—As brewery opposes latest alcohol levy hike
Mathatisi Sebusi
THE Ministry of Finance and Development Planning and the Maluti Mountain Brewery (MMB) must dialogue over the proposed 2.5% increase in the alcohol levy which MMB says will further cripple its operations.
The recommendation for talks is contained in a report of the Economic and Development Cluster portfolio committee on the 2025/2026 budget.
The report said MMB had expressed objections to the proposed levy increase and asked for a reassessment.
The MMB had also urged the finance ministry to initiate collaborative discussions with industry stakeholders “to identify sustainable economic strategies that would facilitate both revenue generation and long-term economic development”.
The MMB’s concerns were formally presented to the committee following the budget speech by finance minister, Dr Retšelisitsoe Matlanyane, on February 19, 2025. In her address, she proposed a 2.5% increase in the alcohol levy alongside a 5% rise in the tobacco levy.
The budget speech emphasized the government’s intention to implement these levies incrementally to allow for necessary administrative adjustments and business adaptations.
The committee quotes MMB as complaining that the latest increase, on top of the substantial levy increases of 2023, would negatively impact its long-term economic prospects.
The MMB, founded in 1982, had since the 2003 increase had to freeze vacancies, lay off employees, and close a depot and liquor distribution centre.
The report said MMB had been a cornerstone of Lesotho’s economy, playing a vital role in economic activities and representing the nation on the international front.
“With a cutting-edge manufacturing facility, MMB produces premium beer for distribution through three depots and five distribution centres, along with exports to South Africa. The company currently employs over 245 individuals and has contributed more than M3 billion in taxes to the national treasury from 2016 to 2023,” the report indicated.
The report said MMB was now encountering significant risks due to fiscal policies that have inadvertently affected its business operations.
It noted that the implementation of the Tobacco and Alcohol Products Levy Act, 2023, set at 7.5%, had imposed a considerable burden on the alcohol industry, particularly impacting the beer sector’s competitiveness and sustainability.
The latest proposed increase of 2.5%, which would elevate the total levy to 10% since 2023, would only worsen these challenges, further straining MMB, its supply chain, and the overall economy.
The report underscored that the beer industry in Lesotho was a crucial contributor to employment, supporting one in every 45 jobs through its extensive value chain, making its sustainability essential for long-term economic development.
Furthermore, MMB’s capacity to compete with South African firms has been significantly hindered. While the South African beer market has seen a growth of 5.7%, MMB has suffered a decline of 21.8% in total volumes, primarily attributed to price differences that encourage cross-border illicit trade, the report noted.
The committee said MMB had also complained about the failure to effectively manage border control, which has allowed lower-priced South African products to inundate the local market, thereby undermining legitimate business operations and diminishing government tax revenues from customs and excise duties.
Although the latest levy may yield short-term revenue increases, its long-term effects could be detrimental, the committee noted.
The committee thus encouraged the finance ministry and MMB to sit down to explore solutions to this important issue.
In an interview a fortnight ago, Mapulumo Mosisili, the Head of Corporate Affairs and Legal at MMB, said the proposed 2.5 percent adjustment would affect the annual dividend payment of roughly M50 million to the government as the brewery’s revenues will be adversely affected.
“MMB distributes approximately M50 million in dividends to its shareholder, the government, each year. Due to the current pressures on the business, it is likely that dividend payments will decrease,” Ms Mosisili remarked.
The government had initially proposed to increase the alcohol levy by 15 percent in 2023. Following negotiations, it slashed this to 7.5 percent in October that same year. Mr Mosisili said this approach had been helpful as it resulted in a slight improvement in sales volume.
However, she cautioned that the latest proposed increase would pose challenges for the business, necessitating adjustments in alcohol pricing to ensure profitability.
“It is clear that, considering the pressures on the business, dividend payments are likely to decline,” Ms Mosisili said.
Following the initial implementation of the 15% levy in 2023, MMB had experienced a 20% drop in sales from March to May 2023.
While a modest recovery was observed after the levy was reduced to 7.5% in October 2023, it was not enough to recover the lost sales volumes.
MMB wants to avoid any further pitfalls and the committee encourages further discussions.
