Steel products makers warn against additional wire rod tax

24Apr 2018
Francis Kajubi
The Guardian
Steel products makers warn against additional wire rod tax
  • • Treasury is proposing to impose a 15 per cent duty on wire rod with a magnitude of 6.5mm and above, which is a key raw material in the production of nails, in the forthcoming financial year

THOUSANDS of workers may lose their jobs if Treasury goes ahead to introduce 15 per cent import duty on wire rods used as raw materials by local steel products manufacturers in the next fiscal year.

Speaking in Dar es Salaam at a stakeholders meeting organized by Fair Competition Commission, representatives of the manufacturers said raising import duty on the raw material will drive overhead costs high and force them to drive them down by retrenching workers.

The local manufacturers of iron bars, nails and iron sheets warned that even scrap metal is in short supply currently hence most factories rely on the imported wire rods.

“Although this import duty is going to be refunded, it is a big threat to industries since the refunding of such taxes is already a major problem facing many other sectors as TRA delays them,” said Saleem Khatrl, General Manager for Cotex Industries Limited.

Khatrl pointed out that Treasury is proposing to impose a 15 per cent duty on wire rod with a magnitude of 6.5mm and above which is a key raw material in the production of nails.

“We have been paying U$200 per metric tonne of wire rod as duty which translates to the normal ten per cent of the import duty, an additional 15 per cent will raise the duty to about U$500 per tonne which is unbearable to manufacturers of nails and steel bars,” the Cotex Industries Limited GM argued.

He said if Treasury goes ahead and imposes the duty, local steel products manufacturers may stop production and resort to importing nails and steel bars which will be much cheaper.

“It will make sense for any local nail manufacturers to import tonnes of nails and sell them in the domestic market than importing wire rod- raw material at hefty import duty,” Khatrl pointed out.

Cotex Industries imports between 500 and 700 metric tons of wire rods from Ukraine and Russia per month.

“We do pay between 200mn/- and 220mn/- as taxes to the government every month. My factory also employs 270 people whose destiny may be jeopardize by the introduction of the additional import duty which will likely force the factory into reducing high operational costs,” the Cotex Industries GM warned.

Seconding Khatrl’s arguments, Steel Masters’ General Director Hitesh Patel pointed out that apart from the threat facing wire rod imports, currently steel products manufacturers are facing scarcity of scrap metal.

“Purchasing price for an iron bar of 40 feet/12 mm width has increased to 23,000/- from 19,000/- last month due to scrap metal scarcity,” said Patel.

Currently, the country has 24 steel products manufacturers with a combined capacity of 600,000 metric tonnes while demand is 700,000 per annum. Steel products manufacturers rely on scrap metal which comes from mining areas led by Geita and Mwanza regions. Manufacturers use 300 and 500 grades scrap metal as raw material.

Responding to complaints raised by steel manufacturers, the Assistant Director of Investment and Research in the Ministry of Industry, Trade and Investment, Eng Elli Pallangyo, said his ministry has no idea of the proposed import duty.

“We have not included the issue of additional import duty on wire rod in the next budget as manufacturers claim. Last time the issue of wire rod duty was raised at East African Legislative Assembly by other state members because they already have industries that are manufacturing the raw material,” Eng. Pallangyo noted.

He promised to follow up on the matter and take up the issues with Treasury if it is included in the next budget estimates currently being debated by parliament in Dodoma.

“Manufacturers are just blaming the government generally without coming up with specifics on who is proposing such import duty.”