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British American Tobacco (BAT) is set to shut down its sole manufacturing facility in South Africa, signalling a pullback after a 70-year presence.<\/p>\n
Businesslive reported that the company has informed local authorities in the Lesedi municipality, where its Heidelberg plant is based, that the factory will be mothballed by the end of the year.<\/p>\n
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\u201cBATSA commenced its formal consultation process today with affected employees and union representatives in accordance with Section 189A of the Labour Relations Act,\u201d the group said in a statement issued on Thursday.<\/p>\n
It expects to conclude this process by end March 2026, with the complete closure of the manufacturing facility planned for the end of 2026, it noted in a statement issued on Thursday morning.<\/p>\n
BAT has blamed the decision on the rapid expansion of the illicit cigarette trade, which it says now accounts for roughly three-quarters of the local market.<\/p>\n
\u201c[The closure is] as a result of the devastating impact of the illicit cigarette trade on the local market,\u201d it adds.<\/p>\n
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Once the closure is completed, BAT will no longer manufacture cigarettes in South Africa and will instead rely on imports to meet the domestic market\u2019s needs.<\/p>\n
In correspondence with the municipality, the company stated that the Heidelberg facility was operating at only 35% of capacity, making it commercially unfeasible.<\/p>\n
BAT has stressed that it is not exiting South Africa entirely. It will retain its secondary listing on the JSE and continue to sell its products locally through imported cigarettes.<\/p>\n
\u2018A difficult day\u2019\u00a0<\/strong><\/p>\n \u201cThis is an incredibly difficult day for BATSA and for the approximately 230 employees and families who may be affected. These are skilled, dedicated people who have given years of service, who, unfortunately, are affected by an illicit market that operates outside of the regulatory net,\u201d says Johnny Moloto, head of corporate and regulatory affairs at BAT Sub-Saharan Africa.<\/p>\n The group notes that it has engaged with the South African government and law enforcement authorities over the past decade, \u201cconsistently raising concerns about the growth of illicit trade and advocating for effective enforcement\u201d.<\/p>\n However, it notes that several policy decisions have exacerbated the situation: the \u201cunconstitutional 2020 tobacco sales ban\u201d during the Covid-19 pandemic, from which the legitimate market has never recovered, and above-inflation excise increases that have widened the price gap between legal and illicit\u00a0products.<\/p>\n \u201cAdding to this is proposed new tobacco legislation currently before Parliament, which, if passed, will exacerbate South Africa\u2019s illicit trade issues,\u201d it notes.<\/p>\n \u2018We have tried everything\u2019<\/strong><\/p>\n ADVERTISEMENT:<\/p>\n CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n In a presentation to the Portfolio Committee on Health last year, the South African Revenue Service stated it believed the proposed legislation would worsen the illicit tobacco trade, according to the group.<\/p>\n \u201cBATSA has raised these concerns for years, providing data and proposing solutions. While some in government have genuinely tried to help, the overall response hasn\u2019t been enough to protect legitimate businesses and the jobs they create.<\/p>\n \u201cWith the illicit industry\u2019s current size and scale, only a co-ordinated, whole-of-government response can make a real impact,\u201d Moloto notes.<\/p>\n \u201cWe have tried everything to ensure we don\u2019t have to close this facility, which has been a part of the Heidelberg community since 1975, including implementing various efficiency initiatives over the years.<\/p>\n \u201cBut when three-quarters of your market is illicit, there\u2019s a limit to what any company can do. We\u2019ve reached that limit.\u201d<\/p>\n He adds that the closure will affect more than just factory employees. The broader Lesedi community \u2013 including suppliers, logistics providers and contractors \u2013 all depend on the facility.<\/p>\n Read: BAT lights up again as rerating gathers pace<\/p>\n Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n