Malawi: Job Cuts At Castel Malawi - to Lay Off Around 200 Workers

22 August 2019

Castel Malawi Limited, producers of alcoholic and non-alcoholic beverages, which took over from Carlsberg Malawi Brewer just a few years ago and is at risk of closure due to continued decline in sales volume, turnover and heavy excise tax rate, has officially announced that if will lay off about approximately 200 employees on Friday, August 23 2019.

Castel Malawi Limited to lay off around 200 workers

A short memo dated August 16 seen by Nyasa Times signed by Director of Human Resources Naomi Nyirenda, says: "Management wishes to inform all members of staff that the first phase of retrenchment will be done on 23rd August, 2019 in all three regions.

"All affected employees will be served with retrenchment letters and 23rd August, 2019 and this will be their last day of working. The retrenchment packages will be paid together with August 2019 salaries."

The memo did not specify but an inside source says the company plan to retrench 200 people just for the first phase with the possibility of more layoffs in months to come and will affect staff in finance, logistics, auditors, some in production and some heads of department.

"The second phase will affect almost everyone from every department because the actual number they want to get rid of is 600 employees," said our inside source.

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 Malawi Ltd 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."

However, Milhade's assurance to his employees in June that together with his management team he was to continue to put every effort to rectify the current situation to sustain operations and their commitment to employees, customers, consumers and the general public is the opposite as per the decision to retrench the 600.

During that period, our inside source confided with us that the MD had indicated at a staff union meeting they had that the owners are considering leaving the country opting for Zambia, citing unfavorable economic environment and unstable political environment.

The source had said the government milks the company by demanding payment on top of the excessive taxes it is being charged with.

Castel Malawi is rated as one of the top 10 taxpayers in the country, contributing to the development of the economy for over 50 years and are also the number one taxpayers of import duties.

The company employs a workforce of 1 284 people with a business network of over 100 000 stakeholders, customers, suppliers, distributors contractors, locally and internationally.

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