Tobacco Control and Research in Developing Countries

8/8/2019 Tobacco Control and Research in Developing Countries

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Evan Blecher and Corn Van Walbeek

School of Economics

University of Cape Town

South Africa

Tobacco Control and Research in Developing Countries:

Lessons from South Africa and Jamaica


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Aim of this presentationAim of this presentation

Indicate the role of antiIndicate the role of anti--tobacco groups intobacco groups in

implementing policy change in developing countriesimplementing policy change in developing countries

Medical and economic argumentsMedical and economic arguments

Indicate what tobacco control interventions work bestIndicate what tobacco control interventions work best

in developing countriesin developing countries

Look at how research can influence policyLook at how research can influence policy


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Tobacco control in South AfricaTobacco control in South Africa

Prior to 1990 South Africa did not have any tobaccoPrior to 1990 South Africa did not have any tobacco

control strategy/policycontrol strategy/policy

Cigarette consumption increased threefold sinceCigarette consumption increased threefold since1960s1960s

Cigarettes were 40 per cent more affordable than inCigarettes were 40 per cent more affordable than in

19701970

No legislation or health warnings of any sortNo legislation or health warnings of any sort

Airlines introduced restrictions on smoking in lateAirlines introduced restrictions on smoking in late

1980s1980s


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First hesitant tobacco control stepsFirst hesitant tobacco control steps

The National Party government had very cordialThe National Party government had very cordial

relations with the tobacco industryrelations with the tobacco industry

Pressure from opposition, the ANC and empiricalPressure from opposition, the ANC and empirical

evidenceevidence forced NP government to impose tobaccoforced NP government to impose tobacco

control legislation in 1993control legislation in 1993

Health warnings on packaging and advertising materialHealth warnings on packaging and advertising material Restricting smoking on public transportRestricting smoking on public transport

This pressure levied NGO and researchersThis pressure levied NGO and researchers


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The democratic transition of 1994The democratic transition of 1994

African National Congress came to powerAfrican National Congress came to power

No historical ties with the tobacco industryNo historical ties with the tobacco industry

Strong primary health care focusStrong primary health care focus

Had theHad the political willpolitical will to actto act

June 1994:June 1994:

Government announced intention to raise taxes to 50 perGovernment announced intention to raise taxes to 50 per

cent of retail pricecent of retail price Rationale: public healthRationale: public health

Tax increases phased in over a number of yearsTax increases phased in over a number of years


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Concerns about the excise tax increasesConcerns about the excise tax increases

1.1. It might reduce total government revenueIt might reduce total government revenue

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eal excise rate eal excise revenue


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More concerns about the tax increasesMore concerns about the tax increases

2. It would lead to increased cigarette smuggling2. It would lead to increased cigarette smuggling

In my chairmans Address of August, I stated that we had conclusiveIn my chairmans Address of August, I stated that we had conclusive

proof that huge quantities of cigarettes, without the required healthproof that huge quantities of cigarettes, without the required health

warnings, are available in the South African market. We warned thatwarnings, are available in the South African market. We warned that

smuggling was out of control.smuggling was out of control.

In 1993, in a lawIn 1993, in a law--abiding country like Canada, smuggled cigarettesabiding country like Canada, smuggled cigarettes

increased to over 40 % of the total market. As in South Africa, this wasincreased to over 40 % of the total market. As in South Africa, this was

due to high levels of excise duties. The Canadian Government lost taxdue to high levels of excise duties. The Canadian Government lost tax

revenues and, due to the availability of cheaper smuggled products,revenues and, due to the availability of cheaper smuggled products,consumption did not decrease. The Canadian Government subsequentlyconsumption did not decrease. The Canadian Government subsequently

reduced their excise duties. Today the incidence of smuggling in Canadareduced their excise duties. Today the incidence of smuggling in Canada

is almost zero.is almost zero.

Open letter to Nkosazana Zuma, Minister of Health, by Johann Rupert, chairman ofOpen letter to Nkosazana Zuma, Minister of Health, by Johann Rupert, chairman of

the Rembrandt Groupthe Rembrandt Group


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The 1999 LegislationThe 1999 Legislation

Aim of the legislationAim of the legislation

Protect nonProtect non--smokers from ETSsmokers from ETS

Protect childrenProtect children

Main elements of the legislationMain elements of the legislation

Ban all tobacco advertising and sponsorshipBan all tobacco advertising and sponsorship

No smoking in all enclosed workplaces and other publicNo smoking in all enclosed workplaces and other public

placesplaces Includes public smoking restrictions in the hospitalityIncludes public smoking restrictions in the hospitality

industry (restaurants, bars, etc)industry (restaurants, bars, etc)

Restricts sale to childrenRestricts sale to children


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Cigarette prices and cigarette consumptionCigarette prices and cigarette consumption

Realpriceperpac

kof20

(inconstant2000

cents)

Cig

aretteconsum

ption

(millionsofpacks)

ea price o cigarettes Consumption o cigarettes


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Tobacco control and economicsTobacco control and economics

Industry cannot argue against the medical evidenceIndustry cannot argue against the medical evidence

Typical tobacco industry responsesTypical tobacco industry responses

We are an important industry in terms of employment andWe are an important industry in terms of employment andcontribution to GDPcontribution to GDP

We are the most heavily taxed industry and contributeWe are the most heavily taxed industry and contribute

massively to government revenuemassively to government revenue

Dont kill the golden gooseDont kill the golden goose

Economic, rather than medical or epidemiological,Economic, rather than medical or epidemiological,

arguments were required to counter these industryarguments were required to counter these industry

argumentsarguments


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Economics: The EvidenceEconomics: The Evidence

Government has allowed real excise tax to decreaseGovernment has allowed real excise tax to decrease Result: loss of potential revenueResult: loss of potential revenue

Price elasticity of demand is aroundPrice elasticity of demand is around --0.60.6

Implication: tax increases raises government revenueImplication: tax increases raises government revenue andand

decreases consumptiondecreases consumption

Limited econometric evidence that advertisingLimited econometric evidence that advertisingincreases cigarette consumptionincreases cigarette consumption

But 1999 legislation nevertheless banned tobaccoBut 1999 legislation nevertheless banned tobacco

advertisingadvertising


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Tobacco control in JamaicaTobacco control in Jamaica

Some observationsSome observations

Per capita consumption of cigarettes in Jamaica isPer capita consumption of cigarettes in Jamaica is

relatively low and has been decreasing since 1970srelatively low and has been decreasing since 1970s

Most cigarettes are sold as single sticksMost cigarettes are sold as single sticks

Strong tobacco control commitment by Ministry ofStrong tobacco control commitment by Ministry of

HealthHealth Huge government debt places tax revenue issuesHuge government debt places tax revenue issues

above health issuesabove health issues


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Keeping both the Ministries ofFinance andKeeping both the Ministries ofFinance and

Health satisfiedHealth satisfied

Price elasticityPrice elasticity % change in consumption% change in consumption % change in government% change in government

revenuerevenue

0.00.0 0.000.00 10.0010.00

--0.10.1 --0.520.52 9.439.43--0.20.2 --1.041.04 8.868.86

--0.30.3 --1.561.56 8.288.28

--0.40.4 --2.082.08 7.717.71

--0.50.5 --2.602.60 7.147.14

--0.60.6 --3.123.12 6.576.57

--0.70.7 --3.643.64 6.006.00

--0.80.8 --4.164.16 5.425.42

--0.90.9 --4.684.68 4.854.85

--1.01.0 --5.205.20 4.284.28

--1.11.1 --5.725.72 3.713.71

--1.21.2 --6.246.24 3.143.14--1.31.3 --6.766.76 2.562.56

Impact of a 10 per cent increase in cigarette tax, givendifferent price elasticities of demand


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The potential to increase taxes onThe potential to increase taxes on

cigarettes in Jamaica (with cigarettes in Jamaica (with pp ==--0.5)0.5)

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Total tax burden on cigarettes(taxas percentage ofaverage retail price)

Percentagec

angei

ngovernmen

trevenue

from2

004

levels

The starting point

Impact of tax increase of 14 April 2005

EU minimum tax burden


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Industry responses to tax increasesIndustry responses to tax increases

Intention of tax increase is toIntention of tax increase is to1. Increase government revenue1. Increase government revenue

2. Reduce consumption2. Reduce consumption

Cigarette manufacturing industry increases wholesaleCigarette manufacturing industry increases wholesale

price by more than the increase in the excise taxprice by more than the increase in the excise tax

Result: greater decrease in cigarette consumptionResult: greater decrease in cigarette consumption

than originally expectedthan originally expected

(Similar trend was found in SA)(Similar trend was found in SA)


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Cartoon in Gleaner, 15 April 2005


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Lessons learnt from South Africa andLessons learnt from South Africa and

JamaicaJamaica

Lack of finances should not prevent effective tobaccoLack of finances should not prevent effective tobacco

control lobbyingcontrol lobbying

One or two people can have a huge impactOne or two people can have a huge impact

Economic arguments weigh heavilyEconomic arguments weigh heavily

Sustained increases in the excise tax is the mostSustained increases in the excise tax is the most

effective tobacco control tool, especially in developingeffective tobacco control tool, especially in developing

countriescountries

The press can be a valuable ally in promoting aThe press can be a valuable ally in promoting a

healthy lifestylehealthy lifestyle


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What can we do with economics?What can we do with economics?

EconometricsEconometrics demand analysisdemand analysis

Price elasticityPrice elasticity

Potential tax revenue (Laffer curve)Potential tax revenue (Laffer curve)

Income elasticity of demandIncome elasticity of demand

Cost benefit analysisCost benefit analysis

Policy AnalysisPolicy Analysis ETS & advertising bansETS & advertising bans

Employment studies (SAC & Input/Output)Employment studies (SAC & Input/Output)


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Some ideas about cigarette affordabilitySome ideas about cigarette affordability

It is not all about pricesIt is not all about prices

What about income?What about income?

This brings in a simple concept: affordabilityThis brings in a simple concept: affordability

Blecher and Van Walbeek,Blecher and Van Walbeek, Tobacco ControlTobacco Control, 2005, 2005

Price as a proportion of incomePrice as a proportion of income

Conclusion: Need to consider tax increases in line withConclusion: Need to consider tax increases in line with

increases in income as well as inflation just to keep the statusincreases in income as well as inflation just to keep the status

quoquo


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Blecher and Van Walbeek,Tobacco Control, 2005


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Tobacco Control and Research in Developing Countries

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