A study commissioned by the Vapour Products Association of South Africa (VPASA) has found that the vapour industry – including vapes, e-cigarettes and heat-not-burn products – adds R2.49 billion in gross value added to gross domestic product and benefits the country both through health harm reduction and economic growth.
Below is a VPASA news release published on 6 September 2021. And below the release are links to the full report and associated material.
Economic impact of the vaping industry in South Africa
A new study of the vapour industry demonstrates that harm-reduced products like vapes and electronic cigarettes make a substantial contribution to the South African economy, in addition to helping the country meet its health commitments under the World Health Organization’s Framework Convention on Tobacco Control (WHO FCTC).
Commissioned by the Vapour Products Association of South Africa, and undertaken by NKC African Economics, the economic impact assessment study quantifies the vapour industry’s economic contribution in terms of gross value added (GVA) contribution to gross domestic product (GDP), employment and tax revenue.
The study, titled The Economic impact of the vaping industry in South Africa, is only the second of its kind following a review by Canback Consulting in 2018, and presents a glimmer of hope for South Africa’s economic outlook, albeit from a niche but growing industry.
The results of the study show that in 2019, the industry contributed R2.49 billion in GVA to the economy, paid R710 million in taxes and employed approximately 9,500 people, across direct, indirect and induced channels of impact.
“The most significant contribution the vapour industry can make towards a post-COVID-19 recovery is enabling entrepreneurship and job creation,” says Asanda Gcoyi, CEO of VPASA.
“This study demonstrates the significant contribution that the industry is already making to that recovery as well as the increasing size of the economic opportunity for South Africa.”
South Africa’s vapour products industry is primarily represented by small to medium enterprises (SMEs). And it’s these businesses that constitute more than 98% of trade and employ up to 60% of the country’s workforce, according to McKinsey & Company.
NKC African Economics’ Cobus de Hart, who led the study, says his team used data on procurement, tax, human resources and finances from a survey of vapour industry participants in South Africa. “The results speak for themselves.
“The vapour products industry supports GDP and jobs throughout its supply chain. Its total gross value-added contribution to GDP is R2.49 billion, with R710 million in tax payments made in 2019. The government would be remiss not to take this into account as it looks to revive the country’s economy after the hard-hitting impacts of the COVID-19 pandemic.”
Key findings of The Economic Impact of the Vaping Industry in South Africa report include:
Direct economic impact:
- More than 350,000 South Africans use vapour products.
- Vapour product sales in 2019 amounted to R1.25 billion.
- The industry generated 3,800 jobs.
- R280 million was paid in taxes.
- Gross value-added contribution from the vapour industry amounted to R930 million.
Indirect economic impact:
- R290 million in local procurement.
- 40% and 31% spent with financial and business services and manufacturing, respectively.
- Supported 4,200 jobs.
- Indirectly contributed R1.09 billion to SA’s GDP.
Further challenges await an industry poised for development and economic growth
The study further investigates the likely impact of the Control of Tobacco Products and Electronic Nicotine Delivery Systems Bill on the industry.
The Bill intends to introduce a number of regulations that could curtail the industry’s growth including a ban on sales through certain channels and classifying the products in the same category as tobacco products, which Gcoyi says is completely inappropriate.
According to this latest data, the introduction of the new Bill could see a reduction in sales of vapour products of more than 34% which will affect thousands of jobs in the industry’s value chains.
VPASA has previously welcomed evidence-backed regulation and accepts that public health discourse requires a carefully considered set of regulations to safeguard public health interests.
However, the Association believes it will be difficult to convince smokers to switch to a less risky alternative if vapour products are regulated in the same way as tobacco products.
“This will be a tragic outcome, given that combustible tobacco and the thousands of chemicals released while smoking is what leads to an estimated 44,000 premature deaths annually in South Africa.
“In a country where both health and finances are now even more of a concern than ever before, any industry that encourages harm reduction and economic growth should be embraced with open arms,” concludes Gcoyi.
About the Vapour Products Association of South Africa
The Vapour Products Association of South Africa (VPASA) works together with the government and other stakeholders to develop legal regulations and standards for the vapour products industry, and to ensure consumers have access to information related to vapour products and their effects.