The closure places about 230 jobs in Lesedi Local Municipality at risk and is expected to affect suppliers, contractors, and the wider South African economy, highlighting enforcement gaps that impact legitimate tobacco and cigarette producers.
“Legal cigarette volumes have collapsed over the past decade, while the volume of illicit cigarettes available on the market has surged,” Johnny Moloto, area head of corporate and regulatory affairs for BAT sub-Saharan Africa, told Farmer’s Weekly.
“[Legal] volumes declared by local manufacturers to [the South African Revenue Service] fell from roughly 22 billion cigarettes in 2014 to around eight billion in 2024, as per National Treasury figures,” he added.
READ SA loses R24bn in revenue to illicit tobacco sales
He said illicit cigarettes now hold an estimated three-quarters of the market, with most sold below the minimum collectable tax (MCT) threshold of R26,22 per pack of 20 cigarettes.
This estimate is based on what Moloto described as a ‘robust methodology’, drawing on third-party market research and data from National Treasury and the South African Revenue Service (SARS).
He explained that research done by Ipsos in 2025 supports this assessment, showing that cigarettes sold below the MCT threshold were found in 76,6% of stores nationwide.
“BATSA estimates that the South African fiscus loses around R28 billion in excise tax every year to the uncontrolled sale of illicit cigarettes.”
Factory operating well below capacity
The Heidelberg factory, which has been in operation since 1975, is currently running at just 35% of its total capacity.
“This is directly attributable to the exponential growth of the illicit tobacco trade in South Africa, which makes continued local manufacturing unviable for BATSA,” Moloto said.
“The majority of these illicit products are manufactured domestically in South Africa rather than smuggled from neighbouring countries.”
He also linked the decline of the legal market to policy shocks, particularly the 2020 tobacco sales ban.
“According to Oxford Economics, excise revenue crashed from R13,97 billion in 2019 to R9 billion following the ban. Legal sales never recovered from this policy decision, which the [Western Cape] High Court declared unconstitutional,” Moloto explained.
While the legal market and excise revenue collapsed, cigarette consumption increased due to illicit trade.
“An additional 1,6 billion cigarettes were smoked in 2021, the year after the sales ban, compared with 2019. In 2014, legal manufacturers supplied about 70% of the total cigarette market,” he said.
BATSA has consistently called for stronger enforcement against illicit manufacturing, importation, and distribution.
“We’ve provided data and have engaged with multiple departments on this topic over more than a decade,” Moloto explained.
While some progress has been made, he argued that the overall response has fallen short.
“This problem needs a whole-of-government solution. When illicit trade grows from about 35% to more than 75% in a decade, more needs to be done.”
Impact on employment and economy
The closure of the Heidelberg facility is expected to have far-reaching consequences. An Oxford Economics Africa report from November 2023 showed that BATSA’s Heidelberg factory supported more than 35 200 jobs across the tobacco value chain in 2022.
“These numbers have continued to decline over time as a result of the growing illicit trade, and this will be exacerbated by the closure of the factory,” Moloto said.
He added that BATSA remains committed to buying locally grown tobacco leaf, which will “help to cushion the impact on South African farmers, in particular”.
For the approximately 230 workers at the Heidelberg facility, the decision comes amid already high unemployment.
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“The devastating reality of this decision is that unemployment in Lesedi is extremely high at 43%. Our workers are skilled, dedicated people who’ve done their jobs well. They don’t deserve this,” he said.
He added that while BATSA will support affected employees where possible, the impact will be severe.
“Beyond our direct employees, agricultural suppliers, logistics providers, contractors, and the broader community depend on this facility,” he said.
Moloto said that while BATSA would shift to an import-based supply model, he acknowledged that illicit trade would remain a serious challenge.
“If law enforcement is able to invert these numbers again and maintain that momentum over a sustained period, BATSA believes that the conditions for restarting local production could be right,” Moloto said.
He warned that the closure sent a broader signal to other manufacturers operating in South Africa.
“Illicit trade doesn’t just hurt companies; it destroys jobs and communities. If this can happen to a facility that’s been operating for 50 years, it can happen to anyone,” he said.
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