Sugar tax waiver, beverage makers still not impressed

Zimbabwe’s beverage makers say the waiver of the special surtax on beverages sugar content due for the period 1 January 2024 to 8 February 2024 will just address the gap upon which Zimra was demanding the tax band for the period at a rate of US$0,002/gramme.

Zimra had approached beverage companies in an effort to collect US$0,002 in sugar taxes for the period, prior to the levy being reviewed downwards to US$0,001/gramme with effect from February 9, 2024.

The tax sparked outrage from industries, which said up to US$1,6 billion would be wiped out of the beverage producer sector this year.

In the 2025 mid-term budget review yesterday, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said whereas some of the manufacturers complied with the legislation existing in January 2024, a number of operators could not honour their tax obligations, resulting in unsustainable tax debts.

“In view of the need to ensure continuity of business operations, I propose to provide reprieve through waiver of the special surtax on beverages sugar content due for the period 1 January 2024 to 8 February 2024.

“Operators who had already honoured their tax obligations at US$ 0,002/g will be availed with the option of having their accounts credited against future tax obligations,” he said.

In addition, he said whereas the current legislation provides for the levying of surtax, he proposed to enhance such legislation to specifically cater for the levying of the special surtax on beverages sugar content tax and any other surtax of a similar nature.

However, sector players maintain that they remain under pressure from the sugar tax on beverages, which has slowed demand across the various categories and increased production costs.

“We maintain the view that the tax level is high compared to the region and attracting lower priced goods from neighbouring countries,” Alex Makamure, Delta Corporation’s finance director, told Business Weekly.

He noted that most beverage manufacturers were dissuaded from implementing the tax measures announced in the 2024 budget per the ministerial statement of 8 January and engagements with the relevant ministries.

He said the legislation was not amended therefore, as Zimra were intending to collect in terms of the law.

“The midterm is addressing this gap. It will not affect current pricing of beverages and the crediting of those that paid is an acceptable refund process,” said Makamure.

Earlier this month, Makamure said the sugar tax resulted in retail prices going up by 10–33 percent depending on the sugar content of each beverage, and this has slowed demand across the various categories.

Delta Corporation Limited are the manufacturers and marketers of international and locally produced beverages in Zimbabwe, operating through segments of non-alcoholic beverages, sparkling beverages, lager beers and traditional beers.

Another beverage company, Dairibord Holdings, said the implementation of a per-gramme sugar tax on beverage products resulted in a direct and quantifiable increase in production costs as sugar is a significant and essential raw material in the manufacture of beverages.

“The cost of production has significantly increased, making Zimbabwean products uncompetitive and there is a significant risk that the beverage industry as a whole will become uncompetitive compared to our neighbouring countries,” chief executive Mercy Ndoro told Business Weekly early this month.

Ndoro said Zimbabwe’s sugar tax, currently the highest within the Southern African region, has demonstrably exacerbated price sensitivity among consumers within the beverage sector.

“This poses a significant challenge to the overall competitiveness of domestic beverage manufacturers and there is also an elevated risk of increased grey imports of unauthorised, potentially lower-quality, and untaxed substitute products,” she said.

Ndoro also noted that the requirement to remit the sugar tax on a monthly basis, potentially preceding the settlement of invoices by retailers and distributors, exerts a significant strain on the company’s working capital, which, in turn, negatively impacts overall liquidity and hinders operational efficiency.

In the same mid-term budget statement, Mthuli also proposed to exempt live cattle, pigs, goats, sheep and bovine semen from Value Added Tax (VAT) in order to encourage formal trade of meat products.

Additionally, in order to encourage the trading of poultry meat in the formal market, he proposed to exempt poultry meat from VAT.

Livestock and Meat Advisory Council (LMAC) agricultural economist, Dr. Reneth Mano, told Business Weekly that the move shows the government’s commitment to the growth and development of the livestock industry.

“We commit our support to the growth and development of Zimbabwe’s livestock industry and agricultural sector towards sustainable and resilient national food security and growth,” he said.

Dr Mano said LMAC appreciates the policy move by the government to restore the viability of the livestock and meat industry during a year in which livestock farmers, abattoirs, and consumers are enduring the double adversity of El Nino drought-induced loss of income and purchasing power and VAT-induced fall in livestock producer prices and/or rise in retail prices of meat.

According to the Finance Minister, the recent changes in VAT legislation, where live animals and meat are standard-rated, have caused the industry to experience a decline in demand due to low disposable incomes, which is attributed to the El Nino-induced drought.

He said observations show that 85 percent of live animals are sourced from smallholder farmers, who at most sell two beasts per year, making them ineligible for VAT registration.

Furthermore, Mthuli said the emergence of middlemen, who use toll slaughtering abattoirs, has since substituted livestock auctioneers and formal abattoirs in order to minimise, or in other cases, evade payment of VAT.

“Resultantly, carcass sales have shifted from formal, inspected abattoirs that feed into the formal meat value chain.

“This has been exacerbated by non-tax-compliant butcheries that prefer purchasing toll-sheared meat carcasses from the informal market to avoid VAT, posing a risk of diseases as the meat would not have passed through the mandatory inspections,” he said.

In the poultry industry, Mthuli said currently, a third of the broiler production is traded in the formal market, whereas the rest is dominated by micro and small poultry farmers whose livelihood and empowerment are sustained through such economic activities.-busineswekly