Africa-Press – Mozambique. British American Tobacco (BAT) has decided to pull the plug on its Mozambican operations in a move that puts pressure on authorities in South Africa to rein in the infiltration of illegal cigarettes, which have cost the group 40% of sales volumes in the past five years.
BAT, which is listed in Johannesburg and London, said on Tuesday it will exit the Mozambican market, without putting forward reasons.
BAT Mozambique has been a leading cigarette manufacturer and distributor in that country, with more than 90% of the market at some point.
“For next year, we also have some exit markets to lap, like Mozambique. And as you know, we have the expectation to leave Cuba as well,” said Tadeu Marroco, CEO, Member of Management Board & Executive Director of British American Tobacco.
BAT spokesperson Daniel Munden could not be drawn to reveal the timing of the exit and the impact it would have on jobs.
“In terms of the rationale, this is part of a broader strategic decision to reduce our footprint and reallocate resources to where we can maximise returns. This is something we’ve been doing for a while and we have reduced our global footprint from circa 170 markets to 140 in recent years,” Munden said.
Munden could also not be drawn to discuss the future of the South Africa business, with the group also looking to exit the Cuba market. “Like any global business, we keep our international footprint under constant review.”
Primarily smuggling route
According to the Africa Organised Crime Index, illicit cigarettes are primarily smuggled between South Africa and Mozambique via the Maputo Corridor and the Beira Corridor.
BAT South Africa has experienced a 40% volume decline since 2020 due to the explosion of availability of illicit cigarettes in the market. This volume loss has resulted in job losses at the company, with it having reduced its overall workforce by more than 30% since 2020 as a result.
The UK-headquartered group’s presence in South Africa goes back to 1904 with the establishment of the United Tobacco Company. In 1999, the group merged with Rothmans International, in which the Rupert family had a stake, giving birth to BAT South Africa.
The Rupert family, led by its patriarch and South Africa’s richest person, Johann Rupert, earlier this year ended its 80 years with the tobacco industry, selling its more than 43-million shares for £1.221bn in cash.
The Rupert dynasty’s association with the tobacco industry dates back to the 1940s, when Anton Rupert founded the Voorbrand Tobacco Company, later known as Rembrandt. By the mid-20th century, Rembrandt had cemented its place as a top player in the industry, listing on the JSE in 1956 and branching out into banking, mining and financial services.
The Tobacco Institute of Southern Africa (Tisa) has warned tax authorities against wasting billions of rand in pushing for the implementation of a new illegal cigarette tracking system
The group has called on authorities to place customs officials at cigarette factories as part of measures to clamp down on the proliferation of illegal cigarettes. (FILE)
The group earlier this year called on South African authorities to place customs officials at cigarette factories as part of measures to clamp down on the proliferation of illegal cigarettes, which it said is costing the fiscus R100m a day in lost revenue, which amounts to R28bn a year.
A study by Ipsos, commissioned and paid for by BAT, found the availability of illegal cigarettes in SA has become endemic, with nearly eight in 10 SA retailers selling illicit cigarettes — triple the number reported three years ago.
The study, which surveyed more than 4,000 outlets countrywide, found about 69% of retailers were selling cigarettes at less than R20 per pack and nearly 80% were selling below the R26.22 minimum collectible tax.
BAT’s 2023 results were negatively affected by an impairment of goodwill regarding South Africa of £291m (R7bn) due to the continued “negative effect of illicit trade”.
The group also called for the “urgent” introduction of a minimum retail price of R37 per pack, saying it should be illegal to sell a box of 20 cigarettes below the threshold, which it said is “economically viable”.
