Kenya lost nearly Sh2 billion in tobacco exports to Sudan in the aftermath of the deadly war that led to the shutdown of the BAT plant in Khartoum.
The BAT plant in Sudan, which received unprocessed tobacco for the manufacture of cigarettes from Nairobi, was closed shortly after violent clashes erupted between the Sudanese army and a powerful paramilitary group in April 2024.
Official data indicates that exports of tobacco to Sudan from Kenya plunged to Sh472.69 million in 2023 from Sh2.45 billion the previous year, underlining the impact of the bloody conflict on trade between the two nations.
BAT Kenya fed its affiliate in Sudan with cut rag or unprocessed tobacco, giving the Nairobi bourse-listed firm a larger share of the exports.
"However, with the outbreak of the civil war in Sudan, our factory ceased operations," said Crispin Achola, the managing director of BAT Kenya.
"It became untenable to continue producing in Sudan and with the cessation of the production in Sudan the opportunity to continue to ship cut rug into Sudan dried out for BAT Kenya."
Mr Achola said that the Kenyan plant had zero exports last year.
The war, which continues to this day, has claimed more than 15,000 lives. About nine million people have been forced to flee their homes. in what the United Nations has termed one of the world's "largest displacement crises".
The Sudan business is managed as part of the BAT group's Middle East business unit, though the factory in Khartoum got its semi-processed tobacco from the Kenyan unit.
BAT entered the Sudanese market in June 2016 through the acquisition of Blue Nile Cigarette Company (BNCC) by its subsidiary BAT Middle East.
It has been battling for market share with Japan Tobacco International, which entered Sudan in 2011 through the buyout of Haggar Cigarette and Tobacco Factory (HCTF).
Tobacco products used in Sudan include cigarettes, cigars, pipes, hookah, shisha, and toombak.
In 2010, BAT Kenya diversified into the export of semi-processed tobacco after investing Sh350 million in a processing plant to increase its revenue sources.
It serves nearly 15 countries from the Nairobi plant.
The export business was crucial for the firm as its domestic market continued to shrink due to increased taxation and regulation.
Since then, tobacco exports have taken up half of BAT Kenya’s revenue, with countries such as Sudan getting cut rag tobacco from Nairobi.
BAT Kenya's export sales --including of manufactured and unmanufactured --dropped from Sh14.15 billion in 2022 to Sh13.25 billion in 2023.
This nearly matches the Sh13.7 billion of Kenya’s tobacco exports.
Cigarettes in Sudan are sold in a packet of 10 sticks unlike in most other countries that follow the 20-cigarette rule.
Kenya’s largest export to Sudan is tea, valued at $29.6 million (Sh3.822 billion), official data shows.
However, after Nairobi hosted the RSF, Sudan’s military government in Port Sudan said that it would announce measures regarding sourcing tea from other markets.
“A government committee has been established to explore alternative sources of tea from other African and Asian countries, and to implement a ban on the import of Kenyan tea to Sudan,” said a statement quoting Culture and Information Minister Khaled Al-Aiser. The move was said to be a response to President William Ruto’s insistence on hosting the groups.
As sales of cigarettes in Kenya have flagged, BAT has looked to neighbouring countries.
BAT exports half of its tobacco products to countries such as Zambia, Malawi, Somalia, Somaliland and Mauritius.
The firm has also been seeking new export markets to compensate for lower consumption of cigarettes in Kenya, targeting Djibouti, Madagascar and South Sudan with cigarettes, cut rag tobacco and tobacco-free oral nicotine pouches, Lyft.
BAT Kenya's exports in recent times have experienced a decline due to a stronger Kenyan shilling, leading to lower revenues from export sales, with the company citing challenges in export markets like forex scarcity, adverse weather, supply chain disruptions, and geopolitical tensions as contributing factors.
The company registered a 19.4 decline in net profit to Sh4.4 billion in the year ended December 2024 following a rise in operating costs and lower income from exports.
→ dakure@ke.nationamedia.com
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