Investors have been in a stampede to exit Sechaba Holdings LimitedÔÇöthe parent company of Kgalagadi BreweriesÔÇöwhose products are being targeted by the alcohol levy that now is expected to come into effect by the end of next month.
“We are seeing more and more people now prepared to sell at a price lower than the last trading price, but buyers are also pulling the prices down,” head of Stocbrokers Botswana, Geoffrey Bakwena, said Friday.
A fortnight ago, the company was trading at 1880 thebe but punters were prepared to settle for around 1700 thebe.
As the nation is holding its breath against the incoming legislation on alcohol, the biggest looser is expected to be governmentÔÇöthrough the Botswana Development CorporationÔÇöwhich holds shares worth over P 625 million or 20 percent of the listed shares. Other victims would be the trucking companies owned by Batswana, property owners who will have to face the banks.
Further, poor workers who are feeding many mouths will fall in the trap while consumers are expected to be divided on their next choices.
Some will drift to hard drugs and home brews but the challenge is whether the police force and the already over stretched health sector would be prepared to deal with the new challenges.
“The new legislation will bring down the company which was forecast to do well into the future. This is obviously going to kill the confidence in the market,” he added.
“I think government should go back to the drawing board and look at this issue once again,” Leutwetse Tumelo said.
Government has once again shifted the effective date for the implementation of the new levy priced at 70 percent. Initially, the levy was supposed to have been effected from the beginning of August but was moved to mid month. Now, it has been changed to the end of September pending presentations from the captains of the industry, BOCCIM.
Last week, KBL said the levy would destroy 42 000 lives who rely on alcohol industry for a living.
KBL further said if the levy was implemented, they would have no choice but to close down their plant as it would no longer make commercial sense to operate from Botswana.
“There has been no consultation on this levy with the result that its implementation has been unexpected. Substantial losses are being realised as a result. We have to date committed in excess of P40 million in capital expenditure, an investment whose benefits and return on investment will not be realised,” said the KBL report to Government.
More importantly, KBL warned government of the levy’s unintended consequences.
“Abusive drinkers in the lower income population will spend a greater degree of disproportionate spend on alcohol beverages.”
“The social levy is predicated upon the belief that significantly increasing the price of alcohol will reduce consumption. History, on the contrary, teaches us that invariably this never works.”
Among other things, the report of which Sunday Standard is in possession says that if the levy is introduced then KBL would have no choice but close down its plant in Broadhurst (Gaborone) because “the cost of production would outstrip profitability.”
