“Tito, don’t hike tobacco tax, illegal trade is exploding”

Informal traders have pleaded with Minister of Finance, Tito Mboweni, to consider their plight when he prepares his budget speech and to not hike taxes especially those on tobacco products like e-cigarettes which are growing in popularity.

The South African Informal Traders Alliance (SAITA) called on Mboweni to recognise the sector as a major player in the economy and to consider the impact of spiralling electricity prices, taxes on goods like tobacco products and to provide small businesses with Covid-19 financial relief.

Time for Tito to consult small businesses

“Millions of South Africans work in the informal trade in order to feed their families and educate their children but our voice is seldom heard, and our needs seldom taken into account when it comes to government’s policies and budgets.  As the country slips deeper into economic gloom, made worse by the COVID-19 pandemic, more South Africans will turn to the informal trade in order to provide for their loved ones,” SAITA national president Rosheda Muller said.

“For too long now, Government has made decisions, developed policy and regulations without consulting the informal trade.  Informal traders create and support jobs, we are the engine of the informal economy and we deserve more consultation and recognition when it comes to developing policies that affect our people,” she said.

She said the government was keen to engage with big business and it was “high time” small businesses were consulted regarding the impact of its decisions on their businesses. 

Tax hikes will hit business hard

According to SAITA  the most common products traders sell are fruit and veg, dairy products, chips, sweets, cold drinks, cigarettes and other tobacco products.  

“These products are the lifeblood of our trade, and therefore, excessive price increases or taxes impacts our ability to trade and survive in business.  This is especially true for tobacco products,” Muller said.

“We have noted two key trends within this market.  Illicit trade has exploded since the beginning of the pandemic, most likely due to the ban on tobacco sales.  This has had a significant impact on crime, the health of our citizens and our ability to compete with these criminals on a level playing field.  We are committed to fighting illicit trade, but extraordinary increases in cigarette taxes will simply drive customers to trade down into cheaper illicit brands,” she said.

“The second trend we have noticed is the general move from traditional cigarettes to less harmful nicotine products.  Inclusivity and affordability are key to integrating these products into the informal market, and implementing excessive taxes on them will drive up their prices, further alienating the informal market and putting them out of reach for millions of customers. A move like this will discourage people from choosing less harmful alternatives to cigarettes.”

Muller said businesses were also greatly alarmed that Eskom would receive a 15% tariff hike on April 1. 

“Why is the nation, and especially poor South Africans, subsidising the cost of malfeasance and corruption?  Traders can ill afford an additional 15% increase to our bills,” Muller said.

Muller added that Tito should consider that informal traders had not had any financial relief despite the devastating economic impact Covid-19 has had on the sector. 

“During President Ramaphosa’s speech, when he announced the R500 billion bailout, he mentioned that they would look at how to assist informal traders. Despite many attempts to engage with the Presidency and writing to request a meeting, all we have received is a pro forma letter of acknowledgement.  Informal traders are as crucial to the economy as professionals working in big corporate companies,” Muller said.

READ: Vaccine tax hike: How much could taxpayers be told to fork out?