East African Breweries has hit out at the government over increasingly unpredictable policy and regulatory environment. The giant brewer says this has undermined long-term investment decisions.
“A predictable policy and regulation environment will help firms plan five, ten years out,” EABL chairman Charles Muchene said yesterday in Nairobi. “You have to keep taking into account all stakeholders not necessarily about fixing everything where it is, but creating an environment where changes in future are going to be predictable and people can plan around those changes.”
Kenya’s investment climate as measured by the World Bank’s Ease of Doing Business Index 2017, released last October, improved to position 92 out of 189 countries from 113 previously.
The company, 50.03 per cent controlled by UK’s Diageo, has been a victim of “sin taxes” which have borne the brunt of government’s taxation measures aimed at growing ordinary revenue to meet rising annual expenditure needs.
In the budget statement for financial year 2017-18, Treasury CS Henry Rotich increased excise tax on spirits by 14.29 per cent to Sh200 per litre from Sh175, which the company said was a “surprise”. Kenya Breweries CEO Jane Karuku said the new tax, which was backdated and effected on April 3, has already pushed up retail prices, and could hurt sales. Muchene said the company’s proposals to the Treasury and Kenya Revenue Authority were overridden by other competing interests from other stakeholders.
EABL operates subsidiaries in Kenya, Uganda, Tanzania and South Sudan, with distribution reach in Rwanda, DRC and Burundi.
“We put forth our point of view which is that basically a stable and predictable environment is best for business, but from they have got many stakeholders to take into account,” he said. “Each market has got its own unique issues.”
He spoke during the listing of the Sh6 billion second tranche of the Sh11 billion medium-term corporate bond on the Nairobi Securities Exchange. The first tranche of Sh5 billion was raised in 2015. The five-year medium-term note, subscribed by 140.9 per cent, has an annual interest rate of 14.17 per cent. The yield on the first corporate bond issue on NSE is more than the 14 per cent maximum interest commercial banks are required to charge on loans.
“As any investor would acknowledge, an unpredictable environment makes it difficult for you to attract long-term capital and when you do, the increased uncertainty leads to an increase in the cost of that capital. This increases the cost of doing business,” Muchene said.