Ohorongo sounds alarm over cement imports

Ohorongo sounds alarm over cement imports
24 September 2012

If infant industry protection cement imports are not left in place, an investment of more than NAD2bn (US$241m) in the Namibian economy and hundreds of jobs created in the process could be at risk, according to Hans-Wilhelm Schuette, Ohorongo Cement’s managing director.

The statement comes in response to the latest stage of a case before the Windhoek High Court in which Chinese-owned Jack’s Trading CC wants to have the cement import duty declared invalid. Ohorongo Cement has filed an application with the High Court in which it is asking to be allowed to join the case in which a cement importer, Jack’s Trading CC, has sued the Minister of Finance and the Commissioner of Customs and Excise in connection with the tariffs which have been levied on cement imports into Namibia since 27 July.  The Finance Minister and the Commissioner of Customs and Excise have lodged an appeal to the Supreme Court against the judgement in which High Court Judge Dave Smuts on 31 August declared the import duty as being of no force and effect due to procedural mistakes in terms of the Customs and Excise Act of 1998 when the import duty was imposed. At present, the import tariffs remain in place despite Jack’s Trading CC having approached the High Court to petition that the 31 August judgment be put into operation while the appeal is pending.

However, in the latest development , Mr Schuette has filed an affidavit with the High Court in Windhoek, saying that, “The absence of infant industry protection will jeopardise (Ohorongo Cement’s) entire operations in Namibia and may result in the need to retrench employees and down-scale (or totally halt) operations,” according to a report by The Namibian. 

“(Ohorongo Cement’s) significant investment in Namibia will be put at risk, with the concomitant knock-on effects upon the local and national economy.” 

Ohorongo Cement set up a 0.7Mta cement plant between Otavi and Tsumeb  and has invested around NAD2.25bn in Namibia while its sister company – Energy For Future – invested a further NAD200m. The cement works has been producing cement since February last year and with national demand at around 0.5Mta, the plant would be able to meet the country’s cement needs and still export cement.

Finance Minister Saara Kuugongelwa-Amadhila imposed an import duty of 60 per cent on cement with effect from 27 July. The rate of 60 per cent would be in force until 2014. In 2015, the import tariff would be lowered to 50 per cent, while it would drop further to 42 per cent in 2016, 24 per cent in 2017, and 12 per cent in 2018.  Infant industry protection, which is allowed under the 2002 Southern African Customs Union agreement, was a precondition for the decision to establish Ohorongo Cement’s plant in Namibia, Schütte says.

However, given Ohorongo’s costs and scale of production, as well as domestic demand, it is difficult to compete in price with cement imported into Namibia, he says. If the import duty falls away, “the possibility exists that (Ohorongo Cement) will close down as (it) will be unable to repay interest and capital amounts to its long term lenders and various financial institutions.” Mr Schütte added: “The loss of infant industry protection will send a negative signal to potential foreign and domestic investors.”

Published under Cement News