Industry presses Treasury to soften sugar levy

STAFF WRITER

Industry is pressing Treasury to introduce a levy-free threshold of 4g of sugar per 100ml in the 2027 National Budget, arguing that Zimbabwe’s sugar levy now weighs more heavily on producers than South Africa’s and is pushing consumers towards informally imported drinks that avoid duties and taxes, and towards artificial sweeteners.
The push follows mixed signals from the Minister of Finance, Professor Mthuli Ncube.
Addressing legislators at the 2027 Pre-Budget Seminar on 30 October, he said Treasury would consider the sugar tax and “perhaps align with the region, South Africa, Botswana, in the main”. He has since said the tax will not be reviewed because it is critical to discouraging excessive sugar consumption and financing healthcare.Industry says it is not asking for the levy to go.
The Confederation of Zimbabwe Industries (CZI), in its 2027 budget submission, recommends keeping it but exempting the first 4g per 100ml, in line with South Africa and Botswana.The levy is charged at US$0.001 per gram of sugar.
That rate dates from January 2024, when Treasury cut the US$0.02 per gram proposed in the 2024 Budget within days of representations from CZI.
The cut removed a rate twenty times higher, but it did not settle whether the levy should have a threshold.The Minister has described the current rate as one that “presents an administratively simple methodology of exempting the first 4g of added sugar”. Industry disputes this. The levy applies to every gram from the first, which is the reason a threshold is being sought.South Africa’s Health Promotion Levy is about 2.21 cents per gram, charged only on sugar above 4g per 100ml. On a drink containing 10.6g per 100ml, Zimbabwe’s levy comes to US$0.106 a litre. With the rand trading at around R16.6 to the US dollar this week, South Africa’s charge on the same drink is about US$0.088, which leaves Zimbabwe’s roughly a fifth higher. On a drink at 4g per 100ml, South Africa charges nothing.CZI estimates that manufacturers pay US$1,000 in levy for every tonne of sugar they use, when the sugar itself costs about US$800 a tonne. Imported bottler-grade sugar, needed when local mills are off-season, carries a further 30% surtax under SI 50A of 2025.
The confederation says the burden is feeding grey-market imports, which it reports have risen by more than 10%. The central concern is significant informal imports that avoid payment of duties and taxes, including the sugar levy. These drinks compete with tax-paying local producers while contributing no corresponding levy revenue to healthcare.Official trade data show a sharp rise in imports.
Zimstat figures show imports of sweetened soft drinks reached US$20.9 million in the first nine months of 2026, against US$2.4 million in the same period last year and more than four times the total for the whole of 2025. The surge began in April and has run at about US$3 million a month since May. Total beverage imports, including beer and spirits, rose almost fourfold by volume to about 104,000 tonnes, nearly all of it from SADC.The sugar levy applies to formally imported beverages as well as locally produced drinks.
The main concern is significant informal inflows that avoid duties and taxes, including the levy, rather than a blanket exemption for imported drinks. The official trade figures show growth in recorded imports; they do not measure the scale of informal inflows or establish tax evasion. Separately, there is an unverified allegation that the levy is suppressed for imports from COMESA.
That question should not obscure the central issue of untaxed informal trade.Reformulation is necessary, but it cannot be unlimited. Producers accept the Minister’s call to reduce added sugar and say reductions are already under way. Sugar, however, supplies body, mouthfeel and balance as well as sweetness. International brands must remain recognisably comparable across markets and meet the taste and quality expectations consumers associate with them.
Producers therefore cannot keep reducing sugar without regard to the resulting product: beyond a certain point, reformulation changes the drink’s character rather than simply lowering its sugar content. The practical limit is a recipe that still delivers the product consumers recognise and expect.Zero-sugar drinks are already available in Zimbabwe, but industry reports limited market traction. Their availability does not mean consumers will accept unlimited changes to established products. If consumers reject a reformulated drink, they may switch to full-sugar imports or informal substitutes. Formally imported beverages are subject to the levy; informal substitutes that evade duties and taxes fall outside effective collection.
The policy must therefore encourage achievable, consumer-tested reductions without driving demand outside the tax net.CZI reports that sweetener use has more than tripled since the levy began and warns this threatens the viability of the local sugar industry centred on Chiredzi. In 2023, the World Health Organisation issued a conditional recommendation against using non-sugar sweeteners to control body weight or reduce the risk of noncommunicable diseases, finding no long-term benefit in reducing body fat.
That guidance concerns those health uses and is not a finding that sweeteners are unsafe. Treasury’s 2026 National Budget Statement added a “Beverages Sugar Content Tax: Artificial Sweeteners”, which commentators read as extending the tax to sweeteners.A threshold, industry argues, would reward moderate reductions that consumers accept and let lower-sugar drinks reach a levy-free point using local sugar rather than sweeteners.
Britain’s Soft Drinks Industry Levy, which charges nothing below 5g per 100ml, is the best-studied example: the Institute for Fiscal Studies reports that nearly 80% of the resulting fall in sugar intake came from producers reformulating their drinks.The Minister reported levy collections of US$29.1 million in 2024 and about US$59.4 million in 2025.
In April this year, the Ministry of Health and Child Care told Parliament that about US$30.8 million had gone to cancer diagnosis and treatment equipment, and legislators asked for a full account of the balance. The figures do not cover matching periods and do not show that any money was misapplied, but industry says collections and health spending should be reconciled and published.The levy also raises the question of fairness between producers. Varun Beverages, which received special economic zone status in 2019, has been reported to enjoy tax relief not available to other beverage makers, while established producers such as Delta carry the levy on top of their existing tax load. Treasury’s investor guide provides for qualifying SEZ companies to receive a five-year corporate income tax exemption, a 15% rate thereafter and duty-free raw material imports, although the guide does not show what any one company currently receives.
Industry says it is not seeking exemptions for anyone or questioning investment support, only pointing out that a common levy does not mean equal overall tax treatment.Industry wants the levy retained but redesigned. Its central proposal is a levy-free threshold for ready-to-drink beverages, with tax charged only on sugar above 4g per 100ml.
It also wants the effective burden per litre aligned with South Africa and Botswana, informed by public-health assessment and fiscal modelling, and sugar and sweeteners treated consistently around the threshold rather than encouraging wholesale substitution into artificial sweeteners.On imports, the priority is enforcement against informal inflows that avoid duties and taxes.
Formally imported finished beverages are already subject to the levy; industry wants consistent collection at customs clearance. It also wants tariff code 2106.90.90 narrowed to exclude food preparations that are not beverages.On accountability, industry proposes annual publication of levy collections and earmarked health spending, reconciled to Zimra receipts, followed by an independent review after two years. In return, producers say they are prepared to commit to gradual, consumer-tested sugar reduction targets, share product-level data for independent evaluation and support clearer labelling and public health education.Industry says the Minister’s objectives of cutting added sugar and financing health are the right ones.
Its case for the 2027 Budget is to retain the levy, but introduce a threshold that rewards achievable sugar reduction, enforce collection fairly and account publicly for how the proceeds are spent.