The term “sugar tax” appears at least 10 times in Delta’s latest financials, showing how much it has been a sour point for the country’s biggest beverage company.
Between February and September, the government raised US$20.4 million from charging the sugar tax on Delta’s drinks, the company reports. By the end of its current financial year, Delta expects to have paid government the equivalent of US$32 million from the tax.
Finance Minister Mthuli Ncube introduced the controversial tax in his 2024 budget, charging US$0.001 per gramme of sugar in drinks, saying he would use it to buy cancer treatment equipment for public hospitals.
How has the tax hit Delta?
This has impacted Delta and other beverage producers such as Dairibord. According to Delta, the tax has caused “unavoidable price increases”, which have slowed down sales and eaten into its profits.
In the six months to September, Delta sold 10% more fizzy drinks than it did over the same period last year. Because locally produced drinks now cost more, some traders are importing the same brands from outside the country, which is bad for Delta’s business.
Says the company: “Generally, the sector’s competitiveness has been affected by the relatively high sugar tax, leading to an increase in imports of similar offerings from neighbouring countries.”
The damage is worse for Delta’s Schweppes, which makes Mazoe. Sales volumes were down 9% for the half year, after the company was forced to raise prices to account for the sugar tax. Schweppes is now battling cheaper imports of its own brand. “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.”
The sugar tax has also affected sales of maheu and packaging materials from Nampak, which makes containers and lids for Delta. There has been a “dampening of sales of packaging materials to the soft drink business following the introduction of sugar tax and increase of VAT on Maheu also negatively impacted volume”.
Where is the sugar tax money?
In July, Health Minister Douglas Mombeshora said Treasury had raised US$8 million from the tax, but the money was yet to be released to his department. In September, Ncube told Parliament that the tax had raised the equivalent of US$18 million from all companies, and that he was working with Health on procurement.
Last year, government bought two radiotherapy machines for Parirenyatwa and Mpilo hospitals for US$2.4 million. However, public hospitals are still well short of cancer treatment infrastructure and medication, at a time when cancer cases are rising. Ncube is due to announce the 2025 budget late this month, and beverage manufacturers — and the public — will be keen to see how he plans to deploy the sugar tax earnings.
