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Analysis

Fast action needed over dumped dry batteries

When Tanzania embarked on the Economic Recovery Programmes (ERPs) and Free Market Economy policy, most industries producing locally were hit by the influx of imported products.
One of the institutions that suffered a big blow was the old and well established enterprise in the country, Matsushita Electric (EA) Limited (MEFCA), which before the programmes was the sole manufacturer of high quality National and Panasonic equipment.
But MEFCA suspended the manufacture of radios, TV sets and fans due to the increase of similar products, which were manufacture in Far East stealing the brand names of National, and Panasonic.
The problem grew bigger for MEFCA when the country was hit by an influx of imported sub-standard dry batteries from the same location. 
Some of the batteries, which are mostly manufactured in China's 'backyard factories', bore the brand name of National Hyper, which is MEFCA's trademark for dry batteries meant for export. 
According to Katsuo Chiba, MEFCA's Director of Marketing and Sales, the company now operates at only 60 percent capacity utilisation due to the influx of various brands of sub-standard batteries imported from the Far East.
MEFCA was not the only victims to that phenomenon. As of late Alfa Batteries Manufacturing Company Ltd., the manufacturers of Magic Cell has reported to have failed to sell batteries worth over Tsh.80 million as a result of the influx of sub-standard batteries in the country.
Following failure to move bulks of consignments lying at the factories' warehouses, Alfa Batteries has been forced to close down production for two consecutive weeks now. The factory blames TRA and the Ministry of Finance for laxity in curbing the situation.
Again Alfa batteries like their counterparts MEFCA, reiterated that the substandard dry batteries, which have flooded the market, are sold at throwaway prices which clearly indicate that they are brought into the country through clandestine routes hence all taxes are evaded. Alfa Batteries says this kind of dumping is 'killing' the local manufacturers. 
Judging from the prices of dry batteries, one cannot fail to note that they are imported without those concerned paying the necessary taxes or duties, which is also a blow to the government.
Sources within MEFCA have it that the company established some 35 years ago is not up in arms against the importation of other brands of batteries, but they are asking the authorities to create a level playing ground for all dry battery dealers in the country.
Recently, the Tanzania Revenue Authority (TRA) has formed a team to probe the illegal importation of dry batteries. 
The fact that no documents for dry batteries importation have been tendered to the customs and excise department in the recent years for necessary examination further complicates the vice suggesting two alternatives.
The first one is that dry batteries, which are of different sizes, may be entering the country through clandestine routes hence they are smuggled into the market. Secondly, the dry batteries may be those designated for neighbouring countries but end up being dumped in Tanzania. 
Recently during the launching of a new UM 3 dry production line at MEFCA in Dar es Salaam, the Vice President Dr. Ali Mohamed Shein promised to increase efforts of fighting the illegal influx of dry batteries and other similar imported products.
He said, executing agencies would be reinforced to ensure that all imported products followed the set regulations including paying of taxes, customs excise duties and VAT.
He however threw a challenge to MEFCA and other local manufacturers that while the government was trying its best to curb the illegal importation of sub-standard batteries, they should adopt and respond to the demand and requirements of the majority of consumers without compromising the quality of their products. 
The Minister for Industries and Trade Dr. Juma Ngasonwa assured the dry battery manufacturers in the country that the ministry will take stern measures in relation to dumping as the government too has an interest in protecting the local industries. 
The vice of the influx of sub-standard batteries in the countries is not a new ordeal. The practice is as old as the Liberalisation, ERPs and Free Market economy policies. But it beats to note that TRA who are the guardians of revenue in the country were silent till soon.
It is a pre-requisite also for all products entering the country to be certified by the Tanzania Bureau of Standards (TBS) before they can be released in the market for consumption; but with imported dry batteries this did not happen. 
Furthermore, according to TRA, the dry battery saga in the country can be equated with the illegal dumping, adulteration and smuggling of fuel that saw the government loosing Tsh.50 billion annually. 
It is not yet known how much the government is loosing through the illegal importation of sub-standard dry batteries although MEFCA pays about Tsh.1.4 billion in VAT only per annum, about Tsh.50 million in payroll taxes and about Tsh.100 million in PAYEE.
If TRA is serious in launching this crackdown they should collaborate with all stakeholders in the dry battery manufacturing industry. They should also collaborate with other institutions such as TBS.

BIDCO shows the way
Since Thursday last week, the Initial Public Offer of the five-year corporate bond of BIDCO Oil and Soap Ltd. was traded for six-days before the closure of the primary market. 
The Tsh.10 billion bond, will be sold at per-value face of Tsh.100,000 due to received interest rate. The bond, with a coupon rate of 9.6 per cent is semi-annual, offered in two categories-floating and fixed rate. 
The floating bond interest rate will be calculated based on Treasury Bill of 182 days plus 0.6 per cent at the date of maturity. 
The fixed bond calculation will be pegged on Treasury Bonds of five years as well as 0.3 per cent.
The bond is 100 per cent guaranteed by Barclays Bank PLC of United Kingdom. 
What is interesting here is that BIDCO becomes the first company in the history of Tanzania to float a corporate bond at the Dar es Salaam Stock Exchange (DSE). And the oil and soap manufacturing company has used a simple cheap way of raising the capital. BIDCO has skipped the exhorting interest rate charged by commercial banks. 
George Fumbuka, CEO of Core Securities Ltd, a chief sponsor broker of BIDCO bond said: " I am positive social securities and other banks will scramble for the bond as its strongly backed-up." In a few days, this remains to be seen. 
Fumbuka though has a ground to back up his predication. One is that the bond's interest is higher than of the government treasury bills of 182-day and five-year bond. Also the annual interest rate for 182-day T-Bill at mid-this month was 7.59 per cent and five-year T-Bond weighted average coupon yield stood at 9.52 per cent. 
Tanzanian businesspersons are yet to realise the potential lying ahead when it comes to acquiring loans. DSE is one place where companies could get a loan with less interest rates compared to the banks. 
The procedure of listing of corporate bonds, unlike equities, does not require the company to have three years of clean record of profitability either. Rather it is based on the guarantor and strong feasibility study one drafted. 
Bonds are debt instruments the companies floating them must pay the interest rate of as specified. That is the core responsibility for the company floating a bond. And bonds are risk-free investments. The investor is assured his/her investment's return. It's unlike equities where Board of Directors determines dividends.
But bonds at DSE trade infrequently after they are issued (many investors buy and hold them until their maturity), thence the bourse experience limited transactions. But that is not the problem. What matters most is for the investor who will receive its investment returns.
Commenting on why the bond market is not vivacious, Fumbuka said: "The bond market is not well known" and the amount needed to purchase bonds is unaffordable for individuals given the fact that half of the country's population is surviving under a dollar a day.
He gave the example of EADB bond where one bond was sold at Tsh.10 million (US$ 10,000) and Bidco will sell at Tsh.100, 000. 
However, investing in bonds is a very tricky business since when one wants to buy at floating rate, one has to be sure that interest rate of T-bills are going up and when purchasing, fixed rate interest is going down. 
The best advice brokers give? "Better-invest-in-both, fifty-fifty."

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