The alcohol industry this week raised their collective glasses in delight when the tortuous alcohol levy was slashed for the first time in the 10 years since its introduction. Staff Writer, MBONGENI MGUNI finds that not all the tears that marked this week’s announcement, were of joy
A week ago, assistant trade minister, Moiseraele Goya sat in the midst of a roomful of the country’s most prominent liquor traders and assured them that all efforts would be taken to avoid a shock reduction of the 55% alcohol levy.
Members of the Botswana Alcohol Industry Association (BAIA) had explained to Goya that while a reduction in the punitive levy would be most welcome, a sudden drop would lead to pricing losses on inventory already in hand. BAIA members represent the country’s largest producers, wholesalers and retailers of alcohol.
Goya said the Health Ministry, which is leading the consultations on reviewing the levy, would be appropriately advised.
“I will take it up with my counterpart at Health, to explain that the industry is saying ‘don’t do it before the end of this year’,” Goya said.
“What I know is that the Health Ministry is doing consultations this year, but their intention is to revise the levy next year, which is what you as the industry also want.”
As countrywide consultations on the 10-year old instrument gather momentum, all indications have been that the levy would be substantially reduced or done away with altogether.
The liquor producers and traders were aware of this and sought assurances that the reduction would be a phased approach, allowing them to sell off existing inventory without incurring losses.
Then on Wednesday, by way of the Government Gazette, it was announced that the levy had been slashed to 35%, with adjustments to the mechanism used to calculate it as well.
“We are all surprised, more so that we had a meeting with the assistant trade minister last week,” BAIA chair, Mothusi Molokomme said.
“It’s a shock and we are still seeking clarity from government.
“We are not saying the reduction is bad,
For major liquor traders such as Sefalana, the 20% cut in the alcohol levy is damaging.
According to the CEO, Chandra Chauhan, the decision could not have come at a worse time.
“At Sefalana, between Independence and Christmas, we carry between P80 and P90 million of liquor stock and if there’s a reduction, we cannot sell that stock at a mark up,” Chauhan said.
“We would have to take a huge hit on the price we bought the stock for. We need at least four months to liquidate our stock.
“September to December is our peak period and as an industry we usually carry large inventories. It is not the right time to implement any abrupt measures.
“As you had said, you are still consulting but we are saying a notice period is essential.”
While the liquor traders count their potential losses, imbibers have been unable to restrain their elation at the latest developments.
Mmegi broke the story of the alcohol levy’s reduction at noon on Wednesday and by Press time yesterday, it had been seen by 182,480, with more than 1,200 comments and 1,000 shares.
Overwhelmingly, reactions were in favour of the reduction, with many dismissing the traders’ concerns.
“BAIA people are not serious. When the levy was introduced, there was no waiting period to clear stock bought at a cheaper price.
“They made a lot of unexpected profit then,” Onkay Ndulamo wrote.
“When the levy was introduced, they didn’t need a notice. In business, you lose some, you win some. They must learn,” Rebaone Monekwe wrote.
While it remains to be seen when the effects of the levy’s reduction will trickle down to consumers, for many imbibers, it is enough that the boozegates have been opened.