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Alcohol levy brings more job cuts at KBL

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.

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Business

Dark days as Aviation industry collapses

22nd November 2020
Air Botswana

As the Aviation industry takes a COVID-19 pummeling, for Africa the numbers are staggering, Chief Executive Officer of the International Air Transport Association (IATA), Alexandre de Juniac has observed.

Speaking recently at the African Airlines Association (AFRAA) has been hosting an Annual General Assembly, de Juniac said traffic is down 89% and revenue loses are expected to reach $6 billion. And this figure is likely to be revised downwards in the next forecast to be released later this month. “But the impact is much broader. The consequences of the breakdown in connectivity are severe,” he surmised.

According to de Juniac, five million African livelihoods are at risk while aviation-supported GDP could fall by as much as $37 billion. That’s a 58% fall.

“We have a health crisis. And it is evolving into a jobs and economic disaster. Fixing it is beyond the scope of what the industry can do by itself.”

He said they need governments to act, “And act fast to prevent a calamity.”

“We are in the middle of the biggest crisis our industry has ever faced. As leaders of Africa’s aviation industry, you know that firsthand. Airline revenues have collapsed. Fleets are grounded. And you are taking extreme actions just to survive. We all support efforts to contain the COVID-19 pandemic.  It is our duty and we will prevail. But policymakers must know that this has come at a great cost to jobs, individual freedoms and entire economies,” he said.

de Juniac used the AFRA general assembly platform to amplify IATA’s call for governments to address two top priorities: “The first is unblocking committed financial relief. Airlines will go bust without it. Already four African carriers have ceased operations and two are in administration. Without financial relief, many others will follow.”

Over US$31 billion in financial support has been pledged by African governments, international finance bodies and other institutions, including the African Development Bank, the African Union and the International Monetary Fund.

Unfortunately de Juniac pointed out, in his words, “Pledges do not pay the bills. And little of this funding has materialized. And let me emphasize that, while we are calling for relief for aviation, this is an investment in the future of the continent. It will need financially viable airlines to support the economic recovery from COVID-19.”

The second priority, according to IATA is to safely re-open borders using testing and without quarantines.

“People have not lost their desire to travel. Border closures and travel restrictions make it effectively impossible. Forty-four countries in Africa have opened their borders to regional and international air travel. In 20 of these countries, passengers are still subject to a mandatory 14-day quarantine. Who would travel under such conditions?” de Juniac quizzed rhetorically.

He suggested that countries should adopt systematic testing before departure provides a safe alternative to quarantine and a solution to stop the economic and social devastation being caused by COVID-19.

He admitted that it’s a frightening time for everyone, not least the millions of people whose livelihoods depend on a functioning airline industry. Right now, de Juniac said there essentially is no airline industry. He cited the example that China’s largest airlines sound optimistic, but in a vague way. “They gave no hard data about current yields, loads, or forward bookings, discussing only developments in 2019. Boy, does that seem like ages ago.”

Aviation’s darkest days

The IATA CEO said these are the darkest days in aviation’s history. “But as leaders of this great industry I know that you will share with me continued confidence in the future.

Our customers want to fly. They desire the exploration that aviation enables. They need to do international business that aviation facilitates. And they long to reunite with family and loved ones.”

He said the industry will, no doubt, be changed by this crisis, but flying will return. “Airlines will be back in the skies. The resilience of our industry has been proven many times. We will rise again,” he said.

de Juniac said Aviation is a business of freedom. “For Africa that is the freedom to develop and thrive. And that is not something people on this continent will forget or lose their desire for.”

 

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Business

Inflation increased to 2.2% in October 2020

22nd November 2020

Headline inflation increased from 1.8 percent in September to 2.2 percent in October 2020, but remained below the lower bound of the Bank’s medium-term objective range of 3 – 6 percent, and lower than the 2.4 percent in October 2019.

According to Statistics Botswana, the increase in inflation between September and October 2020 mainly reflects the upward adjustment in domestic fuel prices {Transport (from -3.9 to -2.5 percent)}, which is estimated to have increased inflation by approximately 0.29 percentage points.

“There was also a rise in the annual price increase for most categories of goods and services: Alcoholic Beverages and Tobacco (from 6.2 to 6.6 percent); Clothing and Footwear (from 2.5 to 2.7 percent); Communications (from 0.6 to 0.9 percent); Housing, Water, Electricity, Gas and Other Fuels (from 6.4 to 6.6 percent); Recreation and Culture (from 0 to 0.2 percent); Miscellaneous Goods and Services (from 0.7 to 0.9 percent); Food & Non-Alcoholic Beverages (from 4.2 to 4.3 percent); and Furnishing, Household Equipment and Routine Maintenance (from 2 to 2.1 percent). Inflation remained stable for: Education (4.7 percent); Restaurants and Hotels (3 percent); and Health (1.5 percent). Similarly, the 16 percent trimmed mean inflation and inflation excluding administered prices rose from 1.8 percent and 3.1 percent to 2.2 percent and 3.4 percent, respectively, in the same period.”

[Source: Bank of Botswana]

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Business

BDC injects further P64 million into Kromberg & Schubert

22nd November 2020
BDC

Botswana Development Corporation (BDC) has to date pumped a total of P100 million into the expansion of Kromberg and Schubert, a car harnessing manufacturing company, operating from Gaborone Old Naledi.

At the official ground breaking ceremony of the company‘s new warehouse today, BDC Managing Director, Cross Kgosidiile revealed the wholly state owned investment corporation has pumped P64 million into the expansion which entailed building of the new warehouse.

Kgosidiile explained that this follows another expansion project which was successfully launched in 2017, in which BDC invested P36 million, bringing the total investment into Kromberg at P100 million. The MD also acknowledged Botswana Investment and Trade Centre (BITC) as a partner in the project and for having facilitated the acquisition of the land.

 

Giving a keynote address, Minister of Investment, Trade & Industry, Peggy Serame highlighted the importance of infrastructural development in growing the local manufacturing sector and transforming the economy of Botswana.

Serame underscored the value of strategic partnerships between Government and the private sector, noting that when the two work together and pull together in one direction results will be evident and jobs will be created.

“With the prevailing conditions of depressed economy occasioned by COVID-19 pandemic, government is reliant on entities like BDC to bring in revenue and acceleration of private sector development in line with its mandate and strategic plan. This plan is supported by the need to invest in growth sectors and accelerate the implementation of the Economic Diversification Drive,” Serame said.

Minister Serame noted that the partnership between BDC and Kromberg & Schubert begun in 2017 when the P36 million, 4100 square metres factory expansion for the company was launched.

 

She said the launch of the 7320 square meters factory expansion, to be built at the tune of P64 million signals the continuation of the good partnership between the two companies.

 

“I must commend BDC for their continuous efforts to build partnerships with the private sector geared towards contributing to economic development of this country.”

 

Minister Serame also added that BITC through its robust investor aftercare programme continues to provide value added and red carpet to Kromberg and Schubert under their One Stop Service Centre.

 

“In this regard BITC facilitated acquisition of land to enable this expansion. I therefore would like to commend BITC for their timely facilitation to make this expansion possible,” the minister said.

 

Kromberg & Schubert was incorporated in Botswana in 2009; The Company has grown to asset its position as a significant player in the regional automotive industry value chain.

 

The company is also a critical player in the economic development of Botswana, it currently employs 2100 Batswana across its operations. Kromberg exports on average P2.0 billion worth of goods annually, contributing significantly to foreign exchange.

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