Low cost imported cement is choking the regional industry, according to a report in the Uganda Monitor. The reduction in import tariff on cement has led to an influx of cheap cement from low cost producers such as India, China, and Pakistan sold at 50 - 60 per cent less than the domestic market price since producers in these countries enjoy a lower production cost.
The Executive Director of East African Business Council, Mr Charles Mbogori, said the influx of cheap cement imports from countries with lower production costs will in the long run have a negative impact on the local industry.
“For instance cement producers in Egypt enjoy subsidy on natural gas used in cement production while producers in India and China enjoy diesel price subsidy,” Mr Mbogori said.
The local cement industry is currently faced with high production costs resulting from high energy costs, labour costs, poor distribution network especially railway transport and inadequate ancillary industries for spare parts and consumable.
Uganda alone spends close to Shs2 trillion in the importation of cement into the country to meet the increasing demand from the booming construction industry because the current production is not enough to satisfy the growing demand.
Currently, Uganda’s cement production is rated at about 1 million tonnes capacity from the both Hima (350,000) and Tororo (700,000).
At the onset of the EAC in 2004, cement producers negotiated the Common External Tariff (CET) for cement and agreed that cement was to be considered a sensitive product due to its capital intensive investment requirement.
Although EAC CET is classified in three tariff bands of 0 per cent for raw materials, 10 per cent for intermediate goods and 25 per cent for finished products, goods considered sensitive often attract a higher tariff. “Cement was considered a sensitive product with tariff set at 55 per cent in 2005 which was to reduce at a rate of 5 per cent annually capping it at 35 per cent in 2009,” Mr Mbogori said. 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 EAC CET.
Mr Mbogori said: “This was done without consultation with the industry stakeholders. Such unilateral decisions and lack of commitment by Partner States of EAC to live up-to and uphold the CET is tantamount to deliberate creation of unpredictable policy environment in the region.”