Castel add more staff on job cuts: Malawi brewer risks closure as talks with government reaches stalemate

Talks between government and Castel Malawi Ltd, which is at risk of closure due to continued decline in sales volume, turnover and heavy excise tax rate, have reached a stalemate and it plans to increase number of staff to be retrenched this month end.

Castel

Meanwhile, the company’s Managing Director, Herve Milhade has since left the country for Paris, France to hold talks with Group Castel on the future of company.

In a letter to members of staff, Milhade said the budget statement made on Monday the 7th of October 2019 in Parliament, confirms Excise Tax rate on malt beet would be 60% on ex-factory price (sales price).

“The 60% on ex-factory price is higher for operations, which means our taxes have been increased by 22% on clear beer compared to what we were paying at 90% on production cost.

“Considering the increase in our other categories, the government is increasing our total tax amount by more than 30%.

“Our discussions, negotiations and confirmation letters have always proposed that the Tax applied to be ideal to enable us to have a win-win situation; where the company makes money in order to run healthy operations and in turn allow the government to collect Taxes that contribute to the development of the country.”

The MD continues to say that despite many meeting during which the company has explained and demonstrated to Ministers, Parliamentary committees and professional associations the need to reduce their level of taxation that is rendering Castel Malawi, structurally deficit and, therefore, condemned.

“Obviously and for some reasons, our organization, our families, our economy and the whole country will be penalized by this decision, contrary to our individual interests, our collective ambition and the Malawi development.

“Today I will be leaving the country for Paris to present this difficult situation to Group Castel. The future of Castel Malawi is compromised if we don’t find an agreement with the authorities on this tax issue.

“For the time being, the retrenchment plan will be performed and reshaped regarding this bad perspective.

“As soon as the Group decisions is made, I will communicate internally with full transparency.

“Be assured that the Excom and I, will put all efforts to continue to defend the operations of Castle Malawi. Kindly remain engaged as the issue is not closed and I can’t imagine the government old implement such decision which puts, at risk, the future of our pride, Castel Malawi.

The French company, which took over management of Carlsberg Malawi Brewery just a few years ago, retrenched close to 200 employees in August and in a memo dated 30th September, 2019 signed by Director of Human Resources, Naomi Nyirenda, informed the staff members that the second phase of retrenchment will be implemented on 25th October, 2019.

The first phase done in August affected staff in finance, logistics, auditors, some in production and some heads of department and this second phase targets almost everyone.

A source within the company said Castel was targeting to offload over 600 employees but with this development the number might double.

Over the past few years, Castel has been struggling to maintain business profitability due to what the MD had said was due to mostly unfair conditions set by Malawi Revenue Authority (MRA).

“In 2013, the Malawi Revenue Authority confirmed calculation of excise tax for alcoholic beverages be based on 90% of production cost,” Milhade had said.

“In 2013, the Malawi Revenue Authority confirmed the calculation of excise tax based on production cost. In September 2018, Malawi Revenue Authority advised the Company to start calculating excise tax based on ex-factory price (production cost + margin). At the rate of 90% this will adversely affect the performance, cash flow and survival of the Company.

On 17th June, 2019, MRA garnished Castel Malawi Ltd accounts.

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mpilu
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mpilu

khazibegi ankakoma kale kucotsadi ludzu. za Chona zi anta. 1966 kamuzu anatsekulila , ma investors atabwera ndi kampaniyi. lelo thousands of trips ,fleets of dunderheads are heading to europe kopempha ma investors kuti abwere ndi ma company ao, what do we see???? we see acina farook kukoza some crooked balot paot papers and the dubai company on such papers kuzabera anthu osauka. and if you see dubai, its is a vast and i mean vast country osati ngati kacimbudzi kathu kathu kano msete zili thoooo. thats why we are in this mess kaamba moone as our so calld presdent contiinue… Read more »

National CEO
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National CEO

It seems Castel wants to dictate the government. Even myself am not happy with the tax that I pay to MRA but I make my ends meet. The COO and CEO of Castel shoud bang heads and find ways of passing the tax to consumers.

Acapulco
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Acapulco

Excise taxes are usually passed on to the consumers inform of price adjustment so if quality is maintained demand is always there. Very lame excuse that excise taxes are killing castel. Castel bought carlsberg just to access the Malawi alcohol market and now that they have access they will close operations and area already supplying desperate malawi imbibers with castel products manufactured in Mozambique or South Africa. In short castel is playing the southern African regional economy, they don’t care much about Malawi. Economies of scale! Very soon the once mighty carlsberg will be reduced to retailing foreign made beers.

Haryfurusy
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Haryfurusy

This company is closing down as soon as MD comes back from the meeting at its head office. There will be no drinks in Malawi likewise Zimbabwe. On top of that tax base for MRA will go down completely and may be the government has no vision about it.

SAUNDERS
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SAUNDERS

I dont really understand the issue concerning taxes here. Was the formula used by Carlsberg Malawi LTD different from those being levied on Castel? I think the FRENCH Company is somehow arrogant or our Taxation system is bad, its killing our Industries and thats why we are a consuming Nation. Yesterday I went in SPAR Supermarket looking for SOBO, CASTEL Stopped producing SOBO and now Zimbabwean Juices are replacing our sweet SOBO. Malawians are we happy with what is happening at CASTEL? Lets lobby that CASTEL can go but leave Southern Bottlers back to us

kanchenga
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kanchenga

Saunders you are right in wondering. I am a small business person whose profit percentage is less than 15 percent of gross but MRA deduct 20 percent with holding tax. They tell you to prepare tax returns every year so you can get a with holding tax certificate which I have done for the past 11 years earning a refund totalling close to 100 million kwacha but have never been refunded. Infact when I read in the papers that soso has a problem with mra I don’t get surprised because for lack of financial continuity people hit the VAT collected… Read more »

Acapulco
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Acapulco

What you need is tax advice. Find a local professional to assist you

Karina Jumpha Banda
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Karina Jumpha Banda

Carlsberg Malawi was exempted from paying tax for a period of its operations in Malawi. When the tax holiday ended, they sold the company to castel which was not granted the privileges carlsberg Malawi had. MRA is overtaxing the company. They needed to go into constructive engagements and craft a tax that will not suffocate the company and its staff . Unless Ministry of Finance and MRA on one hand have another company in mind that they intend to bring in, they have the responsibility to save castel and it’s employees. Parliament could step in to save the situation. Otherwise… Read more »

MRA
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MRA

Don’t write about stuff you don’t know! This is all wrong!!

Chipalamandule
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Chipalamandule

But this tippex government eeeishi!