The TCDI Zambia website was developed by Development Gateway. The website is intended to respond to the needs of government, civil society and academic stakeholders by providing access to demand-driven, high-quality data on national tobacco prevalence, products, and policies. The design, functionality and content for the website are led by the Zambian tobacco control community’s needs. This document outlines our overall website development methodology.

The tobacco harm page discusses and provides information on the health, economic, social and environmental implications of tobacco use in Zambia. Analysis draws from secondary sources of data including the Investment Case for Tobacco Control in Zambia.

The tobacco industry interference page discusses and provides information on the pervasiveness of the tobacco industry’s resistance to tobacco control measures. The page provides information on the tactics used by the tobacco industry in Zambia to interfere with tobacco policy development and implementation, compares the level of interference in Zambia against that in other African countries, describes the tactics being used, demystifies common tobacco industry myths and provides recommendations on how to address industry interference in Zambia. Analysis draws from secondary sources of data including the Global Industry Interference Index.

The prevalence page discusses and provides information on the prevalence of tobacco use in general and the variation in prevalence by gender, age, education and wealth. The prevalence page also discusses prevalence across the varying tobacco products. Analysis is based on 2018 DHS data, 2015 ITC Wave 2 data and 2011 GYTS data. The TCDI team further analysed the DHS dataset in Stata. 2018 DHS youth data is contentious and was therefore disregarded in the analysis.

The taxation page discusses and provides information on tobacco tax policy in Zambia and how it compares globally. The page also discusses the effects of increases in excise tax on retail prices, government revenue and consumption.

In addition to drawing on secondary sources, data analysis was conducted by the TCDI team to predict how increases in tax and graduation from a tiered tax structure to a uniform tax structure will affect retail prices, government revenue and consumption, using the Tobacco Excise Tax Simulation Model (TETSiM) developed by the Research Unit on the Economics of Excisable Products (REEP). TETSiM is a “tool to quantify the likely impact of a change in the excise tax structure and/or the level of the excise tax on a number of variables, including the price of cigarettes, cigarette consumption and excise tax revenue.” 

TETSiM Model

The Tobacco Excise Tax Simulation Model (TETSiM) is a simulation tool that has been developed by the Research Unit on the Economics of Excisable Products at the University of Cape Town. The TETSiM model quantifies the likely impact of a change in the excise tax structure and/or the level of the excise tax on a number of variables, including cigarette consumption and excise revenue collected by the government. Because the model is programmed in Excel, it can be customised to the tax system for any individual country.

The team designed 2 scenarios for Zambia:

(a)  Scenario 1: This scenario assumes that the specific tiered tobacco excise tax that is currently in place in Zambia stays in place between 2023 and 2027. The cigarette excise tax increases by 35% in 2023 and then by 40% annually between 2024 and 2027 for both imported and domestic brands. We assume an over-shift response from the tobacco industry. An over-shift implies that the net-of-tax (NOT) price increases over time, resulting in the retail selling price increasing by the sum of the excise tax increase and the NOT price increase. This normally occurs when there is imperfect competition in the market. We assume that the tobacco industry will respond to this increase in the excise tax by increasing the NOT price by the rate of inflation recorded in the previous year.  

(b) Scenario 2:  The tiered excise tax system gradually merges into a uniform specific excise tax. We do this by increasing the excise tax for domestic brands by 80% in 2023, 85% annually between 2024 and 2026 and by 82% in 2027. We modelled the excise tax  for imported and domestic brands to be the same value at 25.7 ZMW in constant 2022 prices by 2027. Also assumes an over-shift. We assume, like in scenario one, that  the tobacco industry increases the NOT price by the rate of inflation recorded in the previous year. 

While an over-shift may not be the response from the tobacco industry, we assumed an over-shift response in order to model the best-case scenario of the effects of the current tax structure in Zambia in terms of public health outcomes, ie. consumption and prevalence.

In addition to these two scenarios, we did a retrospective projection to estimate how much excise revenue was lost between 2018 and 2021 due to the tiered excise tax. 

All our results are presented in nominal values (not adjusted for inflation) and constant 2022 values (inflation -adjusted values).

For all scenarios we made the following assumptions:

Product segments: Five brand segments, including imports, premium, popular, discount and illicit.

1. Illicit cigarette market: 15% of the total cigarette market. This is based on an estimate from the Zambia Revenue Authority (ZRA) gap study on excise (not yet publicly available).
2. Price elasticity of demand: Range -0.5 to -0.6, with absolute elasticity being greater for lower-higher priced brands, and smaller for higher-priced brands groups
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3. Income elasticity of demand: Range 0 to 0.5, with 0.5 for imports, 0.4 for premium, 0.3 for popular and 0 for discount and illicit segments.

Note:

• How does the model work? The model uses what is known in economics as the “price elasticity of demand”[1] to estimate how a change in the excise tax rate or structure (and ultimately, a change in the retail price of cigarettes) will affect the consumption of cigarettes. These changes will in turn cause a change in government revenue, tobacco industry revenue, etc. The model also uses the concept of “cross-price elasticity of demand”[2] to estimate how an increase in the price of one brand of cigarettes will impact the consumption of a cheaper brand of cigarettes.
• The price elasticity of demand measures the percentage change in the demand of a product resulting from a 1% change in the retail price of that product. In the case of cigarettes, price elasticity is negative, because increases in price will result in a reduction in demand. In low- and middle-income countries (LMICs), the price elasticity of demand for cigarettes has been estimated at between -0.2 and -0.8, with many estimates clustered at around -0.5. Thus, for LMICs, a 10% increase in the retail price of cigarettes is expected to reduce consumption by between 2% and 8%.
• The income elasticity of demand measures by what percentage the demand changes in response to a 1% increase in income. As income rises, the demand for normal  goods increases.
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  Thus, the income elasticity for normal goods is positive, implying that the demand rises with income. Goods with income elasticities above one are perceived as luxury or superior goods. While those with income elasticities below one are perceived as necessities
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  .  Most estimates of income elasticity of demand for tobacco products lie between 0 and 1. An income elasticity of demand of 0.5 means that an increase in income of 10% will result in tobacco consumption rising by 5%.
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Data from the International Monetary Fund, the World Health Organizations, and the Zambia Revenue Authority.

The illicit trade page discusses the extent of illicit cigarette consumption in Zambia. Primary data collection including both quantitative and qualitative methods were used to achieve the following research objectives:

1. To determine the proportion of illicit cigarettes consumed in Zambia
2. To examine the extent of cigarette tax evasion in Zambia
3. To explore facilitators of tax evasion and illicit cigarette trade in Zambia

The quantitative portion of the study involved data collection of cigarette packs from various retailers such as general stores, kiosks (“tuntemba”) and pan/cigarette stands. The retailers would be supplied with a “collection bag” at the beginning of business each day and asked to keep all the empty packs resulting from loose sales of cigarettes during the day. All “collection bags” will be retrieved by the field workers at the end of the business day. During bag collection, basic information such as name and type of the store, price and brands of cigarettes shall be collected. A structured questionnaire that has been used in studies elsewhere has been adapted to collect these data from the retailers. Data collection also involved collection of discarded packs from the streets where retailers are established and from other locally important streets around public gathering places.

A cigarette pack is considered illicit if it has at least one of the following: 

• No textual health warnings i.e., “TOBACCO IS HARMFUL TO YOUR HEALTH” 
• A tax stamp from ZRA
• A duty-free stamp
• A brand that is not listed by ZRA as authorised to be sold in Zambia

The qualitative portion of the study involved semi-structured key informant interviews (KIIs) conducted with Zambia Revenue Authority (ZRA), cigarette retailers, wholesalers and manufacturers. The KIIs also informed the classification of legal and illegal cigarette packs.