An employee performs a quality control check on cigarettes at the British American Tobacco factory in Bayreuth, Germany. (Photo: Thomas Langer / Bloomberg via Getty Images) 
British American Tobacco South Africa (Batsa) announced on Thursday, 15 January that it would lose its Heidelberg manufacturing facility in Gauteng and cease local production of factory-manufactured cigarettes by the end of 2026.
The decision brings the curtain down on a facility that has been operating in the Heidelberg community since 1975. Batsa said the closure threatens about 230 jobs in the Lesedi Municipality as it transitions to an import-based supply chain.
The company confirmed in a statement that a formal consultation process with workers and unions began on Thursday and is expected to reach a conclusion by the end of March 2026. While the decision to close the factory is final, the company said individual employment outcomes would be determined through that process.
A market of illicit trade
Batsa has laid responsibility for the closure at the door of the illicit cigarette trade, which it estimates now accounts for around 75% of the South African market. As a result, the Heidelberg plant has been operating at just 35% of its production capacity.
“This is an incredibly difficult day for Batsa and for the approximately 230 employees and families who may be affected,” said Johnny Moloto, head of Corporate and Regulatory Affairs at BAT Sub-Saharan Africa, in the company’s statement.
“These are skilled, dedicated people who have given years of service, who unfortunately are affected by an illicit market that operates outside of the regulatory net.”
Independent data broadly support the company’s assessment of the scale of the problem. The Transnational Alliance to Combat Illicit Trade (Tracit) reported in its 2025 review that the government lost an estimated R18-billion in revenue in 2022 alone due to illicit trade in tobacco. Over the two decades from 2002 to 2022, cumulative excise and VAT losses were calculated at R119-billion.
Read more: After the Bell: Stubbing out tobacco — one tax at a time
Batsa said that it was not exiting South Africa, but would continue supplying adult consumers through imported products. It would reconsider local manufacturing if there were a “substantial and sustained” improvement in efforts to curb illicit trade.
The legacy of lockdown
While illicit trade in cigarettes predates Covid-19, Batsa has pointed to the 2020 tobacco sales ban as a turning point. The ban, later declared unconstitutional, coincided with a rapid expansion of illegal supply networks from which the legal market never recovered.
Since 2020, Batsa said it had retrenched more than 30% of its workforce, according to Reuters. In 2023, the company announced a restructuring process that placed a further 200 jobs at risk, noting that its permanent workforce had already fallen from about 1,800 employees in 2019.
Apart from inflation, excise tax increases have compounded the problem, according to Batsa, by widening the price gap between legal and illegal cigarettes. Tracit’s research shows illicit packs selling far below the Minimum Collectible Tax threshold, in some cases for as little as R5 to R10.
Enforcement actions have struggled to dent the trade. In July 2025, the South African Tobacco Transformation Alliance noted that despite being under curatorship and having R3-billion in assets frozen by SARS, Gold Leaf Tobacco Company products remained widely available.
Read more: Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle
How this affects you
🚬 When 75% of a market goes illicit, the government loses billions in tax revenue – money meant for schools, clinics and infrastructure.
🚬The loss of 230 factory jobs creates a ripple effect, threatening the livelihoods of local shopkeepers, transport operators and small-scale suppliers in the Lesedi area.
🚬 When a global giant like Batsa stops local production, it sends a signal that South Africa is a difficult place to manufacture, potentially deterring other companies from investing here.
🚬 The dominance of tobacco mafias suggests that criminal syndicates can operate with impunity, often leading to a rise in crime in other sectors, such as food, alcohol and clothing.
Enforcement gaps
Batsa’s announcement comes as the government has begun to acknowledge the scale of enforcement failures. In October 2025, the parliamentary health committee heard presentations from SARS and the South African Police Service (SAPS), detailing how organised criminal syndicates dominated illicit tobacco flows and how low penalties failed to deter offenders.
The committee expressed concern about corruption within licensing bodies for clearing and forwarding agents, as well as chronic shortages of staff and resources inside SARS and SAPS.
According to Tracit, South Africa’s Border Management Authority faces a budget shortfall of R4.3-billion and thousands of vacancies, leaving borders vulnerable to smuggling.
Read more: Home Affairs minister launches new body to combat corruption at South Africa’s borders
Batsa has proposed countermeasures such as a legislated Minimum Retail Price of R37 per pack and the reinstatement of customs officials at manufacturing sites to monitor production volumes.
“Batsa has raised these concerns for years, providing data and proposing solutions. While some in government have genuinely tried to help, the overall response hasn’t been enough to protect legitimate businesses and the jobs they create. With the illicit industry’s current size and scale, only a coordinated, whole-of-government response can make a real impact,” Moloto said.
Global growth vs local decline
The closure in Heidelberg contrasts with the global performance of British American Tobacco. In December 2025, the group was on track for around 2% growth in sales and profit for the year.
New-generation products such as nicotine pouches and vapes have become their growth drivers, underpinning plans for a R29-billion share buy-back in 2026.
Read more: Deals, delistings and lifelines reshape sugar, nicotine, chrome and iron
Competitor Philip Morris International (PMI) is also pursuing a transition from combustible cigarettes towards so-called smoke-free products. In South Africa, PMI recently appointed Buena Barnes as its first female general manager to steer that transition. Barnes previously spent more than six years at BAT in senior finance roles.
For workers in Heidelberg, however, global growth offers little consolation. Batsa said the closure will also affect suppliers, logistics firms and contractors in the Lesedi area.
A warning for the industrial base
Batsa has described the shutdown as a cautionary tale for all legitimate manufacturers operating in South Africa.
“Illicit trade doesn’t just hurt companies – it destroys jobs and communities,” Moloto said, warning that similar patterns are emerging in sectors such as alcohol, pharmaceuticals and clothing.
In a letter to its external distributors, Batsa said it had “implemented robust measures to ensure there is no disruption to your product availability” and that it is “exercising every duty of care to ensure a smooth changeover”.
What disappears with the Heidelberg closure is faith that the state can effectively police illicit markets and, for South Africa’s shrinking manufacturing base, that may be the most damaging loss of all. DM