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NewsDay

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High excise duty threatens Afdis

Business
WINES and spirits maker African Distillers Limited (Afdis) expects product affordability challenges going forward owing to an upsurge in excise duty charged on its goods.

BY MISHMA CHAKANYUKA

WINES and spirits maker African Distillers Limited (Afdis) expects product affordability challenges going forward owing to an upsurge in excise duty charged on its goods.

Excise duty is a tax designed to discourage the purchase of particular goods. If you import goods from abroad, you might need to pay a few different types of taxes or duties.

In 2010, government introduced specific excise duty rates based on the level of absolute alcohol content in order to equal the playing field between imported and locally-produced products.

“Post year-end, the government changed duty structures, effectively doubling excise duty on company products. Affordability is likely to be a challenge going forward,” company chairman Pearson Gowero said in a statement accompanying Afdis’ financial results for the year ended June 30, 2019.

Gowero’s sentiments come after Treasury, through the mid-year budget review and supplementary budget, reviewed upwards spirits excise duty by 40% plus $20/LAA (level of absolute alcohol) from $5/LAA, fortified wines to ZWL$4 a litre from $0,50 per litre, unfortified (still wines) from $0,40 per litre to $3,50 per litre.

Excise duty for other fermented beverages was raised to $3 per litre from $0,36 per litre and opaque beer powder from $0,05 per kilogramme (kg) to$0,50 per kg.

Profit-after-tax for the period was up by 243,8% to $18,05 million from a comparative 2018 figure of $5,25 million. Revenue and operating income grew by 95% and 257% respectively.

“Revenue stood at $60,55 million, an upturn from $30,58 million recorded in 2018, while operating income increased to $25,39 million from $7,10 million achieved in prior year. The significant increase in operating income is as a result of volume upsurge, supply chain cost management and inflation driven price adjustments,” Gowero said.

Total assets grew to $81,8 million from $40,2 million, while liabilities rose to $20,76 million from $17,16 million.

Volumes improved by 17% compared to prior year, with the spirits segment registering 21% growth followed by ready-to-drink at 18%, while wine registered a 10% decline.

Gowero said foreign currency shortages persisted during the period, affecting the company’s ability to fully supply the market, while the fluctuating exchange rates also impacted on costs, which, in turn, applied pressure on the selling prices.

“Macro-economic conditions continue to deteriorate, further reducing consumer disposable incomes and compromising product demand. The company will continue to seek opportunities to protect market share and enhance shareholder value,” he said.

In August this year, Afdis was among 12 food and beverages companies that were exempted from paying duty in foreign currency when importing certain raw material quantities necessary to support local production.