National Breweries managing director Martin Makomva says government’s proposal to increase the specific excise duty on opaque beer will kill the traditional beer industry.
In its 2022 budget, government has proposed to increase the specific excise duty on opaque beer to 50 ngwee per litre (packaged) and to one Kwacha for (unpackaged) from 15 ngwee, as one of the revenue raising measures.
Commenting on the development in an interview, Saturday, Makomva said the proposed increment would be harmful to the industry.
He said stakeholders had already started engaging government to see if there could be a reduction in the proposed rates.
“We have already started the process of engaging government with a view to reviewing those rates downwards because in their current form clearly, they will be very harmful to not just our business but the industry. The whole traditional beer industry. So we don’t think that it is government’s intention to kill the industry and so that’s why we are engaging government to sit down and review the rates as announced by the minister,” Makomva said.
“Unfortunately that will not do any good to government’s effort to try and raise revenue from the industry. So we think that it’s a serious matter that the highest increase is on a product that is perceived by the industry to be affordable for the market. So we believe that consumption patterns are going to be driven in a direction that neither the industry or the government would have intended. I think that there is merit in considering the impact of these increases on the target market in our industry. I think it’s something that is critical in the context of job creation and national development.”
Makomva said the increment might lead to a significant reduction in production volumes and capacity utilization.
“So it is with our products and particularly, because we are targeting the lower end of the market, where price sensitivities are very high and also affordability is an issue. And therefore if we are going to pass on this increase to our consumers we expect that our volumes will really come significantly down. This is an industry where a small increase in price results in a significant reduction in volume. And we expect that this will happen if we pass on the kind of increases that have been proposed by the minister,” he said.
“And so we expect that our volumes are going to tumble and that when that happens, obviously it means that we can’t operate our plans at the same level of capacity utilization as we did before. We would have to assess the full impact of these increases but we expect that [there] would be a significant reduction in capacity utilization, which normally would lead to loss of jobs in distribution and in production itself and generally across all other service departments.”
Meanwhile, National Breweries commercial executive Joseph Chona said government could raise more revenue from the industry if they increased compliance levels so that everyone was paying their fair share of taxes rather than the proposed increment.
“Such a situation could be detrimental to government’s overall aspirations to increase revenue coming from this industry because then you are only getting from a few compliant players while others are maybe finding ways around to mitigate the impact. It’s important for government to also look at how they can increase compliance levels across the industry, so that everyone in the industry is paying their fair share of taxes. You might find that actually rather than raising the taxation rate, it is a better way for government to raise the revenues coming from the industry,” said Chona.