Higher costs worry Ugandan Industrialists
Ugandan manufacturers are worried at the way the cost of doing business has gone up since their exemption period of not paying import duty on certain raw materials ran out recently. The exemption has been a contentious issue with other countries saying it gives Uganda unfair advantage over others in the market by making cheap products that are without the 10 per cent external tariff. During the EAC Council of Ministers meeting held in Arusha in November 2004, Uganda re-submitted a list of 135 products they termed as their raw materials or industrial inputs urging for the application of zero per cent duty under the EAC Common External Tariff.
Moses Kaggwa, a Trade Commissioner in the Ministry of Finance, in June this year ahead of the July 1 deadline said that the list of 135 raw materials and industrial inputs is no longer necessary since Uganda is part of the East African Community (EAC) and the Common Market for East and Central Africa (COMESA) arrangement where goods move tax free.
The zero-tax on the imported raw materials was supposed to be an exemption and incentive to Ugandan manufacturers who produced for export within the community, but were required to pay export taxes to trade within the region.
This was before the coming into force of the region’s customs and Common Market protocols which now allow free movement of goods and persons.
Uganda was given a preferential treatment for the 135 raw materials used in the production of goods exported to other East African countries, also known as the Ugandan List in 2005, to enable Uganda develop her nascent industrial sector to the level of Kenya and Tanzania.
Now that the list is no more, Ssebagala Kigozi, the Executive Director of Uganda Manufacturers Association said Uganda still faces the same challenges it faced when the list was drawn up.
“We are not saying it shouldn’t be removed, no, we are saying what has been done on the condition that led to the establishment of that list. Uganda is still a landlocked country, no infrastructure, no power and many other challenges,” Kigozi said in an interview.
He said for as long as the challenges that prompted the formation of what became to be known as the Ugandan list still exist, doing business for Ugandan manufacturers is going to be hard.
“Everytime you add a figure to what I use to produce you add a cost. The cost is equivalent to what has been levied,” Kigozi said. He said different raw material comes with a different tax cost.
The elimination of the Uganda List has affected almost all sectors in the country since 135 different raw materials cuts across the entire manufacturing sector. Robert Ogwal the Director of Trade at Uganda Private Sector Foundation the apex umbrella body for business practitioners in the country said the elimination of the Uganda List has a negative impact for a certain section of the business community.
Ogwal says this is so because some countries still have in place arrangements similar to the Ugandan list of raw material which renders Uganda uncompetitive in the regional market. Tanzania imports raw materials at a zero rate from SADC while Kenya, Burundi and Rwanda are still benefiting from importation of zero rated raw materials. “This makes it hard for Ugandan people to do business. East African countries have to rationalize all remission schemes in the region to have a leveled playing ground,” Ogwal notes.