149-year-old company to shut down only factory of its kind in South Africa 

Mpact is considering shutting down its paper mill in Springs, as it is no longer competitive with imported cartonboard due to global oversupply and the strength of the rand. 

The factory is the only domestic producer of cartonboard and currently employs 377 people in the east of Johannesburg. 

Mpact, founded in Port Elizabeth in 1877, said its board has approved the commencement of a section 189A process pending the mill’s closure. 

It explained that the decision to enter a formal retrenchment process comes as it considers the discontinuation of operations at the Springs mill after a sustained decline in its competitiveness. 

“The mill is the only domestic producer of cartonboard and competes directly with imports from several countries,” Mpact said in a recent SENS announcement. 

Mpact explained that the mill has been negatively impacted by significant overcapacity in the global cartonboard market, which it expects to persist for the foreseeable future.

This has been coupled with a significantly stronger rand, enabling the mill’s largest customers to import cartonboard at prices approximately 20% below its cost of production. 

As a result, the mill’s largest customers have increasingly turned to imports to meet their demand for cartonboard to reduce their operating costs. 

The tipping point for the mill came in January 2026, when its largest customer notified Mpact that it would no longer procure its cartonboard through the mill and turn to imports instead. 

“Despite extensive efforts, Mpact is unable to bridge the cost gap and is unlikely to secure sufficient demand from other customers at sustainable prices,” the company said. 

“Subject to the consideration of alternatives, production at the Springs mill is likely to discontinue once all open orders have been completed.” 

Mpact expects these orders to be completed by the end of March 2026, after which it will close down, and 377 jobs will be lost.

The Springs mill, comprehensively rebuilt in the 1980s, is no small operation, with two machines having a combined capacity of over 130,000 tonnes per annum. 

Perhaps most famously, the mill produces the cartonboard takeaway packaging for KFC in South Africa, as well as boxes for Blitz firelighters and Freshpak rooibos. 

South Africa’s deindustrialisation

The looming closure of Mpact’s Springs mill is the latest example of South Africa’s deindustrialisation, following hot on the heels of the announcement of the closure of British American Tobacco’s (BAT) Heidelberg plant. 

The BAT plant in Heidelberg produced 26 billion cigarettes a year at its peak for Southern Africa, employing over 1,000 staff members. It is estimated that the facility supported 35,000 jobs in South Africa across the broader tobacco value chain. 

In announcing that the facility will be shut down by the end of the year, BAT revealed that it has been operating at 35% of its capacity and with only 230 staff members due to the sharp rise in illicit cigarettes in South Africa.

The plant’s closure is despite repeated calls from industry and business leaders about the disastrous impact of illicit trade in South Africa. 

BAT’s calls for action from the government, among others, appear to have fallen on deaf ears, as little has been done to meaningfully address the rise of the illicit industry in South Africa.

The company estimates that 75% of the market is now supplied by illicit traders, with the trade’s surge in popularity being driven by the unconstitutional ban on legitimate cigarette sales in 2020. 

While the Springs mill and BAT’s Heidelberg plant closed down for unique circumstances, the closures come amidst a general decline in manufacturing in South Africa. 

South Africa’s manufacturing sector has struggled to survive amid an onslaught from cheaper Asian products, an unstable energy supply, and declining service delivery. 

These challenges have been compounded by rising operating costs in South Africa, with electricity and water prices surging in the past decade. 

The decline of South Africa’s manufacturing sector began two decades ago, with its output stagnating from 2004 onwards. 

This two-decade decline cannot be attributed to load-shedding alone and points to a much more fundamental reason – a lack of confidence in the South African economy. 

Declining business confidence in the country since 2006 has resulted in many companies preferring to keep their cash in the bank rather than invest in manufacturing capacity.

Another issue is the lack of policy certainty. South Africa has no clear and permanent macroeconomic plan to provide investors with clarity and the ability to make long-term investments. 

More concerning data can be found in the Reserve Bank’s quarterly reviews, which indicate that only 77% of the country’s manufacturing capacity is used. 

This shows that there is a lack of demand for products in South Africa’s weak economy and poor consumer confidence.