All businesses are already suffering due to the pandemic, the sector most likely to lose the most from the pandemic will be small businesses that are neither permitted to trade through the lockdown, nor have the required resources to sustain themselves without the requisite cashflow. Vape shops will not be immune from these dire consequences.
The South African vaping market consists mainly of small enterprises operating brick and mortar shops. Most vape shop owners are entrepreneurs, who not only saw the opportunity to sell cigarette alternatives to South Africans, but also contribute to job creation in the country.
Up to 2017, the vaping industry had created over 4000 jobs, with projections of up to 14,690 jobs by 2027. This is according to Canback EIU, which conducted a study on the vaping industry in 2017. This direct employment provides a livelihood to tens of thousands of South Africans indirectly, who are part of the supply chain of the industry.
The spread of the Coronavirus pandemic (COVID-19) has resulted in a steep decline in economic activity across the world making the onset of a global recession a foregone conclusion. The International Monetary Fund (IMF) has stated that the impact of the COVID-19 pandemic on the global economy will be worse than the 2008 global financial crisis. In South Africa, the Reserve Bank has warned that the pandemic could see the South African economy contract by 6.1% this year, down from the 0.2% forecast only a month ago. This has prompted the body to lower South Africa’s Repo Rate by 2% in the space of one month, bringing the rate to a low of 4.25%.
With the rate of infections going up daily, albeit slower than originally anticipated, government made the right decision in extending the lockdown to the end of April 2020, from the initially anticipated lift of 18 April 2020. From a pandemic management perspective, this is a logical decision that government had to make to further slowdown the spread of the virus.
The South African Reserve Bank has warned that the 21- day lockdown could cause about 1600 businesses to go under and 370 000 people to lose their jobs. With an extension of the lockdown, it is likely that the numbers will be much worse than they already are.
The government has put in place measures to support small businesses during this time. The absence of a regulatory framework for vaping is likely to pose a challenge for vaping businesses seeking to access this funding. Thus far, government has tended to treat the vaping industry in a similar vein to tobacco, pending the adoption of the flawed Control of Tobacco Products and Nicotine Delivery System Bill which was published for public comment in May 2018. The experience of the tobacco sector is generally one of being ostracised by government authorities. It may be expected that similar treatment will be extended to the vaping sector. If this comes to pass, many vape shops will go bankrupt after the lockdown as many operators are small and do not have the resources to emerge unscathed from the crisis. The expected jobs projected by Canback EIU in its study will simply not materialise under the circumstances, further undermining the potential of the vaping sector to act as a driver for job creation.
The SA economy is already on a downward spiral, with many job losses recorded in 2019. Government’s approach must be based on the appreciation that, while the overriding principle of the current regulations is to protect and save lives, post-covid 19 the economy must still function and job security must be prioritised as part of the broader effort to address the triple challenge of poverty, unemployment and inequality.
With the foregoing in mind, government should allow for a relaxation of the lockdown regulations to allow for vaping shops to trade for a limited time during the lockdown to improve their chances of survival. Alternatively, an exemption for online trading should be considered to limit the movement of people. With courier services and e-commerce retailers such as Takealot in operation, those services can be used to deliver vaping products and other non-essential goods to consumers.
The South African government should take cue from countries such as Italy, Spain and France that classed vaping as essential, thus allowing vape shops to stay open or Canada and Malta that have allowed the selling of vaping products online during their lockdowns. Such measures will not only assist vape shops in survive beyond the lockdown period, but also ensure that vapers do not turn to the illicit market or return to smoking to get their nicotine fix.