Questions surround shutdown of important 51-year-old factory in South Africa

Employees at British American Tobacco’s (BAT) Heidelberg facility claimed the company has been unable to adequately support its decision to shut down the factory at the end of the year. 

BAT said the factory was being closed as it was no longer economically viable to operate it in an environment where illicit cigarettes make up 75% of the market. 

The company laid the blame squarely at the government’s feet, which has failed to address the rise in the illicit cigarette trade over the past decade.

However, trade union Solidarity claimed the 233 employees set to be impacted by the closure have not seen an in-depth analysis from the company regarding the reasons for shutting down the plant. 

Over the past week, Solidarity has participated in the first section 189A consultation with BAT, following the company’s announcement in early January that it would close the factory at the end of the year. 

The trade union said disappointingly few questions were answered, leaving the 233 employees with further uncertainty regarding their futures. It said limited progress was made. 

Solidarity organiser for Agriculture, Tertiary and General Sector Dana Grové explained that the purpose of the consultation process is to eliminate uncertainty for the large number of affected employees. 

“BATSA, however, came to the table with minimal information, offering little insight into its decision, leaving employees in a double pinch,” Grové claimed. 

“On the one hand, they are bearing the consequences of the government’s failure to effectively combat the illicit tobacco trade.” 

“On the other hand, they are confronted with a consultation process in which the employer’s reasons for possible retrenchments are presented only at a high, general level, with limited supporting detail to truly understand the rationale behind the decision.”

BAT maintains that the government’s negligence in addressing the illicit tobacco trade is the core reason for the proposed retrenchments.

Grové said Solidarity expects an employer with a multinational footprint such as BAT to present a thorough, in-depth analysis before decisions regarding retrenchments are made.

“If such an analysis has indeed been conducted, it was unfortunately not shared with the consulting parties during the consultation process,” Grové claimed.

“This leaves employees, who are already concerned, grappling with even greater uncertainty,” Grové said, adding that the employees felt the information shared during the first consultation was insufficient to enable meaningful participation or informed proposals.

“A process with such far-reaching consequences requires full and transparent data – not merely high-level presentations.”

Further questions

There is also speculation that the decision to close BAT’s Heidelberg plant has already been made by its corporate head office in London.

Solidarity said this raises serious questions about the purpose and integrity of the retrenchment process at the South African facility. 

The trade union emphasised that section 189A requires consultation on possible retrenchments.

“If the outcome has, in effect, already been predetermined, the purpose of the consultation is undermined, and employees’ rights to meaningful participation are severely weakened,” it said.  

“Two days after the first consultation, BAT issued a statement inviting employees to apply for voluntary severance packages,” Grové explained. 

“Typically, such measures are first thoroughly discussed and considered with the consulting parties before being implemented. This step creates the impression that the consultation process is not being approached in an open and unbiased manner.”

Consequently, Solidarity will formally submit written questions and requests for further information to BAT. 

The trade union said it cannot accept that employees should pay the price for government failure and a consultation process that is not transparent.

According to BAT, its Heidelberg factory is a shell of its former self, operating at 35% of capacity in recent years amid a surge in the illicit cigarette trade. 

At its peak, the plant employed over 1,000 people directly and sustained over 35,000 jobs across the broader tobacco value chain in South Africa. 

The 35-hectare site is BAT’s eighth-largest in the world and, at its peak, produced around 26 billion cigarettes a year. It also produced around 1,400 tonnes of cut-rag tobacco annually.

Across key brands such as Dunhill, Peter Stuyvesant, Rothmans, Pall Mall, and Kent, the factory supplied the majority of legal cigarettes in Southern Africa.

BAT has explained that the facility will not be sold or broken down, and that it will reopen the factory should the market share of illicit cigarettes in South Africa shrink significantly. 

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 said that while the legal market in South Africa and the excise tax revenue it generates for the state have collapsed, total annual cigarette consumption has increased due to illicit trade.

In 2014, local manufacturers declared about 22 billion cigarettes to SARS and generated R12.6 billion in excise tax revenue. 

A decade later, this had fallen to just 8.3 billion cigarettes, and excise tax collected by SARS declined to R8.3 billion despite the rate levied on tobacco products rising.

BAT said the rise in illicit trade is the reason it is closing its Heidelberg plant, noting that the industry has never recovered from the ban placed on legal cigarette sales in 2020.