State sets Sh5bn cassava beer investor cap for tax breaks

Investors seeking to set up alcoholic plants to manufacture beer made from sorghum, millet and cassava will be compelled to invest a minimum of Sh5 billion to benefit from remission or reduction of excise duty.

The remission of excise duty shall, however, be for a period of five years from the date of commencement of operations of the beer manufacturer.

The tax break is meant to encourage investments in the beer market, which is dominated by East Africa Breweries Limited (EABL) #ticker:EABL, and offer a ready market to sorghum, millet and cassava farmers.

National Treasury secretary Ukur Yatani published the new rules through legal notice number 196 on December 18, 2019, which was made public on Monday.

“The Cabinet Secretary may, on the application by a manufacturer, grant remission of excise duty at 90 per centum with respect to beer made from sorghum, millet or cassava or any other agricultural produce grown in Kenya provided that the manufacturer shall invest at least Sh5 billion in the manufacture of the beer,” Mr Yatani said in the notice.

The regulations stipulate that the government and the manufacturer shall enter into an agreement where the beer maker shall meet specific commitments on production.

EABL makes Senator Keg beer, a low-priced lager made from locally grown sorghum.

Senator Keg has been one of the fastest growing brands for EABL in recent years due to huge demand from price-sensitive consumers, some of whom are switching from illegal drinks to more formal ones.

The brewer invested Sh15 billion in a plant in Kisumu with a two-year production run of its Senator Keg beer.

It will then move on to mainstream brands like Tusker.

“Legal notice No. 196 spells out the requirements that an investor (manufacturer) of beer made from sorghum, millet or cassava or any other agricultural produce grown in Kenya will have to meet in order to qualify for an enhanced excise duty remission of 90 percent,” Mr Yatani said in a memorandum explaining the new regulations.

For this provision to apply, the law provides that manufacturers must pack the beer in pasteurised containers of at least 30 litres or such other container and quantity as the Cabinet Secretary responsible for Finance may approve.