Cape Town - A further 200 jobs British American Tobacco South Africa (BAT) may be lost due to the growing illicit tobacco trade and the impact of the ban on cigarette sales implemented during the Covid-19 lockdown in 2020, judged to be unconstitutional by the high court.
South Africa’s largest tobacco manufacturer said in a statement yesterday that it has begun a consultative process with staff in line with Section 189 (1) of the Labour Relations Act around a restructuring of the business.
Since 2020, the company had already retrenched more than 30% of its workforce, equating to around 500 positions.
BAT said that while it applauded recent efforts by the SA Revenue Service and law enforcement agencies to clamp down on the illicit cigarette market, it was calling for even stronger action, given that the current approach had not stopped the growth of illicit cigarettes.
A BAT spokesperson said: “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 said that in 2019, it permanently employed about 1 800 highly qualified staff across its South African operations and that since 2020 it had been forced to retrench more than 30% of its workforce.
“Over the same period, the company has lost around 40% of its cigarette sales as the illicit market accelerates.” Based on independent studies, BAT 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,” the spokesperson said.
However, a study published in September last year by a UCT PhD candidate, Nicole Vellios, said BAT’s 70% loss estimate was wrong.
The study was published in an article in Econ3x3, the online economic policy publication housed at UCT’s Southern Africa Labour and Development Research Unit (Saldru).
The study said that to test the veracity of BAT’s claim, Vellios updated previous research that provided estimates of illicit trade from 2002−17 to include estimates for 2018−21.
Using gap analysis, she estimated that between 2002 and 2009 the illicit cigarette market accounted for about 5% of the total market.
"Since 2009, the illicit cigarette market has increased sharply, and by 2017 illicit trade accounted for 30%−35% of the total market. By 2020, illicit trade was around 54%.”
Vellios said that the illicit market was greatly stimulated by the 20-week sales ban in 2020, when no cigarettes were sold legally and when the government received no excise revenue for cigarettes and that in 2021, the illicit market remained at about 54%.
“BAT’s estimate is wrong for two reasons: the estimate is for Gauteng (one of the nine provinces in their sample), not South Africa as a whole, and, secondly, its estimate relates to the proportion of stores it claims sold illicit cigarettes, as opposed to the overall proportion of illicit cigarettes consumed," said Vellios.
In October last year, the government announced it was going ahead with a host of new laws that would crack down on cigarette smokers and vapers who would face a proposed ban on advertising and a 100% ban of smoking in public areas.
The Tobacco Products and Electronic Delivery Systems Control Bill of 2018 was given the green light for submission to Parliament in September 2022.
mwangi.githahu@inl.co.za