British American Tobacco (BAT) has announced plans to close its sole manufacturing facility in South Africa by the end of 2026, citing the devastating impact of the illicit cigarette trade on the local market. The decision marks a significant shift for the company, which has maintained a manufacturing presence in the country for more than five decades.
BAT South Africa confirmed that it will cease all local production of factory-manufactured cigarettes (FMC) and transition to an import-based model to continue serving the market. The company emphasized that despite the closure, it remains committed to South African consumers.
According to Johnny Moloto, who leads Corporate & Regulatory Affairs at BAT Sub-Saharan Africa:
With approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable.
Impact of Illicit Trade
The Heidelberg facility in Gauteng currently operates at just 35% of its total capacity, a direct consequence of severe volume losses driven by the exponential growth of illegal tobacco products. BAT described the decision as “incredibly difficult,” noting that approximately 230 employees and their families will be affected.
The company stated:
These are skilled, dedicated people who have given years of service, who, unfortunately, are impacted by an illicit market that operates outside of the regulatory net.
BAT has initiated a formal consultation process with employees and unions under Section 189A of the Labour Relations Act, starting January 15, 2026. The process is expected to conclude by March 2026, with full closure scheduled for the end of the year.
Illicit Market Surge Post-COVID
South Africa’s illicit cigarette trade gained momentum during the COVID-19 lockdown, when a blanket ban on tobacco sales created opportunities for criminal networks. The South African Revenue Service (SARS) has since warned that international crime syndicates are partnering with local networks to dominate the illegal market.
SARS data reveals that tax collection from tobacco has stagnated despite rising consumption over the past five years, creating a R40 billion gap in tax revenue post-pandemic. Research estimates that 60% to 75% of South Africa’s tobacco market is now illicit, resulting in tax losses of R51 billion to R84 billion.
Moloto cautioned that the problem extends beyond tobacco:
All indicators are that illicit trade is becoming a significant issue in multiple industries, including alcohol, pharmaceuticals, cosmetics, food, clothing, and even toys. If this can happen to a facility that’s been operating for 50 years, it can happen to anyone.
End of an Era for BAT and the Rupert Connection
BAT’s roots in South Africa date back to 1904 with the establishment of the United Tobacco Company. In 1999, BAT merged with Rothmans International, a Rupert family subsidiary, to form BAT South Africa. However, the Rupert family has since fully divested from BAT.
In early 2025, Reinet Investments, one of Johann Rupert’s investment vehicles, sold over 43 million BAT shares to institutional investors, raising approximately R28 billion through an accelerated bookbuild process. Additional share sales in late 2024 generated R3 billion, completing Reinet’s exit from BAT. The investment firm now plans to redeploy these funds into new ventures.
