Imported cement drags down East African prices

Cement from India, China and Pakistan into the East African Community (EAC) member states is hurting local manufacturers since it is sold 50% and 60% cheaper than the local price.

This has forced the East African Business Council (EABC) to ask member state's governments to reclassify cement as a sensitive product to protect the domestic industry from collapsing.

EABC boss, Mr. Charles Mbogori said that the influx of cheap cement imports from countries with lower production costs has negatively affected the local industry.

Under the EAC Common External Tariff (CET), cement was classified as a sensitive product whose tariff was set at 55% in 2005, and was to be reduced at rate of 5% per year.

The EAC common external tariff is classified in three tariff bands of zero percent for raw materials, 10% for intermediate goods and 25% for finished products. Goods considered sensitive often attract a higher tariff.

"However, in June last year the sensitive status accorded to the cement was removed with import duty drastically reduced from 40% to 25% and this was done without consultation with the industry stakeholders," Mbogori said.

He said unilateral decisions and lack of commitment by partner states to uphold the CET is tantamount to deliberate creation of an unpredictable policy environment in the region.

"Our cement producers are faced with high production costs resulting from high energy and labour costs, poor distribution networks, high transport costs and inadequate ancillary industries for spare parts and consumables which created an opportunity for cheap imports to make their way into the market," he said.

"The cost of energy and transportation in the region is three to four times that of low cost countries," he noted.

Although Uganda wants the tariff reviewed from the current 25% to zero percent to mitigate the effects of high prices on the construction sector, the East African Cement Producers Association (EACPA) argues the local industry has capacity to meet local demand.

The current production capacity for cement in East Africa is 9.5 million metric tons against a demand of 6 million metric tons.

"EACPA has assured us that the region has enough capacity to meet the regional demand but cannot fully utilise its installed capacity due to unfair competition from imported cheap and sub-standard cement," Mbogori said.

"We therefore recommend that cement should be treated as a sensitive product and CET reverted to 35% or $50 per ton whichever is higher as per the Customs Union Protocol.

The $50 per ton is meant to protect the industry from unfair competition caused specifically by the current world economic crisis that has led to availability of cheap cement from Asia and the Middle East.

From China Cement (2009-11-9)