British American Tobacco South Africa has announced it would be scaling down its direct retail product distribution and delivery operations due to the heightened illicit trade, reports DFA.

Johnny Moloto, the area head of Corporate and Regulatory Affairs for BAT Sub-Saharan Africa, said the company estimated that 70 per cent of cigarettes consumed in South Africa stemmed from illegal trade and that the legal market only had a 30 per cent market share.
“For a long time, BATSA has been reluctant to scale down distribution operations in view of the impact on our integrated supply chain. However, the business must take urgent action to enhance efficiencies, as we try to mitigate the impact of illicit trade and an uncertain regulatory environment,” he said.
According to DFA, in 2019, BATSA permanently employed about 1,800 staff but since 2020, it has to cut its workforce by more than 30 per cent because it has lost around 40 per cent of its cigarette sales in the same period, mainly because of the growth of the illicit market.
Dr Nicole Vellios based at UCT’s Research Unit on the Economics of Excisable Products (REEP), said in 2022 the government lost R17.6bn in excise and VAT revenue due to illegal cigarette sales. According to Vellios, the illegal market started to grow in 2010 with the illicit cigarette market accounting for 5 per cent of the market in 2009 up to 60 per cent by 2021 when it peaked, and a slight decrease to 58 per cent in 2022.
South Africa has also not ratified the Protocol to Eliminate Illicit Trade on Tobacco Products, reports DFA.
Professor Corné van Walbeek, also from UCT, said the protocol aims to eliminate illicit trade in tobacco products. By committing to the protocol, countries vow to implement things like licensing requirements for all producers in the tobacco supply chain and a track-and-trace system to monitor the flow of tobacco products.