Major international company closing South African factory because of crime

British American Tobacco’s South Africa subsidiary will end local production of cigarettes after the spread of illicit trade shrank volumes and made operating unviable.

The maker of Dunhill and Pall Mall cigarettes will close its only factory in the country by year-end and rely on imports instead, according to a statement Thursday.

The facility, located in the province of Gauteng, has been operating since 1975 and is BAT’s eighth largest worldwide. It employs about 230 staff, whose future will be determined through a consultation process.

“With approximately 75% of the South African cigarette market now estimated to be illicit, continued local manufacturing has become unviable,” said Johnny Moloto, head of regulatory affairs at BAT Sub-Saharan Africa.

The growth of illegal cigarettes in South Africa has resulted in severe volume loss at the factory, which now operates at 35% of its total capacity, BAT South Africa said.

Tobacco companies are increasingly speaking out against illicit trade, which hurts their profits, mostly generated from the sale of traditional cigarettes.

About 80% of BAT’s overall revenue came from cigarettes in 2024, compared with 17% from smoke-free products such as Vuse vapes and Velo oral pouches.

South Africa banned the sale of alcohol, tobacco and vaping products for several months in 2020 to contain the Covid pandemic. BAT South Africa sought to overturn the ban at the time, claiming it would boost the country’s already substantial illegal cigarette market.

BAT can trace its roots in South Africa back more than a century, but its presence in the country was turbo-charged when it joined forces with Rothmans International, a tobacco company controlled by the Rupert family, in 1999. 

The Ruperts later expanded into alcohol, health care, luxury goods and financial services through companies including Cie. Financiere Richemont SA and Remgro Ltd.

The family, now led by South Arica’s richest man, Johann Rupert, remained an investor in BAT for a long time, only officially ending its involvement last year when it sold all remaining shares in the company via their Reinet Investments vehicle.