March 2026: BAT Faces Rising Illicit Trade in African Markets
British American Tobacco (BAT) reported a 12.5% year-on-year revenue decline in Kenya in 2025, as domestic market performance continued to be undermined by illicit trade. Illicit cigarettes now account for 45% of the Kenyan market, up from 37% in 2024, with cross-border smuggling – particularly from Uganda – further pressuring legal sales.
Similarly, BAT’s net revenue in Zambia fell 11% in 2025. The company attributed the decline to a surge in illicit cigarette consumption, which now represents around 30% of the market, up sharply from 12% in 2024. BAT cited steep and unpredictable excise duty increases in 2025 – 13% in January followed by a 66% hike in August, resulting in a cumulative 88% adjustment – as a key driver. Weak consumer purchasing power amid these tax hikes pushed smokers toward lower-priced, untaxed alternatives. Despite higher tax rates, government tax collections from the tobacco sector fell 5%, as reduced legal sales volumes offset the impact of the increases. BAT called for stronger border controls, enhanced market surveillance, stricter penalties for offenders, and improved collaboration among enforcement agencies to dismantle illicit supply networks.
Meanwhile, facing pressure from rising illicit trade, BAT plans to increase its local tobacco sourcing to reduce production costs in Kenya. The company aims to purchase at least 70% of its tobacco leaves domestically in 2026, up from 60% in 2025 and 55% in 2024, saving approximately £2 per kilogram of locally sourced tobacco. Kenya’s tobacco leaf production rose from 10,533 tonnes in 2020 to 12,446 tonnes in 2024, an 18% increase over five years. Nevertheless, Kenya’s output remains modest compared with other East African producers such as Malawi, Tanzania, and Mozambique, each harvesting over 100,000 tonnes annually.
March 2026: Illicit Cigarette Trade Surges in Kenya, Pressuring Legal Market
Recent data indicate a sharp increase in the prevalence of illicit cigarettes in Kenya. Illegal products are estimated to account for 45% of total cigarette consumption in 2025, up from 37% in 2024. The primary driver of this growth is the widening excise tax differential between Kenya and neighboring countries, particularly Uganda. Lower production and retail costs in these markets create a cross-border price gap, incentivizing the inflow of untaxed cigarettes into Kenya. As a result, legally manufactured and fully taxed products are losing competitiveness in the domestic market.
British American Tobacco (BAT) remains the dominant player in Kenya’s legal cigarette sector. However, the expansion of illicit trade is weighing on performance. Revenue at BAT’s Kenyan affiliate declined by around 10% in 2025, despite stable export sales – which account for roughly half of total turnover – and the resumption of nicotine pouch sales.
February 2026: Philip Morris Plans Return to Zimbabwe’s Reviving Tobacco Sector
Philip Morris International (PMI), the world’s largest publicly traded tobacco company, is preparing to re-establish a direct presence in Zimbabwe, marking a significant strategic shift nearly two decades after exiting the market.
PMI closed its Southern Africa office in 1981 amid international sanctions linked to the apartheid regime, ending its direct operations in Zimbabwe and neighboring countries. Following that exit, British American Tobacco SA held exclusive rights to manufacture, distribute and sell PMI’s brands in Zimbabwe and parts of the region under licensing arrangements.
The planned return comes at a time of strong momentum in Zimbabwe’s tobacco industry. The planted area for the 2025/2026 marketing season has expanded by 42%, reflecting renewed farmer participation and improved financing conditions. This growth supports the government’s Tobacco Value Chain Transformation Plan, which aims to expand the industry into a US$5 billion sector by 2025 by increasing local processing and manufacturing capacity rather than relying predominantly on raw leaf exports.
Zimbabwe remains Africa’s largest tobacco producer, but historically around 90% of its crop has been exported in unprocessed form. PMI’s re-entry could signal greater multinational interest in downstream investment, including manufacturing, product development and supply chain integration, potentially accelerating the country’s transition toward higher value-added production.
January 2026: British American Tobacco will shut down the Heidelberg, South Africa plant
British American Tobacco (BAT) will close its only manufacturing plant in South Africa due to the proliferation of illegal cigarettes. As a result, BAT will stop manufacturing cigarettes in South Africa for the first time in more than 70 years, resorting to imports to serve the local market. Illegeal cigarettes reportedly account for 75% of the South African market and BAT’s Heidelberg manufacturing facility is operating at just 35% of total capacity, rendering the operations unsustainable.
BAT confirmed that it is not exiting the South African market and will continue to supply the market through importation. It will also retain its secondary listing on the JSE. The BAT Heidelberg factory is the Group’s eighth-largest factory and accounts for a significant total production for both domestic consumption and export into the wider Southern African area region. It employs at least 1,500 people. The decision to shut the plant comes shortly after the Company decided to cease its Mozambican operations. BAT South Africa has experienced a 40% volume decline since 2020 due to the explosion of availability of illicit cigarettes in the market and, consequently, reduced its overall workforce by more than 30%.
December 2025: British American Tobacco will exit the Mozambican market
British American Tobacco (BAT) announced the decision to exit Mozambique. As part of the Quality Growth strategy (i.e. reallocation of resources to markets/segments where returns can be maximised), BAT has been reducing its global footprint in recent years – in this period, BAT exited several West Africa markets, including Mali. BAT now operates in 140 markets as opposed to c.170 markets a few years ago.
BAT was the leading cigarette manufacturer and distributor in Mozambique with more than 90% of the market at some point. The Mozambique exit is speculated to be associated with neighbouring, South Africa – which can be seen as both a threat to exit South Africa at a later stage and a preventive action to cut the flow of contraband cigarettes from Mozambique to South Africa.
