Global tobacco giant British American Tobacco (Batsa) yesterday said it will cease all SA production of cigarettes and close its Heidelberg factory by the end of this year, due to illicit trade that dominates the local market.

Up to 230 jobs could be affected by the closure of its 50-year-old Heidelberg facility in Gauteng, the company said in a statement. 

News24 reports that the JSE-listed group’s local unit said it ‘remained committed’ to SA, though, and would be transitioning from a local manufacturing model to an import-based supply chain to continue serving its customers locally.

‘With approximately 75% of the SA cigarette market now estimated to be illicit, continued local manufacturing has become unviable,’ said Johnny Moloto, head of corporate and regulatory affairs at BAT Sub-Saharan Africa.

The Heidelberg facility currently operates at just 35% of total capacity due to ‘severe volume losses’, the company said.

Moloto said the group had tried everything to ‘ensure that we don’t have to close this facility, which has been part of the Heidelberg community since 1975’.

‘But when three-quarters of your market is illicit, there’s a limit to what any company can do. We’ve reached that limit.’

Batsa said it had ‘engaged’ with the government and law enforcement authorities over the past decade about the growth of illicit trade, adding it had advocated for ‘effective enforcement’.

It said certain government policy decisions had also ‘worsened the situation’, including the ‘unconstitutional 2020 Tobacco Sales Ban’ during the Covid-19 pandemic.

Batsa said the legitimate market has ‘never recovered’, while ‘above-inflation excise increases’ have widened the price gap between legal and illegal products.

Full News24 report