88 lose jobs as Lobatse opaque drinks plant closes down
The country’s sole producer of beverages, Kgalagadi Breweries Limited, laid off 88 employees this week following a decision to close down its opaque drinks plant in Lobatse. The development was brought about by an untenable trading environment that has been characterised by an unfriendly and ever increasing alcohol levy, currently standing at 55 percent.
The plant’s closure brought to two the numbers of manufacturing plants shut down in just two years, following the closure of their Chibuku and Mageu manufacturing plants at the KBL Palapye brewery in 2013.
“The step from 50 to 55, we believe, was one too far,” said KBL MD, Johann de Kock at an engagement for media and financial analysts, recently. He added that the levy, for the first time went above the excise rate. The traditional beer regulations introduced in 2012, which bans sale of brews from homesteads has also hit the Chibuku business where it hurts most.
The opaque drinks sector makes an integral portion of the company’s business, contributing between 20 and 25 percent of sales. De Kok said that the number of small traders has decreased from 10 000, across the country, to only 750 depot operators.
December is seemingly the customary increase month as the levy reached 45 percent from the initial 30 percent. In December 2013, it went up to 50 percent after a five percent increase. This week, Government imposed a further 10 percent on the levy, bringing it to 55 percent.
The introduction of the alcohol levy which is directly attributable to President Lt Gen Ian Khama’s disdain for use of alcoholic drinks which he blames for evident social ills. Initially, President Khama had announced a 70 percent levy but settled for 30 percent but the trajectory of the levy suggests that it will reach the intended 70 percent.
In a statement issued by the brewer this week, the company said: “Generally, the entire KBL Opaque Beer portfolio has suffered sustained challenges in its trading environment as a result of the Traditional Beer Regulations that were implemented in July 2012; effectively banning the sale of traditional beer in residential areas that previously represented approximately 80 percent of trading channels for KBL Opaque Beer Division’s traditional heritage product, Chibuku. Other factors that ultimately contributed to this untenable situation relate to licensing issues as well as the unavailability of land to set up Chibuku distribution points.
The company also noted that: “it is increasingly the lower income consumers who have been most affected. Notably, with this reduction in Chibuku outlets, the traditional consumers of the product have turned to potent and often dangerous illicit brews that are produced under poor quality and questionable hygienic standards.”
However, De Kok said that all is not lost as the growth of the drink that is currently driving sales, Black Label, is reflective of the traditional Chibuku drinker who has not upgraded to clear beer or starts off with Chibuku and then takes clear beer.
De Kok, further asserted that Sechaba Brewery Holdings and KBL are still profitable and the business will continue, as evidenced by the capital expenditure of P600 million over the three years, which the company continues to layout. Multinational brewer, SABMiller, owns 40 percent of KBL.
According to De Kok, “water and electricity is a key leverage for us when we engage with Government,” adding that “if they don’t do it (provide electricity) we will most probably have to find a way to do it ourselves.” De Kok said that the company is considering sourcing local coal for electricity generation though it would come at great cost because it needs to be washed to bring it to desirable quality levels, this move being an alternative to sourcing the coal from South Africa, which currently is the case.
Last week in Parliament, Assistant Minister of Health Dr Alfred Madigele revealed that Kgalagadi Breweries Limited (KBL) has paid over P760 million to Botswana government under the Alcohol Levy since the levy was introduced.
Madigele further explained that the money is collected by Botswana Unified Revenue Service (BURS), routed through the Accountant General, who then disburses the funds to respective beneficiaries in the proportions of 85 percent to Government Consolidated funds, 10 percent to Gender Affairs Department and 5 percent to the Alcohol Campaign in the Health Ministry.
The Assistant Minister however expressed ignorance of imminent job losses caused by the alcohol levy. “My ministry is not aware of the impending retrenchment exercise at Kgalagadi Breweries Limited KBL or the number of jobs that are on the line,” as quoted in Parliament.
The company’s financial results, which were released recently saw the company’s profits rise 7,4 percent against volume decreases of 1 percent in clear beer and soft drinks and 11 percent for opaque drinks, respectively.
This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.
“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.
Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.
A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.
Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.
A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.
Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.
In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.
The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.
In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.
Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.
The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”
In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.
Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.
The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.