Mulled alcohol levy worries brewery

NEO SENOKO

MASERU – Once again, the Maluti Mountain Brewery (MMB), with a value chain that supports 25 000 livelihoods, insists that the government should not implement the proposed enactment of the alcohol levy in a bid to save businesses and jobs, among others.

The government through the Ministry of Finance and the Lesotho Revenue Authority (LRA) has however, proposed the introduction of a 30 percent levy on tobacco products and a 15 percent tax on alcoholic drinks.

Discussions around implementation of the bill are currently ongoing. In its new revenue and collection efficiency measures, the government reiterated during the budget speech presentation for the fiscal year 2021/22 that it intends to introduce policy measures and legislation that would make the budget estimates a reality.

Among these policy measures, the Minister of Finance, Thabo Sofonea, just like his predecessor and current Prime Minister Dr Moeketsi Majoro promised that the government would introduce the said sin tax. Projected collections amount to M286.6 million. Since the proposition of the idea, the MMB has been resolute that the proposed levy would only be detrimental to the industry.

The company said in the past that the levy on alcohol specifically, applies in addition to the excise increase of 7.4 percent as announced in South Africa in 2019 which is also applicable to all members of the Southern African Customs Union (SACU), including Lesotho. In effect, MMB had warned that consumers will face an increase in prices of up to 22.4 percent, excluding necessary inflationary cost increases.

In an interview with Public Eye earlier this MMB Managing Director, Sesupo Wagamang, said they expected to see a significant drop in taxes to the Lesotho Revenue Authority and dividends to the government if Treasury finally implements the levy on alcohol to 15 percent as announced recently.

This is because MMB expects a 19 percent drop in sales volumes as a result of an increased levy, Wagamang further noted that for the past four years, the MMB has paid the government up to M1.1 billion in taxes, M250 million in dividends and spent M150 million on local procurement all of which he notes cannot be guaranteed in future if the levy increment goes through.

The Lesotho government has a 61 percent stake in MMB, while MMB and ABInBev own the remaining 39 percent stake. “We are quite a major player in the economy of Lesotho and any policy decisions made on us will impact the economy either positively or negatively. Over the past three years, from 2016 to 2019, the taxes we paid to Government have grown by at least by 25 percent, which translates to more than a M1 billion.

“In 2019, our contributions in terms of revenue have also grown by 6 percent,” he said. He said the reason they have been realizing such growth is because as a business they understand that alcohol is sensitive to pricing so every year they strive to price their products below the inflation rate to stimulate demand.

“When demand is stimulated sales grow and when sales grow, we get to pay more taxes to the Government through exercise while also creating more employment. “When we create more employment opportunities people get to also pay PAYE tax,” he said.

He noted MMB is one of the most consistent corporates from the start when it comes to paying dividends to the government. If the government finally implements these ideas, MMB is deeply concerned about an increase in smuggling, some possible job losses on its part as well as consumers switching to informal alcohol, thus negatively affecting the entire liquor industry in Lesotho.

This week again the company, along with industry partners including the Lesotho Liquor and Restaurant Association (LLROA), has come out with guns blazing, opposing the implementation of the alcohol levy.

“The MMB along with industry partners like the Lesotho Liquor and Restaurant Association is calling for no alcohol levy implementation, to save businesses and jobs, to limit smuggling, which cuts profits, to guard against un-registered traders, who don’t contribute to government revenue,” MMB said in a statement.

On Wednesday, President of the Lesotho Liquor and Restaurant Association (LLROA), Motseki Nkeeane, says they have been engaging in a number of consultations with the government through the Ministry of Finance and the LRA over the matter, however, the parties remain at loggerheads to date. The government, Nkeeane said, insists that the alcohol levy should be introduced to improve the plummeting government revenue in a move to save the economy.

“We had several consultations with both the Ministry of Finance and LRA over this issue but so far, we have not reached any agreement because they insist that the levy should be introduced against all odds. On the other hand, we are not denying that the idea is good, but the timing is wrong,” he also said.

Instead, Nkeeane said the government should be working tirelessly in addressing issues of smuggling and other challenges before introducing the levy. “According to our own findings, only 20 percent of businesses in the industry are registered while 80 percent of them are unregistered. So we are saying the government should instead be dealing with these challenges before anything else,” he said, adding however, that expectations are that consultations will continue until a lasting solution is reached.

 

 

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