Will South Africans be paying more for cigarettes? This will be on the minds of smokers following an announcement that cigarette giant British American Tobacco South Africa (BATSA) will pull out of the country.
In an explosive revelation, BAT South Africa announced on Thursday that it will cease local production of factory-manufactured cigarettes (FMC) and close its sole South African manufacturing facility by the end of 2026.
The decision by London and Johannesburg will see the group not manufacturing cigarettes for the first time in more than 70 years, resorting to imports to serve the local market.
BAT extinguished
The maker of Dunhill and Pall Mall cigarettes said this closure was 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.
“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.
Illicit cigarettes
South Africa loses about R30 billion in revenue every year due to the illicit trade in cigarettes and liquor, according to a new report, almost three times as much as the government wanted to collect by increasing VAT.
According to the Transnational Alliance to Combat Illicit Trade (Tracit) report for 2025, published on 6 May 2025, South Africa is doing worse now than in 2019 and 2023 in combating illicit trade and other illicit economic activities across sectors, including alcohol, tobacco, foodstuffs, agrichemicals, pharmaceuticals, counterfeiting, mining and wildlife trafficking.
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Job losses
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.”
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Policy decisions
The company has also pointed to several policy decisions that have worsened the situation.
“The unconstitutional 2020 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 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,” Moloto said.
Closure
Moloto said BAT tried by all means to avert the closure.
“We have tried everything to ensure we don’t have to close this facility, which has been a part of the Heidelberg community since 1975, including implementing various efficiency initiatives over the years,” noted Moloto.
“But when three-quarters of your market is illicit, there’s a limit to what any company can do. We’ve reached that limit.”
The closure will affect more than just factory employees. The broader Lesedi community including suppliers, logistics providers and contractors all depend on the facility.
“Should there be a substantial and sustained trend change in the local illicit trade environment, BAT will re-invest in local production in South Africa,” confirmed Moloto.
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