The Tobacco Industry in South Africa 2024

Challenges

Illicit tobacco sales are entrenched in the market. Proposed new tobacco controls legislation will significantly impact tobacco and vape companies.

Introduction

South Africa’s tobacco industry is facing enormous challenges from an illicit cigarette market that entrenched itself during the five-month tobacco sales ban in 2020. Illicit sales of cheaper cigarettes appear to occupy over half of the market and duties are collected on less than half of all cigarettes sold. Low revenue and volumes have resulted in a dramatic drop off in demand for tobacco leaf, causing the exit of many tobacco farmers from the industry. Competition has increased in the e-cigarette market, which is shifting from refillable cartridge and tank devices to cheaper, disposable units. Tobacco products and vape companies are concerned that legislation bringing e-cigarettes into the regulatory and tax net will destroy the industry. Industry players say intensifying tobacco controls in an environment of a large illicit economy will entrench illicit sales rather than discourage tobacco use.

Opportunities

The arrival of new vape products and retailers show there is opportunity in the market. The vape market is growing.

Outlook

The rapid growth of illicit cigarettes and looming stricter tobacco marketing controls mean the outlook for the industry is far from positive. The industry fears that increased excise duties will further entrench the illicit economy. A key factor is whether alleged widespread practices of tax avoidance will be addressed. The vape market is growing strongly, but excise duties introduced in 2023 and proposed regulation is causing concern about profitability.

Report Coverage

This report on the tobacco and tobacco products industry includes information on tobacco farming and processing, cigarette manufacturing and tobacco, e-cigarettes, and tobacco heating products. There is comprehensive information on the state and size of the sector, major manufacturers, distributors and brands, the effects of a large and growing illicit industry, notable players, trade in tobacco leaf and manufactured products, and influencing factors including health and environmental issues and innovation. There are profiles of 28 companies including major international players such as JT International, British American Tobacco and Philip Morris, major players in the local market such as Gold Leaf and Carnilinx, green tobacco leaf processor LTP and vape companies such as Vape Africa, Vaperite and the Vape Studio.

Trends

Closed, disposable vape devices are driving growth and the biggest part of the e-cigarette market. E-liquids became subject to excise duties from mid-2023. Illicit cigarette sales have increased and dominate the market. Increased competition among vape companies is leading to reduced prices. The number of smokers in South Africa appears to be increasing. There is declining demand for, and planting of, tobacco leaf, especially by small contract farmers. Vape companies incorporating CBD flavours into e-liquid.