British American Tobacco South Africa (BATSA) on Thursday announced it will cease local production of factory manufactured cigarettes (FMC) and close its sole South African manufacturing facility by the end of 2026 as a result of the devastating impact of the illicit cigarette trade on the local market.

However, the company emphasised that it remains committed to the South African market and will transition from a local manufacturing model to an import-based supply chain to continue serving adult consumers in the market.

“With approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable,” said Johnny Moloto, Head of Corporate & Regulatory Affairs at BAT Sub-Saharan Africa.

Located in Heidelberg, Gauteng, the facility currently operates at just 35% of total capacity due to severe volume losses, directly attributable to the exponential growth of the illicit tobacco trade in South Africa.

“This 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.”

A decade of engagement BATSA has engaged with government and law enforcement authorities over the past decade, consistently raising concerns about the growth of illicit trade and advocating for effective enforcement.

The company points to several policy decisions that have worsened the situation including; the unconstitutional 2020 COVID-19 related Tobacco Sales Ban from which the legitimate market has never recovered; and above-inflation excise increases that have widened the price gap between legal and illegal products.

Adding to this is a proposed new tobacco legislation currently before Parliament, which, if passed, will exacerbate South Africa’s illicit trade issues.

In a presentation to the Portfolio Committee on Health last year, the South African Revenue Service (SARS) stated they believed the proposed legislation would worsen the illicit tobacco trade.

“BATSA has raised these concerns for years, providing data and proposing solutions. While some in government have genuinely tried to help, the overall response hasn’t been enough to protect legitimate businesses and the jobs they create. With the illicit industry’s current size and scale, only a coordinated, whole of government response can make a real impact,” said Moloto.