Removal of Suspended Duty - Cement Makers ’Face Collapse’

Removal of Suspended Duty - Cement Makers ’Face Collapse’
Published: 04 November 2008

A decision by Kenya, Uganda and Tanzania to phase out suspended duty on cement is beginning to take its toll, with some players saying they may be forced to close down.

According to the East Africa Cement Producers Association (EAPCA), the industry in the region is staring ruin in the face since countries that enjoy low production costs like China, Middle East and India have taken advantage of the removal of the suspended duty to flood the region with cheaper imports.

The lobby is asking East African governments to immediately rescind the decision in order to save the industry from "imminent collapse." Reinstating the duty will also restore investor confidence in the region, it says.

EAPCA has also asked the East African Business Council, the apex body of business organisations in the region, to help have the decision reversed.Last week, Tanga Cement, a major player in the region, said the decision to phase out the duty by the finance ministers of the three countries just before the reading of this year’s budgets, had put its expansion plans in jeopardy.

The duty was introduced with the launch of the East African Community Customs Union in 2005 alongside a common external tariff negotiated at 25 per cent. Under the arrangement, cement makers were allowed a common external tariff and a suspended duty, to be reduced five per cent every year and end in 2011.

The duty was however reduced from 20 per cent to zero in this year’s budget instead of the anticipated 15 per cent.

All three EAC countries had agreed to implement the measures to allow local cement manufacturers to become internationally competitive by the end of the "infancy" period.

"We are starting to feel the pinch already," Juerg Fluehmann, chairman of the East Africa Cement Producers Association, told The EastAfrican in Kigali last Wednesday.

Mr Fluemann, who is also the Tanga Cement managing director, had earlier told participants at the East Africa International Business Forum that took place last week in Kigali that the phasing out of the suspended duty had sent the wrong signal to potential investors in the region.