7 December 2012

Tanzania: Request to Protect Cement Firms Rejected

THE local cement producers' plea for an increase in the common external tariff on cement imports has, once again, been rejected by the government.

Instead, the cement companies have been asked to calculate their genuine production costs so that the government can help them compete fairly with their foreign counterparts.

The Minister for Trade and Industry, Dr Abdallah Kigoda, said in Dar es Salaam that the government is not planning to remove the suspended duties on imported cement, but would instead put in place conditions necessitating smooth operation.

The move includes provision of reliable electric power, passable roads and railways systems for a beneficial distribution network. Stakeholders have always complained that imported cement is sold cheaply because Pakistan, India, China and even Egypt heavily subsidize their producers.

Tanzania imports about 250,000 tonnes annually to bridge the deficit. The government's position came to the fore when the minister was inaugurating Kiln 3 upgrading project at Tanzania Portland Cement Company Limited (TPCC), at Wazo in Dar es Salaam.

The minister's remarks followed a request from Mr Jean Marc Junon, the chairman of the TPCC Board, that the cement industry is still going through tough times with the suspended duties on cement removed, causing massive inflows of subsidized imported cement in the country.

He had asked the government to take the necessary measures to support the local industry by re-instating the suspended duties. Dr Kigoda said the government is committed to put in place initiatives to support such good models of the private sector. He added that TPCC should continue putting systems that are more efficient and cost effective. He praised TPCC for having moved from producing 700,000 tonnes of cement per year in 2008 to 1.3 tonnes to date.

He said that there are 304 million consumers within the Southern Africa Development Community (SADC) and East African Community (EAC) regions and that TPCC as one of the top ten tax payers would target such markets. He said Tanzania industries needed to compete with international companies as they strengthened position at the domestic market.

TPCC has the largest domestic market share of over 41 per cent. He said the government is currently embarking on a strenuous exercise to enhance the country's competitive position for investment flows destined for the region and meet the challenges of globalization.

In May, this year, the ministers for Finance from the EAC agreed on continuing to apply the Common External Tarrif rate of 25 per cent instead of 35 per cent on cement under Harmonized Systems Code 2523.90.00 for the period of one year. Cement producers have been asking for an increase in cement import tariff since, at least, 2008 when EAC ministers removed cement from the list of sensitive products classified under the East Africa Customs Union protocol in 2005.

Under the sensitive list cement imports enjoyed a 55 per cent tariff and was to be reduced at a rate of five per cent per year. However, EAC member states removed the product's sensitive status in June 2008, due to cement shortages because of construction of stadia for the 2010 World Cup tournament in South Africa.

The import duty was then reduced from 40 per cent to 25 per cent. Tanzania's local cement industries are capable of producing three million tonnes of cement per year, against the country's yearly demand of 2.1 million tonnes. Tanzania Portland Cement is the major producer with a production capacity totalling 1.4 million tones per annum (tpa), followed by Tanga cement with a 1.25 million tpa capacity.

The Mbeya cement plant has an installed capacity of 350 000 tpa. At the launch yesterday, the TPCC chairman, Mr Jean Marc Junon, said that more than 25bn/- has been spent in the modernization of the key equipment that will ideally complement kiln 1 and kiln 4, bringing the total capacity of clinker produced at Wazo Hill to 1.2m tonnes per year.

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