British American Tobacco has announced that it will close its Heidelberg, Gauteng, factory by the end of 2026, marking the end of cigarette manufacturing in South Africa after 70 years. BAT said the decision was driven by the rapid growth of the illicit cigarette trade, which now makes up about three-quarters of the local market.

Johnny Moloto, head of corporate and regulatory affairs at BAT Sub-Saharan Africa, said it was not an easy decision to make:

“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.”

 

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

 

“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.”

Thousands of tobacco farmers in South Africa also face an uncertain future, as BAT will sell its products locally through imported cigarettes in the future. The broader Lesedi community, including suppliers, logistics providers, and contractors, all depend on the facility.

Tax Justice SA (TJSA) has reacted to the news, arguing that the closure of British American Tobacco South Africa’s manufacturing plant is damning proof that authorities’ failure to curb the illicit cigarette trade is destroying jobs, draining public revenue and eroding the rule of law.

TJSA’s founder, Yusuf Abramjee, says the decision is the predictable outcome of allowing organised criminal networks to operate openly while enforcement agencies fail to act decisively.

“This shows what happens when you fail to tackle illicit trade: legitimate businesses are compromised, honest jobs are destroyed and vital tax revenue is lost.”

“When criminals are allowed to operate openly and at scale, investment leaves, jobs disappear and the rule of law begins to collapse.”

Abramjee argues the lucrative illicit cigarette trade, which blossomed during the years of State Capture, was turbo-charged by the five-month tobacco ban imposed during the Covid-19 epidemic.

He says tax-evading cigarettes now account for an estimated 75% of all sales, depriving the fiscus of almost R30 billion in excise annually – vital revenue that should be spent on education, housing and security.

“Every year of inaction strengthens organised crime and weakens the state’s authority. Without decisive action against illicit trade, South Africa will continue to lose revenue, credibility and control.

“A country where criminal networks outcompete law-abiding businesses is sliding towards a gangster state. This downward spiral cannot be tolerated for a single day longer.”

Moloto confirmed BAT will re-invest in local production in South Africa, should there be a substantial and sustained trend change in the local illicit trade environment.