Castel Malawi set to retrench more employees this month

By Duncan Mlanjira

Castel Malawi Ltd, which is at risk of closure due to continued decline in sales volume, turnover and heavy excise tax rate, will continue to retrench its staff this month.

The French company, which took over management of Carlsberg Malawi Brewery just a few years ago, retrenched close to 200 employees in August.

Products by Castel

In a recent memo dated 30th September, 2019 signed by Director of Human Resources, Naomi Nyirenda, informs the staff members that the second phase of retrenchment will be implemented on 25th October, 2019.

“All payments in respect of retrenchment will be made through the payroll on 25th October, 2019 together with October 2019 salaries,” the letter says.

“Other payments such as EIP and overtime will be paid as per company’s respective payout procedure. However, the company will recover all outstanding debts that each retrenched employee has as at the time of exit.

Castel took over from Carlsberg

“Finally, the company shall, upon request, repatriate any affected employee to their registered homes within Malawi. The request for repatriation should be made within a period of 3 months from the date of retrenchment to avoid forfeiture.

“The company shall honour all requests for repatriation as such and not through cash payments to the retrenched employee.”

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 Castle targets to offload over 600 employees.

In a memo on June 17 to its members of staff, Castel’s Managing Director Herve Milhade had said over the past few years, Castel has been struggling to maintain business profitability due to mostly unfair conditions set by Malawi Revenue Authority (MRA), who had since taken over the company’s accounts.

“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 the memo. 

“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.

“As recently as Thursday, 13th June, 2019, I met with top MRA officials, Mr. Tom Gray Malata, the MRA Commissioner General and Mrs. Nellie Jimmu — Commissioner of Domestic Taxes. However, these efforts have failed and the MRA has issued a final distraint notice against the Company.

“Today, Monday 17th June, 2019, the Malawi Revenue Authority has garnished Castel Malawi Ltd accounts. This action by MRA mean that Castel Malawi Ltd is at risk of closure and the withdrawal of Castel Groupe from the country due to unrealistic and unaffordable excise calculations.”

Last month, Milhade also informed the staff that following the National Budget that was presented in Parliament, the Customs & Excise Tax rate was reduced from 90 percent to 65 percent on malt beer.

“With this new tax calculation; if based on production cost, is a positive development for the company.

“However, if the calculation is based on sales price this will have drastic impact on the business as we would now pay more excise tax than before.”

Milhade had assured the staff that he shall continue to engage the government in dialogue.

“Employment and the future of Castel Malawi remains at risk if we fail to find a more favourable tax agreement,” Milhade had said.