Elbow benders in Botswana were left with an egg on the face after a sad discovery that prices of alcohol, also known as “the holy waters” might not go down anytime soon.
The premature celebrations of possible liquor prices fall were brought upon by a recent government announcement on the decision has been taken to reduce the controversial levy by up to 20 percent. Under Statutory Instrument No. 157 of 2018 of the Control of Goods (Intoxicating Liquor (Levy) Amendment Regulations which was published on the Government Gazette on the 28th of September 2018, the alcohol levy shall, going forward be calculated at 35 percent for both domestic production and imports.
While the reduction on the levy was seen by some alcohol consumers as “a sign of good olden-times coming back”, the celebratory mood was cut short by an announcement by Kgalagadi Breweries Limited (KBL) that it will not be reducing prices on its products.
A cautionary document that circulated on social media under the KBL heading on Friday brought the sobering news to liquor consumers ÔÇô most of whom classified the news as ‘unwelcome’.
In the document, KBL stated that the effects of the levy over the years has had adverse impact on the alcohol industry and in the process negatively affected the entire supply chain of the industry.
While KBL’s head of communications manager Masegonyana Madisa could not take Sunday Standard calls on Friday to confirm the authenticity of the circulating document, it has since become common knowledge that the company’s profit margins have over the years plummeted and resulted in the closure of Opaque manufacturing plants as well as clear beer depots across the country.
SKIDDING ON THIN ICE
In early September 2018, just a few weeks before the levy reduction announcement, KBL, just like in previous years reported lower earnings on the back of the alcohol levy and deferred tax.
KBL’s profit before alcohol levy is reported at P280.8 million, up 18.5 percent from the previous corresponding period (2017 HY1) following an increase in consumption of products, up 8.2 percent in volumes. However, as usual, the profit was damped by the alcohol levy which sapped about 62.7 percent of the profit, leaving KBL with profit before tax of P104.6 million, which was still a 9.8 percent improvement from the same period last year.
On Friday, KBL said that the 20 percent reduction will help it to return to profitability due to improved financial performance which should also aid the whole supply chain.
Meanwhile on the other hand, while KBL and other manufacturers celebrate the interim measure, pundits maintain that it is government coffer that is likely to suffer most.
The levy has, with exception of 2009, collected nothing less than P200 million on an annual basis giving a shot in the arm to the government coffers.
The Botswana Unified Revenue Services (BURS) which collect the levy on behalf of the government has over the years reported growth in the money collected.
Official figures provided by the BURS shows that by 2009, the levy ÔÇô which was introduced by the former President Ian Khama in 2008 collected close to P68 million before tripling the figures to P222 million during the year in which Africa hosted the FIFA world cup ÔÇô 2010. Since 2008, the levy has been raised every year until 2015 at which point it was sitting at 55 percent. In 2011 the levy tank grew up to P289 million while in 2016 and 2017 it raised a whooping P325 465 million in 2016 and P428 964 million respectively.