Where there is smoke there is fire
As smoking of tobacco continues to decline in higher income countries, global tobacco companies have shifted their attention to low income regions of the world where cigarette smoking is on the rise. Africa is quickly becoming a frontier market for tobacco companies. However, more and more countries in the continent are also introducing measures to control the production and distribution of tobacco, writes Dawit Endeshaw.
A couple of weeks ago Ethiopia’s former Health Minister and later Foreign Affairs Minister, who is now Director-General of the World Health Organization (WHO), Tedros Adhanom (PhD), co-authored an op-ed with the President of Uruguay, Tabaré Ramón Vázquez, about the very complex and complicated global tobacco industry and its growing threats.
In the article he pointed out that the tobacco industry and players within the industry will always find ways to sell the toxic substance. He also highlighted historical facts within the industry where he stated that giant tobacco companies such as Philip Morris USA, RJ Reynolds Tobacco, Lorillard, and Altria had been forced to publicize the deadly health effects of tobacco as well as their depictive marketing strategies after losing a court battle in a US federal court in 2006.
This might be considered to be a milestone victory after the 1994 hearings where CEOs and top executives of the seven largest American tobacco companies testified in front of the United States Congress denying the impact tobacco has on health.
According to analysts, tobacco companies are now shifting their investments from the West to new destinations particularly Africa to find new markets and escape stringent tobacco control regulations by European countries and the United States.
Some studies indicate that Africa will be the next safe haven for tobacco companies coming from other part of the world.
According to World Health Organization’s factsheets on Status of tobacco production and trade in Africa, from 1995 to 2012 the area under tobacco cultivation decreased globally by 10.6 percent, while in Africa it increased by 65.3 percent.
According to commentators in the tobacco industry, the fact that stringent tobacco control is being introduced in the West is pushing tobacco companies to look into emerging markets like Africa.
Reports from the WHO on Trends in Prevalence of Tobacco smoking (2015) indicate that there is a significant increase in the population of smokers in Africa amounting to 32 million smokers.
Ethiopia, as part of the larger continent, is also passing through the same trend where a multinational tobacco producer arrived with a big chunk of investment.
Just last year, Japan Tobacco International bought 40 percent stake, which was owned by the government, in the National Tobacco Enterprise (NTE) for USD 510 million. This transaction was made as part of the government plans to privatize state-owned enterprises. In this regard, the money paid for the share is registered to be one of the largest in Ethiopia’s privatization history.
JTI did not stop there; just a few weeks ago the tobacco conglomerate bought an additional 30.95 percent state share in NTE for 434 million dollars. Now, JTI has a total 70.95 percent shares at NTE, with the remaining 29.05 shares being owned by Sheba Group, a Yemen-based company.
“The government is no longer interested in continuing to involve in the tobacco business,” Wondafrash Assefa, communications director at the Ministry of Public Enterprise told The Reporter. The Ministry is the one which facilitate the transfer of the shares on behalf of the Ethiopian government.
The move by the government, which is giving up its stake in tobacco industry, is interpreted in two ways by those who are closely following the industry.
“It might be a positive thing having the government to withdraw itself from the industry because it will give it more leverage to monitor and control the tobacco industry by giving emphasis to public health and the environment,” a tobacco control expert argues.
On the other hand, since the NTE is fully privatized, the government will no longer have a clue or knowledge to anticipate the future investments by these companies, he said. Given the secretive nature of the tobacco industry it might be difficult to monitor them.
JTI, following its huge investment and much more which is expected to come in the future, has a long ambition of making NTE a major player in the African market.
We want to take the company to the next level, according to Getu Alemayehu, communications head at NTE.
When compared to other African countries, Ethiopia’s cigarette consumption per capita is very low. The recent figure from Global Adult Tobacco Survey shows that there are not more than five million adult smokers.
Although available data is sketchy, most recent figures show that annual cigarette per capita consumption (number of cigarettes smoked per adult per year) stands at 62 pieces – roughly one cigarette a week. In comparison, per capita consumption in Djibouti is 309 and more than 2,800 in Serbia.
The survey, which monitors adult tobacco use and tracks tobacco control indicators, assist countries to fulfill their obligation under the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC).
In this respect the 2017 survey on Ethiopia shows that there is insignificant number of smokers in relative terms, but the growth is said to be alarming.
There are around 3.2 million tobacco users out of which 2.9 million of them smoke cigarette. The report also indicates that the price of 20 cigarettes is around 18.4 birr which is much cheaper when it is compared to many countries.
East African countries such Tanzania has close to 7.7 million adult smokers while Burundi has 24.6 percent adult men smokers from a total 55 million.
As far as tobacco control regulation is concerned, the aforementioned countries such as Tanzania with around seven tobacco companies has adopted no tobacco control regulation mainly as a result of interference of tobacco companies.
In this respect, Ethiopia adopted tobacco control proclamation in 2014 as per WHO’s FCTC and introduced a directive in line with the proclamation in 2015. Yet, these and other legal frameworks concerning tobacco control have their own implementation gaps. For instance, even though the Council of Ministers adopted a regulation, which prohibit smoking in public areas, the regulation by large is not implemented nationwide. It is only a few cities in Tigray region such as Mekelle that is strictly applying the regulation.
Moreover, the tobacco control directive adopted in 2015 by default prohibits the use of flavored tobacco a.k.a. shisha or hookah.
“No person shall import, wholesale, distribute, sell or offer for sale any tobacco products containing any content or ingredient used to create an impression that a tobacco product has health benefits or reduced health hazards, including but not limited to vitamin, fruits, vegetables, amino acids and essential fatty acids and stimulant compounds that are associated with energy and vitality,” reads the directive.
Though the directive clearly mentioned the illegality of using shisha, the number of users especially in cities like Addis is alarmingly increasing.
The Reporter observed that very well known nightclubs, lounges and bars scattered off Bole Road, Kasainchis, Chechnya area, and in the vicinity of Edna Mall serve shisha to customers.
Apart from Addis Ababa, the trend is also increasing across the country. The product is mostly smuggled in to the country via illegal channels.
As East African countries such as Kenya and Uganda banned the use of shisha just two weeks ago, Ethiopia is yet to implement its own directive introduced almost three years ago.
With the new investment, JTI is saying that its target is not to increase the number of smokers; rather it wants to focus on alternative markets.
It also announced that NTE will focus on the 44 percent Ethiopian market.
“Currently, our company only has 56 percent share of the tobacco market in Ethiopia,” Getu said.
“We specifically want to focus on the eastern part of Ethiopia’s market, which source 90 percent of its supply from contraband trade,” he said.
However, commentators, who closely follow the industry, claim that this argument from NTE is very misleading.
Looking at the market and price of tobacco in Ethiopia, the price is very cheap so it is not wise for NTE to focus only on the existing market, argues an expert on tobacco control whose name is withheld upon request.
“It would be very unwise and not logical if we say JTI invest almost one billion dollars within two years to focus on the 44 percent market,” he said.
“This is not logical; they will definitely come up with strategies and means to increase the number of smokers,” according to the expert. “We have a very significant number of youth populations which is a potential market for the company.”
These tobacco control experts also fear the unwelcomed intervention of NTE and people from JTI in the ongoing amendment of tobacco control proclamation.
The experts express their concern that the company might negotiate to influence provisos in the upcoming proclamation.
According to sources that are close to the amendment process, the tobacco control proclamation among other things, will force NTE to cover 70 percent of its cigarette packaging with both graphic and text warning.
In addition, the amendment also proposes an addition on excise tax levied on the industry. The excise tax on tobacco, which is currently around 14 percent, is expected to increase up to 26 percent, according to the amendments, which are yet to be endorsed.
Though officials from Food, Medicine and Health Care Administration and Control Authority are very optimistic about this amendment from public health perspective, now the amendment faces another hurdle.
Just this week, a letter addressed to the Minister of Finance and Economic Cooperation signed by Alemayehu Tegenu, Cabinet Affairs Minister at the Office of the Prime Minister ordered discontinuation of the amendment process particularly concerning excise tax.
He states in the letter that no adjustment in excise tax should be made without consultation with NTE.
Be that as it may, there is an expansion plan and aggressive investment from JTI and NTE is expected to fully operate in the coming few years.
Over the past one year, since the coming of JTI, NTE was getting technical as well as managerial assistance from JTI, Gizachew Hagos, managing director of NTE, said.
“We have`planned expansion projects even before the coming of JTI, but now it is under revision and we will start from that,” he said.