Govt fails to account for US$5m in sugar tax

Kudakwashe Pembere

Harare—There are yet to be explained discrepancies regarding revenue collected from a sugar tax that Finance minister, Mthuli Ncube, introduced in the 2024 national budget that was announced in December last year, it has emerged.

This has brought into question government transparency in the declaration of income generated from tax.

Health and Child Care minister, Douglas Mombeshora, stated in mid-July that the tax had generated US$8 million, which he added would go towards cancer treatment.

“They (Finance ministry) said there is US$8 million now for us to utilise,” Mombeshora said then.

“…This is going to target procurement of cancer treatment machines and cancer treatment drugs,” he added.

The Finance minister announced towards the end of September that government had collected some US$18 million.

Initially, Ncube had targeted to levy two cents on every gramme of sugar contained in a beverage, but the figure was in February reduced to US0.001 following an outcry by industry.

The tax has led to increased prices, reduced demand, and a surge in informal imports.

The tax was introduced to ostensibly reduce consumption of sugary drinks and combat non-communicable diseases such as cancer.

The Delta Corporation finance director, Alex Makamure, told a recent briefing for their September 2024 results that its combined contributions to the sugar tax with Schweppes Zimbabwe from February was over US$20 million.

“It is highlighted that an equivalent of US$20.5 million was paid as sugar tax by Delta Beverages and Schweppes Zimbabwe for the period February to September 2024,” he said.

Makamure added, “Schweppes Holdings Africa Limited recorded a volume decline of 9% for the six months, primarily due to significant price increases, driven by the sugar tax, which is particularly punitive for cordials.

“The business was also weighed down by a surge in imports of the flagship Mazoe Orange Crush from regional markets driven by the price disparity created by the sugar tax.

“Volume was also impacted by disruptions in the route to market arising from the fiscal regulations,” he announced.

The two beverages giants contributed a monthly average of US$2.6 million for the five months spanning February to June.

Dairibord Zimbabwe has also been affected by the sugar tax, paying between US$100,000 and US$300,000 per month.

This would translate to up to US$2.4 million between February and September and about US$23 million for Delta, Schweppes and Dairibord.

With the government’s declaration of only US$18 million, it means at least US$5 million remains unaccounted for.

Delta general manager for corporate affairs, Patricia Murambinda, expressed deep concern over the adverse effects of the sugar tax on local beverage manufacturers.

“Delta and Schweppes paid a combined amount equivalent to US$13 million for the period February to June 2024.

“There has been a reduction in volume reflecting the high price increases effected to implement the sugar tax,” said Murambinda.

“We are also experiencing lower demand arising from informal imports of our brands from regional countries with lower taxes.

“We still expect to pay over $25m in sugar tax by December 2024 after factoring in waiver of the January 2024 amounts,” added Murambinda.

Innscor subsidiary, Probrands, in an interview refused to provide figures of the sugar tax they paid.

“Unfortunately, I am not at liberty to disclose financial information to you,” Nqobani Mthethwa, Probrands financial director, said.

Efforts to get comment from the Zimbabwe Revenue Authority (Zimra) and the Finance ministry were futile until this publication came out.

Observers have called for transparency and accountability in the use of sugar tax revenue.

Prosper Chitambara, an economist, recommends ring-fencing the funds to ensure they are used for their intended purpose, such as cancer treatment.

“But of course, for that to happen, there’s a need for enabling legislation because as it is, the funds are going into the consolidated revenue fund.

“And sometimes the risk is that those funds can then be used for other purposes and not for cancer treatment.

“So, I think we need to make sure the funds are ring-fenced and, that way, there will be a greater likelihood that they would then go to cancer treatment without being diverted to other purposes,” said Chitambara

Itai Rusike, executive director of the Community Working Group on Health, supports the sugar tax as a global best practice to combat non-communicable diseases.

“This is in line with regional and global best practices. The WHO has been advocating for a sugar tax on sugar sweetened beverages to fight the scourge of non-communicable diseases,” said Rusike.

However, he emphasises the importance of effective implementation and utilisation of the funds.

Despite efforts to obtain clarification from Zimbabwe Revenue Authority (Zimra), the discrepancies in the figures remain unresolved.

The lack of transparency and accountability raises concerns about the effectiveness of the sugar tax and its impact on both the industry and public health.