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The Tobacco Industry
The tobacco manufacturing industry in South Africa, that is estimated to be worth close to R30bn and supported by nearly 8 million adult tobacco users, continues to be seriously affected by the rampant growth in illicit cigarettes. The number of legally-declared cigarettes declined more than 20% between 2013 and 2018, while industry sources say the illegal trade grew to 33% of the total market in 2018. The industry contributed R10.9bn in excise duty to the fiscus in 2017/2018, a decline of nearly R2bn from 2015/16, despite increased taxes.
The rampant illicit trade in cigarettes is blamed for the reduction in cigarette sales volumes of multinational tobacco companies and lower leaf orders to the estimated 176 commercial tobacco farmers and 155 small-scale farmers. At the same time, the e-cigarette market is estimated to have grown to be worth R1bn, but faces regulation in the form of the proposed Control of Tobacco Products and Electronic Delivery Systems Bill. Another key issue facing the industry is government’s plan to further tighten legislation on smoking and the introduction of plain packaging. Health concerns associated with tobacco are expected to continue to affect consumption.
This report covers the tobacco manufacturing industry, including the size and state of the industry and the factors that influence it. These include detailed descriptions of proposed legislation, the illicit tobacco trade and the e-cigarette market. There are profiles of 16 companies including British American Tobacco South Africa which is estimated to hold 74% of the legal market and 22 out of around 30 brands. There are also profiles of Philip Morris, with leading brands Marlboro and Chesterfield, and its subsidiary Leonard Dingler, which manufactures products such as pipe tobacco and snuff. Other profiles include Limpopo Tobacco Processors, the biggest single supplier of tobacco leaves to local buyers.