Thursday, February 1, 2018

Govt allays fears over fall in capital goods imports


By Alex Malanga @ChiefMalanga

Dar es Salaam. The importation of capital goods dropped in the year ending June 30, 2017, signalling a slowdown in investment.

But the government has allayed fears, attributing the fall to investment saturation in some sectors, completion of major construction projects and a decrease in motor vehicle imports.

According to the Bank of Tanzania (BoT) annual report for 2016/17, imports of oil, equipment as well as capital goods for transport, building and construction fell during the year ending June 30, 2017.

The importation of equipment and capital goods for transport decreased to Sh2.17 trillion from Sh2.37 trillion during the same period.

They were as high as Sh5.75 trillion in 2014.

Imports of capital goods for building and construction decreased from Sh1.96 trillion to Sh1.95 trillion.

Construction of residential and non-residential buildings, roads and bridges and other civil works grew by 13 per cent in 2016 compared with 16.8 per cent in 2015.

BoT reported that happened because the importation of capital goods fell as major construction projects such as cement factories, power plants and gas pipelines were completed.

Capital goods are defined as tangible assets such as buildings, machinery, equipment, vehicles and tools that an organisation uses to produce goods or services in order to produce consumer goods and goods for other businesses.

Manufacturers of automobiles, aircraft, and machinery fall within the capital goods sector because their products are used by companies involved in manufacturing, shipping and providing other services.

The BoT report showed that oil worth Sh4.32 trillion was imported in the year ending June 30, 2017, down from Sh5.99 trillion the previous year. It stood at Sh6.62 trillion in 2014.

Tanzania Private Sector Foundation executive director Godfrey Simbeye believes that low investment might have partly been the cause of the fall in the importation of capital goods as many sectors performed badly during the period.

“Things were worse in construction during the period. There were no new meaningful mega projects in the industry,” Mr Simbeye told The Citizen over phone.

But Industry, Trade and Investment minister Charles Mwijage associates the decrease in the importation of capital goods with overproduction in some industries and a decline in motor vehicle imports.

He spoke of cement factories whose total production capacity is 10.8 million tonnes against demand of 4.8 million tonnes.

Three more firms --- one in Tanga and two in Coast Region -- with a total capacity of 10 million tonnes are set to start operating in 2020, according to him.

He said the decrease in the importation of transport equipment might be associated with a drop in the importation of vehicles.

“It’s good that imports of machinery and industrial raw materials rose.”

That of machinery increased from Sh3.89 trillion to Sh4.24 trillion, according to the report, while that of industrial raw materials increased from Sh1.72 trillion to Sh2.24 trillion.

“More factories have been built in the past two years. Not fewer than 3,306 of them,” said Mr Mwijage.

Manufacturing activity grew by 7.8 per cent in 2016 from 6.5 per cent in 2015, according to BoT. Much of the growth occurred in the production of food, cement, beverages, tobacco and clothing.

The number of people employed in manufacturing industries increased to 95,678 in 2016 from 91,008 in 2015. More than 50 per cent of them were working in factories involved in food, beverages and tobacco processing.

However, employment in paper and paper products manufacturing decreased.

Exports of manufactured goods also dwindled to Sh2.28 trillion in the year to June 30, 2017 from the previous year’s Sh2.53 trillion.

Mr Mwijage said that happened mainly because Tanzania was yet to study its competitors’ tactics well.

“We are doing all we can to understand our competitors so as to make our products stand out in global markets.”