Predictable policies needed to industrialise Tanzania, say manufacturers

Dar es Salaam. Manufacturers of food and beverages in Tanzania have raised six issues which should be addressed by the government in so far as they relate to the national budget for the 2018/19 financial year that commences on July 1 this year.

Among the issues are policy unpredictability, delays in the issuance of chemical import permits, and high value-added tax rate (VAT).

Others are corporate tax, high import duty on industrial sugar and the lack of a proper system for the verification of industrial sugar imports.

Speaking to BusinessWeek in Dar es Salaam, the Shelys Pharmaceuticals procurement executive, James John, called for “a clear tax payment system.

“We are required to pay VAT on packaging materials and raw materials despite being exempted by law,” lamented Mr John.

“It sometimes takes us more than a week to make follows-up on the matter, thus plunging us into extra storage charges levied by the Ports Authority after a grace period of the first seven days.”

The port charges are $40 (about Sh89, 200) per 40ft high cube container per day. Up until March 22 this year, Shelys Pharmaceuticals had paid a total of Sh150 million in storage charges alone to the Azam Inland Container Depot (ICD).

In addition to that, it had to pay Sh7 million as warehousing rent to the Tanzania Revenue Authority (TRA). The company has some 150 tonnes of imported industrial sugar stranded at the Azam ICD since last November ostensibly for verification by the government to ensure that the sugar is not diverted to household use. Mr John also cried foul over delay in the issuing of chemical import permit, calling on the government Chemist Laboratory Agency to speed up its testing process to two days, instead of the current seven days.

For his part, the director general of the Iringa Food and Logistics Company, Arif Ibrahim, calls for reduction of VAT from the current 18 per cent to 16 per cent, the rate that is levied in Kenya next-door, a fellow member country of the East African Community.

Mr Ibrahim was also of the view that the current corporate tax of 30 per cent be reduced to 25 per cent or lower… And, while at it, the government should also scrap the service levy, withholding tax on dividends – and the 15 per cent refundable import duty on industrial sugar.

At the end of the day, the government should be left with the 10 per cent import duty on sugar “if it truly wants to do away with the inconveniences that the industry is grappling with,” Mr Ibrahim told BusinessWeek.

His sentiments were echoed by the corporate affairs director of the Bakhresa Group, Hussein Sufian, who said that the 15 per cent refundable import duty adversely affects the firms’ cash flow.

By way of elaboration, Mr Sufian said the duty “increases the cost of doing business, as firms are compelled to use borrowed funds. In which case refund delays translate into more interest to be paid for failing to pay loan on time.

“Why should we suffer at the expense of others,” he rhetorized, suggesting that the government should penalize dishonest players.

Iringa Food and Logistics Company and Shelys Pharmaceuticals recently suspended production due to unavailability of industrial sugar.

In the event, more than 190 employees were likely to lose their jobs, according to senior executives of the two firms.

“The industry is being hurt by policy unpredictability. In that case, we cannot be competitive enough in the global market,” warned Mr Ibrahim.