Star Africa says sugar tax will impact demand

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By Alois Vinga

LISTED sugar-producing firm, Star Africa Corporation Limited (SACL) says the imposed tax on added sugar will likely choke demand of dependent products effectively affecting the sector.

Finance Minister Mthuli Ncube, in his 2024 National Budget, implemented a tax on beverages that contain sugar, charged at US$0.002 per gram, effective 1 January in a development which has seen the prices of beverages shooting up.

For instance, a two-litre bottle of Mazoe Orange Crush produced by Schweppes Zimbabwe now costs US$5.10, a US$2.10 hike from US$3, while a 500ml bottle of Maheu now costs US$0.75, up from between US$0.50 and US$0.60, depending on the retail outlet.

Presenting the group’s performance for the period ended March 31 2024, SACL board chairman, Rungamo Mbire said the fiscal measures will choke volumes and demand.

“The introduction of a tax on added sugar in beverages and additional withholding taxes, as well as the changing of the Value-Added Tax status for white sugar from Zero-rated to Exempt adversely impacts overall demand and margins,” he said.

Already, several players in the sugar value chain have indicated declines in product uptake, leaving the unregulated informal sector players at an advantage.

However, during the reporting period, SACL’s total turnover increased by 23% for the year under review from ZWL1.54 trillion in the previous year to ZWL1.90 trillion attributable to inflationary pressures.

The Group incurred an operating loss of ZWL679 billion for the year against a profit of ZWL13 billion in the comparative year.

“This loss was primarily due to a 3-month plant shutdown due to raw sugar supply challenges that have since been resolved, as well as the increased cost of key raw materials and other overheads.

“The Group continues to rationalise operations to reduce costs. In historical cost terms, total revenue increased by 789% from ZWL42 billion in the previous year to ZWL378 billion, while operating profit decreased by -910%, from a profit of ZWL2.28 billion to a loss of ZWL18.47 billion,” said Mbire.