British American Tobacco (BTI) will close its sole South African manufacturing facility by the end of the year, ending nearly five decades of local cigarette production. The decision, announced Thursday, is a direct result of the country's overwhelming illicit tobacco market, which the company says has made continued operations financially unsustainable.
The factory, located in Gauteng and operational since 1975, currently employs approximately 230 people. BAT stated it will now supply the South African market through imports. The facility is running at just 35% of its total capacity due to massive volume losses driven by illegal trade.
“With approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable,” said Johnny Moloto, head of regulatory affairs at BAT Sub-Saharan Africa.
The company highlighted that the spread of illicit trade has been a long-standing concern, worsened by South Africa's temporary ban on tobacco sales during the COVID-19 pandemic in 2020. BAT had warned at the time that the prohibition would fuel the illegal market. Traditional cigarettes still account for the vast majority — about 80% — of BAT’s global revenue.
The closure marks a significant shift for a company with roots in South Africa stretching back over a century. BAT's local presence expanded after its 1999 merger with Rothmans International, a firm historically controlled by the prominent Rupert family.
The market will view BAT's exit from local manufacturing as a rational, if stark, business decision driven by severe market distortion. It underscores the crippling effect that illicit trade and regulatory challenges can have on formal sector investment and employment. For BAT, the move likely represents a cost-cutting measure to protect margins, but it also signals a retrenchment in a key African market. Investors may see this as a responsible step to stem losses, but it could raise broader concerns about the operating environment in South Africa for other consumer goods companies. The long-term impact on BAT's brand presence and supply chain efficiency in the region remains to be seen. The company hopes that importing products proves more viable than producing them locally under the current conditions.
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