Monopolies will make ‘wananchi’ pay the price

Sep 17, 2003

SIR— On September 11, you ran an article “Finance may re-introduce taxes on duty free imports” on page 20.<br>As an inter-mediate consumer of galvanised sheets, I was perturbed to learn that the parliamentary finance committee recommend that the Government levies import duty on galvanised coi

SIR— On September 11, you ran an article “Finance may re-introduce taxes on duty free imports” on page 20.
As an inter-mediate consumer of galvanised sheets, I was perturbed to learn that the parliamentary finance committee recommend that the Government levies import duty on galvanised coils, a raw material used to produce corrugated roofing sheets.

This was on the basis that one company, Uganda Baati Ltd, has the capacity to produce it.
I understand that the MPs gave audience to Uganda Baati Ltd, but the other stakeholders were not consulted.

I think it my duty to pass on the following facts to the MPs and the Government so that they can make informed decisions.

Uganda’s consumption of galvanised iron sheets has been growing at a rate of 30% since 2000. The consumption in 2002 was 37,000 metric tons. This year, based on the consumption in the first six months, it is expected to be 50,000 metric tons. Uganda Baati’s installed capacity is 36,000 metric tons of gauge 28.

If you produce gauge 32 which constitutes the bulk of our consumption, this capacity further drops to about 25,000. This is only a small fraction of the national requirement, let alone other specialised requirements of small-scale manufacturers.

It is for this reason that Uganda Baati’s applications to the Ministry of Finance for protection, lodged through the Uganda Manufacturers Association, have been thrown out for four years in a row.

Ugandans have benefited tremendously from better quality and moderately priced products.

Before new companies like Roofings, Tororo Cement, Crane Roofings and others came to Uganda, a sheet of gauge 32 was costing sh8,200 and the exchange rate to a dollar was sh1,315.

This was $6.2. Now a sheet of the same gauge costs sh7,200 and the exchange rate to a dollar is sh2,000. So it costs $3.6 and the quality is superb. Who was paying $6.2? Wananchi. Who is paying $3.6? Wananchi. Who is saving $2.6? Wananchi.

In the galvanising process, all the inputs like cold-rolled coil, zinc, lead, sodium bi-chromate, ammonium chloride, sulphur, and furnace oil are all imported. The only local input is electricity, which is a very dismal value addition. Should we protect a company because it consumes electricity — which is being rationed elsewhere anyway? Or should we protect it because it imports unprocessed chemicals to pollute our environment? Where is the incentive?

Given these facts, I request Parliament and the Government to critically analyse the issues underlying the protection of some manufactures and avoid monopolies which make wananchi pay
the price.

Name withheld

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