British American Tobacco South Africa to Close Heidelberg Plant Amid Illicit Trade Surge

British American Tobacco South Africa (BATSA) has announced the closure of its sole manufacturing facility in Heidelberg, Gauteng, by the end of 2026. This decision is attributed to the overwhelming impact of the illicit cigarette trade, which now constitutes approximately 75% of the South African cigarette market. The factory, operational since 1975, currently runs at only 35% of its capacity, leading to significant job losses for around 230 employees and their families in the Lesedi Municipality. Johnny Moloto, Head of Corporate & Regulatory Affairs at BAT Sub-Saharan Africa, emphasized the devastating consequences for the local economy, stating, “This is an incredibly difficult day for BATSA and for the approximately 230 employees and families who may be affected.”

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BATSA's decision follows a decade of engagement with government and law enforcement regarding the growth of illicit trade. The company cites several policy failures, including the unconstitutional 2020 Tobacco Sales Ban and above-inflation excise increases, which have widened the price gap between legal and illegal products. These factors have made local manufacturing unviable, with BATSA reporting a 40% decline in sales volumes since 2020. The proposed new tobacco legislation currently before Parliament is also expected to exacerbate the illicit trade issues, as warned by the South African Revenue Service (SARS).

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Despite the closure, BATSA has stated its commitment to the South African market, transitioning to an import-based supply model to continue serving adult consumers. The company will maintain its secondary listing on the Johannesburg Stock Exchange and continue commercial operations in the country. Moloto noted that while BATSA remains dedicated to South Africa, it has reached its limit in local production due to the scale of the illicit market. He indicated that the company would consider reinvestment in local manufacturing if there were a substantial reduction in illegal trade.

BATSA to shut down local production as illicit cigarette trade drowns market

The closure of the Heidelberg plant is not just a corporate restructuring; it reflects a broader failure to combat illicit trade that undermines legitimate businesses and erodes tax revenue. Moloto warned that the illicit trade issue extends beyond tobacco, affecting various sectors, including alcohol and pharmaceuticals. He stated, “Illicit trade doesn’t just hurt companies – it destroys jobs and communities.”

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

Critics argue that the government's response has been insufficient to protect legitimate businesses. BATSA has consistently raised concerns and proposed solutions, but the overall governmental action has not been adequate to address the crisis effectively.

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

In compliance with Section 189A of the Labour Relations Act, BATSA has initiated formal consultations with affected employees and union representatives, expected to conclude by the end of March 2026. The company’s decision underscores the urgent need for coordinated government intervention to dismantle illicit supply chains. Whether this situation prompts the necessary enforcement measures will determine if it marks an isolated incident or signals a broader retreat from legitimate production in South Africa.

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

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

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

• “This is an incredibly difficult day for BATSA and for the approximately 230 employees and families who may be affected.” — Johnny Moloto

BATSA to shut down local production as illicit cigarette trade drowns market

• “Illicit trade doesn’t just hurt companies – it destroys jobs and communities.” — Johnny Moloto

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

• “But when three-quarters of your market is illicit, there’s a limit to what any company can do. We’ve reached that limit.” — Johnny Moloto

British American Tobacco South Africa to Close Heidelberg Plant as Illicit Cigarette Trade Reaches 75% of Market

The closure of BATSA's Heidelberg plant serves as a stark reminder of the challenges facing legitimate businesses in South Africa amidst a growing illicit market.

Tobacco giant BAT to shut down SA plant in face of surging illicit cigarette trade