The contribution of British American Tobacco South Africa

The contribution of British American Tobacco South Africa to the South African economyA study conducted by Quantec Research, 2016

2 | The contribution of British American Tobacco South Africa to the South African Economy

Contents:

1. Introduction 04

2. National impact 06

3. Key findings 08

3.1. Employment impact 09

3.2. Contribution to labour income 14

3.3. Contribution to government tax revenue 16

3.4. Contribution to intermediate output 18

3.5. Capital requirement 21

3.6. Impact on the balance of payments 21

3.7. Impact on gross domestic product 22

4. Impact on the provinces 24

4.1. Gauteng 25

4.2. Western Cape 26

4.3. Kwazulu-Natal 27

4.4. Eastern Cape, Free State and Northern Cape 28

4.5. Limpopo, Mpumalanga and North West 29

5. Making a difference in local communities 30

5.1. Empowerment 31

5.2. Civic life 32

5.3. Sustainable agriculture 32

6. Conclusion 34

7. Methodology 36

8. Tables and figures 38

Contents


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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


1. Introduction 04


3. Key findings 08









4.1. Gauteng 25



4.4. Eastern Cape, Free State and Northern Cape Eastern Cape, Free State and Northern Cape 28



5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


GDP


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



1. Introduction

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


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British American Tobacco (BAT) South Africa is the largest manufacturer and distributor of tobacco products in South Africa. Opera-tional since 1904, its portfolio includes the country’s top six cigarette brands, namely Peter Stuyvesant, Dunhill, Rothmans, Benson & Hedges, Pall Mall and Kent.

Through its nation-wide operations, BAT South Africa provides employment and income to thousands of house-holds across South Africa and makes a vital contribution to government tax revenues. Its factory in Heidelberg, Gauteng, is the eighth largest BAT factory in the world and the biggest employer in the Lesedi municipality. With a production capacity of 27 billion sticks per annum, it produces cigarettes and cut-rag tobacco for both the local market and export.

However, the economic impact of BAT South Africa consti-tutes only a small fraction of its total contribution to the South African economy. In the process of manufacturing, packaging, exporting and distributing cigarettes and cutrag tobacco, the company stimulates economic activity throughout the entire tobacco value chain, encompassing a wide range of producers and suppliers, such as tobacco farmers (upstream linkages), as well as retailers, distributors and the hospitality industry (downstream linkages). These upstream and downstream activities generate additional income and tax revenue which, in turn, is spent in the economy, thereby inducing further economic benefits.

Purpose of this report

The purpose of this study is to provide a credible assessment of the direct contribution of BAT South Africa to the South African economy, as well as its indirect and induced impacts – also referred to as the multiplier effects.1

The company’s economic impact is measured in terms of value added (i.e. gross domestic product or GDP), sales, inter-mediate output (or production), employment (by skills level and population group), labour remuneration, capital stock and tax revenue in South Africa. No analysis was done on the health implications of smoking.

The study was commissioned by BAT South Africa and conducted by Quantec Research. BAT South Africa provided the data and other information on the direct economic impact of BAT South Africa, as well as estimates of total cigarette sales volumes and value. This was supplemented by independent analyses undertaken by Quantec Research. Quantec Research modified and utilised its Social Accounting Matrix (SAM) for the South African economy to model the multiplier effects of BAT South Africa.

Unless stated otherwise, all figures are dated 2015.

British American Tobacco South Africa is the largest manufacturer and distributor of tobacco products in South Africa

A study conducted by Quantec Research for British American Tobacco South Africa, October 2016.

1. For a detailed explanation of the direct and multiplier effects, see Section 7.


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



27 BN

CIGARETTES PRODUCED EACH YEAR

DISTRIBUTED TO SA & 22 COUNTRIES

75% share of legal cigarette market

2,187PEOPLEEMPLOYED

1.46% R18.75 BILLION

Businessservices

Retail &wholesale

Agriculture Transport CommunicationFROMLOCAL

SUPPLIERS

87,233OF NATIONAL TREASURY’S TOTAL REVENUE

HIGH SCHOOL TEACHERS

Economy-wideimpact generated

IN TAX REVENUES

R34.26 BILLION

These suppliers bought

R6.06 BILLION

(including all the economic multiplier effects)

TOTAL PRODUCTION STIMULUS IN SOUTH AFRICA

worth of goods & services

R14.49 BILLION in TAX REVENUES

OPERATIONS GENERATED

ENOUGH TO PAY FOR:

2. National impact

INTERMEDIATE OUTPUT

TAX CONTRIBUTION

Purchased goods & services worth

R11.95BILLIONfrom local suppliers (including BATSA’s value added)

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


| 7

CONTRIBUTING R5.84 BILLION IN WAGESacross the country

CAPITALINVESTED stimulates

R9.4 MILLION OF THE COUNTRY’S GDP

37vs. national average of 16

creates

JOBS

SECTORS THAT

BENEFITED THE MOST Business

services

Retail &wholesale

R10 MN

IN TOTAL SUPPORTING

72,279 JOBS OF NATIONAL

EMPLOYMENT

32additional jobs across the economy

GENERATES

Each BATSA job

IN SOUTH AFRICA

0.64%

R18.38 BILLIONTO SA’S GDPGDP

ECONOMY-WIDE IMPACT CONTRIBUTES

LABOUR & GDP TO CAPITAL RATIOSGDP CONTRIBUTION

Contributed 0.52% to South Africa’s GDP

EMPLOYMENT

For every R1 of

SALES REVENUE

R1.54IS ADDED to the country’s GDP

OF JOBS ARESKILLED & SEMI-SKILLED

OF ECONOMY-WIDE JOBS HELD BY PREVIOUSLY

DISADVANTAGED INDIVIDUALS

40% 86%


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



3. Key findings

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


2. As published in the Quarterly employment statistics (QES)

Source: Statistics South Africa & BAT South Africa

3,000

2,500

2,000

1,500

1,000

500

0

Num

ber

Num

ber

(‘0

00)

2011 2012 2013 2014 2015

1,200

1,190

1,180

1,170

1,160

1,150

1,140

1,130

BAT South Africa (left) Manufacturing (right)

Figure 1: BAT South Africa’s employment vs. total manufacturing industry employment

Recognised as a Top Employer for the last eight years

Employs 2,187 people nationally across South Africa

This section outlines the economic contribution and ripple effects of BAT South Africa’s value chain on the South African economy. The direct, indirect and induced impacts of the company’s operations on intermediate output, capital requirement, employment, labour income, government tax revenue and value added (GDP) are examined.

3.1 Employment impact

Direct company impact

BAT South Africa makes a vital contribution to the livelihoods of over 72,200 South Africans involved in the tobacco value chain. The company has been recognised and accredited amongst the “Top Employers” in South Africa for the last eight years, attesting to the exceptional working environment that it maintains for its employees.

Workforce size

BAT South Africa employed a total of 2,187 people across the country in 2015.

Figure 1 shows that between 2011 and 2013 the company’s workforce increased by 25.5% (or 551 additional employees), but has since declined by 19.4% - a loss of 528 jobs. This was mainly due growing commercial pressures resulting from the growth in the size of the illegal tobacco market. To put this in perspective, according to Statistics South Africa2, employment in the broader manufacturing sector between 2001 and 2015 declined by only 3.09%, of which a 2.26% decline occurred after 2013.

Population group profile

As Table 1 shows, two out of three employees working at BAT South Africa are from previously disadvantaged population groups, testimony to the company’s commitment to trans-formation. At the skilled and semi-skilled levels, workers from previously disadvantaged backgrounds account for 60.7% of the company’s employees.


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Skills development

BAT South Africa is particularly proud of its commitment to skills development. During 2015, the company invested R21.14 million on the training and development of its staff, equating to 2.5% of its payroll. This translated into 3,241 training interventions. BAT South Africa has invested close to R245 million on the training and development of its employees over the last five years.

Invested R245 million in skills development since 2010

Table 1: Employment by race and skill (Number of people)

Black Coloured Asian/white White Total Distribution

by skill (5)PDI % of total

Black%of total

Skilled 89 58 24 237 408 18.7 41.9 21.8

Semi-skilled 939 183 36 449 1,607 73.5 72.1 58.4

Low-skilled 130 12 0 30 172 7.9 82.6 75.6

Total 1,158 253 60 716 2,187 100.0 67.3 52.9

Distribution by race (%) 52.9 11.6 2.7 32.7 100.0Source: BAT South Africa

3. Key findings

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

R m

illio

n

Source: Quantec Research

2,187

31,458

9,461

43,106

29,173

72,279

BAT + First Round + ROI = Direct & Indirect +Induced = RSA

Figure 2: Impact on total employment in South Africa

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Wholesale & retail trade19,145(60.9%)

Manufacturing excl. BAT South Africa1,930(6.1%)

Business services3,491(11.1%)

Other goods & services1,147(3.6%)

Finance & insurance2,403(7.6%)

Transport &storage1,625(5.2%)

Agriculture1,717(5.5%)


Figure 3: First-round impact on employment, by industry (Number of people) 67% of employees

from previously disadvantaged backgrounds

Wholesale & retail trade25,787(35.7%)Manufacturing

excl. BAT South Africa9.150(12.7%)

Business services10,011(13.9%) Other goods

& services12,187(16.9%)


Transport & storage3,568(4.9%)

Agriculture2,774(3.8%)


Figure 4 : Economy-wide impact on employment, by industry (Number of people)

Direct, indirect & induced employment impacts

BAT South Africa can be considered to utilise a relatively capital intensive production process. However, once the company’s suppliers are added to the equation, a very different picture emerges. Figure 2 shows the first-round impact on employment for the main supplying sectors.When all sectors are included, BAT South Africa’s first-round employment impact totalled to 31,458 jobs, including 23,843 formal jobs and an additional 7,616 informal jobs (see Figure 3).

The indirect and induced impacts supported another 38,634 jobs, taking the total number of jobs supported by BAT South Africa’s operations to 72,279 full-time equivalent jobs (see Figure 2). This represents 0.64% of all employment in South Africa. Formal employment constituted 78.4% (56,685 full-time equivalent jobs) of the economy-wide impact.

Figure 4 outlines which sectors of the economy benefited the most in terms of employment from BAT South Africa’s operations during 2015.

Supports 72,279 jobs - or 0.64% of all employment in South Africa


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Employment multipliers

Considering only formal employment, BAT South Africa’s economy-wide employment multiplier was estimated at 25.92. Thus, for each person directly employed by the company, almost 25 additional upstream and downstream formal sector jobs were sustained in the national economy.

When taking the informal sector into account, the total employment multiplier increased to 33.05. That is, after accounting for each person employed directly by the company, 32 additional formal and informal jobs were sustained in the national economy

Skills development

Figure 5 shows the skills composition of BAT South Africa’s economy-wide employment impact. Skilled positions comprised only a small portion of the company’s total employment mix (8.6%). The majority of job opportunities sustained by the company’s value chain were low-skilled positions (39.3%). BAT South Africa’s noteworthy contri-bution to the employment of low-skilled workers should be viewed positively given the high unemployment rate among low-skilled workers in South Africa.

Figure 6 shows the population group composition of BAT South Africa’s economy-wide employment impact. The vast majority (86.3%) of the 72,279 jobs sustained by the company’s operations are filled by previously disadvan-taged employees, with black employees comprising 72.1% of the positions.

The majority of jobs sustained by the company’s value chain are low-skilled

Previously disadvantaged individuals occupy over 86% of jobs sustained across the economy


Informal15,594(21.6%)

Skilled6,226(8.6%)

Low-skilled28,388(39.3%)

Semi-skilled22,071(30.5%)

Figure 5: Economy-wide impact on total employment, by skill (Number of people)


Figure 6: Economy-wide impact on total employment, by race (Number of people)

Coloured7,520

(10.4%)

Asian2,682

(3.7%)

White9,940

(13.8%)

Black52,136(72.1%)

3. Key findings

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


In-depth: Wholesale and retail trade

BAT South Africa is not directly involved in selling its products to consumers, but instead relies on over 179,000 outlets across the country to do so. The impli-cation of this is a significant impact on employment in the wholesale and retail trade sector.

This includes informal retailers such as spaza shops (which constitute the largest portion of stores, numbering 69,453), independent convenience stores and taverns, as well as formal channels such as grocery and wine outlets. Table 2 provides a breakdown of the outlets by distribution channel.With this in mind, a large portion of BAT South Africa’s first-round employment impact is in this labour-intensive sector, accounting for 19,145 jobs – or 60.9% of first-round employment. Many of these businesses are small, independent, black-owned, and derive a significant portion of their revenue from the sale of tobacco products. The multiplier effects add another 6,642 jobs to employment in this sector, thereby increasing the company’s impact to 25,787 jobs economy-wide.

The number of jobs in the wholesale and retail trade sector that are sustained by the company’s operations has declined markedly since 2013, where the first-round contribution was estimated at 24,605 jobs.

This reduction has been driven partly by growing economic pressure on the retail and wholesale environment, but in the most part by increased commercial pressure on BAT South Africa caused by higher illicit trade, which has reduced the volume of cigarettes it sells. This has forced the company to reduce its labour force by almost 20%, which has conse-quently had an adverse knock-on effect on the number of jobs supported economy-wide in this sector.

In-depth: Agricultural sector

BAT South Africa buys over 90% of all tobacco leaf grown in South Africa. The bulk of this leaf is sourced from Mpumalanga, Limpopo and North West provinces.

The impact on the agriculture sector3 (of which tobacco farming is the largest component when considering the first-round suppliers) amounts to 1,717 full-time equivalent tobacco farming jobs4.

It is important to note that the agricultural sector relies greatly on the employment of seasonal (part-time) workers. The distinction between full-time equivalent jobs (as used in the impact methodology in this study) and part-time job opportunities therefore becomes important. The actual, real-world number of jobs (which will include permanent and part-time) is therefore likely to be much greater than the stated full-time equivalent impact on employment, since for example, two workers working half a day each will equate to one full-time equivalent employment opportunity. Additionally, a number of tobacco farmers are not exclu-sively involved in tobacco farming. These mixed-crop farms, for example, also grow maize, beans and other crops. When these factors are considered, BAT South Africa’s first-round employment impact on the agricultural sector increases to around 5,800 farming jobs.

3. The agricultural sector includes forestry and fishing activities, although these constitute only a small percentage of the total employment in the sector.4. According to Statistics South Africa, the number of full-time equivalent (FTE) jobs is defined as total hours worked divided by average hours worked in full-time jobs. One FTE job,

therefore, typically equated to one person working a full workday on a permanent basis.

Table 2: Retail and wholesale trade distribution channels for BAT South Africa’s products (Number)

Stores Stores as % of total

% of sales volume

Spaza or houseshop 69,453 38.7 21.1

Independent convenience 64,282 35.8 27.6

Taverns 28,740 16.0 4.9

Specialist liquor 9,729 5.4 4.3

Grocery & grocers wine 2,982 1.7 25.9

Independent forecourts 2,343 1.3 6.1

Branded forecourts 2,003 1.1 9.9

Total dependents 179,532 100.0 100.0


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Employees earn on average R45,058 per month

3.2. Contribution to labour income

BAT South Africa contributed an estimated R1.18 billion towards household income during 2015. This includes remuneration as well as staff costs such as medical aid, pension contributions by the company, the provision of an executive share benefit scheme, annual leave and other staff costs. The remuneration that BAT South Africa offers its employees is significantly higher than that of the rest of the domestic manufacturing industry. While the average monthly wage, including bonuses and overtime, in the manufacturing sector amounted to R16,471 per employee in 2015 (and R18,399 for all formal non-agricultural sector workers in South Africa), the

company’s average employee earned R45,058 per month (see Table 3). This is 2.7 times the average wage in the manufac-turing sector.

One explanation for this trend is that 92.1% of the company’s staff are classified as skilled or semi-skilled, with such groups typically earning higher salaries.

It should also be noted that BAT South Africa workers who fall into the low-skilled category earned an average income of R18,678 per month after tax in 2015, which is significantly higher than the national average of R4,600 per month. In a South African context, BAT South Africa’s workforce can therefore be said to be extremely well-remunerated.

Table 3: Remuneration relative to the broader manufacturing sector

Employment and labour 2013 2015

Gross labour remuneration (R million)* 979 1,183

Average annual wage (R) 360,589 540,697

Average monthly wage (R) 30,049 45,058

Average monthly wage in total manufacturing sector (R)* * 14,663 16,471

BAT South Africa’s average wage as % of average manufacturing sector wage 184 274

* Including all benefits and bonuses* Source: Statistics South Africa, Quarterly Employment Statistics, March 2015 to December 2015 (4-quater average of monthly earnings including bonuses and overtime)

3. Key findings

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

R m

illi

on

2,187

1,771

5751,183

3,528

2,310

5,838


Figure 7: Impact on household income in 2015 (Rand, million)

Generated nation-wide labour income of R5.84 billion

Household income impact

When the labour remuneration of the company’s direct and indirect suppliers and the multiplier effects of consumer income and spending throughout the national economy are taken into consideration, the total contribution to labour remuneration increases to R5.84 billion in 2015 (see Figure 7).

In contrast to the skills breakdown of employment, the labour income figures favour the skilled (i.e. higher remunerated) occupations. Approximately 82.9% of the labour income generated in the formal sector can be ascribed to the semi-skilled and skilled groups.


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


3.3. Contribution to government tax revenue

The financial proceeds arising from direct and indirect taxes on the production and sale of cigarettes are a vital source of government revenue in South Africa.

The tobacco sector contributes to tax revenue in various ways, including excise duties, value added tax (VAT), corporate tax and personal income tax. Although it could be argued that excise duties, VAT and income taxes essentially fall upon tobacco sector employees and consumers, it is nevertheless instructive to consider the total amount of state revenue derived from taxes on the production and sale of tobacco products each year.

Total tax contribution

During 2015, National Treasury received R14.49 billion in tax revenue from BAT South Africa, its employees and customers, accounting for 1.46% of total government revenue for the year. A breakdown of the company’s initial tax contributions is given in Table 4.3.4. Contribution to

intermediate output

The production of cigarettes requires inputs (also known as the intermediate output of the supplying sectors) from a number of sectors in the economy. These inputs range from tobacco leaf and wood pulp harvested by the agricultural and forestry industries, to paper, adhesives and wrapping material supplied by manufacturers, as well as water, electricity,

Table 4: Tax contribution relative to total government tax revenue (Rand, million)

Excise duties VAT

Customs & import duties

PAYE, SDL & UIF

Corporate income tax

Withholding tax on dividends

Other tax revenue


BAT South Africa (2013) 9,480 2,041 54 278 1,672 50 14 13,589

BAT South Africa (2015) 10,171 2,249 183 264 1,610 0 10 14,487

Government tax revenue* 37,458 270,087 45,032 399,625 185,211 23,106 28,106 988,894

BAT South Africa as % of South Africa 27.15 0.83 0.41 0.07 0.87 0.00 0.03 1.46

*2015 tax year estimatesSource: BAT South Africa and South African Reserve Bank Quarterly Bulletin - National government financials


Figure 8: Tax contribution, by tax type (Rand million)

Excise duties10,171(70.2%)

Corporateincome tax

1,610(11.1%)

PAYE and other taxes

456(3.2%)

VAT2,249

(15.5%)

Contributed R14.49 billion in taxes – or 1.46% of total government revenue

3. Key findings


During 2015, National Treasury received R14.49 billion in tax revenue from BAT South Africa, its employees and customers, accounting for 1.46% of total government revenue for the year. A breakdown of the company’s initial tax contributions is given in Table 4.

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


R14.49 BILLION IS ENOUGH TO PAY FOR:

5 The National Treasury announced an increase in the excise duty rate from R12.42 per pack of 20 cigarettes in the 2015/16 budget year to R13.24 in the 2016/17 fiscal year (in February 2016).

AT A COST OF R160,500 PER HOUSE. TO DATE SOUTH AFRICA’S HOUSING BACKLOG STANDS AT 2.1 MILLION HOMES.

BAT SOUTH AFRICA’S NATIONAL TAX CONTRIBUTION OF

87,233 HIGH SCHOOLTEACHERS

CHILD SUPPORT GRANTS

90,260 LOW COST HOMES

Excise duties

The majority (70.2%) of the taxes derived from the sale of tobacco products manufactured by BAT South Africa comes from excise taxes5. In 2015, the government generated excise duties to the value of R10.17 billion from the sale of the company’s products, representing 27.2% of all excise tax collected in South Africa. Value added tax

Approximately 0.83% (or R2.25 billion) of the govern-ment’s VAT income in 2015 was acquired from the sale of tobacco products manufactured by BAT South Africa. VAT accounted for 15.5% of all the taxes contributed by the company in 2015.

Corporate tax

BAT South Africa contributed R1.61 billion to state revenue in the form of corporate taxes in 2015 (11.1% of its total tax contribution), accounting for 0.87% of all corporate taxes collected in South Africa.

PAYE, skills development levy and UIF

The company and its employees paid R264 million in the form of personal income taxes, skills development levies (SDL) and unemployment insurance fund (UIF) contributions during 2015.

OR OR

Source: BAT South Africa, PayScale, National Treasury and South African Institute of Race Relations

WITH AN AVERAGE ANNUAL SALARY OF R166,068 PER TEACHER AT R330 PER MONTH PER CHILD

TAX CONTRIBUTION IN PERSPECTIVE

3.658MILLION


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Purchased goods, services and capital equipment worth R6.06 billion from local suppliers


20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

R m

illi

on

14,487

1,088764

16,339

2,450

18,751


Figure 9: Impact on government tax income (Rand, million)

Government revenue impact

The tax revenue arising from the direct, indirect and induced impacts of BAT South Africa’s operations (i.e. all the multi-plier effects) increased the National Treasury’s take to R18.75 billion, or 1.9% of the National Treasury’s total tax revenue in 2015 (see Figure 9).

Indirect taxes paid by consumers remain the most important revenue source, at R14.1 billion (or 75.2% of BAT South Africa’s economy-wide tax contribution), followed by corporate taxes at R3.56 billion (19.0%).

The initial tax contribution by a firm as a proportion of its economy-wide impact is typically small. However, BAT South Africa’s initial tax contribution constitutes 77.3% of its econo-my-wide impact. This is indicative of the of the significant tax burden borne by the company.

3.4. Contribution to intermediate output

The production of cigarettes requires inputs (also known as the intermediate output of the supplying sectors) from a number of sectors in the economy. These inputs range from tobacco leaf and wood pulp harvested by the agricultural and forestry industries, to paper, adhesives and wrapping material supplied by manufacturers, as well as water, electricity, transport and storage services.

In addition, BAT South Africa also utilises equipment and machinery, requiring regular maintenance, and depends on a range of other providers for services such as security, cleaning, information technology, marketing, telecommunication, finance, accounting and consultancy.

3. Key findings

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Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



Manufacturing excl. BAT South Africa698(11.5%)

Business services743(12.3%)

Other goods & services266(4.4%)

Finance & insurance340(5.6%)

Transport & storage326(5.4%)

Agriculture485(8%)


Figure 10: Goods, services and capital purchased from first-round suppliers in South Africa, by industry (Rand, million)

First-round and direct impacts

During 2015, BAT South Africa purchased goods, services and capital equipment to the value of R6.06 billion directly from local, South African suppliers (i.e. the first-round impact on industrial output or production) as shown in Figure 10.

Indirect and induced impacts

In order to meet BAT South Africa’s cigarette manufacturing, storage, distribution and export needs, the direct suppliers must, in turn, purchase goods and services from their suppliers – also known as the indirect impact. Successive rounds of purchases by suppliers create a chain of economic activity that involves not only the production of output, but also the remuneration of workers and tax contributions. This generates income that is re-spent in the economy – the induced impact. These multiplier effects are included in the company’s total impact on intermediate output (production) and are shown in Figure 11. BAT South Africa’s economy-wide impact contributed a massive R34.26 billion to intermediate output in 2015. Figure 12 shows the sectors which benefited substantially from BAT South Africa’s operations include the wholesale and retail trade sector (16.1%) and the business services sector, which includes cleaning, security, marketing and other consultancy services (11.3%).

When excluding the company’s cigarette manufacturing activities, the rest of the manufacturing sector constitutes 13.7% of the impact (or 47.9% of the impact when BAT South Africa’s manufacturing activities are included).

Stimulated production worth R34.26 billion


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

R m

illi

on

11,950

6,059 4,384

22,393

11,870

34,263

BAT + First Round + ROI = Direct & Indirect +Induced = South Africa


Figure 11: Impact on intermediate output (Rand, million)


Manufacturing excl. BAT South Africa4,683(13.7%)

Business services3,889(11.3%)

Other goods & services4,186(12.2%)


Transport & storage1,362(4%)

Agriculture944(2.8%)


Figure 12: Goods, services and capital purchased by BAT South Africa’s value chain in South Africa, by industry (Rand, million)

3. Key findings

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4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



Figure 13: Capital stock required by BAT South Africa’s value chain, by asset type (Rand, billion)

Transportequipment

1,625(8.3%)

Buildings &construction works14,358(73.5%)

Machinery & other equipment

3,559(18.2%)

Goods worth R1.92 billion exported to 22 countries

3.5. Capital requirement

BAT South Africa’s operations require the use of different capital goods, including machinery, transport equipment, office buildings, manufacturing sites and distribution centres.

The value of capital required by the company and its direct and indirect suppliers to sustain the production and supply of cigarettes in South Africa amounted to R9.1 billion in 2015, of which R1.11 billion is owned by the company directly.

When taking into account all production and household effects (i.e. the direct, indirect and induced impacts), BAT South Africa’s operations required a capital stock to the value of R19.54 billion in 2015. This amounted to 0.18% of the total fixed capital stock required for economic activity in South Africa. Figure 13 shows the composition of the econo-my-wide capital required.

3.6. Impact on the balance of payments

With substantial import and export activity as well as capital flows between BAT South Africa and other companies in the BAT Group, the company’s impact on South Africa’s balance of payments is also important to consider.

International trade

The value of the company’s exports amounted to R1.92 billion. Sent to 22 countries, this comprised of 9.1 billion cigarettes, over 9.7 million kilograms of cut-rag tobacco and other related goods and services required in the process of manufacturing tobacco products. Direct imports of finished goods, leaf and other inputs, on the other hand, totalled R2.48 billion. These are, however, not the only transactions between BAT South Africa and the rest of the world.


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4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


GDP Contributed 0.52% to South Africa’s GDP

6. The GDP multiplier measures the incremental value added along the value chain per unit of output. In other words, the GDP multiplier measures the value added per R1.00 of output produced. Value added consists of the remuneration of labour and capital after taking into account the consumption of fixed capital.

7. The GDP multiplier measures the incremental value added along the value chain per unit of output. In other words, the GDP multiplier measures the value added per R1.00 of output produced. Value added consists of the remuneration of labour and capital after taking into account the consumption of fixed capital.

8. The gross operating surplus (GOS) is the excess portion of income generated by incorporated enterprises’ operating activities after paying for labour input costs. In essence, it is the remuneration of capital.

4,000

3,000

2,000

1,000

0

-1,000

-2,000

-3,000

R m

illi

on


3,578

-1,779

-813

1,737

-2,487

-750


Figure 14: Impact on the balance of payments

Dividends and income payments

The movement of dividends from BAT South Africa to its holding company leads to estimated financial outflows of R1.75 billion, while dividends received by South African share-holders from British American Tobacco p.l.c. in turn generate financial inflows valued at an estimated R5.51 billion. With the addition of net income payments (royalties, management and technical advisory fees, etc.) of R414 million, BAT South Africa’s initial impact on the balance of payments is decidedly positive, amounting to a surplus of R3.58 billion (Figure 14).

Although BAT South Africa’s own operations generate a surplus on South Africa’s balance of payments, the impact of the company’s first-round and indirect suppliers, as well as the induced impact of spending by consumers in the economy, is negative. In all, the resulting effect is a deficit of R750 million on the balance of payments, predomi-nantly due to the reliance of many sectors – in particular the manufacturing sector – and consumers on goods and services imported from abroad.

3.7. Impact on gross domestic product

BAT South Africa’s total contribution to South Africa’s value added or gross domestic product (GDP) was estimated at R18.39 billion, or 0.52% of the country’s GDP in 2015 (see Figure 15).

The company’s economy-wide GDP multiplier6 is estimated at 1.54, indicating that for every one rand of sales revenue generated by BAT South Africa (i.e. turnover at company level, excluding indirect taxes), R1.54 of value is added to the national economy.

The national return to capital (gross operating surplus8) totalled close to R12.55 billion, with R10.94 billion as net operating surplus and R1.61 billion as consumption of fixed capital. The return to labour – in the form of labour remuner-ation – was valued at R5.84 billion.

3. Key findings

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4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


GDP/Capital ratio

The company’s GDP/capital ratio of 0.94 is greater than that of the national economy (0.36). Therefore, for every R10 million worth of capital expenditure, BAT South Africa and its direct, indirect and induced activity stimu-lates R9.4 million in GDP, compared with the national average of around R3.6 million.

Both the labour/capital ratio and the GDP/capital ratio suggest that BAT South Africa is more efficient in utilising a unit of investment compared to most other industries in the South African economy.

Labour/capital ratio

Table 5 considers two indicators of the efficiency with which BAT South Africa employs scarce resources, namely the GDP/capital ratio9 and the labour/capital ratio10.

BAT South Africa’s labour (including informal employment) to capital ratio is 3.70, compared with 1.59 for the national economy. That is, for every R10 million of capital investment, BAT South Africa creates 37 jobs. This is well above the national average of about only 16 jobs.


20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

R m

illi

on

6,621

3,6742,123

12,419

5,969

18,387


Figure 15: Impact on GDP

9. The labour/capital ratio, which measures the additional employment opportunities that can be created by every R1 million invested in capital.10. The GDP/capital ratio, which measures the value added to the economy for every R1 million worth of capital expenditure in the province.

Table 5: GDP multipliers and efficiency ratios

2013 2015

Gross domestic product

GDP multiplier (BAT South Africa) 0.60 0.55

GDP multiplier (economy-wide) 1.65 1.54

BAT South Africa economy-wide

GDP/capital ratio 0.94 0.94

Labour (excl. informal)/capital ratio 2.86 2.90

Labour (incl. informal)/capital ratio 3.65 3.70

South Africa

GDP/capital ratio 0.37 0.36

Labour (excl. informal)/capital ratio 1.30 1.15

Labour (incl. informal)/capital ratio 1.73 1.59Source: Quantec Research, Statistics South Africa and South African Reserve Bank

For every R1 of sales, R1.54 of value is added to the national economy


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5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36



4. Impact on the provinces

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3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


BAT South Africa has a presence throughout the country. On a provincial level, the company’s operations are concentrated into five regions, as shown in the map opposite. This section summarises the impact of the company in Gauteng, the Western Cape, KwaZu-lu-Natal, the Central Region (Free State, Eastern Cape and Northern Cape) and the Northern Region (Mpumalanga, Limpopo and North West).

For a detailed overview of the company’s economic impact in the provinces, please see the detailed provincial reports or visit www.batsa.co.za

Table 6

BAT South Africa First-round Province-wide

Province-wide as a % of BAT South Africa*

Employment (Number of people) 1,093 3,157 36,352 50.3

Labour income (R million) 485 288 3,002 51.4

Government tax revenue (R million) 11,272 819 14,491 77.3

Intermediate output (R million) 9,299 3,551 25,062 73.1

Capital requirement (R million) 864 2,364 14,294 73.1

Value added (GDP) at factor cost (R million) 5,220 1,399 12,796 69.6

Employment multiplier (incl. informal) 1.00 3.22 33.26

GDP multiplier 0.56 0.15 1.38

Province-wide employment impact

Financial and business services (9,344; 25; 25.7%)

Manufacturing excl. BAT South Africa (7,668; 21.1%)

Trade and accommodation (6, 871; 18.9%)

Province-wide employment impact , by skill (Number of people)

Highly skilled (3,638; 10%)

Skilled (11,504; 31.6%)

Semi- and unskilled (13,358; 36.7%)

Informal (7,852; 21.6%)

Province-wide intermediate output, by industry (Rand, million)

Financial and business services (4,101; 16.4%)

Trade and accommodation (3,763; 15%)


*BAT South Africa economy-wide impactSource: Quantec Research

Figure 16: Map of South Africa, by province

Gauteng

GAUTENG

LIMPOPO

MPUMALANGA

NORTH WEST

WESTERN CAPE

KWAZULU-NATAL

EASTERN CAPE

NORTHERN CAPE

FREE STATE


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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36


Table 7



Employment (Number of people) 626 840 3,785 5.2

Labour income (R million) 498 70 729 12.5

Government tax revenue (R million) 940 78 14,491 6.6

Intermediate output (R million) 776 651 2,429 7.1

Capital requirement (R million) 72 438 1,433 7.3

Value added (GDP) at factor cost (R million) 694 290 1,480 8.0



Province-wide employment impact, by industry (Number)

Trade and accommodation (964; 25.5%)

Financial and business services (848; 22.4%)

Manufacturing excl. BAT South Africa (503; 13.3%)


Highly skilled (437; 11.6%)

Skilled (1,501; 39.6%)

Semi- and unskilled (1,157; 30.6%)

Informal (691;18.2%)





*BAT South Africa economy-wide impact | Source: Quantec Research


Western Cape

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6. Conclusion 34

7. Methodology 36


Table 8



Employment (Number of people) 200 3,698 4,275 5.9









Trade and accommodation (2,661; 62.2%)





Skilled (1,310; 30.6%)

Semi- and unskilled (1,794; 42%)

Informal (868; 20.3%)






Kwazulu-Natal


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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36


Table 9





Government tax revenue (R million) 635 55 849 4.5











Highly skilled (1,017; 6.8%)

Skilled (4,248; 28.4%)


Informal (3,553; 23.8%)







Eastern Cape, Free State and Northern Cape

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6. Conclusion 34

7. Methodology 36


Table 10

















Skilled (3,508; 27.2%)


Informal (2,630; 20.4%)






Limpopo, Mpumalanga and North West

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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36


5. Making a difference in local communities


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6. Conclusion 34

7. Methodology 36


Together with the tangible economic benefits arising from BAT South Africa’s manufacturing and distribution operations, the company also makes a difference in various local communities across the country through its socio-economic development initiatives.

Over the last decade, BAT South Africa has invested over R280 million in programmes centred on three themes – empowerment, civic life and sustainable agriculture. Since 2015, these programmes have been delivered through a charitable foundation called the Signature Trust.

Table 11: BAT South Africa’s B-BBBEE scorecard (20 June 2016)

Element WeightingBAT South Africa

Ownership 25.00 20.00

Management control 19.00 7.53

Skills development 20.00 17.88

Enterprise and supplier development 40.00 17.97

Socio-economic development 5.00 0.00

Total B-BBEE points scored 109.00 63.38

B-BBEE contribution level 10.0%

B-BBEE recognition level 8Source: BAT South Africa (Verified by Mazars South Africa)

5.1. EMPOWERMENT

Supporting Broad-Based Black Economic BAT South Africa’s Broad-based Black Economic Empow-erment (B-BBEE) contribution is shown in Table 11. The company is classified as an empowering supplier and meets at least three of the four empowerment criteria, including for procurement practises, job creation, skills transfer and adding value locally.

Following changes to the B-BBEE scorecard method-ology enacted in 2016, the company achieved a Level 8 score (down from a Level 3 score in 2015). It is currently conducting an extensive review of its approach to Transfor-mation and is committed to improving this score. Ownership

With respect to ownership, 39.88% of the economic interests of BAT South Africa are owned by black people, with 20.03% in the hands of black women. These figures exceed the targets of 25% and 10% for black ownership and black female ownership, respectively.

Procurement

BAT South Africa’s procurement spending of R2.59 billion from B-BBEE recognised suppliers constitutes 42.7% of its total procurement spending in 2015. Furthermore, 43.22% of all suppliers were majority black-owned.

Of this spend, the company procured 91.15% of its goods and services from empowering suppliers, as determined by the B-BBEE procurement recognition levels, far exceeding the 80% target.


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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36


5.3. SUSTAINABLE AGRICULTURE

BAT South Africa is committed to the transformation of the tobacco leaf growing sector. In partnership with its local leaf suppliers, the company supports various projects aimed at helping emerging black farmers achieve economic success.

The sun-cured Virginia project

Established in 2011, this project aims to train and support previously disadvantaged individuals in growing sun-cured Virginia tobacco and other sustainable crops on a commercial scale. BAT South Africa acts as an incubation partner, providing emerging black farmers with development funding to kick-start farming activities, while Limpopo Tobacco Processors (the company’s main local leaf supplier) provides crop loans and then purchases and processes all the leaf grown. This is supported by Universal Leaf SA, which provides technical support.

In addition, BAT South Africa has contracted Mobile Agri Skills Development and Training (MASDT) to provide training, incubation, mentoring and administrative services to support tobacco growing, as well as the cultivation of other crops and livestock management. The ultimate aim is to enable emerging farmers to become self-sufficient through agricultural diversification.

As Table 12 shows, this project has to date helped establish 87 farmers, who between them cultivate 94 hectares of tobacco crop and produce more than 150 tons of leaf each year. This is supplemented by almost 100 hectares of mixed crops. In doing so, this supports an estimated 3,975 dependents.

BAT South Africa buys all of the tobacco grown through this project, while the sale of food crops is facilitated by MASDT and bought by multiple Boxer stores, among other customers.Table 13 illustrates the impact of the SCV project for emerging farmers.

5. Making a difference in local communities

5.2. CIVIC LIFE

Education and skills development

BAT South Africa paid R9.32 million in skills development levies to the South African Revenue Services, representing 0.79% of the company’s remuneration. The company also spent R161 million on skills development and learning programmes for black people.

Through the company’s commitment to skills development, 782 black people participated in learnerships, apprenticeships and internships supported by the company, while 129 black unemployed people also participated in learning programmes.

BAT South Africa runs a bursary scheme providing education, training and job opportunities for previously disadvantaged individuals in the fields of agriculture, engineering, marketing and law.

The company is a sponsor and partner of the prestigious Mandela Rhodes Foundation, an organisation dedicated to the empowerment of young people through education. Through scholarships provided to young Africans while pursuing their chosen post-graduate degree, students exhibiting academic prowess and leadership potential are provided with access to various development programmes.

BAT South Africa has also formed a close partnership with Sedibeng College, a further education and training estab-lishment located close to its Heidelberg factory in Lesedi munici-pality, Gauteng. Through the partnership, the company provides student scholarships and bursaries, while also sponsoring several training programmes which are used as a foundation to develop existing and potential members of its Heidelberg workforce.

Employee volunteering

The company has partnered with Stop Hunger Now Southern Africa since 2013 in support of their annual Mandela Day meal packaging event. The event sees volun-teers pack meals for distribution to those in need across the country on Mandela Day. During 2015, BAT South Africa employees packed more than 129,000 meals.

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6. Conclusion 34

7. Methodology 36


Table 12: Sun-cured Virginia tobacco project, overview

Tobacco hectares planted

Tobacco volumes (kg) produced

Other crop hectares planted

Number of farmers

Number of beneficiaries

Total invested

2011 41 62, 831 - 45 387 3.79

2012 98 143, 389 - 59 507 8.65

2013 113 148, 219 60 74 636 12.98

2014 108 163, 213 114 88 757 11.80

2015 94 140,378 98 87 748 11.22

Source: BAT South Africa

Table 13: Dependents supported by farmers involved in the sun-cured Virginia tobacco project, by province

Area Dependants

Limpopo

Groblersdal 686

Marble Hall 21

Dennilton 7

Venda

Nzhelele Valley 120

Mianzwe 88

Thohoyandou 16

Mpumalanga

Badplaas 790

Steynsdorp 119

Buffelspruit 1,872

North West

Skuinsdrift 40

Mabeskraal 6

Molatedi 6

Western Cape

Oudsthoorn 204

Total dependants 3, 975

Table 13 illustrates the estimated impact of the project in terms of the number of dependents supported, by province.

In 2014, the scope of this project was expanded to encourage the cultivation of flu-cured Virginia tobacco. BAT South Africa and Limpopo Tobacco Processors have committed to buying 25% of their flu-cured Virginia tobacco requirements from black producers by 2025.


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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36



6. Conclusion

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5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


As the findings of this report show, BAT South Africa’s operations have a significant impact on a number of sectors across the South African economy

The findings of the research in this report reflect the economic importance of BAT South Africa to the broader South African economy.

In 2015, the company’s initial contribution to intermediate output (or production) amounted to R11.95 billion. To support its operations, it employed 2,187 people nationally with a total wage bill of R1,18 billion. The company generated R14.49 billion in tax income for the National Treasury. In all, BAT South Africa’s initial impact contributed R6.62 billion to the total GDP.

In addition to these substantial initial contributions to the national economy, BAT South Africa’s operations also have high spin-off effects. Considering the direct, indirect and induced effects, the company’s impact included:

• Generating intermediate output (production) of R34.26 billion arising from the purchase of local goods and services.

• Supporting 72,279 full-time equivalent jobs.

• Contributing labour income (remuneration) to the value of R5.84 billion.

• Raising R18.75 billion in tax revenues for National Treasury.

• Contributing R18.39 billion to total national GDP.

The value of the company extends far beyond the manufac-turing, packaging, distribution and exporting of cigarettes and cut-rag tobacco. As the findings of this report show, BAT South Africa’s operations have a significant impact on a number of sectors across the South African economy.


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5.1. Empowerment 31

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6. Conclusion 34

7. Methodology 36



This study aims to quantify the economic impact of BAT South Africa on the South African economy as well as the economic multiplier effects. The project commenced with the collection of financial and labour statistics from BAT South Africa, as well as research by Quantec Research on the structure of the broader tobacco industry and findings from similar research projects (e.g. multiplier studies) around the globe.

The results presented in this report derive mainly from desktop research and imputation from the following data sources:

• Published data and reports from official sources, such as Statistics South Africa, the National Treasury, the South African Reserve Bank, the Department of Trade and Industry and the Department of Agriculture, Forestry and Fisheries;

• Public and internal management documents, as well as emails and other written and verbal communication from BAT South Africa staff, supplying information on the company’s key financial statistics, cigarette sales revenue, tax contribution, operational expenditure, exports and imports, employment and labour remuner-ation numbers, corporate social investment and training expenditure for the 2015 calendar year;

• Estimates of legal and illicit cigarette sales volumes and retail selling prices for the total South African market;

• Information published on BAT South Africa’s website, as well as that of the Tobacco Institute of Southern Africa (TISA); and,

• Quantec’s input-output tables for the South African national and provincial economies (used to determine the national and provincial impacts).

7. Methodology

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6. Conclusion 34

7. Methodology 36


The macro-economic impact assessment conducted for this study is based on a detailed input-output analysis and comprehensive Social Accounting Matrix (SAM) based economic model for South Africa.

Input-output analysis is, in essence, an accounting framework that provides a snapshot of the economy at a specific point in time (i.e. the base year: 2015 in the case of this study), describing the composition and level of economic activity and the interactions and dependencies (backward and forward linkages) between industries and institutions.

The SAM offers a complete model of the economy at hand, focusing on relationships among production activities (split between various industries), labour, households, and the public sector. Additionally, the SAM offers insight into the total impact on employment and income (including the

distribution among different skills and population groups). SAM multiplier models are, therefore, well-suited for modelling the intricate linkages of industries and measuring the economy-wide effects of a specific sector. These models are often used for economic impact analysis, where the economic implications of a potential action (e.g. a large infrastructure investment) or new policy or regulation can be evaluated prior to taking that action. The SAM model traces these impacts and provides estimates of total economy-wide employment, income and returns on capital.

Quantec’s SAM model identifies 170 activities or industries in the South African economy. The labour component of the SAM accommodates labour by skill level. Capital stock and expenditure are available for three asset classes, namely, building and construction work, machinery and transport equipment.

• The initial economic impact (injection) is the result of operational and capital expenditures by the company and represents BAT South Africa’s own employment numbers, capital expenditure and tax contributions.

• The first-round effects consider the impact of ongoing spending on and by direct suppliers to the tobacco industry (e.g. production, employment and tax revenue stimulated at first-round suppliers).

• The sum total of the initial injection (e.g. the total production/turnover of the company, the intermediate goods bought, the salaries and wages paid and the profits generated by the company) and the impact on its first-round suppliers constitute the direct impact.

• The indirect impact (also referred to as the “rest of indirect” or ROI) measures the contribution of direct suppliers who purchase goods and services from their suppliers, who in turn remunerate their employees and pay taxes.

• The supplying sectors and their employees and households re-spend in the economy, generating further economic activity. This is known as the induced impact.

• The total economy-wide impact is the sum total of the direct, indirect and induced impacts.

The SAM analysis begins with an injection of demand into the economy (initial impact) and estimates the total (economy-wide) impact in the following sequence:


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6. Conclusion 34

7. Methodology 36


Commodities

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and indirect

(=)

Induced (+)

Economy- wide (=)

Sales - revenue (Basic prices) 11,950

Sales - revenue (Market prices) 26,768

Fixed capital formation (including depreciation

532

Total sales by commodity (Rm) 27,300 8,354 2,425 38,079 13,818 51,897

Agriculture, forestry and fisheries - 581 33 614 461 1,074

Mining - 67 132 199 333 533

Food - 37 17 54 1,147 1,201

Beverages - 3 2 5 441 446

Tobacco: BAT South Africa 26,768 - - 26,768 - 26,768

Tobacco: Other - - - - - -

Tobacco: Illegal - - - - - -

Textiles, clothing and leather goods - 20 18 38 384 422

Wood, paper, publishing and printing

0 382 121 503 311 814

Petroleum products, chemicals, rubber and plastic

4 212 176 392 1,084 1,476

Other non-metal mineral products 0 25 36 62 67 128

Metals, metal products, machinery and equipment

10 57 64 132 133 265

Electrical machinery and apparatus 44 79 40 163 122 285

Communication, professional and scientific equipment

7 8 19 35 115 150

Transport equipment 289 75 27 391 269 660

Furniture and other manufacturing 7 115 25 147 198 345

Electricity - 133 43 175 356 531

Water - 18 28 46 131 177

Construction 93 146 141 381 242 623

Wholesale and retail trade 39 3,461 443 3,943 1,747 5,690

Catering and accommodation services

- 20 8 28 183 211

Transport and storage 2 430 157 588 770 1,359

Communication - 159 93 251 587 788

Finance and insurance - 82 24 106 174 280

Business services 37 2,120 687 2,844 2,932 5,779

Community, social and personal services

- 123 87 210 1,669 1,879

General government - 1 2 3 13 16

Sales multiplier 1.00 0.31 0.09 1.39 0.51 1.90

8. Tables and figures

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Activities

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and indirect

(=)

Induced (+)

Economy- wide (=)

Total output by activity (Rm) 11,950 6,059 4,384 22,393 11,870 34,263

Agriculture, forestry and fisheries - 485 52 537 408 944

Mining - 5 200 206 327 533

Food - 18 49 67 816 882

Beverages - 18 9 26 237 263





Wood, paper, publishing and printing

- 177 205 382 288 670


- 72 278 39 800 1,150

Other non-metal mineral products - 3 52 55 60 115


- 25 122 146 163 309

Electrical machinery and apparatus - 60 54 114 98 212

Communication, professional and scientific equipment

- 6 10 16 38 53

Transport equipment - 244 88 332 235 566

Furniture and other manufacturing - 72 39 111 128 239

Electricity - 87 86 173 346 518

Water - 3 42 44 126 170

Construction - 92 264 356 126 586

Wholesale and retail trade - 3,201 573 3,774 1,725 5,500

Catering and accommodation services

- 14 25 39 209 248

Transport and storage - 326 264 590 772 1,362

Communication - 32 218 251 526 777

Finance and insurance - 340 489 829 920 1,749

Business services - 743 1,141 1,884 2,004 3,889

Community, social and personal services

- 32 99 130 1,206 1,337

General government - - 3 3 13 16

Output multiplier 1.00 0.51 0.37 1.87 0.99 2.87


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Capital

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and

indirect (=)

Induced (+)

Economy- wide (=)

Total capital requirement (Rm) 1,111 3,995 3,996 9,101 10,441 19,543

Buildings and construction works 771 2,909 2,971 6,650 7,708 14,358

Machinery and other equipment 188 762 715 1,664 1,895 3,559

Transport equipment 152 324 310 787 893 1,625

% Share of RSA capital stock 0.01 0.04 0.04 0.08 0.09 0.18

Production factors

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and

indirect (=)

Induced (+)

Economy- wide (=)

Gross domestic product at factor costs (Rm)

6,621 3,674 2,123 12,419 5,969 18,387

Gross operating surplus 5,439 1,904 11548 8,890 3,658 12,549

Capital - Net operating surplus 5,230 1,568 1,262 8,060 2,897 10,939

Capital - Consumption of fixed capital 209 335 286 831 779 1,610

Compensation of employees 1,183 1,203 575 2,960 2,310 5,271

Formal 1,183 1,111 512 2,805 2,163 4,968

- Highly skilled 511 421 238 1,171 1,002 2,173

- Skilled 633 444 142 1,219 787 2,006

- Semi- and unskilled 39 245 132 416 373 789

Informal - 92 63 155 148 302

GDP as % of RSA GDP 0.19 0.09 0.06 0.34 0.17 0.51

GDP Multiplier 0.55 0.26 0.18 0.99 0.50 1.49

| 41

Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Employment

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and

indirect (=)

Induced (+)

Economy- wide (=)

Employment (Number)

Formal and informal 2,187 31,458 9,461 43,106 29,173 72,279

Formal 2,187 23,843 7,648 33,714 22,971 56,685

- Highly skilled 408 2,109 1,157 3,674 2,553 6,226

- Skilled 1,607 9,225 3,380 14,212 7,859 22,071

- Semi and unskilled 172 12,508 3,148 15,828 12,559 28,388

Informal - 7,616 1,776 9,392 6,202 15,594

Employment by race (Numbers) 2,187 31,458 9,460 43,106 29,173 72,279

Black 1,158 23,420 6,403 31,119 21,018 52,136

Coloured 253 3,189 977 4,487 3,033 7,520

Asian 60 1,227 372 1,680 1,003 2,682

White 716 3,622 1,709 5,819 4,120 9,940

Employment by sex (Numbers) 2,187 31,458 9,461 43,106 29,173 72,279

Male 1,650 17,000 5,837 24,159 16,383 40,902

Female 537 14,458 3,623 18,586 12,790 31,377


Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Employment by industry

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and

indirect (=)

Induced (+)

Economy- wide (=)

Total employment by industry (Number)

2,187 31,458 9,461 43,106 29,173 72,279

Agriculture, forestry and fishing - 1,717 330 2,074 727 2,775

Mining - 13 708 721 929 1,650

Food - 76 101 177 1,616 1,793

Beverages - 84 18 103 524 627





Wood, paper, publishing and printing - 773 395 1,167 655 1,823


- 220 440 660 1,187 1,847

Other non-metal mineral products - 9 96 105 94 199


- 53 220 273 297 570

Electrical machinery and apparatus - 240 103 342 261 603

Communication, professional and scien-tific equipment

- 18 24 42 88 130

Transport equipment - 207 76 283 342 625

Furniture and other manufacturing - 234 27 261 200 461

Electricity - 434 90 524 789 1,313

Water - 7 60 67 143 210

Construction - 233 584 817 388 1,205

Wholesale and retail trade - 19,145 1,742 20,886 4,901 25,787

Catering and accommodation services - 64 48 112 444 555

Transport and storage - 1,625 168 1,793 1,775 3,568

Communication - 118 437 555 874 1,430

Finance and insurance - 2,403 1,200 3,603 3,011 6,614

Business services - 3,491 2,068 5,560 4,452 10,011

Community, social and personal services - 278 448 725 5,011 5,736

General government - - 19 19 68 87

Employment multiplier (In terms of initial jobs)

Employment multiplier (Excluding informal)

1.00 10.90 3.51 15.42 10.50 25.92

Employment multiplier (Including informal)

1.00 14.38 4.33 19.71 13.34 33.05

% Share of RSA employment 0.02 0.28 0.08 0.38 0.26 0.64


| 43

Contents:

1. Introduction 04


3. Key findings 08









4.1. Gauteng 25






5.1. Empowerment 31

5.2. Civic life 32


6. Conclusion 34

7. Methodology 36


Household income

BAT South Africa

(+)

First-round

(+)

Rest of indirect

(+)

Direct and

indirect (=)

Induced (+)

Economy- wide (=)

Household income (earned) by quintile - Rm

Quintile 1 57 85 37 178 104 289

Quintile 2 114 170 75 358 212 585

Quintile 3 217 326 148 691 422 1,148

Quintile 4 355 531 248 1,134 710 1,891

Quintile 5 440 659 330 1,430 945 2,435

Total household income (earned) 1,183 1,771 837 3,791 2,393 6,342

% contribution to household in-come (earned)

Quintile 1 4.78 4.79 4.37 4.69 4.33 4.56

Quintile 2 9.61 9.61 8.91 9.45 8.86 9.23

Quintile 3 18.39 18.39 17.63 18.22 17.62 18.00

Quintile 4 29.99 29.98 29.64 29.91 29.65 29.82

Quintile 5 37.23 37.24 39.46 37.73 39.50 38.39

Total household income (earned) 100.00 100.00 100.00 100.00 100.00 100.00

GovernmentGovernment income 15,033 1,088 674 16,795 2,450 19,208

Indirect taxes 13,070 226 294 13,591 968 14,559

Direct taxes 1,963 862 380 3,204 1,481 4,649

Household 265 313 76 654 436 1,090

Enterprises 1,698 549 304 2,551 1,045 3,559

% share of government income 1.52 0.11 0.07 1.70 0.25 1.94

Balance of payments (BOP)Current account of the balance of payments - Rm

Exports 1,916 - - 1,916 - 1,916

Imports 2,478 1,779 385 3,891 2,487 6,378

Nett income payments 414 - - 414 - 414

Dividend payments by BAT South Africa to BAT p.l.c. (estimate)

1,746 - - 1,746 - 1,746

Dividend receipts from BAT p.l.c. by RSA shareholders (estimate)

5,514 - - 5,514 - 5,514

Effect on the current account of the balance of payments

3,578 -1,779 -813 1,737 -2,487 -750

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The contribution of British American Tobacco South Africa