HomeBusinessExcessive duty forces distillers out of business

Excessive duty forces distillers out of business

 

Members of the Local Manufacturers Association of Zimbabwe forwarded a petition to the Ministry of Finance calling for a review of the tariffs.

The ministry rejected the proposals prompting companies to either shut down or relocate to neighbouring countries citing the unsustainable operating environment.

Standardbusiness understands that companies that have completely closed down and stopped production include VHI Distillers, Statia Manufacturing, Kenge Manufacturing, Delphic and Brecko.

“As manufacturers, we have been exposed to an awkward position, said VHI Distillers CEO, Ben Holtzhausen.

“It’s no longer viable to continue production and we have subsequently terminated our contracts with our workers. We are considering relocating to other countries.”

Holtzhausen said the situation was worsened by the fact that the current tariffs were only benefiting multinational companies resulting in the price increase of locally manufactured spirits and the reduction in duty levied on the more expensive imported products.

Kenge Manufacturers has since retrenched part of its workforce because of viability problems and has been operating at a loss for the past four months, making it difficult to pay basic overheads.

“We have so far retrenched 36 workers, closing down and relocating to countries like Mozambique or Botswana would be the only option left for us if the Ministry of Finance fails to reconsider their plight,” said Jeanee Gordon, the director of Kenge Manufacturing.

Emmanuel Katsvamutina a director at Statia Manufacturing said they have since stopped production after making a survey on the market and opting to venture into toll manufacturing for South African Companies.

“Toll manufacturing is now the only available option for us.” he said.

“We will focus more on importing while we are negotiating deals with South African companies to do manufacturing for us since it is no longer profitable in Zimbabwe”.

He also said they were waiting for a response from the Ministry of Labour to retrench at least 157 workers.

Government has in the past admitted that despite its negative attributes, alcohol played a big part in the country’s economy.

“The government needs to consider the harmful and unfortunate consequences that these current rates have had on the unemployment rate, so far approximately 300 people have lost their jobs”, said Ethan Cader a manager at VHI distillers.

 

Successive budgets raised duty on alcohol

In August last year, the Ministry of Finance raised the duty on locally produced and imported alcohol beverages to between 10% and 40%, negatively impacting on distillers.

In this year’s budget, Finance minister Tendai Biti put the excise duty at US$2 per litre of absolute alcohol contrary to the Statutory Instrument which pegged the duty at US$2 per litre of the finished product.

The latter saw duty rising instead of going down and this meant local distillers had to pay

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