BATSA’s plant closure shows what happens when criminals corner the market

British American Tobacco South Africa (BATSA) has confirmed that it will close its only local cigarette manufacturing facility, citing the scale and persistence of illicit trade as the primary reason. In its public statements, BAT has been clear that illicit  cigarettes now dominate the local market, undermining the commercial viability of legal production. 

This decision has implications beyond the tobacco sector. It illustrates what  happens when illicit trade becomes entrenched: compliant businesses lose  ground, criminal networks expand, and the state’s ability to regulate markets and  protect revenue weakens. 

The closure of BAT’s Heidelberg plant reportedly places about 230 direct jobs at  risk. The broader economic footprint is larger. Estimates suggest the facility  supports close to 4 000 jobs in the Lesedi district and up to 35 000 jobs nationally once suppliers, logistics providers, and small businesses in the value chain are  included. These outcomes reflect the wider economic effects that follow when  illicit supply crowds out formal production. 

Alcohol should be paying close attention.

Market-sizing research conducted by Euromonitor International, commissioned  by the Drinks Federation of South Africa (DF-SA), Understanding the Illicit Alcohol  Market in South Africa, shows that nearly one in five alcoholic drinks consumed in  South Africa is illicit. By volume, illicit alcohol accounted for about 18% of total  consumption in 2024. By value, it represented roughly 7% of the market,  indicating the extent to which lower-priced, unregulated supply has penetrated  consumption channels. 

This trend did not develop suddenly. The illicit alcohol market has been expanding  for several years and accelerated during the Covid-19 alcohol bans. While those  restrictions were implemented for public-health reasons, they disrupted legal  supply chains and allowed illicit distribution networks to scale rapidly. Many of  these networks remain active today. 

The economic implications are measurable. Euromonitor estimates that fiscal  losses from illicit alcohol increased from R11.3 billion in 2020 to R16.5bn in  2024, reflecting a compound annual growth rate of nearly 9.8%. Illicit alcohol sales  by value reached approximately R25bn in 2024.  

Using standard compound growth projections based on Euromonitor’s observed  trends between 2020 and 2024, the trajectory warrants close attention. This is not  a forecast with certainty but a scenario analysis grounded in recent market  behaviour. On this basis, lost tax revenue to the state from illicit alcohol could  rise to approximately R26.3bn over the next five years (a 59.6% increase  from the 2024 baseline), while the market value of illicit alcohol sales could  grow to about R32bn (a 28.2% increase) if current dynamics persist.

This risk must be considered in the context of South Africa's labour market.  According to Statistics South Africa’s Quarterly Labour Force Survey (Q3  2025), the official unemployment rate declined to 31.9%, while youth  unemployment (15–24 years) remained above 62%. Expanded unemployment,  which includes discouraged jobseekers, remained above 42%. While overall  employment showed modest improvement, formal-sector job losses continued in  several industries. This context matters, because illicit trade does not replace  informal activity it displaces formal economic value. 

The legal alcohol value chain remains a significant contributor to South Africa’s  economy and jobs. Independent economic-impact modelling commissioned by  DF-SA estimates that the alcohol beverage industry’s direct contribution to GDP  at market prices in 2022 was R108.4bn and that the sector directly sustained  195 966 jobs. These are direct contributions, arising from the activities of alcohol  manufacturers and their first-round suppliers, before wider multiplier effects. 

When illicit alcohol expands, it does more than reduce legitimate sales. It erodes  the tax base, weakens regulatory oversight and shifts consumption to channels  where product standards and consumer protection are harder to enforce. In  these conditions, public health risks increase, and organised criminal networks  strengthen their positions in local economies. 

Such an outcome is not an argument against regulation, nor a denial of harm. The  alcohol industry understands the relationship between harm and industry  responsibility. However, harm reduction is undermined when illicit markets are  allowed to expand, unchecked. When illicit supply grows, consumption does not disappear; it shifts into unregulated channels where oversight is limited and risks  are amplified. 

South Africa should read BAT’s decision as an early indicator. The tobacco industry  is effectively signalling that the illicit supply has crowded out the legal market.  Alcohol faces a similar risk trajectory if current trends continue. Without sustained  and coordinated enforcement interventions, the result is predictable: fewer  compliant producers, weaker oversight, job losses and a shrinking tax base. 

BAT’s exit illustrates where this path leads. South Africa still has an opportunity to  change course, but only if illicit trade is addressed as the economic and  governance challenge it has become. 

* Scenario modelling by Dr Shamal Ramesar, Head of Research DF-SA  is based on compound growth rates observed in Euromonitor International data.