Tobacco giant BAT to shut down SA plant in face of surging illicit cigarette trade

Industry giant British American Tobacco (BAT) is set to shut down its only manufacturing facility in South Africa, as illegal cigarettes flood the market.

BAT South Africa (BATSA) said in a statement that it will close its plant in Heidelberg in Gauteng by the end of 2026, as a result of "the devastating impact" of the illicit cigarette trade on the local market.

The factory currently operates at just 35% of total capacity due to volume losses, with BATSA warning that policy failures and weak enforcement put all legitimate manufacturers at risk.

The closure threatens around 230 jobs in Lesedi Municipality, with BATSA warning that policy failures and weak enforcement put all legitimate manufacturers at risk.

“With approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable,” says Johnny Moloto, Head of Corporate & Regulatory Affairs at BAT Sub-Saharan Africa.

Moloto emphasizes that BAT will still have a presence in South Africa, continuing with an import model: "We remain present and committed to SA, and should the situation substantially change we'll definitely reinvest in local production."

Describing the scale of the "massive" facility where they're now only able to operate at 35% capacity, he says they could be producing the total size of the tobacco industry in the country.

"The sad thing is what (it will do) to that economy in Heidelberg - we've been there for over 50 years and, between ourselves and a second manufacturer, have been the biggest contributors to the local economy as well as to the fiscus of the municipality from a revenue generation point of view."

Much has been made of the boost the pandemic lockdown ban on tobacco sales gave the illicit industry, and Moloto says BATSA lost 40% of its sales volumes between 2019 and 2021, which has accelerated since then.

BATSA points out that it has engaged with government and law enforcement authorities over the past decade, consistently raising concerns about the growth of illicit trade and advocating for effective enforcement; also providing data and proposing solutions.

Scroll up to the audio player to hear more from BAT's Johnny Moloto about the planned closure