
On 27th March, the South African government imposed a cigarette ban along with level 5 lockdown restrictions. Since then, although many restrictions have been lifted (even alcohol was sold for a short period of time) cigarettes are still a no-go. The justification for the prohibition of cigarettes was two-fold. First, when people “zol”, they leave “saliva” on the paper, and that moves the virus from “one to another” (“South African minister …”, 2020). The second justification for the prohibition is more rooted in science. Smokers are associated with more severe symptoms when they contract Covid-19, according to a controversial academic review conducted by Egbe & Ngobese (2020)
What this implies is that, in 2019, all of my smoker-friends failed at answering that one question asked by all job interviewers “where do you see yourself next year in 2020?”. Little did they expect to be signing up for a nationwide “smoking cessation program”, with or without their permission.
In this article, I want to look at the cigarette ban from a unique angle — as a forced “smoking cessation program”. With the help of some economic theories, I will establish why the prohibition looks like a cessation program, and what type of cessation program it is. Then, in the next few blogs, I will use open-source data and some simple techniques to investigate what exactly is expected from the “participants” under the cessation program.
Why does it sound like a smoking cessation program?
Under normal circumstances, almost all smokers try quitting smoking. The two most familiar approaches smokers use are: quit “cold-turkey” and reduction-to-quit. (Fiore et. al., 1990). Quitting “cold-turkey” is the immediate riddance of cigarette. On the other hand, reduction-to-quit is a gradual process. You are allowed to smoke less until you quit.
While never stated explicitly, the government seems to be pushing for a narrative for quitting smoking. An article in South African News Agency (a government body) can be found urging the smokers to give up smoking completely and wave “final goodbye” to cigarettes (“Cigarette ban is …”, 2020).
The government also seems to be of the belief that the cigarette ban was effective at curbing the sales of tobacco. In Pretoria High Court, in defence of the prohibition, the state’s lawyer advocate Marumo Moerane quoted a Human Science Research Council (HSRC) study from April, that “88% of smokers” are not able to buy a cigarette since the ban (Buthelezi, 2020).
This is when I began to perceive the cigarette ban as a “smoking cessation program”. The government, the program runner, stipulated that all must quit smoking immediately (or at least 88% of those people must quit smoking, according to HSRC).
All policies are known to have unintended consequences. It is just difficult for the state to predict how people will respond to the new set of rules and incentives under the new protocol. So, it is worth asking: do smokers see the cigarette ban as a “cold-turkey” styled cessation program? Or are they trying to “cheat” their way out? Some economic discussion might be helpful in finding the answers to these questions.
The economics of cigarette bans
Economics is largely about how people respond to incentives. It is worth looking at how a cigarette ban changes the incentive structure for both the smokers and suppliers of cigarette and how they will respond.
Smokers’ response to the ban
My father is a chain smoker. It started with him stealing cigarettes from his parents who ran a canteen. Prior to the lockdown, he smoked a pack per day (roughly 20 cigarettes). That is equivalent to smoking 1 cigarette every 40 minutes if we assume that he sleeps for 8 hours and eats for 2 hours per day. Although it sounds horrible, he is considered a mild chain-smoker.
Perhaps his smoking image has always been framed by the society as “bad”, and it has been so ingrained in my head, that I subconsciously protested against that habit. As a non-smoker, I can only make some educated guess on how smokers respond to the cigarette ban. Conveniently, I started observing my father. How does a chain smoker like my father respond?
Since the ban, he has gone through several stages. The first stage is “denial”. He denies that the ban will last long. Meanwhile, he finished all his manufactured cigarettes, and recovered some raw tobacco in an aged, yellowish package — a package he had bought more than 1 year ago and would have surely been forgotten if not for the desperation. The second stage is “empty promise”. This happened after he finished the last scrap of tobacco. He realised that the ban is there to stay. That was when he promised to give up smoking — a gesture that is surely appreciated by the policymakers. However, it is needless to say that the promise was negated as soon as he experienced withdrawal symptoms. It is really not easy to quit smoking, especially if it didn’t come from your heart (Fiore et. al., 1990). Study shows that the single best indicator for a successful quit of smoking is if the smoker himself wants to quit. A recent study (van Walbeek, Filby & van der Zee, 2020) also shows that perhaps only 16% of the South African smokers have successfully quit smoking in the meantime. That is fewer than 1 in every 5 smokers. Sadder is the fact that most of them suggested that they will start smoking as soon as the ban is lifted. Naturally then, smokers who failed to quit like my father reached the final stage — which many people call “acceptance” stage, but for reasons I will illustrate below, I will call it the stage of “rationality”.
The reason why I call the final phase “the stage of rationality” is because what he did was in every way understandable from the point of the view of a “homo economicus” (what economists call a “rational, pleasure maximising and selfish man”). We are all “homo economicus” to a certain extent. What made my father a “homo economicus” was that he stopped viewing “smoking” as a moral dilemma and started looking at it as an economic problem. Framed this way, the problem is straightforward:
How does one maximise his utility associated with smoking given the new circumstances under the ban?
Unsurprisingly — he started smoking again. The only difference is he is smoking fewer cigarettes, cigarettes of lower quality, and he no longer has receipts for the purchase (illicit traders are unlikely to provide receipts). What hasn’t changed, however, is that he is spending the same proportion of income on cigarettes.
The economic theories underlying his response is relatively easy to understand. First, the ban did not eradicate cigarettes from the market. It may have substantially reduced the supply thereof, but the demand for it is as high as before the ban. This incentivises the illicit traders to enter the market and expand their operation. Thus, as time goes by, the black market becomes increasingly accessible. Although the government believes only 88% smokers are able to purchase cigarettes, another academic article found that more than 90% of smokers report having access to illicit tobacco products (van Walbeek, Filby & van der Zee, 2020). More ironic is the fact that you can read about this study on HSRC website [1] (HSRC is the research institute that reported “88%” figure, which was quoted by the government).
“Cigarette ban ‘a big failure in every way’, says report”
HSRC website [Last accessed: 2020, Aug 2]
Second, smokers did not associate buying illicit cigarettes with disutility. They denied the one-sided moral narrative provided by the policymaker and began to perceive the ban as a shock to the cigarette market equilibrium. A smoking survey conducted in 6 townships in South Africa shows that, in 2017, 80% of respondents would still buy cigarettes even if they know they are illegal. The follow-up survey in 2018 showed that 75% of respondents would still buy cigarettes even if they knew tax was not paid on them. (REEP, 2017–2018)
Due to the surplus of demand over supply, tobacco products prices are skyrocketing, to the delight of smugglers and illicit traders/manufacturers. When the price of cigarette rises, we cut back on smoking. But we may still spend the same proportion of their income on smoking, just like my father. This is worth a discussion.
In behavioural economics, people are known to conduct “mental accounting”. One of the implications of that is we keep separate accounts in our mind about certain expenses, often without considering the overall picture of wealth. “Mental accounting” is what we have adapted to do to save mental energy facing decisions — but it is also illogical to have a mental account when money is just money. Similarly, it is likely that people have the same mental account for their cigarette expense. When the pandemic hit, those who are rational are more likely to evaluate the potential decline in future income and cut down on proportional spending on nondurable goods — alcohol, cigarettes, eating out… On the other hand, those who are prone to think in “mental account” terms are likely to say “20% of my income is on cigarettes, regardless of whatever happens”.
Lighting up the illicit market: Suppliers’ response to the ban
Since the ban, the illicit market for cigarettes is more bustling than ever in the land of South Africa. In his book “Narconomics”, Tom Wainwright (2017) reviewed the tactics used by politicians who declared war on drugs around the world and came to this conclusion — criminalising drugs is directly linked to the emergence and the booming of the illicit market. The logic is as follows: when you make the supply for a certain good illegal, you make the smuggling/trafficking/manufacturing more profitable, not less. This incentivise aspiring entrepreneurs to join the ranks of illicit traders. This is especially true of countries with weak legal or political institutions. Examples include: the cocaine industry in Mexico, heroin industry in Guatemala… and maybe the cigarette industry in South Africa?
We must first acknowledge there existed a large and functioning illicit cigarette market even prior to the ban. For many years, between 2002 and 2007 (van der Zee et. al., 2020), untaxed cigarettes only constitute 7–11% of all cigarettes sold. This was changed in 2010 when there was a spike in illicit cigarette consumption (van der Zee et. al., 2020). Since then, both the cigarette sector and the academic researchers have estimated the market share of illicit cigarette trading to be at least 30% of the market. (van der Zee et. al., 2020) Studies have also shown that the market penetration of illicit tobacco product in the township is on par with that nation-wide, showing that the problem of cigarette tax evasion is a country-wide problem (van der Zee et. al., 2020)
However, now is the best time for the kingpins in the business of contraband. Since the beginning of the lockdown, they have expanded their distribution operation, a fact attested to by a rise of market share from 35% pre-lockdown to 90% post-lockdown. The illegal tobacco market probably is also the best place to make a buck for the entrepreneurs right now, as the average price of cigarette increased by as much as 90%.
So, what type of cessation program is it really?
Having discussed the demand and the supply side of the cigarette market under the new policy, 3 things become evident. First, it is not only easy but also convenient for smokers to solicit cigarettes. Second, the illicit traders/manufacturers are taking full advantage of the situation to deliver to their customers with better efficiency. And third, the only party that seems to be turning a blind eye on the failure of the “cessation program” seems to be the program organiser itself — the state.
Here is my take
We started this blog comparing a typical smoking cessation program with the national ban on cigarette sales. We think that the underlying narratives accompanying the lockdown restriction are extremely cynical about the smoking habit. While not stated explicitly, it was rather evident that the government not only wanted to make smokers reduce smoking, but also wave their goodbye to tobacco forever.
While the government intended the “cessation program” to be one of the “cold-turkey” styles, we found the reality was quite different. Through a careful analysis of responses of the smokers and illicit cigarette traders, it became evident that both sides are capable of conducting the “smoky” business as usual. However, the surplus of the illicit trades is flowing to the supply side rather than the consumers. The only person who seems oblivious to the situation is the state itself.
In my next blog, I will further investigate and quantify the impact the cigarette ban might have had on smokers, e.g. how much are they forced to smoke nowadays?
References
Cigarette ban is no smoke and mirrors trick. 2020. South African Government News Agency. 5 May. Available: https://www.sanews.gov.za/features-south-africa/cigarette-ban-no-smoke-and-mirrors-trick [2020, Aug 1]
Egbe, C.O. and Ngobese, S.P., 2020. COVID-19 lockdown and the tobacco product ban in South Africa. Tobacco Induced Diseases, 18.
Fiore, M.C., Novotny, T.E., Pierce, J.P., Giovino, G.A., Hatziandreu, E.J., Newcomb, P.A., Surawicz, T.S. and Davis, R.M., 1990. Methods used to quit smoking in the United States: Do cessation programs help?. Ja, 263(20), pp.2760–2765.
South African minister embraces ‘zol’ meme that mocks her cannabis slang. 2020. BBC News. 14th May. Available: https://www.bbc.com/news/world-africa-52662029 [2020, Aug 1].
van der Zee, K., Vellios, N., van Walbeek, C. and Ross, H., 2020. The illicit cigarette market in six South African townships. Tobacco Control.
van Walbeek, C, Filby, S, van der Zee, K. 2020. Lighting up the illicit market: Smoker’s responses to the cigarette sales ban in South Africa. REEP report. Available: http://www.reep.uct.ac.za/news/lighting-illicit-market-report-smoker%E2%80%99s-responses-cigarette-sales-ban-south-africa [2020, Aug 1]
Wainwright, T. 2017. Narconomics: How to run a drug cartel. Penguin Random House U.K.
