British American Tobacco (BAT) is seeking to restructure its business opportunities in South Africa following a decline in legal cigarette sales, which may affect 200 job positions.
This cigarette manufacturer attributes some of its challenges to the five-month ban on cigarette sales implemented by South Africa in 2020. The measure was put in place to help prevent the spread of Covid-19 but was later declared unconstitutional by the country's highest court.
However, according to BAT, by that time the damage had already been done.
The 2020 tobacco sales ban has led to an explosive growth in the black market. Even after the ban was lifted, this trend has continued," stated the company.
In 2019, BAT South Africa employed approximately 1,800 permanent staff for its operations in South Africa. However, the company has recently announced that it has had to lay off over 30% of its workforce since 2020.
The company stated that during the same period, as the illegal market continued to grow rapidly, their cigarette sales declined by approximately 40%.
According to independent research, BAT South Africa estimates that illegal cigarette trade accounts for 70% of the total volume of the cigarette market in South Africa. This illegal trade seriously affects the sustainability of the legal tobacco industry and is a source of funding for criminal organizations in South Africa," BAT stated.
The company is calling for stronger law enforcement and the implementation of new policies to combat illegal trade.
BAT South Africa has shown appreciation for the efforts of the South African Revenue Service (SARS) and law enforcement agencies in cracking down on illegal cigarette markets, but it is also calling for stronger action to be taken. The current measures have not been effective in curbing the growth of the illegal cigarette industry.
The SARS has announced a significant new policy, but it is now time for manufacturers' policies to be reviewed for compliance. To support law enforcement agencies and improve their efficiency, and to help consumers differentiate illegal and legal market prices, a minimum retail price policy needs to be established.
Illegal trade has cost South Africa billions of rand in much-needed tax revenue, with clear impacts now seen on legal businesses and their operations, as well as unfortunate consequences for those relying on the value chain for their livelihoods. Failure to enforce the country's laws makes it impossible for legal businesses to compete.
BAT did not provide specific details on how they plan to restructure their business or which job positions may be eliminated.
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