East African Breweries Limited (EABL) has warned of potential mass layoffs in the alcoholic beverage industry if the proposed Finance Bill 2024 sails through in Parliament.
The company’s corporate relations director, Eric Kiniti, warns that over 1,000 jobs could be lost across the sector if the government goes ahead with its plan to increase taxes on the industry in the coming financial year.
While the bill proposes some relief for beer lovers, spirits, which account for 69% of consumption, are set to face significant price hikes if the bill is passed.
In the proposal, the government seeks to increase taxes on select beers, particularly those with an alcohol by volume of above 6.33%.
However, the real impact will be felt in the spirits category, where consumers will have to pay close to or more than double the current prices.
Impact on the Local Manufacturing Industry
EABL fears this will make locally manufactured products uncompetitive compared to imports, leading to job losses across the industry.
Also Read: Finance Bill: Bread Prices Set to Increase as Beer Lovers Enjoy Lower Prices
“Our products here will be less competitive, they will be more expensive…which means that it will be cheaper for an alcoholic player in the country to import as opposed to manufacturing locally, that has an impact on jobs.”
“We are talking about over 1,000 jobs across the industry, and that will mean that you’re incentivizing importation as opposed to local value addition,” said Kiniti.
Impact of the Finance Bill on Consumer Behavior
Additionally, the company expressed its concern that the price hikes will drive consumers to illicit brews.
For instance, a 250-millilitre bottle of Chrome vodka could see a 70% price hike, from the current Ksh.300 to Ksh.600.
“The consumer who consumers this product is the low-income earner, and they are the ones who are trying to look for something affordable that is safe, and now when you put it out of reach it means that they start consuming illicit,” noted Kiniti.
The company also cautions that the tax increases could lower government revenue collection from spirits by at least 3 billion shillings, as the alcoholic beverage industry contributes around 30% of the total 167 billion shillings collected from excise taxes.
“Government collects around Ksh.167 billion in excise, alcohol industry contributes about 30 percent of that which is about Ksh.51 billion.”
“So, we expect that the quantum will be lower than the Ksh.51 billion they collected in the last one year,” added Kiniti.
Another Company Raises Concerns
Notably, EABL is not the only company that has raised concerns regarding the tax implications outlined in the proposed Finance Bill 2024.
The Associated Battery Manufacturers (ABM East Africa), a well-established battery company with a 61-year legacy, has expressed fears over the potential closure of its operations in Kenya if the Finance Bill 2024 is enacted.
In a statement, the company’s CEO, Guy Jack, expressed concerns regarding the proposed ECO tax of Ksh750 per kilo of battery.
Also Read: Popular Battery Company Risks Closure After 61 Years Over Tax Hikes
He emphasized that such a tax structure could lead to a significant increase in retail prices, ultimately jeopardizing the industry’s sustainability.
ABM highlighted the potential repercussions, warning that the industry could face imminent collapse if the proposed tax measures are implemented without due consideration for the sector.
“One can quickly see that this is completely unsustainable and will result in the immediate destruction of the industry and subsequent closure of the entire Associated Battery Manufacturers Group,” the statement read in part.
Follow our WhatsApp Channel for real-time news updates.
https://whatsapp.com/channel/0029VaB3k54HltYFiQ1f2i2C
