Crime has killed a top South African factory

British American Tobacco South Africa (BATSA) will close its only local manufacturing facility and end domestic production by the end of 2026.

The company explained that the devastating impact of the fast‑growing illicit cigarette market caused this decision.

The maker of Dunhill and Peter Stuyvesant cigarettes stated in a press release that the planned closure will result in the loss of approximately 230 jobs.

Located in Heidelberg, Gauteng, the facility currently operates at just 35% of its total capacity due to severe volume losses.

These losses are directly attributable to the exponential growth of the illicit tobacco trade in South Africa.

Johnny Moloto, Head of Corporate and Regulatory Affairs at BAT Sub-Saharan Africa, highlighted the problem with illicit cigarettes.

Moloto said approximately 75% of the South African cigarette market is now estimated to be illicit, and continued local manufacturing has become unviable.

This decision should not come as a surprise. British American Tobacco (BAT) has warned for years that the illicit trade in tobacco products is a serious problem.

It has regularly highlighted that the illicit trade in the tobacco and vaping industries is hurting the sales of legitimate products.

The tobacco giant called for increased regulatory and enforcement initiatives to address the issue.

The SA Tobacco Transformation Alliance (SATTA) revealed that, in 2023, South Africans smoked 37 billion cigarettes.

However, the South African Revenue Service (SARS) only collected tax on 13 billion. This shows the scale of illegal trade.

SATTA spokesperson Francois Van der Merwe said the illicit cigarette market has taken over the industry.

The illicit trade now accounts for 65% to 70% of the total market, the highest percentage globally.

South Africa is losing out on billions in tax revenue

Last year, Finance Minister Enoch Godongwana confirmed that 70% of cigarettes sold in South Africa are illicit, leading to annual tax revenue losses of over R27 billion.

Godongwana explained that due to the illicit nature of the market, it is difficult to quantify the amount lost to cigarette smuggling reliably.

However, he said that over the past five years, South Africa’s illicit cigarette trade has escalated into a significant economic and enforcement challenge.

SARS’ data shows that revenue collection from tobacco and cigarette products declined from R13.4 billion in the 2015/16 fiscal year to R9.4 billion in 2024/25.

This reflects a decline of R4.0 billion (29.6%) and a 10-year compound annual growth rate of -3.8%.

Godongwana said a 44.9% year-over-year contraction in 2020/21 was primarily due to suppressed consumption during the Covid-19 pandemic lockdown.

Many experts believe the ban on cigarettes during the pandemic allowed the illicit market to flourish and cite these bans as a big reason for the market’s size today.

In his Medium-Term Budget Policy Statement (MTBPS) delivered on Wednesday, 12 November 2025, Godongwana outlined South Africa’s growing illicit trade problem.

He said this issue threatens the economy, endangers consumers and robs the fiscus of billions in revenue.

“The growing markets for illicit cigarettes and alcohol pose a serious risk to public health and undermine legitimate businesses,” he said.

“Each year, billions of rands in taxes go uncollected, funds that could have closed our revenue gap and avoided tax increases entirely.”