E-Malt.com News article: Botswana: Beer prices rise, the first is Kgalagadi Breweries Limited

Kgalagadi Breweries Limited (KBL) has hiked all beer prices by 9.1 % in reaction to the recent 12 % devaluation, Cyberplex Africa cited KBL’s spokesperson, Percy Raditladi, confirming this week.

“Let me take you back to the February 2004 devaluation of 7.5 percent. We only increased the prices of carbonated soft drinks and beer by 3.3 percent, which meant that we absorbed about 4 percent of the impact of devaluation when everybody else in the market increased by the size of devaluation. This time around, we increased by 9.1 percent and devaluation is 12 percent, cumulatively, it means that in the period we absorbed costs associated with devaluation by 7 percent,” he explained.

He said the devaluation has affected their business focus and forecast in that the budget had substantially been affected. He said a business decision had to be made to meet profit and shareholder expectations. KBL sources most of its raw materials from South Africa and Europe, whose currencies have been strengthened against the domestic unit by the devaluation. Raditladi said the total costs of devaluation to the company amounts to P36 million and such amount had to be recovered to continue producing the same quality of products. The 9.1 percent increase is the second this year after the 6 percent effected in February. He defended the spate of this year’s increases, saying they are not a way of transferring costs on consumers after a wholesale salary increase to company staff, which was close to 55 percent and refurbishment exercise.

“It must be understood that there are annual price increases to adjust to inflation and rising costs of factor inputs such as raw materials and that is why we increased by 6 percent in February and the 9.1 percent is a cushion against the devaluation.”

KBL is estimated to be contributing about 3 percent of Gross Domestic Product in taxes. The increment is a confirmation that devaluation is inflationary. In a basket of commodities used to calculate inflation, alcohol and tobacco weigh 13.5 percent. The price hike is expected to further cement an about-turn on inflation that was realised last month, following fuel price increases. Fuel and power weigh 2.6 percent in the inflation basket and the last fuel increment reversed the declining inflation trend by adding 0.1 percent to the month-on-month consumer price index (CPI) figures while other commodities were declining.

“Data for the May CPI were collected before the month-end devaluation and inflation had continued to fall in several major commodity groups,” noted Bank of Botswana in its regular updates.

Commodities that recorded declines included food, which fell from 2.5 percent to 1.7 percent and alcohol and tobacco which declined from 9.3 percent to 8.5 percent as well as housing, from 10.8 percent to 3.3 percent. Due to beer increment, other alcohol and the tobacco sector are expected to shoot up in the coming months.


17 June, 2005