The impact of the government’s proposed vaping tax on women-led business operations and growth

PRETORIA, SOUTH AFRICA, 31 August 2022: Recent evidence has shown that female-driven entrepreneurs across several sectors are more resilient and determined to transform their economic circumstances. Data from Mastercard’s Index of Women Entrepreneurs (MIWE) notes that while South Africa is one of only 12 economies where women’s entrepreneurial activity rates increased in 2021, with 11.1% of working-age women engaged in early-stage entrepreneurial activity, their growth remains hampered by less supportive entrepreneurial support. Insufficient government support for Small and Medium Enterprises (SMEs) has been identified as one of the main constraints to the growth of women-led businesses. ​

According to the MIWE 2022, Botswana, Uganda, Ghana, and South Africa are among the countries with the highest percentage of women entrepreneurs globally, with South Africa enjoying a rating of 21,9%. Increased government support to women-led SMEs would see an increase in this rate.

As part of its package of 2022 Draft Tax Bills, the South African government has proposed a tax on vaping e-liquid, at a rate of R2.90/ml on nicotine and non-nicotine vaping solutions. With the vaping industry primarily comprised of SMEs, the tax is anticipated to have a detrimental impact on growth and stability.

Women in the industry have expressed their concern at the proposed tax and its likely impact on their operations. Shamima Moosa, co-owner of The Ecig Store in the South of Johannesburg, has expressed concern about the impact of the tax on small businesses and their ability to provide employment opportunities. Mrs Moosa says that “Taxing vaping products, at this stage, is not a good idea as the tax will have a negative chain reaction in the vaping industry for vape stores, which will most certainly have to cut down on staff. This will result in further unemployment in the country.” She adds that “The tax will have a heavy impact on small business owners' financial stability to create new opportunities”.

There has also been concern that the tax will hinder access to less-harmful alternatives. Christel Truter, owner of the Rustic Vape in Mpumalanga, is concerned that the tax will make vaping unaffordable for smokers in need of a less-harmful alternative.

The government argues that the tax will reduce youth vaping. However, the industry is worried that this may rob smokers of the opportunity to access vapes, which are an alternative to smoked tobacco. Chief Executive Officer (CEO) of the Vapour Products Association of South Africa (VPASA), Asanda Gcoyi, states that “While it is important to ensure that vaping products are not available for young people, measures can be put in place to ensure this happens without blocking access to adult smokers.” For Mrs Moosa “there is currently very little evidence to support the claim of a youth vaping problem in South Africa. ​ Certainly, we are aware that some young people have tried vaping, either through these being provided by parents to their kids who already smoke, or through simple risk taking by kids. What we are certain of is that established vape shops are very vigilant against selling products to young kids. Nobody wants kids to vape. At the same time, a lot of us in the industry are worried that the proposed tax may fuel a black-market in vapes, which could seriously endanger kids.”

Mrs Moosa’s concern is shared by the industry association, which, in its response to the Discussion Document published by Treasury in December 2020 pointed out that the tax is likely to spawn an illicit industry, while punishing the legal industry through difficult compliance requirements and a rise in already expensive product prices.

To date, some governments have updated their tobacco control legislation to help differentiate vaping products and designed specific programmes for reducing smoking. Countries such as the United Kingdom and New Zealand have experienced significant declines in smoking rates since embracing vaping as a less harmful alternative to smoking.

The industry continues to encourage the government to base its decisions on a balanced evaluation of the available evidence. Failing to do so will have a detrimental impact on the survival of the industry and the country’s ability to curb smoking rates.

MEDIA CONTACT

Puseletso Nthate

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on behalf of the Vapour Products Association of South Africa (VPASA)

ABOUT VPASA

The Vapour Products Association of South Africa (VPASA) represents Electronic Vapour Products (EVP) products manufacturers, retailers, and importers. The association serves as the united, official voice of the industry to the government, regulators, consumers, and the public.