adventure man, who had just finished a cross-country race through the jungle in his hardy four-by-four vehicle, crossing muddy terrain and chopping down trees to build bridges across rivers, and at the end of it all he would settle down for a well-deserved cigarette. Alternatively, there were the cowboys, rustling cattle all day, chasing an errant cow or pulling a calf from a pit, who ended up around the campfire, lighting their cigarette with a burning twig. The adverts I enjoyed most played out on the Swiss Alps, with sportive young men and women criss-crossing the slopes on their skis, ending the day’s play before a log-cabin fireplace with a well-deserved cigarette. The message was clear: the tough guys and beautiful people who enjoyed all the pleasures of this world smoked cigarettes of a particular kind.
Back in the 1980s and 1990s, these brands and their manufacturers would have been easy to identify. Considerably more than two-thirds of our ‘pizza’ would have belonged to them. Of this the lion’s share was held by British American Tobacco, while the only other significant players at the time, though smaller in market share, were Philip Morris International, Imperial Tobacco Group and RJ Reynolds Tobacco Company (which became Japan Tobacco International in 1999). The remaining one-third of the pizza belonged to low-key informal and formal importers and traders and a few groups that were involved in smuggling operations and counterfeiting. Smuggling operations arguably benefited the big companies in the sense that it was their own products that were being smuggled in and sold on. So this was not such a great concern for them at the time. Their biggest bugbear was the counterfeiters, who made copies of the famous brands and sold these off as if they were the real thing. As the counterfeiters used cheaper or smuggled tobacco, paid low wages and didn’t have the huge costs of the big companies, they represented a big threat to the established players. Needless to say, the latter expected the state’s law enforcement agencies to deal with the counterfeiting.
By far the largest of what I call the ‘big boys’ was BAT South Africa. Its origins lie in a small company started by the Afrikaner entrepreneur Anton Rupert in the 1940s, which later became known as Rembrandt. By 1956 the company had listed on the Johannesburg Stock Exchange and by 1961 it was selling cigarettes in 120 countries. In 1972 Rothmans International, which represented Rembrandt’s non-South African tobacco interests, was listed on the London Stock Exchange. In the late 1990s Rembrandt sold off Rothmans International to British American Tobacco plc (BAT) in the United Kingdom, then considered to be the world’s second largest cigarette producer. Out of this merger was born BAT South Africa (BATSA). To give an indication of the size of BATSA, in 2012 the tobacco manufacturer was second only to BHP Billiton, the largest listed company on the Johannesburg Stock Exchange in terms of market capitalisation. (Market capitalisation is the total market value of a publicly listed company’s outstanding shares.) By 2015 it had overtaken BHP Billiton and by 2016 it had grown its market capitalisation to R1.5 trillion. In effect, it was richer than the South African government. BATSA is without doubt the biggest and most influential player in the South African tobacco market.
BATSA’s closest formal rivals are three in number. The one is Philip Morris South Africa, whose parent company, Philip Morris International, with its famous brands of Marlboro and Chesterfield, held for many years the number one position as the world’s leading tobacco manufacturer. Philip Morris SA was re-established in South Africa in 2003. The second is Imperial Tobacco with its famous brands like Gauloises and Embassy. The third rival is JTISA, whose parent company, Japan Tobacco International, was formed after incorporating with the US multinational RJ Reynolds in 1999. JTISA is a late entrant to the South African market, having been established here in 2007. Its best-known brands are Camel, Benson & Hedges, and Silk.
To represent, protect and advance their common interests, the large, established tobacco manufacturers and growers combined to form the Tobacco Institute of Southern Africa (TISA) in 1991. Effectively, this means that TISA was the only organisation of manufacturers and other role-players in the tobacco industry in South Africa at that point. At the time of writing, TISA consists of a number of companies and groupings, including British American Tobacco South Africa (BATSA), Alliance One International, JTI South Africa (JTISA), Philip Morris South Africa, Imperial Tobacco Southern Africa, Universal Leaf South Africa (ULSA), Limpopo Tobacco Processors, Tobacco Traders, Clippa Sales South Africa, and OTP Distributors. Together, in particular with reference to the manufacturers BATSA, JTISA, Philip Morris SA and Imperial Tobacco, they bring with them some serious money and clout. As a lobby group and collective, they represent the biggest manufacturers and distributors of tobacco products and cigarettes in South Africa. In other words, TISA is the big boys’ club.
TISA represents not only big money, but old money. What I mean is that most of their members have been in the game locally and internationally for many years, during which they increased their own market shares worldwide, and grew into multinationals listed on stock exchanges worldwide, with complex business structures. They were big contributors towards developing economies from a tax perspective while simultaneously being rooted in developed economies and were generally seen as the good guys who created jobs, contributed towards the economy and could do no wrong. Where these companies are listed on stock exchanges, you’ll find pension and retirement funds, investment houses and even government investment institutions investing heavily in their shares. These dynamics not only give the perception of respectability, but also provide power, influence and leverage. They make their directors, senior managers and representatives important people who can pick up a phone and call a meeting to raise one or other issue with senior government officials and politicians. Indirectly, without it ever being said overtly, it is always understood that if they are under any kind of threat, this will have a massive impact on jobs, tax revenues for government and their own shares on various stock exchanges around the world, which in turn will affect pension funds, investment houses and, ultimately, the country’s economy. They are not to be trifled with or easily gainsaid.
From the early 1990s the tobacco manufacturers began to face a number of unprecedented challenges that started to subvert their dominance and eat away at their profits.
For one thing, proportionate to population growth, the number of smokers in South Africa started to decline. In 1993, the Tobacco Products Control Act was introduced which required that health warnings had to be prominently displayed on cigarette packs and advertising material. Smoking on public transport was also banned. Around this time, too, government taxes on tobacco products started increasing significantly. The average tax on tobacco products in the mid-1990s was around 30 percent of its sold value and by the end of 1997 this had increased to 50 percent. Simply put, it became more expensive to smoke. In 2000, South Africa became one of the first countries in the world to ban smoking in public places by means of the Tobacco Products Control Amendment Act. This law prohibited smoking in restaurants, shopping malls and public buildings, and limited smoking to areas where there were dedicated enclosed smoking rooms. Advertising and sponsoring of public events were also banned. It is estimated that these measures alone led to a decrease in the number of active smokers to around 25 percent of all adults. By 2003, it was estimated that the number of smokers in South Africa had declined to 23 percent. The original large pizza was now truly a medium-sized one.
By 2005, excise tax – the tax paid on the import and production of cigarettes – had increased to 52 percent of their retail value. This meant that more than half of what a smoker paid for his fix was supposed to go to SARS. By then, the so-called sin taxes had become a standard feature in the annual budget speech of the finance minister. Year by year, it became more and more expensive to smoke. New legislation also made compulsory further extensive health warnings at any point of sale. Soon thereafter, the government banned smoking in partially enclosed public places such as covered patios, verandas, balconies, walkways and parking areas, and smoking in cars when children under the age of 12 were present. Children under the age of 18 were also prohibited from entering designated smoking areas and from purchasing cigarettes. In 2016 it was estimated that the proportion of active smokers had declined to about 16 percent of all adults. The pizza kept on shrinking. Quite clearly, the big brands were starting to lose money as a result of an ever-decreasing number of smokers.
But these legislative restrictions and requirements of government weren’t their only headache. In the 1990s, partly because of these pressures, the various schemes and scams which had once cornered the remaining third of the pizza or what was left of the trough after the big boys had fed, started