Thursday, July 16, 2009

Govt steps in to rescue cement manufacturers *Help in reduction of production costs underway *Spirit of competition to stay


The government has set the stage for development of a plan to rescue 'crying' cement producers from collapse, Business Times can report.

The producers have been crying foul for months over cheaply imported cement claiming it was slowly driving them out of business. Actually, two of the main producers in the industry have suspended productions in the recent months.

In an exclusive interview, Permanent Secretary for Ministry of Industries, Trade and Marketing, Joyce Mapunjo said the plan will entail among other things measures towards reduction of production costs for local cement and strengthening government's ability to combat tax evading portion of imported cement.

She mentioned steps towards cost reduction as including connecting the industries to the Compressed Natural Gas (CNG) system and improving the infrastructure so as to reduce the cost of transportation.

“We also appeal to TRA to strengthen its supervision against cement importers who evade paying taxes” Mapunjo said adding that the goal is always to ensure fair competition in the country.

Concerns about the failure of local cement to compete with imported ones have been at the forefront of local manufacturers' minds since the end of last year, when the government suspended restrictions on importation of cement into the country.

The government was reacting to 'overblown' scarcity that occurred last year pushing the price of a 50 kilogram bag of cement in Dar es Salaam to Tshs 20,000 and 25,000 upcountry.

Basing on claims of expensive power supply system in the country, presence of 'dumping' game in the market (competitors' cement getting subsidies in source countries) and imported cement enjoying tax evasion, local manufacturers argued the market was unfair to them.

There hasn't been a proof of dumping 'tale' yet, but the government appears to 'suffer' from ambivalence on whether some cement from the Far East makes its way to the country without paying taxes.

Tanzania Revenue Authority (T.R.A) has declared not knowing if there was any information about imported cement tax evasion on the part of the Mainland.

The authority advised this paper to contact Zanzibar Revenue Board (ZRB) for clarification of a claim by local cement manufacturers that Zanzibar was the favourable route of the tax evading cargo.

On the other hand, Ministry of Industries, Trade and Marketing said imported cement paid taxes, by all accounts its price in the market would have been higher than the locally made.

Business Time's survey in the city yesterday, showed that the imported cement mainly from Pakistan, India, China, and Egypt was sold the same price as the locally made.

A 50 kgs bag of cement at GongolaMboto area in the outskirts of Dar es Salaam sold at Tsh12,500 in retail price, regardless of where it came from.

According to Mapunjo, if proper taxes were paid, the price of 50 kgs bag of imported cement from India would have sold at Tsh13,400, while the current price of local cement specifically from Tanzania Portland Cement Company Limited (TPCCL) in most parts of the city is Tsh11,400.

Between January and April this year a total of 49 companies imported 100,453 tons of cement whose value was Tshs 10.4 billion mostly from Pakistan, India, China and Egypt.

Recently two out of the three Tanzania's major cement producing companies closed down as two new prospective investors, Maweni Limestone Limited of Kenya and Dangote Limited of Lagos, Nigeria, canceled their investment plans.

It has been alleged that the closure was necessitated by over-flooding of cement in the godowns of Mbeya Cement and Tanga Cement after demand drastically fell down.

Although manufactures have devoted the whole portion of blame to cheaper imported cement from the Far East, consumers have said local cement must substantially improve quality if it has to compete with the imported one.

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