EAC faces test over row on imported cement

by John Njiraini

A split has emerged among East Africa’s cement producers after Rwandan firms joined Uganda in calling for zero rating of imports.

Only days after eight Kenyan and Tanzanian cement manufacturers petitioned their governments to oppose a call by Uganda to zero-rate cement imports entering the bloc,

Rwandan said opening up imports would lower the cost of construction.

Duty-free

Two leading Rwandan companies, DN International and Fair Construction, said allowing importation of cement duty-free, would result in a drastic reduction of prices, benefiting consumers.

"Zero rating of imports is advantageous as it reduces the cost of construction," said DN International Chief Executive Nathan Lyod.

Uganda has called for reduction of tax on building materials from 25 per cent but manufacturers want the duty raised to 35 per cent to protect them from an influx of importation.

Rwanda, with only one cement company with a capacity of 100,000 tonnes, solely depends on imported cement.

The debate, which now puts Rwanda and Uganda on a collision course with Kenya and Tanzania, is viewed as the first major challenge for region, as it gears for the signing of the EAC Common Market Protocol by the Heads of State slated for November 20.

With the East African Community member States preparing for free movement of goods, services and people, there are fears its cement manufacturers could face stiff competition from imports from China, South Africa and Egypt.

Due to the high cost of production in the region, most companies could find it difficult to compete.

Kenya has come out firmly against the any zero rating of imports arguing that it could be disastrous for the region’s manufacturing industry.

"Zero-rating cement would grievously harm the cement industry in the region," said Industrialisation Minister Henry Kosgey in a statement last week.

Complete waiver

Under the EAC Customs Union, cement was included in the sensitive products list and had a Common External Tariff (CET) pegged at 55 per cent in 2005, 50 per cent in 2006, 45 per cent in 2007, 40 per cent in 2008 and 35 per cent in 2009 after which it would remain at 35 per cent.

Last year, the CET was cut from 40 per cent to 25 percent but Uganda has been calling for complete scrapping of taxes.

In recent years, the region has witnessed a steady increase in cement demand, due to booming building and construction.

This has forced nearly all cement makers to increase output while new investors have ventured into the trade.