No cheer for beer traders

No cheer for beer traders

…..Say proposed 15% hike in levy will sink businesses…..

MASERU – BUSINESSES selling alcohol are in panic after Finance Minister Moeketsi Majoro announced a 15 percent levy hike in the price of alcoholic beverages.
The traders say the increase will sink their businesses.
They are now planning to petition the government to review the proposed alcohol levy increment.

The petition is already being circulated among alcohol business owners countrywide.
Their fear is that the industry is already hamstrung by several challenges.
The proposed new levy will add on to a 7.4 percent excise duty hike as announced in South Africa which is applicable to all members of the Southern African Customs Union (SACU), which includes Lesotho.
It is the final nail in the coffin, they say.

Tšita Mohale, a manager at Primi Piatti, confirmed that they signed the petition when fellow traders brought it to them because they understood that the levy increment would jeopardise their alcohol business.
Mohale said even though they are a food-oriented restaurant, the increment in alcohol levy is going to push their already high prices further up.
“We are already more pricy than a lot of other alcohol selling businesses, an increase is going to alienate our already fragile customers,” Mohale said.
He said that now that winter is approaching, business is usually low and an increment at such a time would worsen the situation.

“We already had to send people home at the beginning of the year and we know that we have to send more home now that winter is approaching,” he said.
“But now it looks like it will be more people that we (lay off).”
Motlatsi Lehloka, a waiter at Primi Piati, said customers will no longer afford to give tips, which play a huge role in meeting their survival needs.
“You can just imagine if a 500ml can of Heineken is already M46, how much is it going to be with the increase?” Lehloka said.
“People will have to prioritise and there will be nothing left for tips,” he said.
He said as a five star restaurant, their prices are a bit high because of the kind of service and experience they offer clients.

Paulo De Freitas, Manager of Station Offsales, told thepost that as an independent offsale they are still trying to digest the pending increment.
“The terms of reference are not clear, we do not know whether the levy is going to be on beer only, or on products produced by the breweries only or if it is going to be across the board,” Freitas said.
He said having been in the industry for the past 40 years, he understands why most Basotho-owned liquor selling stores often collapse in their infancy.
“There are no consultations at all to try and get the industry’s inputs and try to understand the issues on the ground,” Freitas said.
He added that perhaps if there had been consultations with the industry, they would have agreed on a sustainable figure.

“We are going to have to let some of our staff go if the increment goes ahead. You can just imagine what is going to happen to smaller Basotho businesses who rely on alcohol-generated revenue for survival,” he said.
Serobonyane Nkhasi, Acting Manager at Pepezzela, said an increase in “sin tax” is going to have a negative impact on tobacco and alcohol businesses.
“Most businesses tend to shift the burden of tax to consumers so this means our prices will increase,” he said.
“Basotho as a nation don’t react so well to price increases and this might force some businesses to close shop or rethink their strategies which might include cutting a few jobs to cover expenses.”
Rethabile Mpiti, a worker at Olympic Public Bar and Offsales, said the fact that the price of alcohol just went up at the beginning of the month and another increment is pending simply means their jobs hang in the balance.
“Already there is a decrease in the quantities we stock. The increment will push them down further,” Mpiti said.

Last week, the Maluti Mountain Brewery (MMB) indicated that it was against the proposed increment.
Sesupo Wagamang, Country Managing Director for MMB, said “by its nature, our industry is very labour intensive and cost efficiencies are paramount to our business”.
“So, the difficult reality is that we will be forced to review the cost structure of the business and cannot rule out the possibility of job losses,” Wagamang said.

He said raising product taxes does not guarantee increased tax revenue since this assumes that customers will retain their previous consumption patterns.
He referred to a document titled Tackling Harmful Alcohol Use 2015, saying a “preventative strategy largely based on taxation will be less effective in countries where consumption of illegal or informally produced alcohol is more widespread or where it is cheap and easy to cross the border to buy alcohol at a lower price.”

Even the informal sector says it will be negatively affected by the increase of the alcohol levy.
Tšito Tšito, is a street vendor in Maseru Bus Stop selling fruits and snacks but like many other vendors he also sells alcohol. He says his business will suffer severely.
“(The price of) alcohol just went up at the beginning of this month and now it is said that it will rise again,” Tšito said.
He said before the increase, he was selling a bottle of Maluti for M15 but because of the increase a 750ml of Maluti is now M19 while Castle Lite is M20.
He said even with the current increase he was shocked to learn that the price of alcohol had been increased when he went to stock in the afternoon.

“In the morning I went to buy two cases but when I came back in the afternoon I was told that the case was now M156. I had to fight with my customers and it will be another fight if this proposed increment is successful,” he said.
He said in the three years that he was only selling fruits and snacks he was not making enough profits hence he introduced alcohol.
“This rate will not be profitable for us who buy in small quantities and we will not be able to provide for our families.”

Research carried out by Euromonitor International in 2018 across seven countries in Africa, concluded that US$1.7 billion (about M23.8 billion) has been lost in tax revenue in 2017 alone due to the illicit trade in alcohol.
The research further concluded that legal alcohol is on average 42 percent more expensive than illegal alcohol with South Africa and Zambia reflecting the higher overall price variations at 51 percent and 53 percent respectively (driven by high increases in excise taxes).

As a result, MMB says it has engaged extensively with the government and other key stakeholders, since it first became aware of the possible introduction of an alcohol levy, in an effort to provide context of the adverse impact of an additional tax on their beer products and the knock-on effects on the company’s’ cost structure and long-term sustainability of the business.
The company says it developed and presented a white paper to the government and other stakeholders, outlining proposals spanning the company’s initiatives with respect to Smart Drinking, entrepreneurship and sustainability.
MMB is one of the major contributors to the economy of Lesotho, currently generating revenue of over a billion Maloti representing an estimated three percent of Lesotho’s GDP.

Over and above the direct and indirect financial input the business makes to the country’s economy, a significant amount of the revenue generated – of which at least 70 percent – is spent in Lesotho.
“MMB’s business strategy also includes a critical focus on building local communities through evidence-based initiatives that make a tangible impact on the lives of individuals,” Wagamang said.
“These initiatives critically target reducing the harm caused by alcohol abuse in communities, real job creation amongst citizens through our entrepreneurship development drive,” he said.

He also said the MMB has “the rollout of sustainability programmes with a focus on accessibility to quality drinking water and reducing the impact of climate change ensuring the long-term prosperity of the communities in which we operate”.
“We believe that our company can play an important role in growing the economy of Lesotho and therefore, we will actively engage with the government to explore alternatives available to help them meet their objectives of additional tax revenue and reduction of harmful use of alcohol,” stated Wagamang.

Lemohang Rakotsoane


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