Dar Es Salaam — The request for state governments within the East Africa region to introduce double tax duty on imported cement has hit a snag as the governments had turned a blind eye to the manufacturers appeal.
Cement imported from India, China and Pakistan into the East African Community (EAC) member states is hurting local manufacturers since it is sold at a very cheap price than the locally manufactured products.
The massive imports have had a major effect on Tanzania's cement industry, where two of the three companies had to suspend their operation last year while the other reduced production of cement after the storage facilities were full of cement.
Dumping of cheap imports in the East African market is posing a big blow to cement manufacturers especially at this time when the majority of them are expanding their businesses from local into international markets.
The Director of Policy and Advocacy with the Confederation of Tanzania Industries, Mr Hussein Kamote said last week that the Confederation had no problem with imported cement.
What we are pushing for is for the government to create a level playing field against subsidized cement products from Asian countries.
"Our cement producers are faced with high production costs resulting from high energy and labour costs, poor distribution networks, high transport costs and inadequate ancillary industries for spare parts and consumables which created an opportunity for cheap imports to make their way into the market," he said.
Tanga Cement, the Holcim Mauritius' cement plant recently released its financial results where it was indicated that revenues increased by 8 per cent in the half year period ending 30 June 2010-same as in the previous period.
However, its net profit after tax declined to 10.2bn/- from 12.8bn/- in the previous period, according to financial results released recently by Tanga Cement Company Limited. Revenues were 61bn/- an increase of 8 per cent when compared to the previous 56.3bn/-.
"Cement imports as well as stiff competition in the market continued to have a negative impact on prices and although sales volumes increased by 16 per cent, revenue increased by only 8 per cent," said Charles Naude, chairperson of the company.
Costs of sales increased to Tsh 38.1 billion (USD 25.06 million) from Tsh 32 billion (USD 21.05 million) mainly due to higher maintenance costs and the use of expensive imported clinker during the maintenance shut down in March and April 2010, Naude said in his statement.
CTI had already contacted the government concerning the issue, and it had promised to conduct its own research and issue a statement. Local cement producers wanted import duty doubled to discourage foreign dealers from selling their cement at cheap prices.
Under EAC Customs Union protocol 2005, cement was considered a sensitive product and the Common External Tariff (CET) was set at 55 per cent gradually reducing by 5 per cent every year capping it at 35 per cent.
He said that East African Community (EAC) finance ministers reduced Common External Tariff (CET) on cement from 40 to 25 per cent. The cement market in the country was flooded with imported cement from Pakistan and other Asian countries which are cheaper compared to the locally manufactured one.
A survey had established that imported cement is sold at between 10,000/- and 11,000/- per 50-kilo bag while locally produced cement is sold at between 12,000/- and 18,000/- per bag.
He said countries like Pakistan provides subsidy for cement producers while Tanzanian producers strive on their own. Available statistics show that Mbeya Cement Company produces more than 300,000 tonnes of cement annually, Tanga cement more than 800,000 tonnes and Twiga more than 1.4 million tonnes.
Total demand for cement in the country stood at an estimated 1.6 million tonnes per year. Local production stands at about 1.7 million tonnes. Tanzania is blessed with huge deposits of raw materials needed in cement production, which include limestone and gypsum.
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