Sechaba Brewery Holdings, the listed vehicle for Kgalagadi Breweries Limited (KBL) and Botswana Breweries Limited (BBL), said it has not started making losses, but revealed its dialogue with government over the impact of the alcohol levy on its operations continues.
The two breweries are subject of government war on alcohol abuse with the two seeing volume decline over the move, which industry says is not achieving its desired objectives.
“KBL (at the moment) is not operating at a loss, but making less money,” Hloni Matsela, the group’s Managing Director, said, adding that this is not making management and shareholders happy.
Sechaba, which is the parent company to KBL and BBL, the country’s two largest brewers, is owned by SAB Miller, Botswana Development Corporation (BDC) and several shareholders through the Botswana Stock Exchange (BSE).
KBL, which produces clear beer, has been impacted heavily by the 30 percent alcohol levy, which is collected at the point of entry of imports into Botswana, is charged on cost, insurance and freight (CIF) of import while it is charged in ex -factory selling price for Kgalagadi Breweries Limited (KBL) and Botswana Breweries Limited (BBL) products.
This gives its competitors an advantage over locally produced beer products as elbow benders go for cheaper fixes.
Therefore, a dialogue with government is meant to present this realist picture to government although it does not seem as if the current regime will accommodate the concerns as there is a talk of another 10 percent increase on the alcohol tax before Christmas.
“Discussions with government are always protracted,” said Matsela. “This is not an easy debate. As an industry, we understand the ins and outs of the levy compared to observers,” he added.
The argument put forward by KBL to government is that the calculations need to be understood as the levy represents two dimensions.
The other difficulty the management faces is the change in regime, which means new faces at the Ministry of Trade and Industry.
“You cannot say I have told your predecessor,” Matsela said of the changes in government.
“It is a long process; but a process we have to continue with. We will continue and explain the impact.”
Matsela said the levy had always had a repressive impact and if the proposed 10 percent increment goes ahead, the impact will be higher as for every 1 percent increase; it will translate into a decline of 1 percent in sales.
He added that KBL is concerned by alcohol abuse in the country, just like government, but the difficulty is the method.