BEER TAX CUT KICK-STARTS CASTLE LITE PRODUCTION

By MacPherson Mukuka

Zambian Breweries says it will resume local production of its popular Castle Lite lager next year as a response to government’s decision 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 is expecting to generate additional jobs in brewing, packaging and distribution of the brand.

Zambian Breweries Managing Director Annabelle Degroot said the decision to restore excise tax to its previous level has given the industry renewed confidence in market conditions.

She said action will stop illegal smuggling, adding that volumes will grow and the company will have a solid basis on which to invest in local manufacturing.

She said high excise tax provided an incentive for smuggling that resulted in Illegal imports of Castle Lite accounting for twice that of legally imported product.

Ms. Degroot said 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).

She has indicated that local sourcing is a core part of the company’s strategy and the move by the government to reduce duty on clear beer will serve to reinforce the strategy.

She said in order to meet the demands of manufacturing Castle Lite in the country, the company will increase the amount of barley it purchases from local farmers.

Zambian Breweries had previously stopped manufacture of Castle Lite in Zambia as volumes fell below the critical 100,000 hectoliter level.

The company’s move comes in response to the government’s decision in the 2016 Budget to reduce excise duty on clear beer from 60 percent to 40 percent with effect from January 1 in order to spur local manufacturing, promote investment and curb smuggling.