It is still one of the biggest businesses in Africa despite all the efforts from the government trying to stamp it out. The tobacco industry makes over $700 billion a year and seems to survive advertising bans and restrictions. Part of this business is African children who work for a dollar a day. The article below first appeared in Forbes Africa and is republished with its permission. Subscribe today by contacting Shanna Jacobsen Shanna.Jacobsen@abn360.com
http://www.cnbcafrica.com/news/special-report/2017/01/05/africa-cigarettes-and-smoking/
It’s 5am in the northern hills of Malawi where its tobacco is grown. Chifundo Ndilowe is awake and ready for the day. Dressed in grey shorts and a blue NBA vest, still filthy from yesterday’s long day on the farm, Ndilowe has hours of hard labour ahead. He is just 15 years old and has been planting and picking tobacco since he was 10.
“I came here in 2011 because rural life is hard. We were battling at home and I had to start contributing for us to survive. I stopped going to school to work. It is very tough working under these conditions because it is hot and we easily get tired and I am often sick,” he says.
Ndilowe moved 567 kilometres from Mulanje to Mpherembe, 300 kilometres north of Malawi’s capital, Lilongwe, to work in a tobacco farm five years ago. It means long hours, missing school and breaking the law for little pay. He earns a little more than $140 and $280 a year depending on the harvest. That’s less than $1 a day.
“We work for the year and only get paid after harvest. During the year, we get 20 kilograms of maize for 12 days because we don’t grow crops for consumption. They also give us salt and then we have to figure out the rest ourselves. I get to eat once a day and I take whatever is there,” he says.
Ndilowe is just one of an estimated 800,000 youngsters in the tobacco fields; voices that are seldom heard. One of an army of children who sweat for millions of cigarettes lit all over Africa.
A study on child labour in the tobacco industry in two areas of Malawi, Suza in the Kasungu district and Katalima in the Dowa district, found 57% of all children were being used as child labour in the tobacco fields.
George Kube, an adult tobacco worker, works with Ndilowe and two other children.
“There is no money for the children to go to school and if they don’t work to help we wouldn’t survive. We farm on two acres of land and the produce is auctioned to tobacco companies. You have to be very strong if you are going to do this job because sometimes we have to cut down trees and look for water,” says Kube.
A study, published by the British Medical Association, says contract farmers, like Kube and Ndilowe, cultivating tobacco in Malawi, live below national poverty lines, while independent farmers operate at a loss.
“Even when labour is excluded from the calculation of income less costs, farmers’ gross margins place most households in the bottom income [groups] of the overall population. Tobacco farmers appear to contract principally as a means to obtain credit, which is consistently reported to be difficult to obtain,” says the study.
Tobacco farmers may struggle to make a living but tobacco manufacturers thrive. The world tobacco industry is worth billions of dollars. Cigarette retail values in 2014 were worth US$744 billion and over 5.6 trillion cigarettes were sold to more than one billion smokers according to the Campaign for Tobacco-Free Kids. But, very few farmers make money from it.
The market is controlled by a few international companies; China National Tobacco Corporation, Philip Morris International, British American Tobacco, Japan Tobacco International and Imperial Brands. They buy tobacco from cheap emerging markets, like Malawi, for profit.
For years, governments around the world have been trying to clamp down on smoking because of its health implications, through stringent laws and higher taxes, yet tobacco use is increasing in some countries, says Zambian economist Grieve Chelwa.
“African incomes have been rising over the last couple of years and we know that tobacco consumption responds to rising incomes. Further, tobacco companies have put in place strategies (subtle advertising) to take advantage of rising incomes.”
And they flourish.
In 2016, British American Tobacco (BAT) announced its revenue went up 8.1% at constant rates of exchange, cigarette volume from subsidiaries was 497 billion, up by 2.2%, cigarette market share in key markets increased by 40 basis points and its brands performed exceptionally well with cigarette volume up 9.8% year ending September 30.
BAT plans to merge with its US partner R.J. Reynolds Tobacco Company, the company behind the famous camel cigarette brand, in a deal valued at $47 billion. It hopes to create a stronger global presence and move into new ventures like e-cigarettes.
In its third quarter, Philip Morris International reported net revenues of $19.9 billion, up by 2.6%, net revenues, excluding excise taxes, of $7 billion, up by 0.8%, operating income of $3 billion, up by 0.6%, and operating company’s income of $3.1 billion, up by 1.2%. In Africa, companies thrive because of weak regulation.
The World Health Organization (WHO) has a 75% benchmark of tax on the retail price, yet the African average is way below. Nigeria taxes cigarettes at only 20% of the retail price. Chelwa says ideally increasing taxes to reduce tobacco use should work anywhere because of the law of demand, increasing price reduces demand.
“But, the important point is the increases have to be real-inflation adjusted increments,” he says.
In Africa, high tobacco taxes are rare. WHO says only 33 countries, with 10% of the world’s population, have introduced taxes on tobacco products of more than 75%.
Tobacco tax revenues are on average 269 times higher than spending on tobacco control.
Tobacco companies are also good at finding new markets, with new smokers and weak regulations. According to an article published by The Lancet, a UK medical journal, tobacco use is declining in higher income countries, but nearly 80% of the world’s smokers live in low and middle income countries.
“Tobacco control regulations are not strong across most of the continent. Countries have ratified the Framework Convention on Tobacco Control (FCTC) but that’s all they have done. And sadly the tobacco industry is an important player in the setting of tobacco control policy in most African countries,” says Chelwa.
For years, tobacco companies argue they market merely to convince smokers to switch brands, but evidence published by the National Center for Biotechnology Information shows advertising drives smoking.
According to a WHO study, smoking has increased in 27 countries over the past 15 years. Seventeen of these are in Africa. In Cameroon, smokers more than doubled from 7% in 2000 to 22% last year. Congo-Brazzaville has seen the biggest spike. Nearly half of Congolese men smoke. Last year, 22% of its people admitted to smoking regularly, up from 6% in 2000.
“Only 42 countries, representing 19% of the world’s population, meet the best practice for pictorial warnings, which includes the warnings in the local language and cover an average of at least half of the front and back of cigarette packs,” says WHO.
In South Africa, cigarette advertising is banned. There are also restrictions on point of sale product display, vending machines and sponsorship of events, activities, individuals, organizations or governments. Now, Health Minister Aaron Motsoaledi has pledged to take it further by strengthening the Tobacco Products Control Act.
Motsoaledi says there should be no branding, no logos and no colors on cigarettes to discourage smoking. If the law is introduced, all cigarettes will be in a brown package with graphics that show the damage they can cause.
This is worrying for the tobacco industry. Christo van Staden heads the only primary tobacco processing factory in South Africa, Limpopo Tobacco Processors, that processes 12 million kilograms of tobacco. He says the effects could be catastrophic.
“The biggest impact [of tougher regulations] is the increase in illicit cigarettes which is a huge dent in the business of BAT and in the whole market. About 20 to 30 percent of cigarettes in Gauteng are illicit and they are paid way below the price,” he says.
As we meet, in Rustenburg, a two-hour drive from Johannesburg, Van Staden’s farmers have lost 30 hectors of tobacco to a passing storm. On this day, the sun blazes down from a cloudless azure sky. A sprinkler keeps the glossy lawns and flowers alive. Inside the factory, it is dark and you can hear a pin drop. The silence is almost tangible. There is no bustle and machines that usually crackle stand still. It is not tobacco season. All employees are upstairs in the offices working. Dressed in khaki shorts and shirt, Van Staden says tobacco farming is hard.
“For every hector, you need two people to work there and pick it by hand, it is very expensive. One hector costs about R130,000 ($9,500) to plant and the farmer needs to make at least 20 to 25 percent profit. Last year was a very tough year. There were very tough conditions and an average farmer did not make any profit at all.”
“Now they are supporting the local market but if they don’t get any benefit out of that, they have to compete with everyone else in plain packaging, then there is no reason for them to buy South African tobacco, they will literally walk out of here overnight and source their product from Brazil, India and China where they can buy a lot cheaper.
We are not ready for that. We would close these doors,” he says.
For Van Staden, closing doors means 10,000 farmers lose their income. He thinks there should be more education about the dangers of tobacco and efforts to keep youngsters away from smoking.
“I am a non-smoker and will not advise anyone to smoke. Most of my staff members don’t smoke. Unfortunately, people smoke everyday but see the warning on the packets and turn a blind eye. Because it’s such an unhealthy product, the governments around the world will try and eradicate it but I don’t think it will happen in the next 20 years. There are laws in this country that allow people to smoke and to close down the primary sector is not going to stop smoking overnight,” adds Van Staden.
South Africa will follow the UK, Ireland, Australia and France in banning branded packaging.
In Uganda, 4,800 kilometres from South Africa, it’s even tougher. If you light up in bars, restaurants or hotels, you will be fined $60 or jailed for up to two months.
Smokers must be at least 50 meters away from public spaces, such as schools, hospitals and taxi ranks.
Uganda’s new laws also ban the sale of electronic cigarettes, flavoured tobacco for water pipes, the sale of single cigarettes and tightened rules on labelling, advertising and selling tobacco to under-21s.
“We are strongly opposed to plain packing as we feel that there hasn’t been enough consultation and research on it. Our concern is the serious adverse consequences that it will have on the economy, jobs and investment; as well as potentially making counterfeit easier. It trounces fundamental intellectual property rights and freedoms guaranteed by the constitution,” says Joe Heshu, Acting Head of External Affairs at BAT.
According to Heshu, counterfeit cigarettes are a bigger issue. In 2015, South Africa’s Treasury lost R5.1 billion ($373 million) due to illicit trade. The trade accounts for about 24% of the market.
South Africa has been increasing tobacco taxes since 1994 and the big impact has been the reduction in consumption and prevalence, but Chelwa agrees there has been a minimal impact of the taxes on illicit trade.
“Illicit trade often has to do with tax administration and not taxes. Even if taxes were a cent, you’d still have illicit trade showing that it is not a tax level or tax rate issue but a tax administration issue,” he says.
On jobs, Chelwa argues “there are very few tobacco manufacturing jobs, very few given how mechanized manufacturing of cigarettes is.”
The big worry he says is in the field.
“Governments have to consciously find ways of transitioning tobacco farmers into growing other types of crops. This will require a lot of work,” says Chelwa.
Asked if he thinks cigarettes are killers, Heshu argues his company has launched e-cigarettes, which are supposedly less harmful products, in the UK, France, Germany, Italy and Poland.
“We are committed to the research and development of Next Generation Products (NGPs) and globally have invested over half a billion pounds during the past five years.
There is a growing body of evidence that NGPs do pose significantly fewer risks than cigarettes.”
For now, tobacco companies continue to thrive. Only 29 countries, representing 12% of the world’s population, have completely banned all forms of tobacco advertising, promotion and sponsorship, according to WHO.
Some of Malawi’s tobacco, grown by the likes of Ndilowe and Kube, is shipped 2,000 kilometers south of Mpherembe. In South Africa, 19% of the population, over the age of 15, smokes according to the World Bank. That’s almost one in five people and it is dangerous.
Tobacco is responsible for six million deaths each year. Of those, 600,000 die from the effects of second-hand smoke. This number is expected to increase to eight million by 2030 if current trends continue, says WHO.
Alexandra chain smoker, Mpho Ndlovu, knows this, yet he goes through three packs of cigarettes a day.
“I have been smoking since I was 15. It started as just playing with friends at school because we knew we weren’t allowed to. It was a way of being cool. I got hooked and have been smoking for 40 years,” says Ndlovu.
What started as a game became a habit and then an addiction.
“Smoking helps me when I’m nervous and I just enjoy it. I have tried to stop many times but have failed. I know this might one day kill me but, at this point, there is nothing I can do.”
Ndlovu spends R110.50 ($8) per day on cigarettes. That’s R766.50 ($56) per week and R3,066 ($225) per month and R36,792 ($2,700) per year and R183,960 ($13,500) in five years. If he continues smoking the same number of cigarettes per day for another 40 years, at this current price, he will spend around $100,000 on cigarettes. If invested, he could buy a house.
Ndlovu spends close to half of his R7,000 ($500) salary he makes working as a driver for a logistics company in Sandton.
“By the last week of the month, I would be out of money and sometimes I have to ask people if I can borrow or take some on credit from the spaza shop,” he says.
“When I smoke, especially on weekends, I drink as well. So the money I earn is never enough. My children get angry because they think I should be using the money on them. I don’t know how to stop.”
Ndlovu buys his cigarettes from Ntando Debeza, a hundred metres from his home.
Debeza’s spaza shop sells cigarettes, pipe tobacco, snuff, chewing tobacco, hookah and shisha.
“I make about R6,000 ($440) a month from this small shop. Most of the money comes from tobacco sales but I also sell other day-to-day products like bread and milk.
People come to buy and sometimes on credit and I collect money at the end of the month,” says Debeza.
This means Ndlovu’s debt grows. But, that’s not all. Smoking does not only affect the smoker. High levels of nicotine exposure from handling tobacco leaves may cause nicotine poisoning called Green Tobacco Sickness, with symptoms including nausea and vomiting.
Back in Mpherembe in Malawi, Kube says he is aware of the dangers of working in a tobacco field without protective clothing, and mostly its effects on minors. “I know children can get sick but what can we do? We need a lot of hands on the farm because this isn’t an easy crop to plant and prepare. It needs three times more people than corn but we don’t make enough money at all,” says Kube.
He is one of the few rural farmers who know this. And it gets worse. A 2009 survey in China revealed that only 38% of smokers knew that smoking causes coronary heart disease and only 27% knew that it can cause strokes.
“Among smokers who are aware of the dangers of tobacco, most want to quit. Counselling and medication can more than double the chance that a smoker who tries to quit will succeed. National comprehensive cessation services with full or partial cost coverage are available to assist tobacco users to quit in only 24 countries, representing 15% of the world’s population,” says WHO.
Cape Town-based entrepreneur Gareth Carter saw this crisis as an opportunity. He founded WeDoRecover, a company that helps patients who suffer from psychiatric and addiction problems.
“Finding the right addiction programme to meet someone’s specific needs is a complex process. The crisis and chaos synonymous with active addiction are overwhelming and the multitude of choices in the marketplace adds to the confusion,” says Carter.
According to Carter, people who smoke are more likely to drink alcohol and vice versa. He says alcoholics frequently present with a co-morbid nicotine addiction.
“As many as 80 percent of people addicted to alcohol and other drugs are frequent smokers, but the bulk will die of smoking-related disease rather than alcohol and drug-related disease…”
The damage doesn’t stop there. Carter adds that major depressive episodes among adults are highest in those addicted to nicotine and lowest in those who have quit or never started smoking.
“With nearly 80 percent of the world’s one billion smokers living in low- and middle-income countries, this is a very real public health care problem for us in Africa.
Making nicotine addiction prevention and treatment readily accessible to the youth counteracts a wide range of potential mental, physical and mood-disorder problems with far-reaching ramifications to families, communities and our economy,” he says.
Carter thinks if tobacco was “invented” today it would be classed with other illegal drugs. That’s not the case. The lucrative industry in Africa puffs on unfettered.
