Heineken Congo Cuts Jobs as It Blames High Taxes, Economic Slump

KINSHASA (Capital Markets in Africa) – Bralima SA, Heineken NV’s subsidiary in the Democratic Republic of Congo, said it’s carrying out a reorganization to cut costs because of the country’s high taxes and continuing economic slump.

The restructuring, which will include dismissals, was announced in a letter Bralima Director-General Marinus Maria Kruijt sent to employees on Oct. 11 that was seen by Bloomberg and verified by the company. The cost-cutting follows the closure of two of its six production facilities last year, when the brewer took an asset-impairment charge of 286 million euros ($336 million), according to Heineken’s annual report.

“This restructuring is a consequence of the difficult economic context in which the company has evolved for some years,” he said. “Bralima has suffered since 2013 with a 50 percent increase in excise duties, a more than 20 percent increase in water and electricity tariffs and the general increase in cost of doing business.”

Growth in Congo, which the World Bank ranked among the world’s fastest-growing economies between 2010 and 2015, slowed to 2.2 percent in 2016 from 6.9 percent a year earlier, mainly because of lower commodity prices. The central African nation is the continent’s largest copper and tin producer and the world’s biggest source of cobalt. The central bank expects the economy to expand 3.2 percent this year.

‘Continuing Deterioration’
Shutting plants and writing off assets last year “unfortunately was not enough because the economic and social situation continues to deteriorate,” Kruijt said. He also cited the depreciation of the Congolese franc, which has weakened 41 percent against the dollar since the start of 2016, and accelerating inflation as reasons for its decision.

Local manufacturers have faced competition from the flow of cheap imports into the country from Angola. In August, Congo’s government introduced a six-month ban on various products, including beer and carbonated drinks, from neighbouring states.

Bralima has operated in Congo for more than 90 years and is the country’s largest producer and distributor of beer and carbonated drinks. Heineken owns about 95 percent of Bralima and has been the company’s majority shareholder since 1987.

Source: Bloomberg Business News