Tanzania has reportedly lost about 8bn/- potential taxes from only two listed cement manufacturers due to cheap cement imports into the country without paying relevant duties.The amount that the taxman has failed to collect from Tanzania Portland Cement and Tanga Cement is equivalent to twice the 3bn/- the government needs to buy school desks for primary schools, countrywide.
Tanga Cement saw the amount of its tax payment to the exchequer dropping to 5.5bn/- in the first half of this year, from 7.8bn/- paid during the corresponding period last year.
Twiga Cement’s tax payment, on the other hand, plummeted to 8.501bn/- from 13.847bn/- over the period under review. “But there were much expectation that the firms would have posted an increase of revenues. Even their revenue generation shows increase trends since listed on the Dar bourse,” a stock analyst said.
The tax amounts sliding came after the two companies experienced a gross profit drop attributed mainly to alleged cheap cement imports in the market that crippled the domestic manufacturers’ revenues.
The industry sources have it that cement importers capitalise on existing loopholes in import and customs systems to under-declare and pay between five and 10 per cent of import duty.
The under-declaration, according to sources, is subjecting the country to the loss of up to 25bn/- each year before factoring in the lost taxes by producers to the government.
Tanga Cement and Twiga Cement both reported net profit slowing down by over one third to 10.5bn/- and 19.25bn/-, respectively in the first half of this year blaming unregulated imports, mostly from Pakistan.
Zan Securities Chief Executive Officer Raphael Masumbuko said both companies have been affected by unfair competition from untaxed cement from abroad.
“It seems the ‘uncouth’ importation has taken its toll on the companies’ finances,” Mr Masumbuko said, adding: “The matter has to be checked, thoroughly.” Orbit Securities Head of Dealings and Operations Juventus Simon said Simba and Twiga cements’ profit reductions represented the wide problem in the sector.
“The best thing is that both companies said they would perform better in the remaining half of this year,” Simon said yesterday. The government has formed a team to investigate allegations that the economy has been flooded with subsidised cheap imports of cement.
Last month, the Ministry of Industry and Trade told a Parliamentary standing committee for Economic Affairs, Industries and Trade that a seven-member team to investigate the matter has been formed.
The team is expected to come up with a detailed report for presentation to the council of ministers for further discussions. Trade Minister Abdallah Kigoda formed the team that had to visit Twiga Cement plant at Wazo Hill in Dar es Salaam.
Twiga’s Managing Director Pascal Lesoinne called upon the government to put in place additional anti-dumping and countervailing duties that will help to check the influx of cement imports into Tanzania’s market.
“If the vice is not checked, it would lead to a complete collapse of the blue-chip companies in Tanzania and will cause the local economy to fall,” he said. Both Twiga and Tanga are expected to increase production capacity in the next two years by producing extra 700,000 and 500,000 tonnes, respectively.
The current annual demand stands at four million tonnes and has been growing at a compound annual growth rate of 10 per cent over the past five years, leaving the market with a deficit of 500,000 tonnes.
The current four firms that produce Twiga, Simba, Rhino and Tembo brands, have installed capacity of 3.75 million tonnes, annually although output is expected to reach 8.65 million tonnes per year in 2015.
Source: Daily News, reported from Dar es Salaam, Tanzania
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