As the beverage giant celebrates bumper earnings, a protracted legal battle with ZIMRA over historical tax assessments represents a material threat to its financial health.
By Jonathan Mbiriyamveka
HARARE – Behind Delta Corporation’s blockbuster half-year results lies a formidable threat that could potentially wipe out a significant portion of its profits: a US$73 million dispute with the Zimbabwe Revenue Authority (ZIMRA).
The contested assessments, covering value-added tax and income tax for the periods 2019 to 2022, plus penalties and interest, stem from disagreements over whether certain tax obligations were payable exclusively in foreign currency.
Delta contends that local currency payments made at the time, which have since been ravaged by hyperinflation, should be considered as settled obligations.
The group has already paid US$13.7 million under the “pay now, argue later” principle, but the legal battle has been arduous.
“Adverse judgements have been made by both the High Court and the Supreme Court,” the company disclosed, adding that the Constitutional Court recently declined to hear the matter, directing it back to the fiscal courts.
“The ambiguities in the tax legislation are pervasive, thereby creating risks of further disagreements in interpretations,” Delta’s board warned, stating that the outcome and timing of a resolution remain unpredictable.
This overhang is a major concern for investors. A negative final ruling could trigger a massive cash outflow, impacting Delta’s ability to fund its ambitious capital expenditure program and maintain its newly increased dividend payout.
“The US$73 million question is the single biggest risk on Delta’s balance sheet,” said financial analyst Primrose Dube.
“It’s a stark reminder that in Zimbabwe, regulatory and policy risks can be just as significant as operational and market risks. These record profits could be swiftly eroded if the courts ultimately rule against them.”
In a notable counterpoint, Delta highlighted that it is owed “significant amounts through treasury bills due from Government,” suggesting a potential offset should the liability crystallize.
However, with over US$147 million paid in current taxes in Zimbabwe during the period—a 19% year-on-year increase—the company is clearly a major contributor to the fiscus, even as it fights a costly rear-guard action against it.
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