How illegal cigarettes helped push BAT out of local manufacturing

Stephen Grootes speaks to  Busisiwe Mavuso, CEO of Business Leadership South Africa about how the growth of the illicit economy and how it's destroying manufacturing jobs, hollowing out tax revenue and entrenching organised crime.

Listen to the interview in the audio player below.

The closure of British American Tobacco’s only cigarette factory in South Africa is a stark warning about the growing damage caused by illicit trade and weak enforcement.

BAT recently announced that it will shut the factory later this year after years of declining production.

The plant has been operating at just 35% capacity and is no longer viable. While 230 direct jobs will be lost, the knock-on effects could be far greater. Up to 35,000 jobs across the tobacco value chain are now at risk, including farmers, distributors and retailers.

At the heart of the problem is the rapid growth of the illegal cigarette market.

In 2019, illicit cigarettes made up about a third of all sales in South Africa. Today, BAT estimates that figure has climbed to 75%. In other words, three out of every four cigarettes sold are now illegal.

In response, Business Leadership South Africa (BLSA) has joined an Illicit Economy Task Force led by the Consumer Goods Council. The group brings together industries affected by counterfeit and illegal goods to develop shared solutions, raise public awareness and work directly with SARS, the police and the National Prosecuting Authority to improve enforcement.

Speaking to Stephen Grootes on The Money Show, Busisiwe Mavuso, CEO of Business Leadership South Africa says this is a result of government failures.

"Warning lights were flashing for years, with both business and the company itself repeatedly raising alarm, yet the signals fell on deaf ears."

- Busisiwe Mavuso, CEO - Business Leadership South Africa

"Nothing has been done by any of government over the years, and now the economy is paying with almost 35,000 jobs, so it's very unfortunate. But it's also a classic example of government talking left and walking right."

- Busisiwe Mavuso, CEO - Business Leadership South Africa

"We need to start by protecting the manufacturing sector...it's not just the tobacco industry You can the auto industry also raising the same concerns."

- Busisiwe Mavuso, CEO - Business Leadership South Africa

Scroll to the top of the article to listen to the full interview.