HARARE – Zimbabwean conglomerate Innscor Africa has called on authorities to extend the country’s sugar tax to imported beverages, warning that the current policy framework is undermining domestic industry competitiveness and distorting market dynamics.
The group, through its dairy and beverage subsidiary Prodairy, says its margins have come under sustained pressure since the introduction of the sugar surtax in January 2024. The levy, designed to curb excessive sugar consumption and improve public health outcomes, currently applies primarily to locally manufactured sugary drinks—leaving imported alternatives relatively unaffected.
Uneven Playing Field
Innscor argues that this asymmetry has created an uneven competitive environment, where foreign producers can undercut local prices while avoiding equivalent fiscal burdens.
“The current framework effectively penalises local value addition while incentivising imports,” industry officials noted, adding that the policy risks accelerating deindustrialisation in Zimbabwe’s already fragile manufacturing sector.
Economists say the distortion arises from a classic tax incidence imbalance: domestic producers absorb the cost of the surtax, while importers exploit regulatory gaps to maintain lower shelf prices, eroding local market share.
Trade and Tariff Complications
However, extending the sugar tax to imports is far from straightforward. Zimbabwe operates within regional and global trade frameworks, including the Southern African Development Community (SADC) and the World Trade Organization (WTO), both of which impose constraints on how member states can structure tariffs and taxes.
Under SADC trade protocols, member states are generally required to eliminate tariffs on goods originating within the region. Imposing an additional tax specifically targeting imported beverages—particularly from fellow SADC countries—could be interpreted as a non-tariff barrier, potentially violating agreed principles of free trade and non-discrimination.
Similarly, WTO rules emphasise the concept of “national treatment,” which requires that imported goods be treated no less favourably than domestically produced goods once they enter the market. While excise taxes such as sugar levies are permissible, they must be applied uniformly to both domestic and imported products to remain compliant.
Policy Design Challenges
This creates a policy dilemma for Zimbabwean authorities. While extending the sugar tax to imports could restore competitive balance, poorly designed measures risk triggering trade disputes or retaliatory actions from regional partners.
Tax experts note that the government would need to carefully recalibrate the sugar levy into a broad-based excise duty applied at the point of entry for imports, ensuring parity with domestic producers. This would require enhanced customs enforcement, improved valuation mechanisms, and tighter monitoring to prevent under-invoicing and smuggling—longstanding challenges in Zimbabwe’s import regime.
Inflationary Pressures and Consumer Impact
There are also concerns about the broader economic implications. Expanding the tax to imports could drive up retail prices across the beverage sector, exacerbating inflationary pressures in a market already characterised by constrained consumer purchasing power.
Retail analysts warn that while such a move may protect local industry, it could simultaneously reduce consumption, shrink overall market volumes, and encourage the proliferation of informal or illicit trade channels.
Strategic Industrial Considerations
From an industrial policy perspective, Innscor’s proposal highlights deeper structural tensions in Zimbabwe’s economy—between protecting domestic manufacturing and adhering to liberalised trade commitments.
The country’s beverage sector, once a strong contributor to value addition and employment, is increasingly facing competition from imports, particularly from regional producers benefiting from scale efficiencies and more stable operating environments.
Innscor maintains that aligning the sugar tax across both local and imported products would not only level the playing field but also reinforce government revenue collection and public health objectives.
Government Yet to Respond
Authorities have not yet issued a formal response to the proposal. However, the issue is expected to feature prominently in ongoing fiscal policy discussions, especially as the government seeks to balance industrial revival with compliance under regional and international trade regimes.
As debate intensifies, the outcome will likely set an important precedent for how Zimbabwe navigates the complex intersection of taxation, trade policy, and industrial competitiveness in an increasingly integrated regional economy.