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The booze ban contagion

Mindboggling figures point to staggering losses all-round and an industry with a far-reaching presence in the lives of many, KITSO DICKSON reports

mm by Staff Writer
October 5, 2021
in News
Reading Time: 4 mins read
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The booze ban contagion
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The liquor sector is a multimillion-pula industry in Botswana. It forms a significant value chain that sustains many livelihoods.

KBL is the largest industry player as a premier brewer and leading distributor of beer. It operates two traditional beer breweries in Gaborone and Francistown, one clear beer brewery in Gaborone and six sales and distribution depots in Botswana with an annual brewing capacity of 156 765 300 litres in 2019 and 110 096 000 litres in 2020.

Its portfolio of beer brands meets the needs of a wide range of consumers, with a substantial market share in 2019 and 2020 being the total KBL sales volume divided by the total industry sales volume.
According to court files, KBL says it currently employs 607 people with an annual salary bill running into tens of millions. These 607 people support approximately 2000 people in addition to themselves from their remunerations paid to them by KBL. Many other Batswana are employed by the liquor sector.

Studies show that the alcohol industry in Botswana provides direct employment to approximately 50 000 people. Direct employment refers to people who are employed in the production, distribution and sale of alcohol beverages. According to court files, the entire value chain itself supports about 200 000 people with indirect employment, meaning positive spillover effects.

In the course of trading, KBL has been generating revenue running into millions for the government in the form of tax and other levies. KBL uses two critical inputs in its production process, being water and electricity. This effectively implies that Water Utilities Corporation (WUC) and Botswana Power Corporation (BPC) are directly affected by the closure of KBL and stand to lose millions per month if it continues.

Over the years, KBL has paid substantial amounts to the BURS in the form of excise tax, levies, VAT, income tax and other taxes annually. Any limitation on KBL’s business, even if stemming from a prohibition on a downstream business, imperils this source of revenue for the government. At present KBL estimates that losses to BURS arising from the previous alcohol bans to be substantial and devastating to the fiscus.

In 2020, revenue collected by two parastatals from KBL had declined by a quarter of a billion pula owing to alcohol trading restrictions, according to figures provided by government. Combined, BURS and WUC collected P620, 432,173 in 2020 compared to P842, 678, 575 in 2019. This represents a 26 percent decline in collections.

BURS alone collected P605,766, 315 compared to P823, 405, 556. WUC collected P14, 665, 858 in 2020 compared to P19, 273, 019 in the previous period. Elsewhere, KBL spent P2, 047, 682 on Morupule Coal Mine Limited in 2020. This was a decline compared to P2, 673, 939 in 2019.

By 25 January 2021, KBL had sent 95 percent of its work force home due to the ban on alcohol. The majority of these employees were on unpaid leave while the contracts of 126 fixed term contractors were not renewed, effective 31 January 2021. KBL has told the court that the current ban would mean that employees are placed on unpaid leave again.

As a result of the 2020 liquor ban, KBL reduced its suppliers from 469 to 384, many of whom rely solely on income received from KBL. About 85 local companies were cut from the value chain. The total spend on suppliers dropped from P1,079,389,167 in 2019 to P784, 040,862 in 2020.

Total spend by the brewer fell by P227, 219, 679. This includes spend on marketing, production materials, services and maintenances.

By January this year, KBL lost about P880 million in total as a result of trading restrictions.

P530 million revenue was lost (this equates to the three months cumulative ban in 2020) while P340 million was lost in 2021 (during the two-month ban). With the current ban, this could exceed a billion pula. Write-offs of expiries were valued at P40 million.

As the liquor industry is a vital sector that absorbs a lot of labour, it is an important cog of Botswana’s burgeoning manufacturing sector. During periods when the government banned the sale of alcohol, ongoing trials of a sorghum localisation project in collaboration with BAMB were affected. A contract was signed between the two entities for KBL to source sorghum for Chibuku production from local farmers.

Every time a ban is announced, KBL is forced to suspend the ongoing trials, which hampers transition into a full-fledged beneficiation project for local farmers. Further, glass collection of returnable bottles is hindered by closure of retail outlets.

In addition to KBL, the alcohol industry constituted the manufacturers such as Okavango Craft Brewery and Big Sip Company, as well as retailers such as wholesalers, distributors, bars and bottle stores. Statistics provided by the government indicate that Okavango Craft Brewery lost in excess of P2,000,000 in expenses and additional costs with extremely little return during the alcohol ban.

However, this did not count for the loss of revenue that was missed out as a result, which the trade ministry said amounts to a potential profit of P140 000/month and additional sales and job creation in their bars and restaurants, which were not opened. The loss of revenue from a potential of 4000l of craft beer a month over three months was over P1 million.

Big Sip which was established in 2017 and started operations in 2018 was liquidated as a result of unfavourable trading conditions. The investment level of the company was P4 million.

As at March 2020, there were 4,893 licensed liquor outlets with an employment level of 15,910 in Botswana. About 1,191 restaurants employed 23,820 people. As a result of alcohol ban, one manufacturing company out of the three, the Big Sip Company, closed down and liquidated while 650 liquor outlets also closed shop.

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