Uganda and Tanzania are headed for a trade war over cement importation with charges of unfair competition.
Tanzania manufacturers are upset that Ugandan cement meant for the domestic market dominates the Lake Victoria Zone. The imported cement is cheaper than the one made in Tanzania because the raw material used to manufacture it is zero rated. However, it is not meant for export.
Uganda has limited amounts of clinker, the substance used to manufacture cement along with other components like gypsum and pozzuolana, and has to import the deficit.
However, the imported clinker is not taxed, to give relief to industries adversely affected by high production costs arising from the power crisis facing the country.
Cement was originally on the list of 131 items that Uganda wanted to placed on the "duty remission scheme" to be exempted from the East African Customs Union Common External Tariff (EAC-CET), which came into force in January last year.
But because of the difficulties which arose in differentiating cement produced with locally procured clinker from the manufactured using the imported one, the raw material was removed from the duty remission scheme and now attracts a 25 per cent import duty and 20 per cent value added tax when exported to Tanzania or Kenya.
When imported into Uganda, however, it only attracts VAT, making Ugandan cement cheaper sell in Tanzania, especially in the Lake Victoria Zone of Mwanza and Kagera regions where the brands dominate the market.
This has given the imported cement a big advantage over the locally produced one.
In the Lake Victoria Zone, cement from the three Tanzanian cement companies is sold at between Tsh14,500 ($11.20) and Tsh15,500 ($11.90) while Uganda imports are sold at Tsh13,000 ($10) per 50 kg bag. In Dar es Salaam the locally made cement is sold at Tsh10,000 per 50kg bag.
Hussein Kamote, a chief economist with the Confederation of Tanzania Industries (CTI) last week told The EastAfrican last week that Tanga Cement Company Ltd has officially complained to the confederation over the matter.
He said during a review of the 131 items Uganda had submitted for tax remission it was decided that clinker was a semi-finished item and therefore does not qualify under the EAC-CU rules of origin to be exempted from duties. Only 85 products qualified for exemption on the list.
Mr Kamote said although the problem has been solved, EAC’s delay in gazzetting the decision has compounded the matter.
However, Abidi Alam, chairman of the East African Business Council said last week that the council has not received any complaints from Tanzania. "I think we need to study the case," he said.