Tanzania’s industries ready for Comesa

According to a study on the effects of Tanzania’s withdrawal from the Common Market for Eastern and Southern Africa (Comesa), the competitiveness of Tanzanian industries in the region is being hampered by the high cost of utilities; water, telecommunication and electricity tariffs, taxes and high interest rates.

The study recommends that Tanzania should not have withdrawn from Comesa, as its exports are losing competitiveness in the Comesa market.

The government should address the problems facing industry, such as taxes, electricity costs, transport and trade policies, says the “Study of the Post-Effects of Tanzania’s Withdrawal from Comesa on Tanzania Business Developments with Comesa Member States.”

The study, presented in Dar es Salaam last week, says that some Tanzanian industries are however competitive.

Companies engaged in agro-processing are more competitive because they source most of their raw materials locally or from the region, unlike the rubber and plastic industries, which source their raw materials from abroad and so are less competitive.

The study was commissioned by the Tanzania Chamber of Commerce, Industry and Agriculture, the Confederation of Tanzania Industries and the East African Business Council.

“The tax structure of iron and steel and cement factories depended on the type of technology, electricity cost, size of output-productivity and transport cost, while textile factories had industrial oil and taxes as the worst factors,” the study says.

An important finding in all previous studies, however, was that many Tanzania industries were nevertheless exporting to Comesa countries, taking advantage of its tariff reductions, which ranged from 70-90 per cent.

For a long time now, Tanzanian industries have demanded protection from the government, claiming that they are still young.

One of the reasons for Tanzania’s withdrawal from Comesa was that its industries were in their infancy and could not compete in the Comesa Free Trade Area.

Indeed, in the past four years, the government has taken a number of pro-active export promotion measures, including preparing and adopting in 2004 a comprehensive export-led economic growth policy; and the adjustment in electricity tariffs from 2000 to 2002.

Electricity tariffs for industrial consumers were reduced from Tsh97 per unit to Tsh54.5 per unit in 2002; tax on industrial oil was reduced in the 2003/04 budget and import duty on raw materials, machinery and intermediate goods has been zero-rated since 2002.

The study notes that the government has invested heavily in road and highway construction and rehabilitation over the past five years, especially the roads leading to Rwanda and Burundi, linking Dar es Salaam to the southern regions of Mtwara and Lindi and opening the way to Mozambique and Malawi through the Mtwara Corridor.

Tanzanian industries said to be competitive in the Comesa region are Aluminium Africa, Kioo Ltd, Kibo Match Corporation, Tanzania Distilleries Ltd, Tanzania China Friendship Textile Ltd and Jiemel Industries. Others are Allied Soap Company Ltd, Sumaria Group of Companies and Raffia Bags Ltd.

According to the study, many industries, that claim to be uncompetitive do not have expansion plans or plans to modernise technology and grow. ‘ The East African.

July 2006
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