Alcohol manufacturers and distributors have warned that the alcohol ban placed by the government to control the spread of coronavirus (COVID-19), will cost workers, sorghum farmers, and the government billions of shillings and thousands of jobs in three months to September.
The ban which began in July has created a massive disruption of the alcohol value chain with the closure of pubs and restaurants. Pubs, Entertainment, and Restaurants Association of Kenya warn that this closure could put 80 percent of its members at risk of closing shops permanently as operating costs seem to increase.
According to the Alcoholic Beverages Association of Kenya (Abak), the ban has affected consumption and reduced demand for products such as barley and wheat, citing the collapse of the Kenya Breweries Limited (KBL) senator keg due to its packaging not being convenient for takeaway option as is currently required of all alcoholic drinks.
“The impacts of Covid-19, closure of bars, ban on consumption of alcohol in restaurants and eateries will lead to supply chain losses of Sh9.1 billion and 57,000 job losses between July-September 2020,” the association said.
Based on Abak analysis, job losses across the alcohol value chain that includes farmers and factories will hit 57,417, resulting in foregone revenue amounting to Sh2.72 billion. In its analysis, it expects the demand for barley and sorghum to fall by 3 million kilograms and 4.8 million kilograms respectively, taking away Sh419 million from over 6,300 farmers. Reduced demand for both grain and finished goods is expected to cost transporters Sh760 million.
The analysis further states that job losses and reduced consumption of alcohol will cost the government Sh5.88 billion in excise duty, value-added tax, and excisable goods management system fees. The county governments are also expected to take a Sh3.4 billion hit on tax and liquor license payment as bars remain shut.
However, the projected fall in tax revenue comes as a result of the net earnings of major player East African Breweries (EABL) plunging to a six-year low. EABL net profit declined by 39 percent to Sh7 billion for the year ended June, as net sales for the second half of the year dipped by nearly a third due to disrupted supply chains.
Lifting the alcohol ban seems to be the only solution in preventing the loss of jobs and revenue, stakeholders say. The government with the help of Abak should regulate the sale of alcohol in the country by opening up bars and restaurants with COVID-19 preventive measures in place, reduce alcohol sales per person, and maintain social distancing.