12 August 1998

Re: Tobacco Products Control Amendment Act
This letter is addressed to you on behalf of CINEmark (Pty) Ltd, the media sales company that provides advertising income to all cinemas in South Africa. We are deeply concerned about the Tobacco Products Control Amendment Act that has been introduced in Parliament by your department. As such we would like to raise the following concerns:

1. Consultation
At no time were we given the opportunity to consult or even speak to anyone in your department about the bill. We believe that in the spirit of consensus and democracy, upon which this government is founded, it is necessary to consult with all interested parties before any such legislation can be tabled.

Had such consultation taken place prior to the tabling of the bill, we believe that the content would have been more acceptable to all parties concerned. Proof of this is that the President and certain Cabinet Ministers having already publicly stated that they will negotiate with certain organisations to change some of the draconian measures called for in the Bill.

2. Freedom of Commercial Speech
We believe that the freedom of expression as entrenched in the Constitution is the basis of a free and democratic society. As such it should not be restricted. The present restrictions contained in the Bill are based on unsound principles and further restrictions based on this precedent will unjustifiably restrict freedom of commercial speech. Should the bill be passed as is, we will support the Freedom of Commercial Speech Trust in taking this issue to the Constitutional Court.

3. Impact of the Bill
We expect Tobacco companies to invest about R 20 million in cigarette advertising on cinemas in South Africa. - The income from this investment account for a huge percentage of the operating income of the cinemas in South Africa. Should the Bill be introduced as is, we feel that our constitutional right in terms of economic activity will be compromised, and this could result in:

3.1 Job Losses
CINEmark employs 53 people
Ster-Kinekor employs 2000 people
Nu Metro employs 700 people
We estimate that a further 900 people are employed by the Independent cinemas.

Many of these people could face the loss of their employment

3.2 Cinemas may close
For many "marginal" cinemas, the difference between a small profit and a loss ~ the cinema advertising. The introduction of this Bill could result in the bankruptcy of many smaller cinemas in South Africa.

3.3 Impact on inflation
About 26 million cinema tickets are sold annually in South Africa. Cigarette advertising is expected to amount to R 20 million in the next 12 months. That means that the impact on ticket prices will be about 77c per ticket, which amounts to a 6,5% increase on the average price of R 11,80 per ticket currently achieved in South Africa. Not only will this have an inflationary impact, but the increased price will also deny the poorer people in our community access to this form of entertainment.

3.4 Pressure on salary increases
The impact of this huge loss of operating income will mean that employers will not be able to afford to pay the salary increases demanded by many of our employees via their trade unions.

3.5 Impact on job creation
A large portion of the advertising income earned by cinema exhibitors is used to fund the development of new cinemas. The ban on Tobacco advertising will thus directly contribute to a slowdown in these developments, with the resultant slowdown in job creation.

4. Our proposed solution

4.1 Consultation
We would like to propose that all interested parties should be allowed to comment on the Bill and meet at a conference to discuss the pros and cons in order to draft a new bill together with the Department of Health.

4.2 Phased Introduction
We would like to see a phased introduction of the new restrictions which would allow us some time to replace the loss of income to our industry in order to reduce the impact on job losses, inflationary ticket prices and new job creation.

4.3 Self Regulation
We would like to form an industry body that regulates the content of all cigarette marketing without the need for a legislated regulatory bill. Already we don't screen any cigarette commercials with children's movies. We also don't screen cigarette commercials during school holidays. Furthermore you will have noticed that most of the cigarette manufacturers have adopted a responsible approach to their cigarette commercials where they seldom show anyone smoking in them. We believe that our industry is responsible enough to regulate this form of advertising in such a way that we achieve our common objectives. In doing so we will only flight cigarette commercials to adult audiences with adult movies.

4.4 Education of the Youth
It is the Department of Health's stated objective to educate the youth about the dangers of smoking. We have access to many
international commercials that do exactly that. We would be quite happy to offer to flight these commercials in all our cinemas in order to get those messages across to the youth. In doing so, we will achieve your objective of empowering the youth with additional information, as opposed to denying them access to information, which is effectively a form of censorship.

Since cinema is an entertainment medium, we would obviously like to select commercials that won't shock or horrify our audiences.

For all the reasons stated above, we urge you to withdraw this legislation and undertake proper consultation with all -interested parties, so as to ensure a fair and democratic outcome. We at ClNEmark would be happy to work with you in this process.

Managing Director