JOHANNESBURG - British American Tobacco South Africa (BATSA) has confirmed that it will close its only local cigarette manufacturing facility, citing the scale and persistence of illicit
trade as the primary reason.
In its public statements, BAT has been clear that illicit cigarettes now dominate the local market, undermining the commercial viability of legal production.
This decision has implications beyond the tobacco sector.
It illustrates what happens when illicit trade becomes entrenched: Compliant businesses lose
ground, criminal networks expand, and the state’s ability to regulate markets and protect revenue weakens.
The closure of BAT’s Heidelberg plant reportedly places about 230 direct jobs at risk.
The broader economic footprint is larger.
Estimates suggest the facility supports close to 4,000 jobs in the Lesedi district and up to 35,000 jobs nationally once suppliers, logistics providers, and small businesses in the value chain are included.
These outcomes reflect the wider economic effects that follow when illicit supply crowds out formal production.
Alcohol should be paying close attention.
Market-sizing research conducted by Euromonitor International, commissioned by the Drinks Federation of South Africa (DF-SA), Understanding the Illicit Alcohol Market in South Africa, shows that nearly one in five alcoholic drinks consumed in South Africa is illicit.
By volume, illicit alcohol accounted for about 18 percent of total consumption in 2024.
By value, it represented roughly 7 percent of the market, indicating the extent to which lower-priced, unregulated supply has penetrated consumption channels.
This trend did not develop suddenly.
The illicit alcohol market has been expanding for several years and accelerated during the Covid-19 alcohol bans.
While those restrictions were implemented for public-health reasons, they disrupted legal
supply chains and allowed illicit distribution networks to scale rapidly.
Many of these networks remain active today.
The economic implications are measurable.
Euromonitor estimates that fiscal losses from illicit alcohol increased from R11.3 billion in 2020 to R16.5 billion in 2024, reflecting a compound annual growth rate of nearly 9.8 percent.
Illicit alcohol sales by value reached approximately R25 billion in 2024.
Using standard compound growth projections based on Euromonitor’s observed trends between 2020 and 2024, the trajectory warrants close attention.
This is not a forecast with certainty but a scenario analysis grounded in recent market behaviour.
On this basis, lost tax revenue to the state from illicit alcohol could rise to approximately R26.3 billion over the next five years (a 59.6 percent increase from the 2024 baseline), while the market value of illicit alcohol sales could grow to about R32 billion (a 28.2 percent increase) if current dynamics persist.*
This risk must be considered in the context of South Africa's labour market.
According to Statistics South Africa’s Quarterly Labour Force Survey (Q3 2025), the official unemployment rate declined to 31.9 percent, while youth unemployment (15–24 years) remained above 62 percent.
Expanded unemployment, which includes discouraged jobseekers, remained above 42 percent. While overall employment showed modest improvement, formal-sector job losses continued in
several industries.
This context matters, because illicit trade does not replace informal activity it displaces formal economic value.
The legal alcohol value chain remains a significant contributor to South Africa’s economy and jobs.
Independent economic-impact modelling commissioned by DF-SA estimates that the alcohol beverage industry’s direct contribution to GDP at market prices in 2022 was R108.4 billion and that the sector directly sustained 195,966 jobs.
These are direct contributions, arising from the activities of alcohol manufacturers and their first-round suppliers, before wider multiplier effects.
When illicit alcohol expands, it does more than reduce legitimate sales.
It erodes the tax base, weakens regulatory oversight and shifts consumption to channels where product standards and consumer protection are harder to enforce.
In these conditions, public health risks increase, and organised criminal networks strengthen their positions in local economies.
Such an outcome is not an argument against regulation, nor a denial of harm.
The alcohol industry understands the relationship between harm and industry
responsibility.
However, harm reduction is undermined when illicit markets are allowed to expand, unchecked.
When illicit supply grows, consumption does not disappear; it shifts into unregulated channels where oversight is limited and risks are amplified.
South Africa should read BAT’s decision as an early indicator.
The tobacco industry is effectively signalling that the illicit supply has crowded out the legal market.
Alcohol faces a similar risk trajectory if current trends continue.
Without sustained and coordinated enforcement interventions, the result is predictable: fewer
compliant producers, weaker oversight, job losses and a shrinking tax base.
BAT’s exit illustrates where this path leads.
South Africa still has an opportunity to change course, but only if illicit trade is addressed as the economic and governance challenge it has become.
* Scenario modelling by Dr Shamal Ramesar is based on compound growth rates
observed in Euromonitor International data.
- by Dr Shamal Ramesar, Head of Research DF-SA
The information contained in the article posted represents the views and opinions of the author and does not necessarily represent the views or opinions of eNCA.com.