Friday, April 23, 2010

Championing Steel manufacturing industries in Tanzania

Steel Manufacturers Association of Tanzania (SMAT) plays a crucial role in ensuring efficiency on the production of steel products used for construction purposes. As an association of steel industry, among the main objectives of the association is to foresee the development of steel manufacturing in the country. The association also finds solutions to the many problems facing the sector, as the association’s chairman Mr. Sharad Salgar explains in an interview which I conducted with him in his office which is based in Dar es Salaam city.

QS: When was the association established?

The association came into existence in the year 1998, and I have been the founder chairman since its inception.

QS: What was the objective of establishing the association

The main objectives of establishing this association was to find a solution to the myriad of problems facing steel manufacturers in the country. In doing this, we do lobbying on behalf of members to discuss the industrial problems with the government in collaboration with the Confederation of Tanzania Industries (CTI). The aim was to share experiences and coordinate with the government’s activities and try to get adequate facilitation from the government.

QS: How many companies/industries are members of your association?

We have fourteen companies as members of the association in the country up to now. Three companies out there are in Arusha city, and one company is based in Mwanza city. The rest of the companies are located in Dar es Salaam city. According to the association’s regulations, all of these companies must ensure production of good quality steel products in their individual factories.

QS: Please specify how the association and its members are categorized in line of the specialization.

We have companies who manufactures corrugated iron sheets, steel bars and as well as steel pipes. ALAF Limited being the largest and the oldest factory, manufactures multi products and has a range of various products. Other companies have specialized only in round bars, steel pipes and other metal products.

QS: What are the main achievements which the association has attained so far since its establishment.

The association is proud to have an increase of the number of companies that manufactures steel products as well as galvanized iron sheets, currently we have 14 companies as I have mentioned. Also due to the association’s efforts of enforcing regulations in the sector, many more industries have been established. Our aim is to ensure further development and production of quality products among our members. Other achievements are to convince the government to reduce duty on raw materials to zero rate. This I must say is a great achievement that will go along way in reducing costs for our members and resultant lower prices to consumers.

QS: What are some of the challenges/problems the association has been faced with and how do you overcome them

The major impediment in our production is the cost of utilities that is still very high despite our several requests to the government to reduce them. Electricity is still very expensive, and unreliable. This is in line with water and telephones etc. These high costs affects business transactions more in Tanzania compared to other East African countries. Although all along we have been calling on the government to reduce utilities costs, nothing positive has happened yet.

QS: The business of reinforced bars is booming, how do you fair in business with other trade partners?

The business is booming because of the emerging construction activities in the country. One problem we have with contractors is that, they presume our locally manufactured round bars does not conform to the TBS standards. Bu I would like to assure them that all bars produced here in Tanzania have the same quality as those ones imported though they do not have international standards. This is the problem, but all of them are strong and have good quality and adhere to TBS standards.

QS: What raw material is used to manufacture steel products? And from where do you import the bulk?

Galvanized Corrugated Iron sheets or in short (GCI), require Hot Roll steel coils and zinc. This is used for manufacturing of the iron sheets whereas round bars is from iron scraps or billets that are locally available. The principal of degree of processing for instance in steel industries, we start with iron ore since Tanzania does not produce basic steel or Hot Rolled Steel coils (HRC). About 55 to 60 percent of the raw material is sourced from South Africa and the remaining percentage rate from Japan and Korea. As far as pipes and corrugated iron sheets is concerned, these have to use HRC which has to be imported. A manufacturer needs to have zinc of 10 percent and steel 90 percent.

QS: What is the government’s stance on the imposition of import duties on raw materials affecting steel manufacturers?

As I have said before, the government has accepted the principal of degree of processing of the raw materials to come to zero duty. In view of this situation, many local manufacturing industries have survived. The government has been very supportive of the local industries. The import duty of 25 percent makes us to survive and that is why the industries are operating in profit. As far as the ALAF Ltd is concerned, in the year 2009, we produced 50,000 metric tones steel products and the various taxes paid to the government was almost Tsh. 18 billion in various taxes which includes corporate tax, VAT and skills and development levy. This is 6 percent of the pay roll costs.

QS: Does the association provides any sort of training to its members?

Each individual company has to train their own people and at their own capacity level and expense. As the association, we do not offer any kind of training. It’s upon each of our members to organize its training program sessions for their own. The engineers working in these companies are occasionally empowered by ERB’s periodic trainings which are conducted under SEAP programs.

QS: What steps does your association take in order to promote the activities of its members?

Each member has to promote its own activities. We are the association and do not interfere with the internal affairs of our members. We only stand to give support on their sustainability on the issues regarding taxes and import duties on raw materials.

QS: How do you see the development of steel manufacturing in Tanzania?

There has been a tremendous growth within a short span of time and as manufacturers we want to ensure that this growth is maintained. This is in government’s policy that so far encouraged the investment in steel industries although no special incentives has been provided. If it is Tanzania’s interest to alleviate poverty and create employment. Industrialization must be encouraged. It’s only through industrialization that one can create employment and reduce poverty. Thus for Tanzanian steel manufacturers have been committed enough to ensure their goals. Usually the country’s development is judged according to the amount steel consumption per capita. The consumption of steel per capita is a good barometer to judge any country’s development. In Tanzania the steel consumption per capita is very low. As long as construction is booming, thus steel manufacturing is expanding.

QS: What are your future plans and aspirations in light of the association development?

With our up-to-date services in the industries that satisfies our customers, we are eager to ensure the progress of steel manufacturing is upgraded to the international standards in future. In view of this fact, we are now encouraging our members to export outside Tanzania to earn foreign exchange. Tanzania is having enough capacity to export its steel products to the neighboring market. Tanzania is supposed to have iron ore and coal in Mchuchuma and Coal in Linganga, now the National Development Corporation (NDC) has invited partners who would develop the industry in Tanzania to produce basic steel tenders from prospective.

NOTE: Mr. Sharad Salgar who is currently Chief Executive Officer of ALAF Limited, is also the founder chairman of the Steel Manufacturing Association since it was established in the country over a decade ago. He is also the 1st Vice-Chairman of the Confederation of Tanzania Industries (CTI). He holds two degrees, one in Commerce and Economics, and another in Law. He is also a Certified Chartered Accountant (CPA) by profession and an associate member of Indian Institute of Chartered Accountants.


Selly said...

This is an interesting article Mr Onyango!

Ric said...

I read your post and i appreciate your efforts. The information that you share in the above article is very nice and useful .All the things that you share with people, are very nice. Thanks for this efficient construction

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