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.
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“Like any global business, we keep our international footprint under constant review.” 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.
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