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HEALTH PORTFOLIO COMMITTEE
31 January 2007
TOBACCO PRODUCTS CONTROL AMENDMENT BILL: PUBLIC HEARINGS
Chairperson: Mr L Ngculu (ANC)
Documents handed out:
Mr Evan Blecher of the University of Cape Town School of Economics submission
Japan Tobacco International submission
Dr Gunilla Bolinder on ‘Snus’ as a substitute for smoking tobacco and its adverse effects: submission
Memorandum on the Act by Advocate Patricia Lambert
Audio recording of meeting
The public hearings on the Tobacco Products Control Amendment Bill continued. UCT School of Economics presented findings on the economic effects of product control on the tobacco and restaurant industries. Tobacco controls via taxation and legislation had had no negative effects on the industry’s revenue. The retail pricing was a product of both industry price and excise taxation, and thus should share in any blame if pricing was held as a pretext for illicit trading. Important questions around production and revenue were addressed. There were no apparent negative effects on the restaurant industry from the tobacco controls. Questions by members related to consumption, illicit trade, the reasons why some restaurants were smoke free, and the effect of the regulation upon local production.
JTI supported the broad objectives but cautioned against the costs of over-regulation. It had severe concerns over disclosure of confidential propriety information. The double references to standards might lead to confusion. Changes to the standards were considered premature as the United Nations was busy working on guidelines for testing and measuring contents and emissions. Standards should be set in regard to internationally recognized scientific standards, and done in consultation with industry. JTI suggested that there was also confusion in the drafting of the definition of “composition” and “ingredient” and suggested a more appropriate definition be found. It was concerned over the potential for double standards in local production and imports of manufactured products. Questions by members addressed the short time for comment, the statement that the impact of legislation should be proportional to its goals, disclosure of confidential proprietary information, content exposure, and greater production for trade secrets. Members felt that the concerns over possible difference of standards and disclosure of ingredients had been adequately addressed in the Bill.
Dr Bolinder dealt with the correctness of the allegations that use of alternative tobacco products such as snus reduced health risks. She made it clear that although snus was claimed by the manufacturers to assist smokers because it provided them with a healthier alternative and helped them to give up smoking, it could not properly be claimed to save lives. It led to worse nicotine cravings, and a host of other medical problems, including heart problems, ill effects to a fetus, increased risk of type-two diabetes, increased risks during birth, propensity for carcinogenic influence, poor and unaesthetic oral health. The promotion of snus use had been a blow to anti-addiction campaigns, making it more difficult to dissuade children from using drugs. She argued thus that it should also be regulated. Questions related to how decreasing the number of smokers could be achieved, the differences between snuff and snus, the addictive effects, and whether snus use would indeed help addicts recover from their nicotine addiction.
Advocate Patricia Lambert, adviser to the Minister then presented a case in support of the new bill. She spoke, as a citizen and anti-smoking activist, about her involvement in the drafting of the bill, consultation with the tobacco industry and the reasoning around various contested aspects of the bill. She stated that South Africa had a good grasp of tobacco control. Members of the portfolio committee then sought clarification on the issues of consultation with the tobacco industry, the inclusion of snuff and snus in the definition of tobacco product, the illicit trade in tobacco products, the division of the legislation and the effect, if both Bills were passed, on controls of sales and smoking in public places.
University of Cape Town (UCT) School of Economics Submission
Mr Evan Blecher, Economist, UCT School of Economics stated that his presentation would consider the effects of tobacco control, primarily from the economic aspect of demand, on pricing, affordability and the policy interventions of government controls, as well as the impact of smoke free areas on the economic well-being of restaurants, which were a potential business sector that might be affected by tobacco control legislation. Mr Blecher argued that, contrary to the tobacco industry’s assertions, tobacco control did not have major negative economic effects on the industry. Despite the stringent controls on the industry, he argued that tobacco companies had been doing at least as well, if not better than in the past, whilst from a public health perspective there was less harm to consumer health.
Mr Blecher stated that at the beginning of controls in the early nineties, there had been an outcry to tobacco controls owing to scaremongering tactics. Legislation or proposals on public smoking bans were today better received, indicating that the tobacco controls legislation had in fact gained acceptance and understanding.
In order to illustrate the effects of excise taxing on the tobacco industry, Mr Blecher presented a series of graphs illustrating the trends in taxation and pricing in relation to earnings, and consumption of cigarettes. The figures showed that prices of tobacco increased due to taxation and banning controls, and the total amount of cigarettes sold in South Africa fell by a quarter, and the total amount of cigarettes consumed per person fell by one third. He maintained that the primary tool used to reduce tobacco consumption were the excise taxes imposed on tobacco. It was important to note that despite rising prices and falling consumption, there had been no long term negative effect on the tobacco industries’ revenue as they subsequently increased their prices (not including excise tax) to compensate for the drop in consumption. Mr Blecher argued that this could be achieved through the monopoly of cigarette companies, the relatively fixed price rate of tobacco manufacturing due to mechanisation, and because the product was relatively resistant to price change because of “in-elasticity” arising from the addictive nature of the products to the consumer. He therefore argued that the pricing increase was partly a result of the tobacco company’s own pricing policies. Therefore it was incorrect to attempt to lay the blame for increases in illicit trade because of high prices on excise tax. The production costs did not rise in accordance with the increase in price. The tobacco industry must share the blame for the increase in illicit tobacco dealings if it was argued that price was the cause. In regard to the argument that production costs led to industry price increases, Mr Blecher argued that tobacco production had remained steady over the the years and this argument was a pretext.
With regard to claims made earlier that controls had a negative effect on employment, Mr Blecher argued that the trend in the decrease of employment in the tobacco production environment reflected the general decrease in employment in the agricultural sector. Further evidence for the lack of a causal relationship between controls and employment loss were evident since the decline in employment in the tobacco industry began prior to tobacco control legislature in 1993, which could be traced in part to mechanisation of the industry.
Mr Blecher then considered the impact of the 1999 legislation in relation to smoke free areas on the restaurant industries. He claimed that one of the most important achievements of the 1999 legislation was the increase in the awareness of the health risks related to smoking. The prevalence of public smoking had decreased, indicating a change in social perceptions around smoking. The legislation had actively achieved better rights to smoke-free air for non-smokers, and reflected the democratic process.
The impact in regard to the economic effect showed high compliance, in spite of the claim that a third in revenue would be lost due to the legislature. His presentation, based on international and credible literature, showed that the research conducted with tobacco-company funding was biased against the positive effects of the tobacco controls in public areas, while more independent research almost seldom found negative economic impacts. The outcome of his research indicated that revenues and survey data around the economic effects showed a positive rather than negative effect on restaurant revenue, which was up by 6%. This refuted the negative perceptions of tobacco controls. As far as compliance was concerned, the presentation again showed a positive influence, since one quarter of restaurants chose not to have smoking sections, and 85% showed self-compliance to the legislature.
Mr Blecher said that in regard to separate smoking areas, 87% of smoking customers had accepted these provisions fairly or very well.
Mr Blecher therefore concluded that even though there was no categorical proof that tobacco control legislation had a positive effect on revenues in the restaurant industry, there was equally no unbiased proof that there was a negative effect. This was congruent to international studies. Therefore the research indicated that the past controls were positive, that further legislation should be supported, particularly in third world countries. Illicit trade problems did not result from tax and excise increases but from the increase in organized crime.
Ms N Mathibela (ANC asked what the connection between the price of tobacco and the amount of tobacco people consume.
In response to the first question, Mr Blecher argued that the relationship between price and consumption was fairly robust where if price increased consumption will almost certainly decrease. He maintained that with every 10% increase in retail price one would find a fairly constant 6% decrease in consumption, but the increase in retail price was not only a function of excise tax increase but in equal measure a result of the increase in industry price.
Ms Mathibela enquired as to the existence of a balance between price and other factors with reference to illicit trade.
Mr Blecher indicated that taxes played an important role in prices and the dissuasion of consumption, but other measure such as bans on advertising played an important social role challenging perceptions of smoking.
Ms Mathibela asked if the increases in taxes on tobacco were a result of inflation or purely excise taxes.
Mr Blecher replied that increased taxes were at the discretion of the finance ministry, but South African increases had been exceeding inflation. Importantly, he argued, excise tax has to be increased at a rate equal to or exceeding inflation to stabilize or reduce consumption accordingly.
Ms C Dudley (ACDP) asked if Mr Blecher’s presentation implied that very little could be done by the committee to regulate illicit trade and consumption.
Mr Blecher argued that the consumption was decreasing in the legal market, while no real data was provided in the illicit sector; however the smoking surveys did include illegal consumption. So in fact the number of smokers, both legal and illegal, was falling in definite terms He argued that the illicit dealing was a pricing issue and one of organised crime so the health committee would be restricted in certain respects in the response to this. However, he argued that it was possible to decrease the numbers of smokers by helping smokers deal with their addiction and ultimately cease smoking. He argued that the addictive nature of cigarettes, which added to its in-elasticity could be addressed by the committee. Finally he argued that the claim that the reduction in the consumption of tobacco might adversely affect the economy was false as that money could and probably would be spent on more constructive sectors of the economy.
Mr B Pule (UCDP) was concerned about the statistic presented that 23% of restaurants chose to go smoke free. He asked why restaurants would choose to be smoke free rather than cater for smokers. He asked if there was any real difference between the quality of the air in the smoking and non-smoking sections. Finally he asked whether the legal tobacco industry had the necessary capacity to address illicit trade without government aid.
Mr Blecher pointed out that most of the restaurants that chose to go smoke free were franchises or situated in malls. The latter, he argued, would suggest that families would frequent such restaurants and would thus be less concerned with having a smoking environment. With regard to air quality, he could not supply a concrete answer, but pointed out that if South Africa had a problem in keeping smoke out of smoke free areas, it would perhaps be better to go entirely smoke free. Regarding the tobacco industries’ capacity to regulate illegal smuggling, Mr Blecher maintained that there was not much incentive for the industry to curb the illegal smuggling of cigarettes into South Africa as the big players such as British American tobacco would still benefit from their products entering South Africa by smuggling, even though they would not encourage it, whereas the incentive to stop local production of illicit products was much higher. He argued that the role of government could be to increase the penalty of smuggling cigarettes into the country, because the current penalty was really low.
A further question was raised as to the impact of tobacco control on the decline in production or the input aspect of the tobacco industry.
Mr Blecher answered that there had been a decline in production of tobacco in South Africa which might be attributed to the decline in consumption, though it was necessary to take into account that there still remained an export market if local consumption was stunted. The industry could also halt imports and consume local tobacco, but ultimately it was affected by the general decline in agriculture in South Africa. Local production had to compete with an ever strengthening external production such as in Malawi.
Japan Tobacco International(JTI) submission
Mr Sean Donnelly, Managing Director, JTI briefly explained that JTI was a South African registered company forming part of the Japan Tobacco group. The brands included Camel, Winston, Yves Saint Lauren and Aspen, comprised about 5% of the South African market and employed 150 people directly. JTI supported appropriate regulation of tobacco products because of the health risks are concerned. However, it maintained that regulation should be developed inclusively; the impact of regulation should be proportional to the purpose it sought to achieve; regulations should be clear and workable; and should aim to provide information on the risks of smoking, preventing youth smoking, and combating the illicit trade of tobacco products.
JTI supported the objectives underlying the legislation, but cautioned against the costs of over-regulation. Mr Donnelly maintained that JTI had real concerns over disclosure of confidential propriety information. There was the possibility of confusion due to double reference to standards. Because the Framework Convention on Tobacco Control (FCTC) was currently developing guidelines on testing and measuring of contents and emissions, JTI suggested that the change to the standards at this stage was premature. Standards should be set in regard to internationally recognized scientific standards, and done in consultation with industry. Insofar as definitions were concerned, JTI considered that the Bill’s definition of ‘composition’ used with ‘ingredient’ could be confusing and inconsistent, and suggested that appropriate definition of ingredient would make the definition of composition redundant.
The most important aspect of Mr Donnelly’s presentation entailed the concern about the disclosure of information to the public in the areas of product information, research, marketing expenditure, and production composition and ingredients. The concern essentially was the disclosure of confidential information that was protected by national and international laws. Mr Donnelly maintained that companies should only be required to disclose emissions and ingredients in so far as they were harmful, and not details or information that competitors could used. Confidentiality protection should be provided for in the Bill.
The Chairperson alluded to the fact that the various tobacco industry players have been given the opportunity to express concerns over the bill, but some had complained that instead of a full three-month period to consider the amendments they had been given only one month.
Dr Chetty, Department of Health responded by although there was at a stage a provision that a Bill could be promulgated after one month’s scrutiny-time had lapsed, the National Health Act now prescribed that at least three months should lapse between publication and promulgation. The Department was attempting to ensure that the three month window was kept open in order to insure transparency and invite commentary.
Mr Pule referred to the comments that the amount of regulation should be reasonably in proportion to the impact of the matter being regulated. Mr Pule argued that the impact of regulation could only be measured after it was implemented. He asked for clarification on the statement.
Mr Donnelly said that JTI’s comment was aimed at addressing over-regulation, and arbitrary regulation. He maintained that the regulation should always consider the ends or goals of the regulation and not overstep its intended effect.
The Chairperson responded by arguing that the matter of over-regulation was one of opinion. He asked if the focus could be shifted from that issue.
Ms Mathibela said that a previous submission had suggested, in regard to the disclosure of confidential proprietary information, that as long as the information provided to the Department was not published or disclosed to the competitors the companies would not object to providing this information. She asked if JTI would agree to this.
Mr Donnelly said that several tobacco companies shared the same concerns and argued that the real concern was the disclosure to the public. He maintained that provided the information was protected from competitors, there would not be any major issues.
Ms Mathibela said that the Tobacco Control Act stated that a product could not be sold if it lacked content information. She asked if JTI was taking issue with this content exposure.
Mr Donnelly argued that content exposure was not the issue, but JTI felt that the specific technique of production and flavouring was information that should be protected from competitors.
The Chairperson argued that according to the Bill such propriety information should be overruled by the constitution where content was concerned.
Mr Donnelly said that JTI felt that the bill was ‘light’ on the protection of important information. He argued that JTI felt that more specific protection for trade secrets should be given directly in the Bill, rather than there merely being a reference to the constitution. Mr Donnelly asked which Act would take precedence if on the one hand the Tobacco Products Control Act asked for full disclosure while any other legislation would protect such information from the public.
Dr Chetty argued that the information would be protected and she assured Mr Donnelly that the Department had measures to protect information such as trade secrets.
Ms Mathibela asked for some clarity on the comment concerning international standards and the potential confusion expressed by Mr Donnelly.
Mr Donnelly argued that the confusion arose through the potential for two sets of standards, one for manufacturing and production, and one for imported products. The Bill, in clause 3A, addressed only the former leaving space for a shift in standards for the latter. He asked whether a product manufactured locally would attract the same standards as if it were imported.
The Chairperson indicated that imported products should meet the standards of the importing country, and was not sure how the confusion could arise. He explained that even if a product was manufactured in another country it still had to meet South African standards of production.
Dr Chetty confirmed this sentiment, and she argued that there would be no double standards on imported or locally manufactured products. She too could not understand any confusion and she assured Mr Donnelly that imported products would not be treated differently, as to do so would defeat the purpose of the Bill.
Dr Chetty felt that the Bill was clear on the definition of ‘ingredients’ and ‘composition’ and asked where the confusion was.
Mr Donnelly asked what was to be disclosed, ingredients or composition. He argued the terms essentially meant the same thing and asked if it was necessary to have both terms in the Bill.
The Chairperson said that disclosure was addressed earlier.
Mr Donnelly accepted the fact that this was dealt with and argued that the point was more relevant to that issue.
Dr Gunilla Bolinder, Karolinska University Hospital, Stockholm submission
Dr Gunilla Bolinder’s presentation considered the emerging product of snus, available in Sweden as an alternative to smoking tobacco. She presented her medical opinion on this product as an alternative to smoking.
Dr Bolinder pointed out that rather than closing down due to the cigarette market’s lessening sales, the manufacturers of snus embarked on a campaign to broaden their target market, and had taken advantage of the legislation and campaign against smoking to promote their product. The tobacco industry thus found an alternative direction for their production. She also pointed out that snus marketing campaign has taken the form of assisting smokers to stop smoking. She argued that this campaign could be seen as a way to save the production industry while not addressing the problem of tobacco consumption and acting under the pretext of reducing harmful smoke.
Dr Bolinder claimed that the tobacco industry was motivated by the idea that tobacco would always exist and simply needed to be made safer to use. She indicated five reasons why she did not believe Snus to be a viable alternative or aid to cessation of smoking. She claimed that statistics could be misleading as ceasing smoking had saved lives, not using snus. She claimed that addiction levels in Snus use were even heavier than smoking and more than 50% of women and 30% of men using snus had wanted to quit using it. In her medical capacity Dr Bolinder argued that even though Snus had been healthier than cigarette smoke, the nicotine addiction was still stronger. The craving for nicotine eventually took priority over other basic needs. Snus use actually increased the use of nicotine by the body, and snus users with heart problems had twice the mortality rate of non users. She pointed out other medical effects of snus to the fetus, increased risk of type-two diabetes, increased risks during birth, propensity for carcinogenic influence, poor and unaesthetic oral health. The promotion of snus use had been a blow to anti-addiction campaigns, making it more difficult to dissuade children from using drugs. Finally ethically she argued that the objective of snus was not to assist in ceasing tobacco use altogether, but rather as an alternative use of tobacco. The “aid to cease smoking” was merely a pretext. The only thing that would save lives was stopping smoking and stopping using tobacco. Snus only addressed the concerns of the tobacco industries. She argued thus that it should also be regulated.
Ms R Mashigo (ANC) asked whether there were any other developed countries where the number of people who smoked had decreased, and how this was achieved.
Dr Bolinder responded that she was not an expert on the issue but believed that if the attitudes of legislators changed then that would influence the attitudes of the public and that eventually change their behaviour.
Ms Mashigo questioned the practicality of the bill; Dr Bolinder’s view around the definition of Snus, particularly the contents of the substance, and the difference between it and the traditional African snuff.
Dr Bolinder responded that the Bill was aiming at increasing health and prohibiting younger people from smoking, and had also included snus in the definition of tobacco. Snuff was the dry product and snus was the wet product. They were the same thing, but were used differently. It was merely a question of how the nicotine was delivered into the blood. Everyone was in agreement that smoking and inhaling nicotine was most damaging, and that snuff and snus caused less damage, but this was not to say that it should be made readily available. Tobacco and nicotine control was a better answer to curb addiction. It was in fact more difficult to stop using snus because, though the industry denied it, she had discovered, when working with her patients, that snuff or snus users are more addicted than cigarette smokers. Even if it did not cause as much cancer, snus did have an adverse effect on a healthy lifestyle.
The Chair asked how it was that snuf and snus should be more addictive than cigarettes.
Dr Bolinder assured the Committee that it was empirically found that snus users were more addicted because they demanded it constantly. In her study on firemen, it was found that snus users used their first dose earliest in the day, obviously suffering form greater cravings because they were more addicted.
The Chairperson asked if one of the earlier presentations was then misleading and whether in her view snus was the same as other tobacco products
Dr Bolinder advised that these views were misleading because using snus would certainly not help addicts recover from their nicotine addiction. When compared to smoking cigarettes, the effects of snus seemed mild, but when compared to those not smoking nor using snus, it was clear that snus negatively affected a healthy lifestyle.
Advocate Patricia Lambert, Ministerial adviser and drafter: Submission
Advocate Patricia Lambert presented a case in support of the new bill. She spoke, as a citizen and anti-smoking activist, about her involvement in the drafting of the bill, consultation with the tobacco industry and the reasoning around various contested aspects of the bill.
Ms Mathibela commented that the presentation was enlightening.
Ms Mathibela also pointed out that Malawian farmers were not really losing their jobs, as had been argued, because of increased controls and lessened tobacco consumption, because they simply switched to farming other more productive crops.
Adv Lambert indicated that the South African government had a good grasp of tobacco control and she was proud of the way African governments had generally conducted themselves. After the conference in Geneva, the South African Minister of Health asked the World Health Organisation to arrange a meeting in Africa, and many African countries attended. They insisted on the strongest possible language for tobacco control, and worldwide media reports recognized this. There had also been great inter-country cooperation. For example, when discussing with the Namibian government why they had not yet ratified the FCTC, it was clear that it had misunderstood the position, thinking that the FCTC could not be ratified before domestic legislation was passed, and South Africa was able to assist in clarification.
Ms Matsemela (ANC) asked about the offences and penalties and what industry has to say about these
The Chairperson responded that these were related to users who smoke in public places and not the tobacco industry
Ms Matsemela asked if there was evidence of illicit trade
Adv Lambert responded that the industry’s own papers and research proved that there was illicit trade. The illicit traders would source tobacco duty-free from elsewhere and were not as concerned about local farmers as they claimed to be. Industries generally existed only to gain maximum profits so this was in line with the profits. However, it was serious because tobacco was not only a legal drug, it was also lethal. It was impossible to ban it altogether, but legislators could, at best, decrease consumer demand and regulate the industry and tobacco use. She agreed that farmers would turn to other crops that did not deplete the quality of the soil as much as tobacco and had beneficial commercial gains.
Ms Mathibela referred to the statement that in 1993 there was consultation when drafting the bill and then redrafting of the bill. She asked if this consultation occurred all the way through the drafting.
Adv Lambert responded that there was always a consultation process. First the draft legislation was published and stakeholders would provide written commentary. If requested, there would be meetings. Stakeholders would be consulted and their concerns were taken into account. Consultation, however, did not mean agreement and since there were many stakeholders and experts drafting laws, the final product may be quite different to what the industry may prefer. Industry made the point that they were more open to consultation with government and then pointed to their relationship with SARS, the Department of Trade and Industry and the Department of Agriculture. These links would in any event exist because the industry would need to consult on a regular basis. Insofar as the Department of Health was concerned, it was not necessarily in constant consultation with different industries, but would indeed consult with specific industries when it sought to regulate them. In regard to advertising and sponsorship issues, the Department had consulted the tobacco industry and asked what would be a reasonable time to phase out tobacco-company sponsorships. Industry felt that three to five years would be preferable. Other countries who had embarked on similar measures reported that they had phased out such sponsorship in six months. Now when the Department was aiming to insist upon pictorial warnings on cigarette packets, the stakeholders to be consulted would be not only the tobacco industry but also the printing industry. The Department of Health was primarily concerned not with the commercial interests of the tobacco industry but rather its effects on public health.
Mr Mashile asked whether anything was not presently included in the bill or if there were any other recommendations
Adv Lambert responded that the legislation was now divided into two sections. The Section 75 Bill raised the legitimate purchasing age, and it was recommended that the hearings for the second bill should start very soon. There were some technical adjustments to be made to the Bill but she would not recommend any change to the its content.
The Chairperson asked about the loopholes with regard to smoking in public places and whether this should change
Adv Lambert said that the Bill referred to smoking being banned in all public places except on the streets. The regulations would deal with cases where the Minister could make exceptions, which would include certain parts of restaurants, but criteria for these would still be set out. If both the Section 75 and 76 Bills were passed, then smokers would have to smoke only in smoking rooms and on the streets, and even then certain criteria would apply as to how close they could be, when smoking, to entrances and windows or doors.
The Chairperson asked if the bill would cover snus
Adv Lambert responded that if the definition was not altered, snus was covered with all the other tobacco products. Instructional pamphlets for how to use snus could not be disseminated. Youth was susceptible to snus addiction because this could not be detected by parents, as it did not smell. Snus would pour even more nicotine into their system since they could use it for long periods of time.
The meeting was adjourned.