Continued escalation of smuggled Chibuku beers from the neighbouring country, Zambia, has forced Chibuku Products Limited - Malawi's leading producer of the Chibuku Super and other opaque beers - to consider reducing the number of its workforce by 150.
The company has since written the Minister of Labour, Youth, Sports and Manpower Development, Martha Chanjo, the Labour Commissioner, Hlalerwayo Nyangulu, the Deputy Labour Commissioner, Wafwire Musukwa, the Regional Labour Officers - Lilongwe, Blantyre and Mzuzu, the Minister of Finance and Secretary to the Treasury and the Minister of Trade and Industry, among others, notifying them about the intention to lay off some workers at company.
The letter, also in Nyasa Times' possession, says the local beer business has, over the past two years, operated under severe trading strain resulting into volume loss and negative financial performance.
According to the letter, which has been signed by the Chibuku Products Limited managing director Gerald Bowler, the company attributes the trade strain to continued escalation of smuggled Chibuku Super and other opaque products Zambian, and increase in illicit unregulated high alcohol by volume percentage spirit products that have flooded the Malawi market.
"With our current sales volume deficit, now running at over one million litres per month, we have been operating at less than 35 per cent of our installed production and manning capacities. Consequently, management has made a decision to right-size the business in line with its current volume demand and production manning levels.
"We believe this will deliver cost efficiency, optimized labor management, as well as sustain our profitability and future ability to continue operations," says Bowler in the letter.
"We plan to reduce our headcount by 150 by second half of 2020," he discloses.
The company is also drawing the attention of the Minister of Finance, Minister of Trade and the Malawi Revenue Authority to the request it made for a downward review on its excise tax, which the three institution did not attend to.
The Chibuku Products Limited therefore believes that reducing its labour size will make Chibuku more competitive against local illicit competition, as well as the Zambian predominantly smuggled imports that continue to evade taxation, infringe on the local company's trade mark rights and offer cheaper products into our market.
"We have also appealed for increased efforts to curb the smuggling operations that have impacted over 60 per cent of our market share in Lilongwe; with severely damaging consequences to our sales volumes, which has resulted in Lilongwe Brewery operating as a loss-making entity. We remain hopeful that all stakeholders will recognize the
dire consequences this organization now faces and come to our assistance as requested in the lobby presentations submitted throughout the past six months of engagement.
"As such, for the past 12 months and through rigorous involvement of our shop-stewards, the company has been undergoing some surgical labor optimization exercises to enable management of company's operational, production and overhead costs," stresses Bowler.
Meanwhile, to accomplish the austerity measures taken, the Chibuku Products Limited management has resorted to head count reduction through natural attrition, freezing recruitment, except for very critical positions, reduction of overtime claims and reduced hire of casuals and temporary employees.
However, the company says although it had the hope the this will result in overall improvement of the company's top and bottom line performance, it regrets to report "with sadness that our business remains strained".
In the further process of right-sizing the business, the company says employees affected in the exercise will be communicated individually using the legally laid down procedures.
"We want to assure the Ministry that all relevant engagement processes will be followed and complied with in line with the applicable legal guidelines. The steps taken will be, but not limited to- and not in sequential order: retrenchment as provided for in the Chibuku Products
Limited Recognition and Procedural Agreement as well as in compliance to the Labor Relations Act of 1995, employees who are due for retirement will be requested to volunteer their willingness retire, the temporary employees working in non-critical jobs will be laid off
and that all casuals in the system will also be laid off following the RA guidance," Bowler says.
"Casuals may be hired on ad-hoc basis where there is a dire need for short-time jobs which permeant employee are not available to be used; any non-critical permanent jobs that fall under operational optimization will also be laid off while some of the permanent employees will be redeployed between breweries and departments; go through job-enlargement and multi-tasking for labor optimization. The process will be done in phases for smooth execution and lessen negative impact on our operations. This will start as soon as consultations are done," he concludes.
The ministers were not immediately available to comment on the matter.