Castel Malawi to increase number of staff to be retrenched as talks with government reaches stalemate

By Duncan Mlanjira

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.

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.