Cigarette prices spike in Egypt

Ahmed Morsy, Al-Ahram Weekly, Friday 3 Jun 2011

Eastern Tobacco's decision to increase cigarette prices dealt another blow to smokers' pockets

Smoker
The recent hike in cigarette prices will not the the last(Photo AP)

The government-owned Eastern Tobacco Company abruptly raised the prices of cigarettes by LE0.25 for Egyptian brands last week. Egyptian cigarette brands are considered the cheapest in the domestic market and they are commonly bought by the lower-income smokers. The prices of Wings and Florida brands increased to LE4.25 from LE4.1, while Boston, which cost LE4.5, is now sold at LE4.75.

Cleopatra and Mondial brands increased to LE5. They were sold for LE4.75 and LE4.9 correspondingly. The state- owned tobacco company kept the prices of other local brands such as Golden Cleopatra at LE4.25 per pack.

Company administration would not respond to Al-Ahram Weekly on the reasons for the hike. Abdel-Naim Hassan, public relations manager at Eastern Tobacco Company, said he has no information on the matter, and Nabil Abdel-Aziz, the company's managing director, did not answer 20 call attempts.

The company plans to produce around 90 billion cigarettes in fiscal year 2011/2012, of which 62 billion cigarettes are for the local market, 0.6 billion cigarettes for exportation, 0.8 billion cigarettes for joint-venture production, and 26.3 billion sticks of foreign brands manufactured for other companies. In 2009/2010, the company produced 83 billion cigarettes.

"Egyptians wake up to a new price increase every day, even in cigarette prices," 42-year-old plumber Ayman Mahmoud complained to the Weekly.

"At first, I was angry. But then I realised that I used to buy a Cleopatra box at LE5 anyway, even when its official price was LE4.75," Mahmoud concluded.

Many seemed to do the same as well. Ahmed Ismail, a 25- year-old kiosk owner, explained that kiosk owners were always selling cigarettes at a higher price anyway, because the company's supply truck, which normally stops once a week, does not provide them with the sufficient amount. Consequently, they resort to the wholesaler, who sells at a high price which they pass on to the consumer. But what Mahmoud may not yet realise is that this means he will be getting his cigarettes at an even higher price now.

However, he can find cigarettes at the officially fixed price from the gas stations since, according to Ismail the kiosk owner, the cigarettes' supply truck provides them with the sufficient amount they need twice or thrice a week. 

He predicts that cigarette price increases will not be limited to the local brands, but that automatically kiosk owners will increase the price for foreign brands as well.

Yet, it seems that at whatever prices consumers will still seek their smoke. "At first, consumers get annoyed when they know the price had increased. Then they buy it after I let them know it is the new official price," said Ismail.

Approximately 10 million Egyptians smoke some sort of tobacco. Of those, 16.2 per cent smoke cigarettes, 3.3 per cent water pipes and 2.6 per cent chewing tobacco, according to a report issued by the Central Agency for Public Mobilisation and Statistics (CAPMAS), although the Health Ministry last year estimated that the figure stood at 14 million smokers.

The CAPMAS report also added that the average monthly spending on cigarettes by smokers in Egypt is LE110. It also added that 25.8 per cent of smokers fall in the age category of 45- 64 years, and the average daily consumption of male smokers is one pack of cigarettes, compared to half a pack for females.

Hussein Fahim, a 50-year-old taxi driver who sees smoking as a relief from the daily drudge, said he was angry when he heard of the price hike because, for him, it would add an additional financial burden to his household budget.

"The government considers smoking cigarettes lavishness and wants the smokers to pay for it. It is a financial burden, however, I cannot quit. The cigarette represents my only companion throughout the day," he complained.

"If the government thinks it will push people to quit the habit by making it more expensive to smoke, it is wrong," said Fahim who smokes two packs per day.

But this price hike is not the end to smokers' woes. Minister of Health, Ashraf Hatem, has said that Egypt will increase taxes on cigarettes by 70 per cent. The taxes will be collected for his ministry in coordination with the Ministry of Finance.

"The Ministry of Health annually spends $3 to $4 billion on treating diseases caused by smoking," Hatem said during the celebration of the "No Smoking Day", held at Nasser Institute this week.

A year ago, extra taxes were imposed on all kinds of tobacco; a 40 per cent raise on cigarettes and 100 per cent on shisha tobacco, or water pipes. 

But taxes are not the answer according to Ibrahim Adham, professor of economics at the Suez Canal University. "While imposing more taxes on cigarettes may be one of the methods to correct people's behaviour, it is wrong to apply such a method with a product such as cigarettes since it is not a flexible commodity. The smoker has a steady income, therefore he will decrease his spending on the other needs in order to buy cigarettes," he said.

"Such increase in taxes will add to the government coffers since it will only reallocate expenditures from the same fixed income. In my opinion, it can be successfully imposed upon the luxury or flexible commodities only," Adham said.

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