Economist weigh in on prices of building materials

Dar es Salaam. With the government urging manufacturers to bring down prices of building materials, analysts have proposed several measures, including cautiously issuing import permits, to stabilise prices.

Reports have it that prices of cement, steel bars and iron sheets have shot up in the past few months in a rise that analysts link partly to the ongoing construction projects being implemented through the use of Covid-19 funds.

In response to rising costs of building materials, Investment, Industry and Trade minister Ashatu Kijaji directed businesses on Monday to set prices of the products based on the actual costs of production and transportation.

Dr Kijaji directed all regulatory authorities to take to task hoarders and those running black markets and to take severe measures against companies that were now forming sort of cartels to hike prices.

In Dar es Salaam, prices of 12mm reinforcement bar have been reportedly to jump from Sh23,000 to Sh27,000 a piece.

Prices of iron sheets have gone up by between Sh3,000 and Sh10,000 depending on type and gauge.

Prices of Twiga cement in Mwanza have gone up from Sh18,500 to Sh22,000 while that of Dangote have climbed from Sh19,000 to Sh21,000.

But analysts who spoke to The Citizen yesterday were of the view that apart from dialogue between the public and private sectors, the government could take several other short and long term measures to stabilise prices.

The measures, they suggested, include creating room for imports to address the shortage, curbing price distortion and providing incentives to local manufacturers for them to up production.

Others are cutting of charges and levies on cross cutting sectors, diversification of sources of imports and strengthening the Industries Development Policy to boost production.

Mzumbe University economics professor Honest Ngowi said during times of shortage of building materials and hiked prices, the government should allow imports, but with extra care.

He said the country had a mandate to protect local industries, but at the same time moral demands to protect the final consumer, suggesting the need to strike a balance between the two.

“To fill the gap, the government should allow imports, at least in the short term,” recommended Prof Ngowi.

“But as we do that, we need to keep on setting a stage for local industries to prepare themselves for production of products with the quality and quantity matching demand.”

Prof Ngowi also expressed the need to diversify import sources so that importers could have a variety of options and choose where prices were competitive.

“We need to boost the supply side of the economy if we are to address the challenge of shortage and thus bring down prices,” he suggested.

Dr Abel Kinyondo from the University of Dar es Salaam’s School of Economics, reiterated the views, suggesting that whenever necessary, imports could be allowed, but with high degree of caution.

He said, if the question of imports could not be treated carefully, local industries which generate employment and tax revenue to the government, were likely to die a natural death.

“Allowing imports is a solution, but not sustainable. We need to be very cautious,” insisted Dr Kinyondo.

In an effort to curb price distortion, he said it was high time the Fair Competition Commission (FCC) tightened a screw by cultivating a culture of monitoring markets on a regular basis.

Trade expert and economist Donath Olomi said if the shortage challenge was likely to last long, imports could be the option despites their threats to local industries.

“This should be the last resort. The best option should be the use of policy measures to address the shortage,” opined Dr Olomi.

The country, he recommended, could respond to shortages by providing incentives to local manufacturers, in an effort to bolster their own domestic supplies.

Confederation of Tanzania Industries (CTI) trade policy specialist Frank Dafa was of the view that for the manufacturers to cut prices, the government should step in and aid them in bringing down operational costs.

“This can become a reality by improving the shape of transportation infrastructure and boosting power supply,” said Mr Dafa.