British American Tobacco (BAT) South Africa has started a retrenchment process – a direct result of the illicit cigarette trade, which boomed after cigarette sales were banned during the lockdown.
BAT South Africa has begun a consultative process with staff in line with Section 189 (1) of the Labour Relations Act around restructuring the business.
The company has embarked on the retrenchment process, given further losses in cigarette volumes in South Africa. It is expected that around 200 jobs may be affected by the proposed restructuring.
The job cuts are a direct result of the cigarette volume loss because of the continued impact of the growth in the illicit cigarette trade in South Africa.
The illicit industry boomed following the cigarette sales ban during the national Covid-19 lockdown in 2020.
“The 2020 tobacco sales ban resulted in an explosion of growth for the illicit market. It has continued even after the ban on tobacco sales was lifted,” BAT said.
BAT South Africa permanently employed around 1,800 highly qualified staff across its South African operations.
Since 2020, it has been forced to retrench more than 30% of its workforce.
Over the same period, the company lost around 40% of its cigarette sales as the illicit market accelerated.
BAT South Africa estimates that the illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market.
“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,” it said.
BAT South Africa applauded recent efforts by the South African Revenue Service (SARS) and law enforcement agencies to clamp down on the illicit cigarette market.
However, it called for even stronger action, given that the current approach has not stopped the growth of illicit cigarettes.
“SARS has issued important new policies, but now it is time to audit manufacturer policy compliance,” BAT said.
“To support law enforcement agencies and increase their effectiveness and help consumers differentiate between illicit and legal market offers, a Minimum Retail Price Policy is required.”
The illicit trade robs South Africa of billions of rands in much-needed tax revenue.
The impact is also clearly seen on legitimate businesses, their operations, and the livelihoods of those in their value chains.
“Legitimate businesses cannot operate competitively if the country’s laws are not enforced,” BAT said.