One of the world’s biggest tobacco producers, British American Tobacco has embarked on a retrenchment process.
BusinessTech Africa has gathered that BAT has launched a Section 189 retrenchment process which could impact 200 jobs at the company.
The tobacco maker which boasts cigarette brands such as Camel and Marlboro, is the fourth largest company in South Africa when measured by market capitalisation, as it currently sits at R1.58 trillion.
The group announced it has started a consultative process with staff, quoting a “restructuring of the business” as the reason.
Media reports in the country suggest that BAT said that it has had to restructure due to further losses in cigarette volumes in South Africa, which it blames on the rise of the illicit market in the country – exacerbated by the 2020 Covid-19 lockdown and ban on cigarette sales in the country.
“BAT South Africa’s cigarette volume loss is almost entirely as a result of the continued impact of the growth in illicit cigarette trade in South Africa, and the unconstitutional ban on cigarette sales implemented during the national Covid-19 lockdown in 2020,” it said per BusinessTech.
“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.”
Meanwhile, a campaign to curb the use of cigarettes during the lockdown which was led by co-operative governance minister Nkosazana Dlamini-Zuma, banned cigarette sales from April to August 2020 in a purported bid to save lives and prevent the spread of Covid-19.
However, the decision was later not backed by any scientific evidence and was deemed unnecessary and unconstitutional by the courts.
BAT and many other stakeholders in the tobacco sector warned that the impact of the ban would be long-lasting.
The company published that over the same period, it had lost around 40% of its cigarette sales as the illicit market accelerates.
Based on studies, BAT estimates that the illicit cigarette trade accounts for up to 70% of South Africa’s total cigarette market.
The latest retrenchments at BAT add to the 30% reduction of the group’s workforce since 2019. BAT South Africa permanently employed around 1,800 staff across its South African operations in 2019.
“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 group said.
“SARS has issued important new policies, but now it is time to audit manufacturer policy compliance. To support law enforcement agencies and increase their effectiveness, as well as help consumers differentiate between illicit and legal market offers, a Minimum Retail Price Policy is required.
“The illicit trade robs South Africa of billions of rands in much-needed tax revenue, and the impact of this is now clearly being seen on legitimate businesses, their operations, and, unfortunately, the livelihoods of those in their value chains. Legitimate businesses cannot operate competitively if the country’s laws are not enforced.”
