High import duty can cut cement influx
East African Business Week
In recent years Tanzania has experienced an influx of cheap
construction materials especially cement from Pakistan, India and China.
This threatens locally manufactured cement. East African Business Week's KENAN KALAGHO spoke to the Confederation of Tanzania Industries (CTI) Executive Director Mr. Hussein Kamote on how local industries can stay competitive.
Qn. There has been the influx of foreign cheap imported cement in the country, What is CTI doing to protect local companies?
(Mr Hussein Kamote ,Director of Policy and Research with Confederation of Tanzania Industries Photo By Kenan Kalagho)
ANS: The government in Tanzania allowed the importation of cement from Pakistan and other countries because of the shortages it experienced during the South African World Cup, a period where a lot of cement was exported to South Africa and that brought about cement shortages. We are however fighting for the government to increase import duty for cement to 35% in all the East African countries from the current 25% to protect local companies in the region and allow them to compete.
Qn. With this influx, what does the government need to do for the local industries to compete both locally and on the international market?
ANS: This is a big problem especially if you look at the construction sector where most of the companies pass through Tanzania Investment Centre (TIC) for investments registration and so have to be exempted from taxes for a certain period of time. However, what we, at the CTI are saying and insisting is that there shouldn't be any foreign construction company importing cement and/ or iron steel while there are local industries producing such materials in the country. If however these foreign companies insist on importing, then they should be required to pay import duty.
Qn. Recently one of the local cement companies complained about the charges of higher taxes in the country and noted that it was one of the reasons local manufacturing companies were unable to compete?
ANS: I will not agree with that because our tax tariff rates of VAT and import duty are very reasonable compared to other countries. For example we have an exercise duty and VAT taxes of 18% which in some of the SADC countries are charged 20% or more than that. However I agree that the government has removed all the exemptions industries and or companies used to enjoy during their investment period because they realized that there were some few companies which were abusing such an opportunity by claiming losses every time.
Qn. It is said that foreign companies were enjoying heavy subsidies from their governments which leads to reduction in their manufactured products and making them to compete on the world market, what lessons can Tanzania learn from this?
ANS:Pakistan and Egypt are some of the countries which are good at subsidy and they usually subsidize on electricity to their industries. Under the World Trade Organization however, there are subsidies that are not allowed to be offered to companies by the government. What we can learn however is to look at some strategic industries like cement and give them preferential rates though such a practice would seem to segregate others. Again the 25% subsidy being offered to these foreign firms, we can increase the tax by 25% to cement importation in order to knock off the subsidy and allow local companies to compete.
Qn. How would you advise the government to ensure local manufacturing industries are empowered to compete locally and internationally?
ANS: I would advise the government to improve our transport infrastructure especially by making sure that the railway systems are effective because that would reduce the cost of most manufactured products in the country including cement. Besides, there is also need for the government to improve our port facilities so that products can be obtained in time and build trust to business partners or traders we deal with.
Qn. There has been the influx of foreign cheap imported cement in the country, What is CTI doing to protect local companies?
ANS: The government in Tanzania allowed the importation of cement from Pakistan and other countries because of the shortages it experienced during the South African World Cup, a period where a lot of cement was exported to South Africa and that brought about cement shortages. We are however fighting for the government to increase import duty for cement to 35% in all the East African countries from the current 25% to protect local companies in the region and allow them to compete.
Qn. With this influx, what does the government need to do for the local industries to compete both locally and on the international market?
ANS: This is a big problem especially if you look at the construction sector where most of the companies pass through Tanzania Investment Centre (TIC) for investments registration and so have to be exempted from taxes for a certain period of time. However, what we, at the CTI are saying and insisting is that there shouldn't be any foreign construction company importing cement and/ or iron steel while there are local industries producing such materials in the country. If however these foreign companies insist on importing, then they should be required to pay import duty.
Qn. Recently one of the local cement companies complained about the charges of higher taxes in the country and noted that it was one of the reasons local manufacturing companies were unable to compete?
ANS: I will not agree with that because our tax tariff rates of VAT and import duty are very reasonable compared to other countries. For example we have an exercise duty and VAT taxes of 18% which in some of the SADC countries are charged 20% or more than that. However I agree that the government has removed all the exemptions industries and or companies used to enjoy during their investment period because they realized that there were some few companies which were abusing such an opportunity by claiming losses every time.
Qn. It is said that foreign companies were enjoying heavy subsidies from their governments which leads to reduction in their manufactured products and making them to compete on the world market, what lessons can Tanzania learn from this?
ANS:Pakistan and Egypt are some of the countries which are good at subsidy and they usually subsidize on electricity to their industries. Under the World Trade Organization however, there are subsidies that are not allowed to be offered to companies by the government. What we can learn however is to look at some strategic industries like cement and give them preferential rates though such a practice would seem to segregate others. Again the 25% subsidy being offered to these foreign firms, we can increase the tax by 25% to cement importation in order to knock off the subsidy and allow local companies to compete.
Qn. How would you advise the government to ensure local manufacturing industries are empowered to compete locally and internationally?
ANS: I would advise the government to improve our transport infrastructure especially by making sure that the railway systems are effective because that would reduce the cost of most manufactured products in the country including cement. Besides, there is also need for the government to improve our port facilities so that products can be obtained in time and build trust to business partners or traders we deal with.
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