Kgalagadi Breweries and its sister company, the Botswana Breweries, have announced that effective end of March, they will start retrenching a sizeable amount of staff in their operations.
The two brewers, which together form Sechaba Holdings, have attributed the impending job losses to the 30% alcohol levy that was introduced by Government late last year.
At the time the Group tried unsuccessfully to convince Government of the negative effects the levy was likely to have on the long term viability of local alcohol producers.
This week, the Group’s Director of Corporate Affairs and Strategy, Thapelo Letsholo, said while they have tried their best to avert job losses, they have been compelled to shed 92 staff members by the end of March.
“Following the implementation of the 30% levy on alcoholic beverages in November 2008 and having done the best possible to avoid this, Kgalagadi Breweries (Pty) Ltd [KBL] and Botswana Breweries (Pty) Ltd [BBL] regret to declare 92 consequent job losses by March 31, 2009.”
These will comprise 63 at KBL and 29 at BBL, said Letsholo.
He said since the introduction of the levy the company has been forced to reconfigure itself and its operations in its bid to stay competitive.
This, he said, was meant to ensure that the company survived and stayed afloat in the face of the new challenges brought about by the levy.
He said that retrenchment was one of several options available on the table, albeit the last on the list.
“However, as originally projected, and very quickly, the levy has resulted in significant social and economic consequences, including but not limited to sales declines, losses on the Botswana Stock Exchange, negative impact on inflation and has disadvantaged comparable locally produced alcoholic beverages compared to imported alcoholic beverages,” said Letsholo.
According to Letsholo, in the context and in an attempt to streamline activities and maximise economies of scale, all the non-alcoholic products produced by BBL, in particular Keone Mooka Mageu and Top One Mageu, will from now on be marketed, sold and distributed by KBL, as these are sold in the same market segments of soft-drinks.
“Therefore, BBL’s mageu products will be managed by the KBL’s sales, marketing and distribution teams, unfortunately rendering the BBL teams redundant.”
To make matters worse, Distell Corporation terminated KBL’s contract for the distribution of Distell products in 2008. Moreover, that of distributing the remaining wines and spirits also had to be terminated as volumes had now dropped below commercially viable levels. Wrap up activities will be concluded in March 2009, he said.
Inevitably this increased the need to rationalise staff, Letsholo added.
“However, KBL and BBL have undertaken to minimise these job losses and the associated impact. To this end, all affected employees have been encouraged to apply for vacancies that may exist in the businesses for due consideration. Notwithstanding, all due diligence and established company recruitment and selection policies and procedures will not be compromised,” he emphasised.
He said in the meantime necessary consultations with the employee unions and the Commissioner of Labour and Social Security are on-going, with the affected employees undergoing counselling sessions.
When the levy was implemented, KBL and BBL announced that they would not hasten to adjust the business per projections at the time. Instead, the companies would first observe the reality of the envisaged negative consequences.
But last month KBL indicated that the way the 30% alcohol levy was being implemented disadvantaged the local producers and gave an unfair competitive edge to importers.
This because for local producers, the levy is charged on ex-factory selling price while for importers it is charged on Cost Insurance & Freight on Import. As a result, for companies such as KBL, the levy is imposed even on margins while for competitor imports it is only limited to the importer.
Thus the resultant quantum of the levy is significantly lower in the case of imported products, said Letsholo at the time.