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BAT Closes SA Factory Amidst 75% Illicit Market
16 Jan
Summary
- South Africa's cigarette market is now 75% illicit.
- British American Tobacco is closing its only factory.
- Operations became unviable due to severe volume loss.
British American Tobacco Plc is shuttering its sole cigarette manufacturing facility in South Africa by the end of 2026 due to the pervasive issue of illicit trade. The company stated that local production has become unviable as approximately 75% of the South African cigarette market is now estimated to be illicit, leading to severe volume loss at the factory.
The Gauteng-based factory, established in 1975 and BAT's eighth largest globally, is currently operating at just 35% of its total capacity. The closure will impact approximately 230 employees, whose futures will be determined through a consultation process. This move underscores the significant challenges faced by tobacco companies in combating illegal markets.
This situation reflects a broader trend where tobacco companies are vocal against illicit trade, which directly impacts their profits primarily derived from traditional cigarette sales. In 2024, 80% of BAT's revenue came from cigarettes, with smoke-free products contributing 17%. The South African government's ban on tobacco sales during the Covid pandemic in 2020 was previously argued by BAT to have boosted the illegal cigarette market.
