The sugar tax will affect demand: Star Africa Corporation Limited

Listed sugar-producing firm Star Africa Corporation Limited (SACL) has expressed concerns that the newly imposed tax on added sugar could significantly reduce demand for products in the sector.

In the 2024 National Budget, Finance Minister Mthuli Ncube introduced a tax on beverages containing sugar, set at US$0.002 per gram, effective January 1. This has led to an increase in beverage prices. For example, a two-litre bottle of Mazoe Orange Crush by Schweppes Zimbabwe now costs US$5.10, up from US$3, while a 500ml bottle of Maheu now costs US$0.75, up from between US$0.50 and US$0.60.

SACL board chairman Rungamo Mbire, presenting the group’s performance for the period ending March 31, 2024, said these fiscal measures will stifle volumes and demand.

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

Several players in the sugar value chain have already reported declines in product uptake, benefiting unregulated informal sector players.

Despite these challenges, SACL’s total turnover increased by 23% for the year under review, from ZWL1.54 trillion to ZWL1.90 trillion, attributed to inflationary pressures. However, the Group incurred an operating loss of ZWL679 billion compared to a profit of ZWL13 billion the previous year.

“This loss was primarily due to a three-month plant shutdown caused by raw sugar supply challenges, which have since been resolved, as well as the increased cost of key raw materials and other overheads. The Group continues to rationalize operations to reduce costs. In historical cost terms, total revenue increased by 789%, from ZWL42 billion to ZWL378 billion, while operating profit decreased by -910%, from a profit of ZWL2.28 billion to a loss of ZWL18.47 billion,” Mbire said.


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