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23 Jan 2023

The Citizen (South Africa)

S. Africa: BAT South Africa plans to retrench employees, blames Covid-19 ban on sale of cigarettes and illicit cigarette trade for the decision

‘British American Tobacco to retrench workers amid ‘ballooning’ illicit tobacco trade in SA’ 16 January 2023

British American Tobacco South Africa (BAT South Africa) says it has started a consultative process with staff in line with Section 189 (1) of the Labour Relations Act around a restructuring of the business. This follows further losses in cigarette volumes in South Africa as a result of the continued impact of the growth in illicit cigarette trade, and the ban on cigarette sales which was implemented during the national Covid-19 lockdown in 2020, said BAT South Africa in a statement. Around 200 company jobs may be affected by the proposed restructure. “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.

…BAT South Africa has also estimated 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.” … A study by the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town last year revealed the national ban on the sale of cigarettes during the hard Covid-19 lockdown in 2020 caused major disruption to the tobacco market. It found that despite the high levels of illicit trade in the local tobacco market, the government’s decision to ban the sale of tobacco products in March 2020, as part of its Covid-19 response, had unintended consequences. Government implemented the measure on the presumption that smokers were more likely to develop severe illnesses from Covid-19, and thus place extra pressure on the health system.

Despite the national sales ban, the study found that most smokers in South Africa did not only continue smoking, but prices increased by over 240%. The illegal cigarette sales also further entrenched an already large illicit market in the country. “Purchases shifted away from the normally dominant brands of the multinational tobacco companies to local/regional producers. “The covariates of price changed substantially during the sales ban, the most pronounced being inter-provincial effects. After the ban, the market shifted back to its pre-ban state, with an overall increase in the price of 3.6%,” the paper stated.