Industry welcomes sugar tax reduction
CAPTAINS of industry and commerce in the beverages sector have welcomed the downward review of the sugar tax from US$0,002 to US$0,001 per gramme of sugar, saying the adjustment will lessen the cost and financial burden associated with the new tax.
Finance, Economic Development, and Investment Promotion, Professor Mthuli Ncube last week gazetted Statutory Instrument (SI) 16 of 2024 on levy of special surtax on beverages sugar content, reflecting the downward review from the initially announced levy.
This provided legal guidance on exactly how much will be levied on sugar content within beverages, and officially announced a marked reduction of the levy from the 0,002 cents per gramme the minister initially announced in the 2024 national budget statement last November.
The initially proposed tax rate on the sugar content would have meant that just the tax on sugar would be higher than the cost of the contents of all beverages with high sugar input.
According to the Treasury, the special surtax on the sugar content in beverages shall only be levied on added sugar.
The latest downward adjustment, recently gazetted after negotiations between the Government and the Confederation of Zimbabwe Industries (CZI), comes as a huge relief to businesses already grappling with several challenges.
Among the industry leaders that had responded to the sugar tax was Schweppes Zimbabwe, which effected two price adjustments since the tax was announced by Minister Ncube last year. It has been among companies calling for a review of the tax.
Initially, Schweppes increased prices for a 2Lx6 pack of the popular Mazoe cordial by 17 percent and recently further hiked the price further to US$24 for the same pack, sparking an outcry from the market over possible profiteering.
Schweppes said the tax, introduced via Statutory Instrument 16 of 2024, had a significant impact on its Mazoe drink compared to ready-to-drink products, given it is calculated based on per gramme contained instead of the global norm of per millimeter.
“Unlike VAT, the sugar tax is a cost to the business, whose funding carries the cost of money. In the beverage industry, supply to formal retailers and wholesalers comes with longer payment terms. The effect is strain working capital, as the tax has to be paid before customers have paid,” Schweppes said.
Two industry executives, speaking on condition of anonymity, shared their sentiments on the development.
“We are pleased that the gazette has finally come through. Since the agreement in January to reduce the sugar tax, we have been in limbo, unsure of when the recommendations would be implemented. This clarity is a welcome relief for our operations,” said one of the sources.
Another industry executive stated “The correction of the sugar tax is a positive step towards alleviating the financial burden on businesses. It demonstrates a willingness from the government to collaborate with industry stakeholders and address concerns that directly impact our bottom line.”
However, economists and accountants caution that while the reduction in the sugar tax is beneficial, there still are some associated costs that businesses must contend with.
Accountant Oliver Nangi said; “Businesses will need to invest resources into adapting to the revised tax structure. From recalibrating accounting software to training staff on new procedures, these adjustments come with financial implications”.
The implementation of the corrected sugar tax underscores the intricate balance between fiscal policies and industry competitiveness.
While the reduction is a step in the right direction for businesses, the broader economic implications must be carefully considered. As industry players navigate the evolving landscape, collaboration between the public and private sectors remains vital in fostering sustainable growth and development.
Other economic analysts noted that while the review of the sugar tax brought much-needed relief and clarity to the business community, it also highlighted the need for comprehensive planning and coordination to mitigate potential adverse effects on consumers.
Moving forward, ongoing dialogue and cooperation between government officials, industry leaders, and economic experts will be crucial in shaping policies that promote both fiscal responsibility and economic prosperity.
ZIMBABWE saw a massive growth in the value of proposed investments in the fourth quarter of 2023 despite approving fewer new investor licenses, according to the Zimbabwe Investment and Development Agency (ZIDA).
ZIDA's 2023 fourth-quarter report reveals a 232,6 percent surge in proposed investment value, reaching US$4,4 billion, with mining proposals accounting for 76 percent, highlighting the continued importance of mining to Zimbabwe's economy.
The investment agency also reported a US$6,9 billion project remained under review, offering no details on its nature or industry.
“On investor activity, there was a drop in the number of licenses the agency issued in the fourth quarter compared to the third quarter. Despite this decline, projected investment value grew by 232,85 percent quarter on quarter with 76 percent of this amount attributable to the mining sector,” ZIDA chief executive Tafadzwa Chinamo said.
Investors are flocking to Zimbabwe's mining industry, drawn by the potential of its rich mineral deposits, particularly lithium–a critical element in the clean energy revolution.
Fuelled by Zimbabwe's ban on raw lithium exports, lithium miners are actively investing in beneficiation facilities. The move is not the only driver of investment, as both the platinum and gold sectors have also seen substantial inflows of capital.
Leading the pack were investment proposals from South Africa and Botswana, which reached US$1,71 billion and US$1,41 billion, respectively. Notably, Masvingo, Manicaland, and Harare emerged as the top destinations for the proposed investments.
Mr Chinamo said the quarter ended on a high note as the agency continued with its commitment to driving sustainable investments and fostering economic growth.
He focused on two crucial developments shaping the investment landscape in Zimbabwe.
Firstly, the promulgation of the Special Economic Zones (SEZ) and General Investments Regulations. These regulations streamline the application processes for both SEZs and general investment licenses, offering greater clarity and efficiency for potential investors. Secondly, Mr Chinamo emphasised the success of ZIDA's Mining Matchmaking Platform. The platform's rising popularity, evidenced by increased inquiries and follow-through, has prompted the launch of its second phase.
This expansion signifies ZIDA's commitment to connecting investors with viable mining opportunities in Zimbabwe.
“This (also) saw us going live with the Tourism Matchmaking Platform that we launched at the Sanganai Hlanganani Tourism Expo. This digital platform will bring together local and international tourism promoters and investors seeking opportunities in the sector,” said Mr
Chinamo.
To enhance investor support in Masvingo, Midlands, Matabeleland North, Matabeleland South, and Bulawayo provinces, ZIDA deployed new offices in these regions.
“In our ongoing effort to make it easy for investors to be aware of opportunities available for investment, work continued on the development of project-specific prospectuses. “This was complemented by research on several value chains, as well as an investor sentiment analysis survey, whose findings will guide us through MDAs to creating a more conducive investment climate,” said Mr Chinamo.
Beyond regional expansion, ZIDA actively fostered partnerships with key stakeholders to streamline investment processes and enhance the ease of doing business.
Notably, ZIDA forged strategic collaborations with Nedbank and Ecobank. These agreements promise to play a pivotal role in promoting Zimbabwe's attractiveness to investors, both domestic and foreign, by facilitating direct investments.
Mr Chinamo said ZIDA remained committed to driving investments and fostering growth.
“Embracing innovation and technology will be central to our success in the future. We recognise the importance of sustainable developments through responsible investments, hence a renewed emphasis to attract socially responsible investors in line with regional and global trends,” said Mr Chinamo.