KAMPALA, Uganda, June 15- East Africa Cement Producers Association has warned that the whole cement manufacturing sector in East Africa is faced with imminent plant closures and job losses as a result of increased dumping of cheap and subsidised cement mainly from Asia.
This follows what association says is a failure by the East African states to take into consideration their recommendations in the budget to level the playing field for the industry.
EACPA Tanzania Chapter Chairman Mbuvi Ngunze said the Association had asked the governments to reinstate cement to the sensitive product status which would restore the Common External Tariff (CET) to 35 percent or US$50 per ton whichever is higher.
The Association had also wanted the governments to invoke additional anti dumping and countervailing duties in consultation with the industry and institute correct valuation of imports for assessment of taxes and duties.
On its part, the government had promised to review its stance on the removal of CET once the manufacturers had invested in new capacity but this is yet to happen in spite of the ominous threat imports pose to the local industries.
“Two years ago, EA governments encouraged cement manufacturers to invest in new capacity in order to meet domestic shortfall and the companies complied by investing $1 billion to grow production from 6.4 Million tons to 10 Million tons. We now have enough capacity to meet local demand and export to emerging markets in the region” complained Mr Mbuvi.
EA member states removed the Common External Tariff in 2008 for a period of two years which EACPA said opened doors for cheap imports to flood the market.
“This decision was made before the global financial crisis which precipitated a cement glut in the world market which means that countries such as Pakistan and China didn’t have sufficient local demand and had to find new markets to sustain their capacity”, the chairman explained.
EACPA said because these countries can produce cement at relatively cheaper cost than manufacturers in East Africa and also because countries such as Pakistan offer subsidies in transport and energy, it had become increasingly difficult for the industry to compete with imports and some manufacturers in Tanzania had been forced to stop production.
“We are not asking for protection, all we want is for the governments to provide us with a level playing field because as manufacturers we can only control some of our production costs, but the bigger costs like power, transport and other infrastructure are largely the domain of the regional governments ” added the association’s secretary Harpreet Duggal.
The Asian countries are favoured by a number of factors including the low cost of power which in East Africa is more than four times that of Pakistan and China where the imports come from. Electricity cost for EA states stand at an average of US 15cts per kilowatt hour while that of Pakistan, China and the Middle East is only US 3cts per kilowatt hour.
Further, the transport cost average for EA is US15 cts per ton per kilometer compared to only US3cts per ton per Kilometer for Pakistan, China and the Middle East. Moreover the region lacks the necessary capacity to reap returns from economies of scale because a typical EA factory for example has a capacity of 1.2 million tons pa, while a single company in China produces 65 Million tons.
Despite these setbacks, most EA countries the officials pointed out have fully installed capacity which can satisfy their local demand for cement as well as adequately supply the regional market.
In Uganda for instance, Hima Cement is about to complete a new plant in Kasese that will increase its production capacity from 350,000 tons to 850,000 tons pa while Tororo Cement recently announced that it will invest $50 million to double its capacity from 1 million tons to 2.2 million tons.