Coke could close South Africa plants

Johannesburg – Coca-Cola Beverages Africa, the bottling joint venture between the US soft-drink maker and brewer SABMiller may close South African plants and see profit more than halve if the government pushes ahead with a proposed sugar tax.

South Africa’s National Treasury last month recommended a levy on sugar-sweetened beverages that would generate almost R11 billion ($813 million) in government revenue, based on 2012 consumption data cited in the policy paper. The charge is aimed at reducing consumption of sugar and encouraging producers and suppliers to cut the sugar content of their drinks, according to the government.

File picture: Jacky Naegelen. Credit: REUTERS

The newly created bottler’s volumes in South Africa would probably drop by at least 25 percent if the tax were implemented as proposed, based on calculations using government assumptions, according to Velaphi Ratshefola, the managing director of Coca-Cola Beverages South Africa and chairman of the Beverage Association of South Africa, an industry lobby group. Smaller producers could shutter operations altogether, he said.

“Our profit will more than half,’’ Ratshefola said in an interview at Bloomberg’s Johannesburg office on Friday. If the tax goes ahead, CCBA would struggle to keep to an agreement with the government to keep employee levels steady for three years, he said.

Discriminatory tax?

Claims of job losses are “mere speculation’’ at this stage of the process, National Treasury spokeswoman Phumza Macanda said in an e-mailed response to questions. The Treasury has set a deadline of Monday for comments on the draft policy paper, after which it will hold a consultation process, she said. The levy is 2.29 South African cents per gram of sugar.

“The industry should not jeopardise constructive engagement on this issue by resorting to scare tactics,” she said. “It’s universally accepted that sugar consumption has negative health consequences.”

The industry argues that the tax is discriminatory because sugar-sweetened drinks only contribute 3 percent, according to Ratshefola –- of South Africans’ daily caloric intake. While obesity and sugar consumption are issues that should be dealt with, the industry could work with government to find other ways to tackle them, he said. The study includes people who don’t drink sugar-sweetened beverages. For those who do, the proportion of daily calories could be higher, he said.

Almost 27 percent of South Africans older than 15 are obese, according to data published by the Organisation for Economic Cooperation and Development. That’s the sixth-highest rate among 41 countries tracked by the OECD. It’s also the highest of the emerging markets in the group after Mexico, which introduced a tax on sugar-sweetened drinks in 2014.

South Africans’ consumption of sugar through processed foods and soft drinks has increased by 33 percent since 1994 and the country consumes about three times more Coca-Cola products than the global average, according to Lisa-Claire Ronquest-Ross, a researcher at the Department of Food Science at Stellenbosch University.

“The high prevalence of soft drink consumption is concerning in terms of its association with obesity and non-communicable diseases,” she said in an e-mailed response to questions.

Shop closures

In addition to possible company closures and job cuts, the beverage industry estimates that as many as 15 000 informal convenience stores, known as spaza shops, could close as a result of the tax, which would be the highest of its kind in the world, Ratshefola said. The vendors rely heavily on the sales of soft drinks, he said. Those shops on average employ 2 people, he said.

SABMiller holds 57 percent of CCBA, while Atlanta-based Coca-Cola Co. owns 11.3 percent. The balance is controlled by the Gutsche family, which was the majority owner of Coca-Cola’s former bottling partner in South Africa. The parties agreed with the government in May to keep employment at current levels for three years to secure approval for the merger, which was first announced in 2014. Other conditions included the creation of two development funds – one for the agriculture industry and the other for retail and distribution – worth a combined R800 million.

“If this tax were to be implemented there’s no way I could afford to keep the number of employees like that for three years,” Ratshefola said. “This tax legislation works completely opposite to what we negotiated.”

Related Posts
Mining firms seek clarity on Zimbabwe platinum export tax
LONDON (Reuters) - Miners Aquarius and Impala said on Friday they are seeking clarity from Zimbabwe's government over a proposed 15 percent export tax on unrefined platinum which, if enforced, ...
READ MORE
Zimbabwe’s Failure to Access Loans Result of Arrears Not US Sanctions – US Ambassador
HARARE — United States Ambassador to Zimbabwe Harry Thomas Jnr. says Washington is ready to engage Harare and dismissed claims that his country’s sanctions regime have hurt Zimbabwe’s economy. The country’s ...
READ MORE
Ease of Doing Business Reforms in Zimbabwe Set to Attract Investors
HARARE — The Zimbabwe Investment Authority (ZIA) says the government’s plans to promulgate 13 laws to improve the ease of doing business by June is informed by World Bank reports. The ...
READ MORE
Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao (left) and his personal assistant Rangu Nyamurundira appear before youth and indigenisation potofolio committee in parliament yesterday.
CAPE TOWN - A game of chicken is playing out right now in Zimbabwe, as foreign firms wait to see if the government will live up to its threat to ...
READ MORE
Fly Africa introduces daily Harare -Vic Falls flights as demand swells
HARARE,– Low cost airline Fly Africa said on Monday it will effective July introduce daily flights between Harare and Victoria Falls up from the current three times weekly in a ...
READ MORE
Mwana Africa calls for power price cut for Zimbabwe gold mine
HARARE (Reuters) - Mwana Africa's gold mine in Zimbabwe, Freda Rebecca, has asked the government to cut its electricity tariff by up to 28 percent because it says current rates ...
READ MORE
City reaches deal over $48mln Zimra debt, water works rehab resume
HARARE,– Harare City Council has reached an agreement to offset its $48 million debt to the Zimbabwe Revenue Authority (Zimra) and has since resumed rehabilitation of Morton Jeffrey water works ...
READ MORE
AfDB to cancel Zimbabwe’s $600mln arrears
HARARE,– The African Development Bank’s (AfDB) has agreed to cancel Zimbabwe’s $601 million arrears with the bank, a senior official announced on Tuesday, as the southern African country intensifies efforts ...
READ MORE
Disaster-error ravaged Zuma reverses Fin. Minister appointment, brings back Gordhan
JOHANNESBURG - President Jacob Zuma has reversed his disastrous decision to appoint little-known MP David van Rooyen as finance minister, bringing Pravin Gordhan back to steady the ship. After the announcement ...
READ MORE
Zimbabwe’s $18bn import spending far outweighs exports
Zimbabwe has splashed over $18 billion in past five years on cheap imported products, as imports continue to far outweigh exports, leaving local businesses baffled on where the money was ...
READ MORE
Mining firms seek clarity on Zimbabwe platinum export
Zimbabwe’s Failure to Access Loans Result of Arrears
Ease of Doing Business Reforms in Zimbabwe Set
‘Indigenisation’ policy threatens to derail Zimbabwe economy
Fly Africa introduces daily Harare -Vic Falls flights
Mwana Africa calls for power price cut for
City reaches deal over $48mln Zimra debt, water
AfDB to cancel Zimbabwe’s $600mln arrears
Disaster-error ravaged Zuma reverses Fin. Minister appointment, brings
Zimbabwe’s $18bn import spending far outweighs exports

Arts & Entertainment