Businesses fear the worst

As Matlanyane hikes sin tax again

RETHABILE MOHONO

MASERU – The government has announced new tax hikes on alcohol and tobacco, tightening the financial squeeze on consumers and businesses already struggling with rising costs.

As part of the 2025/2026 national budget estimates, finance minister, Dr Retšelisitsoe Matlanyane, revealed plans for a phased increase in levies – 2.5 percent on alcohol and 5 percent on tobacco – amid growing tensions between the government, industry stakeholders and advocacy groups.

During the presentation of the budget Dr Matlanyane stated that government remains committed to gradually implementing increases in alcohol and tobacco levies. “This phased approach is intended to allow time for administrative adjustments and business adaptations. The government proposes an increase of 2.5 percent on alcohol levies and 5 percent on tobacco levies,” Dr Matlanyane announced.

The minister mentioned that the increase in alcohol and tobacco levies will assist the government in raising revenue from domestic sources to reduce Lesotho’s reliance on donors and other external funding.

Similarly, last week, the Maluti Mountain Brewery (MMB) announced a price increase set to take effect on March 1.

The company stated that the decision was made after a re-evaluation of its pricing model to ensure business sustainability.

“We value your continued support and partnership with our business. Therefore, ensuring the affordability of our product portfolio for our customers remains of great importance.

As previously stated, the constant re-evaluation of our pricing model and strategy is primarily aimed at ensuring the sustainability of our business and enabling us to continue servicing your business efficiently,” the statement reads.

According to the MMB, the average price increase will be 4.6 percent across several Stock Keeping Units (SKUs). The company added that a detailed price list will be shared after the national budget speech and that all deliveries and collections from March 1 onward will be subject to the new prices, regardless of when the order was placed.

However, the brewery warned that stock availability may limit the buy-in on affected products. The MMB price increase comes against the backdrop of rising alcohol prices since the Covid-19 pandemic, partly attributed to the implementation of the Sin Tax in Lesotho. A sin tax is an excise tax imposed on goods perceived to be harmful to society, such as tobacco, alcohol, and gambling.

In Lesotho, the Tobacco and Alcohol Products Levy Act of 2023 was implemented on March 1, 2023, introducing a 30 percent levy on tobacco products and a 15 percent levy on alcohol. However, the rates were later reduced to 15 percent and 7.5 percent, respectively, following backlash from industry stakeholders.

The government has defended the tax, arguing that it aims to regulate alcohol and tobacco consumption while generating revenue for developmental programs. However, the tax has been met with resistance from traders and stakeholders, including the Lesotho Liquor and Restaurant Association (LLROA).

LLROA president, Motseki Nkeane, previously criticized the implementation of the levy, stating that stakeholders were not consulted in advance.

“It was particularly disappointing that the implementation date of March 1, 2023, was not communicated to stakeholders in a timely manner and was introduced without adequate stakeholder education,” he said. Nkeane further lamented that the levy threatens the sustainability of legal alcohol businesses while giving illegal traders a competitive advantage.

“The alcohol levy implementation comes at a time when small traders are still recovering from the alcohol bans of the Covid-19 era, compounded by rising costs of living. The sustainability of businesses is under threat. With the addition of the levy, there’s a real danger that legal businesses will shut down. Numerous traders operate outside the legal system, and they will benefit from the implementation of the Act.”

The LLROA has urged the government to reconsider the tax and introduce measures that would benefit legal traders. The association has also recommended that the government enforce existing laws to curb the illegal alcohol trade before implementing additional levies.

The government has remained firm in its stance, arguing that the tax is necessary for both public health and revenue collection. According to tax advisory expert, Mosiuoa Masoabi, from Revenue Services Lesotho (RSL), the levy applies at all stages of the business cycle – from manufacturers to wholesalers, retailers, and ultimately consumers.

Masoabi explained that VAT-registered businesses with an annual turnover of M850 000 or more are required to collect the levy. Additionally, customs officials at border posts are responsible for ensuring that the levy is applied to imported alcohol and tobacco products.

Despite these measures, traders have expressed concerns that high alcohol prices in Lesotho could drive consumers to purchase cheaper alternatives from South Africa, leading to smuggling and revenue losses for the government.

The introduction of the sin tax has sparked mixed reactions from advocacy groups. The Anti-Drug Abuse Association of Lesotho (ADAL) welcomed the move, arguing that it will help curb alcohol abuse in the country. ADAL director, Mphonyane Mofokeng, suggested that a portion of the revenue generated should be allocated to health promotion programs.

Conversely, the Southern African Alcohol Policy Alliance (SAAPA) has criticized the government for reducing the levy, accusing it of prioritizing business interests over public health.

SAAPA chairperson, Thabo Mokhutšoane, expressed disappointment at the lack of consultation before the tax reduction, arguing that alcohol abuse affects every household in Lesotho.

Similarly, youth activist, Thuso Leino, of BachaShutdown condemned the levy reduction in previous interviews, stating that the government should be held accountable for failing to address alcohol and drug abuse among young people.

Speaking to this publication, a bar owner expressed concerns about the new levies, stating that they will negatively impact their business, especially given the ongoing struggles since the Covid-19 pandemic.

“We are still trying to recover from the hardships caused by Covid-19, and even now, business remains slow. As a result, we have not been able to rehire all our staff.”