SA BRANDING REGULTIONS MAY SEE BAT CLOSE SA’S ONLY CIGARETTE PLANT

The new plain branding regulations which are set to be implemented in South Africa could see British American Tabacco (BAT) closing its only cigarette plant in South Africa located in Heidelberg, Johannesburg and could result in 1,100 employees losing their jobs.

 

British American Tobacco (BAT) has said it may close SA’s only cigarette plant if plans to ban branded tobacco packaging are implemented.

 

BAT operates its eighth-largest factory globally in Heidelberg, south of Johannesburg. The proposed new rules would threaten the financial viability of the operation, Joe Heshu, BAT’s head of external affairs in Southern Africa, said in an e-mailed response to questions on Monday.

 

Plain packaging threatens the closure of the factory and “poses a threat to the viability of the legal tobacco industry in SA”, 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.

 

SA is cracking down on industries and products viewed as harmful to consumers, such as 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.

 

SA has drafted a bill mandating plain cigarette packaging, which is expected to be made available for public comment soon, Elize Joubert, CEO of the Cancer Association of SA, a lobby group, said on Friday.

 

“You don’t want to build jobs based on people who are sick,” said Department of Health spokesman Joe Maila, 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 such 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 SA 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 R21bn in lost tax revenue since 2010. SA ranks among the top five countries with the highest incidence of cigarette smuggling, according to the institute.

 

-Bloomberg

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