The government’s decision to slash the alcohol levy by 20% this week was partly motivated by the pressure of looming job cuts at Kgalagadi Breweries Limited, where 150 people were set to be retrenched, according to Mmegi.
The consultative process on the review of the alcohol levy and liquor trading hours is a two-ministry approach led by the Ministry of Health and Wellness, which is looking specifically at the levy, while the Investment, Trade and Industry Ministry is focused on the trading hours.
However, this week, the trade ministry announced the immediate reduction of the levy from about 55% to 35%, by way of adjustments made to the Control of Goods, Prices and Other Charges Act. The Ministry also removed restrictions on the operation of liquor outlets such as bottle stores, wholesalers and distributors from certain areas.
Trade Minister, Bogolo Kenewendo said the reduction was aimed at protecting the industry as an intermediary action while consultations continue.
“The consultations on the levy are being led by the Health Ministry and what we are doing is more on the business side,” she told Mmegi.
“We made a decision to reduce the levy in the meantime in order to cushion businesses in the alcohol industry.
We are a government that has committed itself to creating employment and if we have to do something as an intermediary to save jobs, we will do so.”
KBL had retrenched 300 people and was on the verge of letting more, about 150, go. KBL has battled to stay afloat since the alcohol levy and tighter trading hours kicked in 10 years ago, with the beverage company perennially posting lower profits.
Sechaba Holdings, a listed entity which holds 60% in KBL, has issued profit cautionaries each year since the alcohol levy was instituted and with each results announcement, Sechaba directors note that “this will continue to have a significant impact on the company’s financial performance”.
For the half-year ended June 30, 2018, KBL’s sales volumes rose but profits excluding the alcohol levy of P280.8 million grossly overshadowed final pretax profits of P104.7 million.
KBL spokesperson, Masegonyana Madisa said the levy being slashed would provide the beverage manufacturer wiggle room in its battle to stay afloat.
“The reduction of the levy is a welcome development which will improve KBL’s financial performance including saving jobs that were on the line as a result of the highly regulated market,” he said in a written response.