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BAT may close SA cigarette plant

FILE PHOTO - Cigarettes are seen during manufacturing process in BAT Cigarette Factory in Bayreuth

FILE PHOTO - Cigarettes are seen during manufacturing process in BAT Cigarette Factory in Bayreuth

Published Mar 1, 2017

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Johannesburg - British American Tobacco said it may close

South Africa’s only cigarette plant if plans to ban branded tobacco packaging

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are implemented.

BAT operates its eighth-largest factory globally in Heidelberg, south of

Johannesburg. The proposed new rules would threaten the financial viability of

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the operation, Joe Heshu, BAT’s head of external affairs in Southern

Africa, said in an e-mailed response to questions.

Plain packaging threatens the closure of the factory and “poses a threat to the

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viability of the legal tobacco industry in South Africa,” Heshu said. The move

will make it harder to distinguish the cigarettes from black-market cigarettes

and “the illegal market will benefit from having a cheaper product,” he said.

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South Africa is cracking down on industries and products viewed as harmful to

consumers, including through a planned tax on sugar-sweetened beverages, which

Finance Minister Pravin Gordhan said last month will be implemented later this

year. In his budget speech, Gordhan also announced higher taxes on tobacco and

alcohol products.

South Africa has drafted a bill mandating plain cigarette packaging, which

is expected to be made available for public comment soon, Elize Joubert, the CEO

of the Cancer Association of South Africa, a lobby group, said by phone.

Read also;  Savanna to take on BAT giant

“You don’t want to build jobs based on people who are sick,”

said Joe Maila, a spokesman for the Ministry of Health, who declined to provide

a time frame for the new rules. “The process is in place and we are not

apologetic about it.”

Plain packaging of tobacco products, which has been championed globally by the

World Health Organisation, requires standardised designs on cigarette packs.

Australia was the first to introduce legislation in 2012 and other countries

including France and the UK have followed. More than 44 000 South Africans a

year die from tobacco-related diseases, according to the Cancer Association.

BAT has cut 750 jobs in South Africa in two years as it grapples with an

increase in illegal cigarettes, it said. The Heidelberg plant employs 1 100

people and produces more than 27 billion cigarettes a year for sale locally and

for export, according to the company.

According to the Tobacco Institute of Southern Africa, the supply, distribution

and sale of smuggled or counterfeit tobacco products has cost the government

more than R21 billion since 2010 in lost tax revenue. South Africa ranks among

the top five countries globally with the highest incidence of cigarette

smuggling, according to the institute.

BLOOMBERG

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