• Reduction of Sugar Tax: Has cut the sugar tax from 0.001% to 0.0005% per gram
• Revenue Allocation Concerns: Despite generating significant revenue from the sugar tax, no cancer treatment equipment has been procured yet
• Unaccounted Revenue Concerns: There is a troubling discrepancy of at least US$2.5 million in sugar tax revenues that remain unaccounted for

Harare- Following the introduction of a 0.001% sugar tax in January 2024, the government has announced a reduction of this levy to 0.0005% per gram of sugar, effective January 2025.

Initially, Finance Minister Professor Mthuli Ncube proposed a tax of two cents per gram on sugary beverages, however, after significant industry backlash, this figure was revised to US$0.001 in February.

The tax is uniformly applied to both ready-to-drink and concentrated beverages.

Manufacturers contend that cordials, due to their higher sugar concentrations, are disproportionately impacted by the effective tax compared to ready-to-drink options.

Industry norms suggest that the tax should be assessed based on the sugar content of the diluted products to ensure fairness in the marketplace.

To enhance competitive equity between ready-to-drink beverages and cordials, Ncube has proposed a review of the Special Surtax on Beverages' Sugar Content, lowering it from US$0.001/g to US$0.0005/g, effective January 1, 2025 in his latest 2025 budget presentation.

This tax initiative was designed with the dual objectives of curbing sugary drink consumption and addressing non-communicable diseases such as cancer.

Revenue generated from this tax was earmarked for procuring cancer treatment equipment and medications.

However, industry stakeholders have reported substantial cost increases, which have been passed on to consumers through price hikes, resulting in decreased demand and a rise in smuggling of cheaper alternatives.

By September 2024, Delta alone contributed US$20.5 million in sugar tax payments, with projections estimating total contributions could reach up to US$32 million by year-end.

The impact has been particularly pronounced for Delta's subsidiary, Schweppes, which produces Mazoe as the company reported a 9% decline in sales volume for the first half of the year, necessitating price increases to offset the sugar tax.

Schweppes is now contending with cheaper imports encroaching on its market share.

The sugar tax has also adversely affected sales for Nampak, which produces packaging materials for Delta, and for Dairibord Zimbabwe.

Hippo Valley, the largest sugar producer in Zimbabwe, with a commanding 52% market share, has also reported a significant decline in local sugar sales as beverage manufacturers reduce their sugar purchases in response to the tax.

Many companies are exploring artificial sweeteners as a cost-cutting measure, further impacting Hippo Valley's sales volumes.

However, concerns are mounting regarding the allocation of tax revenues, as reports indicate that no cancer treatment machines have been procured despite the funds collected.

The government has acknowledged US$18 million in revenue, leaving at least US$2.5 million unaccounted for dealing with only contributions from Delta, factoring out Dairibord and others.

In September, Ncube reported a total of US$18 million collected from all companies, raising questions about discrepancies, particularly given Delta's payment of US$20.5 million alone.

With additional contributions from Dairibord and Probrands not fully disclosed, total tax revenues could exceed US$50 million by year-end.

Last year, the government allocated US$2.4 million to procure two radiotherapy machines for the Parirenyatwa and Mpilo hospitals.

Public hospitals continue to lack adequate cancer treatment infrastructure and medications amid rising cancer cases.

This situation calls into question the government's stewardship of tax revenues, emphasising the need for stringent measures to ring-fence funds for their intended purposes, such as cancer treatment.

The ongoing lack of transparency and accountability raises critical concerns about the sugar tax's efficacy and its impact on both the beverage industry and public health.

These issues cast a shadow over the recently proposed fast food taxes.

Will the funds generated from this new tax be managed more effectively, or will they encounter similar accountability challenges?

With the government struggling to account for US$2.5 million, the proposed 0.5% fast food tax in the 2025 budget may face similar scrutiny regarding its revenue management.

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