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Return import tariff on cement or we close down
The influx of cheap cement imports into the East African region could see workers like these above laid off. File picture
By MIKE MANDE
THE EAST AFRICAN
Posted Monday, November 30 2009 at 00:00
The East African Cement Producers Association wants the 35 per cent tariff for imported cement products restored to save the sector from collapse.
According to EACPA chairman David Njoroge, there should be a $50 per tonne charge to supplement the 35 per cent tariff but the higher of the two should be charged. The specific rate has been proposed to counter dumping and subsidies by the exporting countries as well as the under invoicing of cement at the ports of entry, he said.
The association has appealed to East African Community partner states to avert the imminent closure of the seven cement manufacturing plants in the region, which employ more than 5,000 people. EACPA also wants Ugandas request to import duty free cement products from Asia be rejected. Since the establishment of the EAC Customs Union protocol in January 2005, cement was classified as a sensitive product with a duty rate of 55 per cent: 25 per cent common external tariff (CET) and a suspended duty of 30 per cent.
5 per cent reduction
The partner states had also agreed that the CET on cement should be reduced by five per cent each year for the subsequent four years to stabilise at a target rate of 35 per cent by 2009. EACPA secretary Harpreet Duggal told The EastAfrican that the tariff was designed to safeguard the cement industry in the EAC from the threat of dumping by low cost producers. The tariff would also shield the local cement prices from subsidies given to importers by their respective governments.
Mr Duggal said that Tanzania has been worst hit by the importation of cement from Pakistan, which has taken over 15 per cent of the domestic market.The EACPA is deeply concerned at these developments and is worried about the survival of the cement industry in the EAC if the partner states do not take corrective action, he said. The EACPA comprises cement manufacturing companies from Kenya, Uganda, Tanzania, Rwanda and Burundi.
According to East African Business Council executive director Charles Mbogori, the influx of cheap cement imports will in the long run have a negative impact on the local industry.Mr Mbogori said that the local cement industry is faced with high production costs resulting from high energy costs, labour costs, a poor distribution network, especially railway transport and inadequate ancillary industries for spare parts and consumables. Although the EAC common external tariff is in three tariff bands zero per cent for raw materials, 10 per cent for intermediate goods and 25 per cent for finished products goods considered sensitive, like cement, often attract a higher tariff.
At the onset of the EAC in 2004, cement producers negotiated the CET and agreed that it was to be considered a sensitive product due to its capital intensive investment requirement. It is produced from local raw materials hence having major benefits for local employment and tax generation.
In addition, the cost of energy and transportation in the region is three to four times that of low cost countries. However, in June 2008, the sensitive status accorded to the cement sector was removed, with import duty being reduced from 40 per cent to 25 per cent under the CET.
This was done without consultation with the industry stakeholders, said Mr Mbogori adding that such unilateral decisions and failure by EAC partner states to live up to the common external tariff is tantamount to deliberate creation of an unpredictable policy environment in the region.
The reduction of import tariff on cement has led to an influx of cheap cement imports from low cost cement producers such as India, China, and Pakistan sold at 50 per cent to 60 per cent below the domestic market price.
Cement producers in Egypt enjoy a subsidy on natural gas used in cement production while producer in India and China enjoy diesel price subsidies.
Even as East African cement producers are grappling with increased influx of cheap cement imports, Uganda wants the tariff reviewed further from the current 25 per cent to zero per cent. Moreover, according to EACPA, the local industry has the capacity to meet local demand.
The current production capacity for cement in East Africa is 9.5 million metric tonnes against a demand of 6 million metric tonnes.
The influx of cheap cement imports into the East African region could see workers like these above laid off. File picture
By MIKE MANDE
THE EAST AFRICAN
Posted Monday, November 30 2009 at 00:00
The East African Cement Producers Association wants the 35 per cent tariff for imported cement products restored to save the sector from collapse.
According to EACPA chairman David Njoroge, there should be a $50 per tonne charge to supplement the 35 per cent tariff but the higher of the two should be charged. The specific rate has been proposed to counter dumping and subsidies by the exporting countries as well as the under invoicing of cement at the ports of entry, he said.
The association has appealed to East African Community partner states to avert the imminent closure of the seven cement manufacturing plants in the region, which employ more than 5,000 people. EACPA also wants Ugandas request to import duty free cement products from Asia be rejected. Since the establishment of the EAC Customs Union protocol in January 2005, cement was classified as a sensitive product with a duty rate of 55 per cent: 25 per cent common external tariff (CET) and a suspended duty of 30 per cent.
5 per cent reduction
The partner states had also agreed that the CET on cement should be reduced by five per cent each year for the subsequent four years to stabilise at a target rate of 35 per cent by 2009. EACPA secretary Harpreet Duggal told The EastAfrican that the tariff was designed to safeguard the cement industry in the EAC from the threat of dumping by low cost producers. The tariff would also shield the local cement prices from subsidies given to importers by their respective governments.
Mr Duggal said that Tanzania has been worst hit by the importation of cement from Pakistan, which has taken over 15 per cent of the domestic market.The EACPA is deeply concerned at these developments and is worried about the survival of the cement industry in the EAC if the partner states do not take corrective action, he said. The EACPA comprises cement manufacturing companies from Kenya, Uganda, Tanzania, Rwanda and Burundi.
According to East African Business Council executive director Charles Mbogori, the influx of cheap cement imports will in the long run have a negative impact on the local industry.Mr Mbogori said that the local cement industry is faced with high production costs resulting from high energy costs, labour costs, a poor distribution network, especially railway transport and inadequate ancillary industries for spare parts and consumables. Although the EAC common external tariff is in three tariff bands zero per cent for raw materials, 10 per cent for intermediate goods and 25 per cent for finished products goods considered sensitive, like cement, often attract a higher tariff.
At the onset of the EAC in 2004, cement producers negotiated the CET and agreed that it was to be considered a sensitive product due to its capital intensive investment requirement. It is produced from local raw materials hence having major benefits for local employment and tax generation.
In addition, the cost of energy and transportation in the region is three to four times that of low cost countries. However, in June 2008, the sensitive status accorded to the cement sector was removed, with import duty being reduced from 40 per cent to 25 per cent under the CET.
This was done without consultation with the industry stakeholders, said Mr Mbogori adding that such unilateral decisions and failure by EAC partner states to live up to the common external tariff is tantamount to deliberate creation of an unpredictable policy environment in the region.
The reduction of import tariff on cement has led to an influx of cheap cement imports from low cost cement producers such as India, China, and Pakistan sold at 50 per cent to 60 per cent below the domestic market price.
Cement producers in Egypt enjoy a subsidy on natural gas used in cement production while producer in India and China enjoy diesel price subsidies.
Even as East African cement producers are grappling with increased influx of cheap cement imports, Uganda wants the tariff reviewed further from the current 25 per cent to zero per cent. Moreover, according to EACPA, the local industry has the capacity to meet local demand.
The current production capacity for cement in East Africa is 9.5 million metric tonnes against a demand of 6 million metric tonnes.
