BEVERAGE makers reportedly held an emergency meeting this week to discuss the impact of the new US$0,02 tax per gram of sugar on their bottom lines, businessdigest can reveal.
Last week, Treasury increased taxes, and proposed to introduce new ones to raise additional revenue of nearly ZW$10 trillion to fund the 2024 fiscal year.
The budget stands at ZW$58,2 trillion.
The changes include the introduction of a wealth tax, the domestic minimum top up tax and a sugar levy.
The Treasury also raised certain fuel levies, tollgate and passport fees, the corporate tax rate, presumptive taxes, car registrations charges, among others.
However, the sugar levy will cause the price of soft drinks to go up, which experts say may force consumers to cut down on beverages entirely.
Businessdigest understands that beverage makers were in crunch talks this week with the Confederation of Zimbabwe Industries (CZI) to come up with a response to a “punitive” tax.
“We had a beverage association meeting this morning (Tuesday) to discuss the issue. It (sugar levy) is a punitive tax, which will have devastating effects on the beverage industry and the price of beverages in Zimbabwe,” one of the top managers at a leading beverage maker told businessdigest.
“So, we’re currently in discussions because it can't be correct. Under CZI, we’ve had a meeting and we will be engaging with the government because the tax is punitive and will have a devastating effect on the beverage industry and we are very hopeful that there will be a positive outcome. Prices are likely to go up due to the effects of this tax.”
CZI president Kurai Matsheza was not available for comment on the matter.
In presenting the tax, Finance, Economic Development and Investment Promotion minister Mthuli Ncube said this was for health reasons.
“In response to the growing concerns on the adverse effects of consumption of sugar, in particular, contained in beverages, tax on beverages has been implemented in a number of countries including in the Sadc region and beyond,” he said.
“The consumption of high sugar content beverages is linked to increased risk of non-communicable diseases.
“It is, thus, necessary to discourage consumption of high sugar content beverages, hence, I propose to introduce a levy of US$0,02 per gram of sugar contained in beverages, excluding water, with effect from 1 January 2024.
“Funds derived from this levy will be ring fenced for therapy and procurement of cancer equipment for diagnosis.”
Delta Corporation Limited corporate affairs general manager Patricia Murambinda said the firm was engaging the government to understand the impact of the new tax and its intentions.
This comes as Delta posted significant growth in all its major segments in its half year ended September 30, 2023, owing to consumers increasing their purchases of the firm’s products using foreign currency.
“We are currently engaging with the government to understand the impact of the tax and whether the intention was well captured in the budget statement,” Murambinda said.
Delta’s sorghum beer volumes were up 4% during the half year period, compared to the 2022 comparative, while lager beer volumes were up 13% and 17% for sparkling beverages. Under the spirits and wines segment, Delta local subsidiary African Distillers recorded a volume growth of 10% during its half year period compared to 2022. Also, under Schweppes Zimbabwe Limited, in which Delta has a 49% equity stake, it had a volume growth of 7% from the comparative 2022 period.
Schweppes is one of the biggest users of sugars as it is a leading manufacturer and distributor of non-carbonated still beverages under licence from The Coca-Cola Company. The product portfolio currently includes cordials, fruit juices and bottled water. Consumer staple and durable goods manufacturer, Innscor Africa Limited, and Varun Beverages Zimbabwe Private Limited chief executive officer Vijay Bahl did not respond to questions.
Varun sells and distributes products from the American multinational food, snack.
It is a subsidiary of the Indian based Varun Beverages Limited, a bottle manufacturer that produces bottles and distributes beverages.
The holding company is the second largest bottling company of PepsiCo.