2c Tax Caught Business By Surprise – Delta

BEVERAGES maker Delta Corporation Limited says the newly introduced two cents Intermediary Money Transfer Tax has caught business and consumers by surprise.

Stakeholders have expressed mixed reactions over the two cents per every dollar transaction imposed by Government last week. In view of public concerns, Treasury has reviewed the new tax model by setting upper and lower limits as part of broader fiscal stabilisation measures.

2c Tax Caught Business By Surprise – Delta

Under the new framework, transactions below $10 will no longer attract the two cents tax, while all transactions above $10 to $500 000 will comply with the new tax regime. The new tax is meant to boost domestic revenue inflows and assist Government to finance development programmes.

However, in its trading update for the second quarter and half year period ended 30 September 2018 issued yesterday, Delta Corporation implored Government to engage stakeholders before making major policy pronouncements so as to maintain market confidence.

“The two percent transaction tax took both business and consumers by surprise, raising policy risks and undermining market confidence. Government and regulators are urged to engage stakeholders ahead of major policy pronouncements in order to maintain market confidence,” said Delta.

“Post the end of the reporting period, the fiscal and monetary policy pronouncements have been dampened by the currency policy statements, which seem to contradict the previous undertakings by the Reserve Bank of Zimbabwe on the multi-currency framework.”

During the period under review, the group increased revenue by 33 percent for the quarter and 37 percent for the half year, driven by the volume growth in the beer businesses. This has positively impacted on profitability and cashflows, said Delta, which declared an interim dividend of 2,5 cents per share to its shareholders payable this month.

The company noted that while consumer demand for the period was firm, business performance reflected the relative impact of the import content, which required hard currency in each business segment.

Lager beer volume grew by 52 percent over prior year for the quarter and is up 54 percent for the six months. The business has responded well to the surge in demand.

However, there were frictional shortages of brands and packs occasioned by the limited production capacity and raw material supply issues. Sorghum beer volume also grew by nine percent above prior year for the quarter and two percent for the six months. There was an improvement in the supply of packaging materials for Chibuku Super.

The sparkling beverages volume declined by 14 percent compared to prior year for the quarter and grew by three percent for the six months.

“The category was adversely affected by the challenges in securing imported raw materials, leading to extended periods of production stoppages and out of stock situations,” said Delta. Meanwhile, National Breweries Plc – Zambia recorded volume growth of 13 percent, in response to the volume recovery initiatives, which focused on packs and competitive pricing.

The Zimbabwe Stock Exchange-listed company has reminded shareholders that it was still trading under a caution with respect to the notice received from The Coca-Cola Company advising of an intention to terminate the Bottler’s Agreements with the group entities.

This followed the merger of AB InBev and SABMiller Plc in October 2016 and the subsequent agreement in principle reached between Coca Cola and AB InBev to explore options to restructure the bottling operations in a number of countries. The discussions amongst the parties are ongoing.