By Staff Reporter
‘Mangaka Mothupi of Teyateyaneng Ha Motjoka is a businesswoman trading in liquor and an assortment of soft drinks. She also runs a grocery café in the administrative capital of the Berea district, about 40km north-east of Maseru.
In recent months, her business has not been doing well and has been steadily sliding into an abyss as patrons continue to dwindle.
She attributes the downward spiral to the Tobacco and Alcohol Product Levy Act of 2023 which has impacted her livelihood and those of her four employees.
The new alcohol and tobacco law came into effect on March 1 this year, much to the chagrin of traders in the liquor and tobacco industry, who blame the piece of legislation for killing their businesses. The levy is a tax imposed on sale of tobacco and alcohol products at all stages of business, and stands at 30 percent and 15 percent, respectively.
Mothupi has already laid off two of her employees because her business was suffering losses and she could no longer afford to pay workers their salaries.
“The introduction of the new levy on these products (alcohol and tobacco) has adversely affected my business. Due to the decline in sales, I have retrenched two employees whose livelihoods depended on their monthly wages,” she told theReporter.
One employee was working in the café and the other in the bar; both businesses are housed in her small complex at Ha Motjoka.
“Liquor sales have plummeted spectacularly. I used to close off at midnight but I now sign off at 8.00pm due to low business,” Mothupi laments.
The country’s brewer, Maluti Mountain Brewery, recent hiked the prices of beer. The new prices, as of August 1 2023, stand at M19, M24 and M25 for Castle Lager, Black Label and Castle Milk Stout respectively. This means new prices at bars range from M23 to M30.
‘Mangaka’s case epitomises the clamour over job losses in the liquor and tobacco business since the introduction of the levies.
The president of Lesotho Liquor and Restaurant Owners Association (LLROA), Motseki Nkeane, has consistently opposed the enactment of the levy legislation.
“In almost all the 10 districts, some businesses trading in such products have either closed down or retrenched employees. For instance, I had 60 employees in different branches and during the COVID-19 pandemic I had 30. Now, I have to part with a further 12. I have to negotiate with them as to who goes first, as is required by the law which adopts a first-in-last-out policy,” Nkeane said.
“I think I might be forced to reduce salaries in order to retain those who are desperate. I preferably employ people who have no means to survive such as orphans,” he noted.
Nkeane also indicated that traders who operate from renting premises can barely afford to meet their obligations and face eviction as a result.
He added that the association was taken aback when it learnt the law was being implemented without their input.
The association had however, expressed its reservations about the legislation when it was initially mooted in 2021.
When it came into force earlier this year, LLROA took the legal route to have it set aside. However, it was advised not to take that route, with some opposition legislators proposing a motion for review of the law.
“Now, time is ticking and the law is still effective. We may have to knock on the court’s door again. Tobacco products such as cigarettes are still stockpiled and dawdling on our shelves and can’t compete against cheap illegally imported brands and variations.
While traders decry the sin tax on economic grounds, organisations like the Anti-Drug Abuse Association of Lesotho (ADAAL) are backing the new law on morality and health grounds.
ADAAL founder and director Mphonyane Mofokeng previously proclaimed: “This is a long overdue legislation that will contribute to reduced alcohol consumption and promote the good health of people of Lesotho. Indeed, everyone who loves the country actually has to applaud this move of the government.”
She scoffed at suggestions that many businesses closed down due to a hike in alcohol levy, insisting a sizeable chunk of enterprises had been in the red long before the implementation of the sin tax.
“Many of them started closing down long before the levy and COVID-19. The main reason is that they cannot afford to pay rentals,” Mofokeng said.
She also dismissed claims that the new law has caused job losses; instead, she attributed the surge in unemployment to poor planning.
“If the skills developed through the education system were relevant to the natural resources of the country and the development needs of the country, we would not be talking about unemployment. Alcohol consumption is one of the main drivers of loss of jobs; people get retrenched because of the consumption of alcohol.
“Once the benefit is higher than the risk, then we take the benefit of closing and retrenching. Furthermore, closing the other door opens one’s eyes to see other opportunities of a better and healthier business. We need healthy means of living.
“Tobacco and alcohol are legally and socially accepted substances, but the harm they cause outweighs the budgetary benefits. I would like to see the levy collection separated from the other taxes and administered separately for accounting purposes.
“This levy must be distributed to civil society groupings and government bodies such as health, social development and youth departments. We have seen in many countries the levy contributing towards employment creation and a reduction in alcohol and tobacco use and their related problems. We need a commission to administer the collected levy,” Mofokeng pointed out.
She is optimistic the collected levy will be allocated to various organisations and government departments through calls for proposals. Thereafter, she said, such beneficiaries should account for the funds received.
The rejection of the motion to review the levy law by coalition legislators in the national assembly was followed shortly by a promise that Prime Minister Sam Matekane was studying the issue and would make a ruling on the way forward.
This was confirmed by the PM’s press attachḗ, Thapelo Mabote, who told this publication last week that even though no major breakthrough has been made by the office yet, Matekane had tasked a cabinet ministerial team to work on the matter.
Mabote said the parties involved were locked in negotiations but could not divulge further details.
