Levies knock down Sechaba performance

SHARE   |   Sunday, 06 July 2014   |   By Kabelo Adamson
Kgalagadi breweries Kgalagadi breweries

The imposition alcohol levy is severely impacting on the operations of Sechaba Brewery Holdings Limited. The company released its audited financial results for the year ended 31 March 2014 last week in which the impact of Traditional Beer Regulation and the Levy on Alcoholic Beverages is openly highlighted.

Towards the end of 2013, the government imposed a further five percent levy on alcoholic beverages to take it to 50 percent and the impact was immediately noticed as the local brewer anticipates a bleak future with more levies expected in the future. Sechaba Holdings Limited, which owns 60 percent shares in two subsidiaries, Kgalagadi Breweries Limited and Botswana Breweries Limited, announced in its financial report that sales of alcoholic beverages declined by three percent compared to the previous year, and this has been blamed on the continued execution of the Traditional Beer Regulations and the Levy on Alcoholic Beverages.

Total volumes for the year are said to have remained the same as in the past year which is believed to have been driven by an increase in export sales as local sales crashed by 2.4 percent from the prior year. Competition in the category of Sparkling Soft drinks has led to Sechaba noticing a one percent decline as competitors are believed to be selling lower quality brands at prices well below KBL prices.

As the effects of Traditional Beer Regulations continue to be felt by KBL, the brewer says it has since intensified its efforts to engage local authorities in an attempt to formalise and establish its distribution network in the spirit of the regulations.

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Due to tax and the levy - which resulted in increment of prices - the company observed a 6.5 percent increase in revenue with the operating profit 7.3 percent better than the preceding year.
Introduced about five years by ago by the government as a means to curb excessive alcohol consumption, the alcohol levy has since become unpopular with Sechaba Brewery Holding through its subsidiaries and alcohol consumers alike as the government continues to rake in millions.

Reports emerged last year that KBL was considering relocation to neighboring South Africa in the wake of hostile operating conditions.