Alcohol producers have lost P880 million as a result of the suspensions of trade. The largest of them, Kgalagadi Breweries Limited (KBL), paid P218 million less in taxes last year. But resilient as ever, alcohol consumers are expected to pop out P394 million in 2021 via the alcohol levy. Staff Writer, MBONGENI MGUNI writes
Beaten and battered as it is, the alcohol industry continues to demonstrate surprising resilience. Despite only being operational for 183 days out of a total 286 days between March 21, 2020, the first sales ban and December 2020, the end of the calendar year, the industry’s main player, KBL, still managed to pay P606 million in taxes during that year.
The period was not without “casualties” however. Assistant Investment, Trade and Industry minister, Molebatsi Molebatsi last week revealed that 650 liquor outlets out of 4,893 had closed shop, while one of the country’s three producers, Big Sip, is in provisional liquidation.
Prior to the onset of COVID-19, 4,893 liquor outlets employed 15,910 workers, while the 1,191 restaurants accounted for another 23,880 jobs. It is presently unknown how many of these jobs were lost but the three producers alone shed 190 jobs, reflecting a dire state of affairs.
“The alcohol industry was amongst the first to close when COVID-19 arrived,” Molebatsi told Parliament.
“We had to start with the alcohol industry because of its high risk to COVID-19. Evidence shows that the virus spreads where people congregate and the alcohol industry is a major contributor to that.
“As a ministry we work together with the Health Ministry and the Presidential Task Team. We came together, they showed us the numbers and we agreed that we cannot continue to sell.”
Despite the bruising it has taken, technocrats within the Accountant General’s official still expect that the alcohol levy will reap P393.6 million this year via consumers. According to estimates made available recently, the alcohol levy, which presently sits at 35%, is expected to have collected P330 million from drinkers in the financial year that is due to end on March 31. In the financial year before that, the alcohol levy amounted to P401 million.
Observers, including Selebi-Phikwe West MP, Dithapelo Keorapetse, are questioning what the millions in the levy are actually doing for the struggling industry.
“How much is in the alcohol levy? Can the alcohol levy be used or has it been used to assist businesses and workers in the industry?
“Does the Fund Order permit assistance of businesses and workers or can it be amended to enable assistance of the liquor industry,” he recently asked the Trade Ministry.
Surprisingly, the millions contributed by alcohol consumers during the periods they have been allowed to buy their favourite drinks, are out of the reach of the struggling industry.
According to its rules, known as the Fund Order, the alcohol levy is used for public and school education campaigns on the harm of alcohol abuse, supporting rehabilitation of alcohol abuse victims, helping police with measures on drunken driving, reviewing practices relating to the sale of alcohol and others.
Even where it provides latitude to expand the rules, the order states that “other activities” may be included but these should be about curbing alcohol abuse or minimising its effect.
The order, therefore, does not provide for helping the industry in times of distress. In addition, the movement of the levy’s management from the Trade Ministry to the Health Ministry a few years ago, put more distance between the millions and the industry producing them.
“The alcohol levy is managed by the Ministry of Health, not us,” Molebatsi told Parliament.
“We would have to talk to that Ministry to see what can be done for the industry.”
The alcohol levies’ million, however, have been the subject of scrutiny by legislators, particularly after a 2018 report indicating that part of the P2.4 billion collected up to that point, had gone to activities and groups on the borderline of the Fund Order. Critics have said the alcohol levy has increasingly been used as “petty cash” with various expenditure having paper thin or tenuous connections with the Fund Order.
In 2015, then Gabane/Mmankgodi MP, Pius Mokgware demanded to know why the levy had been used to buy P5.3 million worth of vehicles for sexual and reproductive health campaigns and why other funds had gone to the Botswana African Youth Games Organising Committee. Then Health Minister, Alfred Madigele said the transfer to the sexual and reproductive health campaigns was at the discretion of the accounting officer responsible for the levy, but was justified.
“Alcohol is known to contribute to inconsistent condom use and unplanned pregnancy which could lead to unsafe abortions as well as maternal deaths,” he said.
On the transfer to the youth games, Madigele said the funds were for branding the youth games with messages on alcohol and substance abuse. The auditor general, meanwhile, has frequently raised concerns about possible violations of the rules around the alcohol levy. In her last report, covering the financial year ended March 2019, Pulane Letebele said lack of access to records was hampering auditors’ work.
“The auditors had not been able to ascertain that 80% of the levy which is allocated directly to the Consolidated Fund and 10% to the Department of Gender Affairs in the Ministry of Nationality, Immigration and Gender Affairs fell within the scope of the purpose of the Fund Order, namely, collection of levies “---- to promote projects and activities designed to combat alcohol abuse and minimise the effects of alcohol abuse ----“, as they did not have access to the records relating to the use of these funds by the said Ministries.”
In addition, the planned alcohol rehabilitation centres envisaged by the levy have not come to fruition, 13 years after the fund was first introduced.
The alcohol industry, meanwhile, is facing a period of uncertainty as government has said it cannot guarantee that there will not be further trade suspensions. The industry is fighting for tax exemptions to help shore up its books and has even asked for some form of compensation for the stock that expired during the sales bans.
KBL alone says it wrote off P40 million worth of expired stock last year and the industry has been asking for refunds of the tax it spent on stock that expired.
“We are looking at that, to see how they are owed,” Molebatsi said.
“There are calculations being made and we will see what do to.”
Molebatsi also revealed that the alcohol industry had not been left to die, but had benefited P22 million from the three month wage subsidy provided by government to distressed businesses last year. He said CEDA also loaned out P82 million to the industry, creating 142 jobs and sustaining others.
The consumers who power the levy, meanwhile, live in fear that the rising cases of COVID-19 could see yet another trade suspension, separating them from their favourite beverages for an unknown amount of time.