ZAMBIAN Breweries will resume local production of its popular Castle Lite lager in August in direct response to Government’s move to reduce excise tax on clear beer.
The company has announced an initial US$2 million investment in new packaging equipment to resume production, and was expecting to generate additional jobs in brewing, packaging and distribution of the brand.
Corporate affairs director Ezekiel Sekele told Daily Nation in an interview that the move comes in response to the Government’s decision in the 2016 Budget to reduce excise duty on clear beer from 60 per cent to 40 per cent with effect from January 1 to spur local manufacturing, promote investment and curb smuggling.
Zambian Breweries had previously stopped manufacture of Castle Lite in Zambia as volumes fell below the critical 100,000 hectolitre level and started importing the product from South Africa.
Mr Sekele said high excise tax provided an incentive for smuggling that resulted in illegal imports of Castle Lite, accounting for twice that of legally imported products.
He said the smuggling cost the company an estimated K24 million in lost revenue in the last financial year, forcing the firm to retrench over 200 employees.
“The decision to restore excise tax to its previous level has given the industry renewed confidence in market conditions. We now believe illegal smuggling will stop, volumes will grow and we have a solid basis on which to invest in local manufacturing,” Mr Sekele said.
Meanwhile, Mr Sekele said the company would not reduce the price of clear beer despite a 20 per cent reduction on exercise duty in the 2016 national Budget.
He said the price of a 375ml of Mosi and Castle bottle would remain the same because the firm had reduced the price in 2015 despite the exercise duty being at 60 per cent. Mr Sekele however said the brewing firm would consider price reduction of its 340ml products once a Statutory Instrument (SI) has been issued by the Minister of Finance.
He said the firm had already been informed and would continue engaging Government through the ministry on clear beer prices.
The reduced excise tax rate will drive Zambian Breweries’ investment in manufacturing in the country and have a knock-on effect in terms of additional employment, and increased purchase of barley from local farmers for the company’s new US$32 million malting plant being built at the Lusaka-South Multi-Facility Economic Zone (MFEZ).
“Local sourcing is a core part of our strategy and the move by the Government to reduce duty on clear beer will serve to reinforce this strategy,” Mr Sekele said.