Bar closures to cost Sh9bn in three months
New Samba Sports Bar in Mombasa which was closed in March due to Covid-19.
What you need to know:
- Abak says the measure has hurt consumption and triggered reduced demand for products such as barley and wheat.
- Consumption of alcohol was also impacted negatively by restrictions on social gatherings.
- EABL net profit declined by 39 per cent to Sh7 billion for the year ended June.
Alcohol manufacturers and distributors are warning that continued closure of bars will cost workers, sorghum farmers and government Sh9.1 billion and 57,000 jobs in three months to September unless the businesses are reopened.
The Alcoholic Beverages Association of Kenya (Abak), which brings together key players such as Kenya Breweries Limited (KBL), says the measure has hurt consumption and triggered reduced demand for products such as barley and wheat used to produce the beverages.
Kenya shut bars on March 22 as part of measures to control the spread of Covid-19 resulting in massive disruption on alcohol value chain that is heavily depended on bars and restaurants.
Consumption of alcohol was also impacted negatively by restrictions on social gatherings such as weddings and parties to achieve social distancing rules.
Supply chain losses
“The impact 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 jobs losses between July-September 2020,” says Abak.
This comes at a time Pubs, Entertainment, and Restaurants Association of Kenya has warned that about 80 percent of its members risk closing shop permanently as operating costs such as rent pile.
Abak analysis shows that job losses across the alcohol value chain that includes farmers and factories will hit 57,417 resulting into forgone revenue amounting to Sh2.72 billion.
KBL’s supply chain for senator Keg has for instance totally collapsed since its packaging is not convenient for take-away option as is currently required of all alcoholic drinks.
Barley, sorghum demand
Abak expects demand for barley and sorghum to fall by three million kilogrammes and 4.8 million kilogrammes 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 lobby sees job losses and reduced consumption of alcohol costing the national government Sh5.88 billion in excise duty, value added tax and excisable goods management system (EGMS) fees.
County governments are also expected to take Sh3.4 billion hit on cess and liquor license payment as bars remain shut.
The projected fall in tax revenue due to government comes on the back of net earnings of major player, East African Breweries, having plunged to six-year low.
EABL net profit declined by 39 per cent to Sh7 billion for the year ended June as net sales for the second half the year dipped by nearly a third due to disrupted supply chains.
