BAT Appeals to Court After South Africa Digs In on Tobacco Ban

(Bloomberg) --

British American Tobacco Plc and Japan Tobacco Inc. are among cigarette makers taking legal action against the South African government to try and overturn a sales ban that's been extended into a third month.

South Africa blocked the sale of smoking products in late March as part of a strict lockdown to help contain the coronavirus, and the restrictions will remain in place even after retail of all other goods -- including alcohol -- resumes on June 1. Cooperative Governance and Traditional Affairs Minister Nkosazana Dlamini-Zuma has cited the impact on health as the main reason for the decision, while arguing that smokers may be more in need of ventilators should they be admitted to hospital with Covid-19.

BAT, which sells Peter Stuyvesant and Dunhill cigarettes and says it has a 78% share of the legal market, initiated urgent legal proceedings on Friday. The London-based company argues that prohibition forces smokers to buy from the illegal market, deprives the state of tax revenue and threatens thousands of jobs. Japan Tobacco, which makes the Camel and Winston brands, supports the case, as do consumer, farmer and retail groups.

“The government's continued ban on legal tobacco sales is threatening the survival of the legal tobacco sector and the livelihoods it directly supports,” Johnny Moloto, head of external affairs for BAT's South African unit, said in a statement. “It has only succeeded in significantly growing a massive and nationwide illegal industry at the direct expense of law-abiding businesses, citizens and taxpayers.”

Debate has raged about the logic behind the smoking ban and the reasons it remains in place. The policy has been driven by Dlamini-Zuma, a qualified medical doctor and former health minister who spearheaded legislation that banned smoking in public places and prohibited all forms of tobacco advertising in the 1990s.

She argued for tobacco restrictions to be kept in place as a member of South Africa's National Command Coronavirus Council, which leads the country's defense against Covid-19. Only a handful of other countries have included cigarettes in lockdown restrictions, including India and neighboring Botswana.

That's made Dlamini-Zuma the target of anger and accusations from those opposing the ban, and this week she denied a rumored association with cigarette trader Adriano Mazzotti. She's also led the government's defense against a second court case brought by the Fair Trade Independent Tobacco Association, which represents smaller local manufacturers. The minister declined to comment further on the ban on Thursday, citing the court proceedings.

Quitting Efforts

About 90% of smokers have been able to buy cigarettes during lockdown, according to a report by academics at the University of Cape Town, which cited a survey filled out by more than 16,000 respondents.

More than 40% said they used the lack of availability as a chance to quit, although a majority of those efforts were unsuccessful, according to the report. Cigarettes are being sold at traffic lights and gas stations as well as by individual dealers -- albeit rarely premium brands and at marked up prices.

BAT said it has “made every effort” to engage with the government since the ban came into force, but has received no formal response. That's in sharp contrast to reports by drinks makers such as Distell Group Holdings Ltd., South Africa's biggest maker of wine and spirits, which successfully argued for longer opening hours and permission for bars to sell for take-away purposes when alcohol sales resume on Monday.