Wednesday, January 18, 2023
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NewsControversy erupts over tobacco monopoly's market share

Controversy erupts over tobacco monopoly’s market share

By Amanuel Yelkal

The Ethiopian Food and Drug Authority and Japan Tobacco International, the major shareholder in the National Tobacco Enterprise, are at odds over the market share of the contraband market and the monopoly.

The Authority is conducting a new market share assessment, contradicting a study presented by Japan Tobacco International, which stated that illicit trade had taken 62.7 percent of the tobacco market.

The company, citing its own study, requested that the government extend the annual excise tax adjustment on tobacco products, and the Authority wants to verify the findings it presented, according to Asnakech Alemu, product safety director at the EFDA.

“We do not accept this kind of study made by the company itself. Studies should be conducted by a neutral body,” Asnakech said, stating the study has been used as an “instrument” to avoid strict measures such as tax increments.

Japan Tobacco did not respond to the claim. “The company can’t provide information since sharing information is considered an advertisement, which is forbidden for the tobacco manufacturer,” Michael Gebremedhin, corporate communications manager at JTI Ethiopia, said.

In the study, presented in July 2022 at an event organized by the Addis Ababa Chamber of Commerce and Sectoral Associations, the company claimed its six tobacco products have only 37.3 percent market share. The study revealed there are more than 70 tobacco products in the local market.

The government loses 4.5 billion birr in tax revenues yearly because of the illicit tobacco market, which accounts of 62.7 percent of the tobacco market, according to the study presented by JTI Ethiopia’s representative, Selam Sahilu.

The company paid 2.5 billion birr in taxes in 2021.

The National Tobacco Enterprise, established in 1942, was a public enterprise until 2017. In 2016/17, the government privatized the enterprise for USD one billion, making it the largest foreign direct investment in the country.

JTI owns a 71 percent stake in the enterprise.

Since the enterprise has a monopoly in the market, every tobacco usage reduction policy introduced by the Ethiopian Food and Drug Authority is directed at the enterprise and its products.

In 2020, the Ministry of Finance introduced a new excise tax proclamation, increasing its tax on tobacco to 30 percent. Eight birr per package are also being collected on the product. The proclamation authorized the ministry to increase or reduce the rate of excise tax on the products that does not exceed 10 percent.

The Authority wants the ministry to make the adjustment to discourage the usage of tobacco products, according to Asnakech.

“It has been two years since the proclamation was ratified; however, the ministry has not made any adjustment to the rate. The company on the other side is lobbying the government, saying the market is controlled by illicit products,” Asnakech said.

The Authority is now finalizing a study it is conducting to determine the market share of illicit tobacco products, which will be presented to the public in two months. The study, according to Heran Gerba, its director general, is being conducted by one of the research institutes of the Ministry of Health.

“We cannot disclose the institute or places where it is conducting the study. This kind of study should be done in a careful manner,” she said.

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