British American Tobacco South Africa (BAT South Africa) says it has commenced a process of consultation with staff in accordance with Section 189 (1) of the Labor Relations Act regarding the restructuring of its business.
This follows further losses in the volume of cigarettes in South Africa as a result of the continued impact of
the growth of the illegal cigarette trade, and the ban on cigarette sales implemented during the national Covid-19 lockdown in 2020, BAT South Africa said in a statement.
Around 200 companies could be affected by the proposed restructuring.
“The 2020 ban on tobacco sales led to an explosion of growth for the illegal market. This continued even after the ban on tobacco sales was lifted.
Also read: ‘NDZ bans tobacco sales knowing it will boost illegal trade’
“In 2019, BAT South Africa permanently employed around 1,800 qualified staff across the South.
African operations. Starting in 2020, we are forced to lay off more than 30% of our workforce.
At the same time, the company has lost about 40% of its cigarette sales to the illegal market
accelerates, said the company.
BAT South Africa has also estimated that the illegal tobacco trade accounts for 70% of the total tobacco market in South Africa.
“This illegal trade undermines the sustainability of the legal tobacco industry and is a source of funding for criminal organizations in South Africa.”
The ban on the sale of cigarettes affects the cigarette market
A study by the Research Unit on the Economics of Excisable Products (REEP) at the University of Cape Town last year showed a national ban on the sale of cigarettes during the Covid-19 lockdown in 2020 caused a major disruption in the cigarette market.
It found that although the level of illegal trade in the local tobacco market is high, the government’s decision to ban the sale of tobacco products in March 2020, as part of the Covid-19 response, had unintended consequences.
The government implemented the measure on the assumption that smokers are more likely to develop serious illnesses from Covid-19, and thus put extra pressure on the health system.
240% price increase
Despite the national sales ban, the study found that most smokers in South Africa not only continued to smoke, but prices increased by more than 240%.
The sale of illegal cigarettes also adds to the country’s already large illegal market.
“Tukusan is moving from a brand that is usually dominant from a multinational tobacco company to a local/regional producer.
“Covariance prices changed substantially during the sales ban, the most obvious being the inter-provincial effect. After the ban, the market returned to the pre-ban state, with an overall increase in prices of 3.6%,” the newspaper said.
READ MORE: SA ban on cigarette sales causes major disruption in tobacco market – study
Additional reporting by Thapelo Lekabe