British American Tobacco's SA exit: Cost-cutting or combating illicit cigarette trade?

British American Tobacco (BAT) has announced that it will stop producing cigarettes in South Africa by the end of 2026, blaming the rise of illicit trade, which it claims accounts for 75% of cigarette sales.

The company has said it could return if illegal activity is brought under control.

However, industry rivals are questioning BAT’s claims.

Sinenhlanhla Mnguni, Chairperson of the Fair-Trade Independent Tobacco Association (FITA), argues the figures are misleading, pointing out that the study cited by BAT was commissioned by the company itself.

"The numbers which have been put forward by that particular manufacturer are not based on any facts."

Mnguni highlights that illicit cigarettes come from multiple sources, including local producers, Zimbabwe, and smuggling syndicates in Asia.

He suggests BAT’s decision is less about curbing illegal trade and more about cutting costs.

"Ultimately, we understand in life there are no vacuums. Ultimately, BAT is not the only cigarette manufacturer in South Africa; there are at least 15 others. People with expertise, a lot of these employees, will be absorbed by a large number of these factories.

"If the issue is that they're losing market share as a result of the illicit trade, why are they not pulling out fully from the South African cigarette market? If they pull out fully from that market, surely then someone would acquire, for instance, that factory and employ those people, but they're not.

"What they're doing is they're cutting employees, still bringing in cigarettes into South Africa, still making a profit. It's just really, in our honest opinion, a move to cut overheads to increase profits, which they've done year-on-year. "

To listen to Mnguni in conversation on 702 and CapeTalk's The Midday Report, use the audio player below: