By Lehlohonolo Lehana.
British American Tobacco South Africa (BATSA) announced that it is entering into consultations with employees as it seeks to shed about 200 jobs at the company.
BAT is the fourth largest company in South Africa when measured by market capitalisation, which is currently sitting at R1.58 trillion.
The company said that it has launched a consultative process with staff, citing a “restructuring of the business.”
It said that it has had to restructure due to further losses in cigarette volumes in South Africa, which it blames on the rise of the illicit market in the country – exacerbated by the 2020 lockdown and ban on cigarette sales in the country.
“BAT South Africa’s cigarette volume loss is almost entirely as a result of the continued impact of the growth in illicit cigarette trade in South Africa, and the unconstitutional ban on cigarette sales implemented during the national Covid-19 lockdown in 2020,” it said.
“The 2020 tobacco sales ban resulted in an explosion of growth for the illicit market. This has continued even after the ban on tobacco sales was lifted.”
The government, spearheaded by cooperative governance minister Nkosazana Dlamini-Zuma, banned cigarette sales from April to August 2020 in a purported bid to save lives and prevent the spread of Covid-19. The decision was not backed by any scientific evidence and was later deemed by the courts as unnecessary and unconstitutional.
Data published in 2021 showed that government ban on the sale of cigarretes was a spectacular failure, with most people not quitting smoking during the period as hoped, while boosting illicit sales and depriving the economy of billions of rands in taxes.
BAT and many other stakeholders in the industry warned that the impact of the ban would be long-lasting. Over the same period, the company said it had lost around 40% of its cigarette sales as the illicit market accelerates.
Based on studies, BAT estimates that the illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market.
The latest retrenchments at BAT add to the 30% reduction of the group’s workforce since 2019. BAT South Africa permanently employed around 1,800 staff across its South African operations in 2019.
“This illegal trade has severely impacted the sustainability of the legal tobacco industry and is a source of funds for criminal organisations in South Africa,” the group said.
The group noted recent efforts by the South African Revenue Service (SARS) and law enforcement agencies to clamp down on the illicit cigarette market, but said more needs to be done.