Monday, September 28, 2020

Alcohol levy keeps escaping the eye of the auditors…for 9 years

The levy on alcohol and Beverages Fund Order has not been externally audited in over 9 years. In its ten year existence, the fund has had one external audit and two internal audits.

Philip Makgalemele, junior minister at Health and Wellness Ministry, said the fund was last audited in 2009 while it was still with the ministry of Investment, Trade and Industry. The fund was then transferred to ministry of Health and Wellness in 2010 with a balance of P133.9 million, where it was subjected to two internal audits in 2013/2014 and 2014/2015 financial years.

Established in 2008, the levy on Alcohol and Beverages Fund Order’s purpose is to promote projects and activities designed to combat alcohol abuse and minimise the effects of alcohol abuse. With a cumulative collection balance of P2.8 billion, the fund is arguably one of the largest in the country.

The funds are collected by Botswana Unified Revenue Services which charges 6 percent collection fee before the funds are disbursed. Both the ministry of Health and Wellness and the ministry of Nationality, Immigration and Gender Affairs each receive 10 percent of the alcohol levy fund, while the remaining funds are paid into the government consolidated fund.

Makgalemela told parliament on Thursday that preparations are underway through the government’s Auditor General to undertake external audit of the fund from 2010 to do a comprehensive audit. The junior minister’s update on the alcohol levy audit was met with confusion, particularly from Major General Pius Mokgware, a legislator who has previously been head of audit at the Botswana Defence Force.

Major General Mokgware asked Makgalemela to confirm that the levy was last audited in 2009, and that the internal audits are not in compliance with paragraph 12 of the fund order which does not recognise internal audits. Instead, Makgalemela only confirmed that there has only been one external audit and did not address the disconnect between paragraph 12 in the Fund order with the two internal audits that have been undertaken.

Furthermore, Makgalemela created more confusion with his remarks as he tried to explain measures put in place to prevent abuse of the fund. It is not clear if the internal audits he alluded to were for the whole levy fund or the ten percent accrued to ministry of Health and Wellness.

“In order to ensure that the abuse does not kick in, that is why two internal audits were undertaken in 2013/2014 and 2014/2015.,” said Makgalemela. “So, I can confidently say, in our view, the two internal audits that took place, notwithstanding the fact that the external one was only done in 2009, were adequate to ensure that the 10 per cent that is being managed by the Ministry of Health and Wellness is actually not abused.”

Meanwhile, the ministry of Health and Wellness had received a total of P1 billion by February 2018 in alcohol levy funds. The expenditure report from the ministry shows that P986.5 million has been spent; P139.6 million on administration, P804.2 million on government beneficiaries and P42.6 million on Non-Governmental Organizations.

The alcohol levy has been most felt by Sechaba Breweries Limited which found itself in a tough regulatory environment since the levy was implemented a decade ago. The levy has weighed heavily on the brewer’s operations, affecting the bottom line the most. Sechaba has since then paid around P1.6 billion to the government. The levy rate for alcohol content of 5 percent and less is at 50 percent and for alcohol content of above 5 percent is at 55 percent.

The government’s numerous levy funds have came under close scrutiny following the National Petroleum Fund scandal that saw millions diverted from their intended use to something else. The ministry of Finance and Economic development this year wrote to the executive to review and transfer some of these special funds to the consolidate fund, where there is tight oversight.

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Sunday Standard September 27 – 3 October

Digital copy of Sunday Standard issue of September 27 - 3 October, 2020.