Beer distributors have appealed to the government to suspend a planned increase of excise duty on 31 products. They said the move was to support the revival of liquor related businesses which are among the hardest hit by the financial crisis brought about by the Covid-19 pandemic.
According to the distributors, the directive to close bars had affected the businesses negatively, resulting in a 39 percent loss worth about Sh 21 billion since March.
The Kenyan law demands that excise duty be adjusted on specific items upwards to coincide with the annual inflation rate or the 12 months prior to reflect the cost of living. The Kenya Revenue Authority in August said it would increase the excise tax on alcohol on the basis of the inflation rate figures from the financial year 2019/2020.
In a statement made to the press, the distributors’ representatives Esther Muthoni and Mr. Maina Gikonyo said that their businesses had been affected and most of them were facing financial difficulties and were even unable to pay off their loans.
“With infections falling, we are optimistic that bars will be re-opened under strict anti-Covid protocols.
“Our market has witnessed a downturn with about 13,500 pubs permanently closing for inability to pay rent and employee salaries,” said Ms Muthoni.
The distributors from more than 70 alcohol distributing companies attributed the fall in revenue collected from excise duty by 17 percent to the effects of Covid-19.
“Already, 30 percent of the bars that were operating before Covid-19 will not be reopening as they constitute the businesses that have collapsed due to the general effect on businesses brought on by the pandemic and the measures to limit its spread,” said Muthoni who is a director at alcohol distributor Jukoma Enterprise.
Last week, the government selected a few bars such as Sabina Joy and Green Club as Pilots to assess the observance of Covid-19 protocols while in operation. Players in the market are urging the government to reopen their bar and restaurant businesses fully to revive the ailing sector.
The distributors said reopening the sector with inflated alcohol prices would be counterproductive as Kenyans generally were still reeling from the effects of an economic slowdown. They referenced South Africa as a great example on how to revive the sector. The South African government cushioned the alcoholic sector by deferring the payment of excise duty to boost sales despite the tough restrictions imposed.
“We are looking forward to a resumption of business soon. If the government is of the view that infection rates have declined well enough, but we are concerned that the sector will face difficulties getting back on its feet if the increased taxes kick in at the same time,” said Gikonyo, a director at beer distributor Rwathia.
The distributors said they expected slow recovery in the sector given that the Covid-19 protocols will allow pubs to host just a few patrons at a time.