British American Tobacco (BAT) is closing its sole manufacturing plant in South Africa, as the company struggles due to the rise of illicit cigarettes. <\/p>\n\n\n\n
BAT South Africa said that it will cease all local production of factory-manufactured cigarettes (FMC) and close its only South African manufacturing facility by the end of the year. <\/p>\n\n\n\n
BAT blamed the closure on the impact of the illicit cigarette trade on the local market. However, the company stated that it remains committed to the South African market and will continue to use imports. <\/p>\n\n\n\n
\u201cWith approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable,\u201d said Johnny Moloto, Head of Corporate & Regulatory Affairs at BAT Sub-Saharan Africa.<\/p>\n\n\n\n
The facility in Heidelberg, Gauteng, currently operates at just 35% of total capacity amid severe volume losses, directly attributable to the exponential growth of the illicit tobacco trade. <\/p>\n\n\n\n
\u201cThis is an incredibly difficult day for BATSA and for the approximately 230 employees and families who may be affected,” it said.<\/p>\n\n\n\n
“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<\/p>\n\n\n\n
BAT confirmed that its formal consultation process started today, 15 January, with affected employees and union representatives as per Section 189A of the Labour Relations Act.<\/p>\n\n\n\n
The company expects to conclude the process by the end of March 2026, with the complete closure of the manufacturing facility planned for the end of 2026<\/p>\n\n\n\n
South Africa has seen the rapid rise of an illegal cigarette market, which started to cement itself following a blanket ban on all smoking during the COVID-19 lockdowns. <\/p>\n\n\n\n
The South African Revenue Service (SARS) has warned that international criminal mafias and syndicates are now partnering with South African networks to enter the local illicit market.<\/p>\n\n\n\n
SARS’s data showed that tax collection from smoking has stagnated despite rising tobacco consumption in South Africa over the last five years. <\/p>\n\n\n\n
This has created a R40 billion gap in tax collection post-COVID-19, excluding displaced consumption that has been absorbed by illicit trade.<\/p>\n\n\n\n
SARS said that the Covid-19 market pushed crime cartels, syndicates and gangs into becoming involved in the illicit cigarette trade, it said.<\/p>\n\n\n\n
Research shows that the illegal tobacco industry in South Africa accounts for between 60% and 75% of the entire sector, with estimated tax losses of between R51 billion and R84 billion.<\/p>\n\n\n\n
While tobacco consumption leads to adverse health effects, it has a slight positive impact on generating tax revenues. <\/p>\n\n\n\n
“All indicators are that illicit is becoming a significant issue in multiple industries, including alcohol, pharmaceuticals and cosmetics, food, clothing and even toys,\u201d Moloto said. <\/p>\n\n\n\n
\u201cIf this can happen to a facility that\u2019s been operating for 50 years, it can happen to anyone.” <\/p>\n\n\n\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2026\/01\/heidelberg.jpeg\")
<\/a><\/figure><\/div>\n\n\n