In my first days as an analyst, my mentor, Ranganayi Makwata, a respected authority in Zimbabwe’s capital markets told me: “Kuda, you cannot afford to miss Delta’s analyst briefing; this counter gives you a general view of the economy.” I didn’t grasp it then, but now I couldn’t agree more.
While we have not attended a briefing, reviewing Delta’s Q1 trading update for the period ending June 30, 2025, offers a clear snapshot of the economy. Hopefully, I will impress Ranga as I unpack this update. Let’s dive in.
Delta’s revenue for Q1 grew by 25% compared to the same quarter in 2024. What drove this performance? Was it a recovery in sorghum volumes following the shift from El Niño to La Niña, the consistently strong Lager segment, which accounted for 44% of FY25 revenue, the wines and spirits segment, or a rebound in sparkling beverages and Schweppes?
Let’s unpack this.
Lager beer volumes rose by 19% in Q1, largely supported by record breaking tobacco production and a 46% surge in gold output to 20,1 tonnes in the first half of 2025.
Both sectors are dollarised, explaining why over 85% of Delta’s domestic sales were in foreign currency. Strong performance in these sectors directly correlates with growth in the Lager segment.
The sorghum segment operates in Zimbabwe, South Africa, and Zambia. In FY25, volumes fell 7% overall: Zimbabwe grew 1% amid El Niño and competition from Inyathi, Zambia plunged 30%, and South Africa declined 10%.
In Q1 FY26, Zimbabwe’s sorghum volumes rose 11%, supported by lower grain prices and improved maize output (2 300 tonnes this season vs. 635 tonnes in 2024).
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However, South Africa and Zambia remained weak, with volumes down 8% and still subdued, respectively. These markets have underperformed for some time, and the group should clarify why it continues to hold them or outline when they expect a turnaround. As the second largest contributor to revenue (28% in FY25), this segment’s underperformance warrants close attention.
For clarity in analysis, let us combine Sparkling Beverages with Schweppes, now a Delta subsidiary.
In Q1, Sparkling Beverages volumes grew by 2%, while Schweppes posted a modest 1% increase, both lagging behind other categories. Looking back, Sparkling Beverages declined by 4% in FY25, and Schweppes fell 15%.
So, is this mild Q1 growth worth celebrating? Not quite. Part of it was driven by price discounting to compete with cheaper substitutes, while both segments continue to lose volume to the informal market and struggle under the sugar tax, albeit reduced in January from US$0,001 to US$0,0005 per gramme.
As the third largest revenue contributor, this segment is clearly under pressure. This reinforces the views I shared that formal retailers are likely to survive, not rebound, in H2 2025, as the informal sector continues to siphon demand.
Management should replicate Afdis’ strategies under these segments, which helped it combat competition from cheaper illicit drugs. Afdis volumes rose 40% in Q1, driven by RTDs (+45% with the 660ml Hunters pack), spirits (+36%), and wines (+25%) benefiting from strong demand in the affordable segment.
In Q1, Delta paid US$4,5 million in sugar tax under Sparkling Beverages and US$2,2 million under Schweppes. Last year, US$31,2 million in surtax was paid between February and December. Still on taxes, Delta remains embroiled in disputes with Zimra, which is seeking an additional US$73 million in tax assessments. Zimra has already collected US$3,21 billion by mid-2025, surpassing its half year target of US$3,13 billion, with 95,9% from tax revenue, and remains confident of meeting its US$7,2 billion annual goal.
Despite adverse rulings from the High and Supreme Courts, Delta has pursued appeals, including at the Constitutional Court, which dismissed its challenge over disputed assessments totalling US$74 million.
Delta argues Zimra failed to account for local currency payments eroded by inflation and currency depreciation. The disputed assessments, covering VAT and income tax for 2019–2022, were issued in November 2024, compounding earlier 2022 assessments and including principal tax, penalties, and interest.
Delta Corporation submitted mid-term budget proposals, calling for an increase in the VAT registration threshold from US$24 000 to over US$60 000 to ease compliance burdens for SMEs.
It also raised concerns over the 5% withholding tax on non-compliant traders, arguing it has pushed up prices, increased taxes on compliant manufacturers and wholesalers, and added to administrative costs.
Delta urged authorities to resolve “legacy issues” from the 2019 currency reforms. Despite a recent tax reduction on cordials, demand has slumped while cheaper regional imports have surged.
Delta proposed further reducing the sugar surtax and applying it only to sugar content above 4g/100ml to align with regional norms and protect the industry.
The company also criticised the 2% Intermediated Money Transfer Tax (IMTT), revealing it has paid an average of US$7,5 million annually over the past three years, warning it discourages banking and promotes cash based trade.
So, is Zimbabwe’s business environment truly conducive? Can we trust official claims of growing currency confidence in formal systems? I will let you decide.
Taimo is an investment analyst with a talent for writing about equities and addressing topical issues in local capital markets. He holds a First Class Degree in Finance and Banking from the University of Zimbabwe. He is an active member of the Investment Professionals of Zimbabwe community, pursuing the Chartered Financial Analyst charter designation.
