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Over 150,000 jobs at stake if Treasury effects proposed changes on recoverable excise duty – KBL

NAIROBI, Kenya, Jun 3 – Kenya Breweries Limited has petitioned the National Treasury to delete the proposed reduction on excise duty remission from 80 percent to 60 percent.

In a letter addressed to the Ministry’s Cabinet Secretary Ukur Yatani, KBL wants Treasury to let the excise duty remain unchanged, as per the current legal notice 52 of 2017.

KBL Managing Director Jane Karuku said the proposal to reduce excise duty remission has a net negative impact of Sh16.5 billion annually to the keg value chain.

Karuku said it will also lead to total direct job losses of over 150,000.

The losses, according to Karuku, exclude the impact of Covid-19, which has seen the 100 percent collapse of the Keg beer trade, with massive losses in revenue for both government and KBL.

“With the reduction in remission to 60 percent post Covid-19, we estimate the demand for Keg beer, which is made exclusively from Sorghum grain, will drop by 84 percent, from pre Covid-19 FY 2019/20 annual projection of 3.7million hectolitres to a post covid-19 FY2020/21 volume of 0.6 million hectolitres. The reduction will be due to excise-driven increase in the price of a single 300ml serve of Keg beer by 35 percent of Sh10 from an effective consumer price of Sh28.50 to Sh38.50.”

The company says in addition, the levels of illicit have been much higher than the pre-Covid levels of 44 percent with the closure of bars and no take away keg beer alternative.

“We understand the need for government to recoup some of the loss in revenue due to tax measures taken by cushion Kenyans from the economic losses from covid-19 pandemic. However, this measure will be more costly to all stakeholders without any commensurate benefits to any of them. Therefore, we submit that this proposal be deleted,” the Managing Director said.

KBL’s Sh14 billion Keg plant in Kisumu remains closed since 23rd March 2020 due to closure of bars and the fact that Keg has no take home option.

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According to the company this has led to 100 percent collapse of the Keg value chain with increase rate of unemployment among women and hundreds of thousands of youth who benefit from it.

The impact of the collapse has been manifested in the unprecedented increased incidents of illicit brew consumption.

Additionall, Karuku said this will only get worse with excise-led increased Keg beer prices once bars are reopened since low income consumers who survive on daily wage and look for alternative to informal sources of alcohol are severely affect. She added that some have resulted to consumption of illicit brew and surrogate alternatives such as hand sanitisers.

Treasury slashed the remission of excise duty targeting beer made from sorghum, millet, cassava or any other product made in Kenya from 80 percent to 60 percent.

On 29th May 2020, the National Treasury and Planning posted an online public notice, inviting comments on the draft Excise Duty (Remission of Excise Duty) (Amendment) Regulations, 2020.

The regulation is proposing to amend Regulation 2 of the Excise Duty (Remission of Excise Duty) Regulations, 2017 as follows: – “deleting the words “eighty percent” appearing in paragraph (1) and substituting therefore the words “sixty percent”.

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