Alcohol, tobacco levy up

MASERU-THE government will this year introduce an alcohol and tobacco levy at 15 and 30 percent respectively. This was revealed by the Minister of Finance, Thabo Sophonea, during his budget speech. The government says it could collect M286.6 million in levies. Players in the industry told parliament’s economic cluster last year that increasing the tobacco and alcohol levy by 15 and 30 percent would hit the industry hard. Sesupo Kgamang, the CEO of Maluti Mountain Brewery (MMB), told the committee that MMB’s success in paying dividends and taxes to the tune of almost M2 billion in the last six years would cease if the levy increase was implemented. MMB argued that due to Covid-19 pandemic the industry sales were to decrease by 15 percent, reducing government revenue to M1 billion instead of the previously projected M1.6 billion in the next three years without Covid-19. “The Covid-19 effects compounded with the levy will result in the alcohol industry declining by 27 percent,” Kgamang said. “Smuggling will also increase as Castle Lager 750ml will cost M17.25 vs M15.00 in South Africa,” he said. Kgamang also said that last year was the first year they had failed to pay dividends due to the impact of the pandemic. He pleaded with the government that the industry, which employs over 25 000 people, should not be subjected to further crisis with a levy increment. According to Thabo Qhesi, chairman of the Private Sector Foundation of Lesotho (PSFL), it is shocking to see that the government was still inclined towards increasing the tobacco and alcohol levy. “We did not expect the matter to appear in the budget, especially because discussions regarding the matter are not yet over,” Qhesi said. This, he said, is a clear indication that the government does not take into account the private sector’s concerns. “It is disturbing that despite concerns raised threatening Lesotho’s economy like the issue of alcohol smuggling that government still sees it fit to propose an increment,” he said. “All this when the government is the biggest shareholder in the industry does not make sense.” He added that having Kgamang as the CEO of MMB at this time was ideal as he had witnessed firsthand how the levy increment affected Botswana’s alcohol industry when the levy was implemented. “Hundreds of jobs were lost, and we really can’t afford that here as we are already struggling with an alarming unemployment rate,” Qhesi said. Meanwhile, Motseki Nkeane, chairman of the Lesotho Liquor and Restaurant Owners Association (LLROA), told thepost that they are very disappointed that government still sees it fit to push for a tobacco and alcohol levy increment. “As it is the industry is crippled. The Covid-19 induced new normal has eroded business. Many of our colleagues closed and many more are still to close business because the situation is terrible,” Nkeane said. “Even though the government has allowed us to operate, the working hours do not make sense for this industry. Monday to Thursday people are at work and by the time they come back we are closed,” he said. “During the weekend we are closed which is when people have time. So in essence alcohol businesses are open but economically they are still shut.” He added that the current operating hours have also created a conducive environment for illegal traders to smuggle alcohol. “We are not making enough to pay salaries and rent. Businesses are closing down yet the government even this year still comes back to a figure similar to 2019 and 2020 before the pandemic hit.” “This makes one to wonder if indeed they are aware of the situation on the ground,” Nkeane said. If the proposal is implemented, he said, the government would be killing this business altogether. Chaka Mosese, chairman of the Independent Basotho Off-sales Association (Ibosa), said that the government must work harmoniously with the private sector and not make decisions on their behalf. “Last year we were supposed to have thorough discussions about the matter but they asked that the discussion be pushed to January or February as they had a lot of work to do,” Mosese said. “Till today a date has not been issued, you can imagine our shock when we heard that tobacco and alcohol levy increment has been proposed without consulting us as the leaders of the industry,” he said. Lemohang Rakotsoane