Avatar photo

By Vhahangwele Nemakonde

Digital Deputy News Editor

British American Tobacco to retrench workers amid ‘ballooning’ illicit tobacco trade in SA

BAT South Africa has estimated the illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market.

British American Tobacco South Africa (BAT South Africa) says it has started a consultative process with staff in line with Section 189 (1) of the Labour Relations Act around a restructuring of the business.

This follows further losses in cigarette volumes in South Africa as a result of the continued impact of the growth in illicit cigarette trade, and the ban on cigarette sales which was implemented during the national Covid-19 lockdown in 2020, said BAT South Africa in a statement.

Around 200 company jobs may be affected by the proposed restructure.

“The 2020 tobacco sales ban resulted in an explosion of growth for the illicit market. This has continued even after the ban on tobacco sales was lifted.

ALSO READ: ‘NDZ banned tobacco sales well knowing it would boost illicit trade’

“In 2019, BAT South Africa permanently employed around 1,800 highly qualified staff across its South African operations. Since 2020, we have been forced to retrench more than 30% of our workforce.”

Over the same period, the company has lost around 40% of its cigarette sales as the illicit market
accelerates, said the company.

BAT South Africa has also estimated that the illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market.

“This illegal trade has severely impacted the sustainability of the legal tobacco industry and is a source of funds for criminal organisations in South Africa.”

Cigarette sales ban affects tobacco market

A study by the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town last year revealed the national ban on the sale of cigarettes during the hard Covid-19 lockdown in 2020 caused major disruption to the tobacco market.

It found that despite the high levels of illicit trade in the local tobacco market, the government’s decision to ban the sale of tobacco products in March 2020, as part of its Covid-19 response, had unintended consequences.

Government implemented the measure on the presumption that smokers were more likely to develop severe illnesses from Covid-19, and thus place extra pressure on the health system.

240% price hike

Despite the national sales ban, the study found that most smokers in South Africa did not only continue smoking, but prices increased by over 240%.

The illegal cigarette sales also further entrenched an already large illicit market in the country.

“Purchases shifted away from the normally dominant brands of the multinational tobacco companies to local/regional producers.

“The covariates of price changed substantially during the sales ban, the most pronounced being inter-provincial effects. After the ban, the market shifted back to its pre-ban state, with an overall increase in the price of 3.6%,” the paper stated.

READ MORE: SA’s ban on cigarette sales caused major disruption to tobacco market – study

Additional reporting by Thapelo Lekabe