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Roofing sheets may become expensive

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Prices of roofing sheets are expected to go up following the government’s decision not to renew the industrial rebate licence on roofing sheets.

Before withdrawal of the license, manufacturers were enjoying duty free status on importation of raw materials for roofing materials, which, in turn, made prices of roofing sheets to be softer.

Some players in the construction industry have since written Malawi Revenue Authority (MRA) Commissioner General, Thom Malata asking him to re-consider the decision.

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In a letter dated January 24 2018 and signed by 12 people, the manufacturers have raised a number of concerns for Malata to consider.

The manufacturers cited the importation of coils for roofing sheets manufacturing from India and China, as a major challenge affecting their business.

They also hinted that the removal of the Industrial Rebate Concession on coils would result in the imposing of a 10 percent duty.

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“This makes duty on coils to be the same as duty on imported sheets. Locally manufactured roofing sheets would be more expensive than the imported profiled roofing sheets. Therefore, the industry will be forced to close its factories and to import profiled sheets as there is no economic benefit to manufacture the roofing sheets in Malawi. This will be contrary to the government initiative of “Buy Malawian,” the letter reads.

The members further expressed surprise with the decision, saying they had not planned to pay duty on raw materials.

They further said most factories have ordered raw materials and machines for 2018 based on the assumption that the raw materials would be cleared duty free as some raw materials have already arrived at the border while others are in transit anticipating duty free clearance.

“This means the industry has to immediately down size and lay off factory workers and close factories as imported roofing sheets from neighbouring countries through the Common Market for Eastern and Southern Africa or the Southern Africa Development Community would be duty free and cheaper than the locally manufactured duty-paid roofing sheets. Neighbouring countries are importing coils from India or China and exporting finished roofing sheets to Malawi,” part of the letter reads.

The sector also observed that since the roofing sheets would be cheaper to import duty free from neighbouring countries, the government would lose revenue, which the industry contributes in form of Value Added Tax, Corporate Tax and Pay as You Earn.

The members also argued that the importation of roofing sheets would result in loss of foreign exchange.

“Closure of the roofing sheet industry will result in short supply of roofing sheets in the market against the high demand. This will result in the increase in prices of roofing sheets making it unaffordable for the local population,” the group says.

The manufacturers have requested Malata to rescind the decision arguing this would allow industry to have ample time to plan better.

When contacted, MRA publicist, Steve Kapoloma, referred the issue to Ministry of Finance. Kapoloma said the matter borders on policy, an area that cannot be handled in isolation by MRA.

Spokesperson in the Ministry of Finance, Davis Sado, confirmed that the sector presented the same issues during the pre-budget consultations and that the ministry has since responded.

However, a source speaking to us in confidence said the committee mandated to oversee rebate licenses decided to revoke the waiver following underperformance of the sector.

“The committee decided to remove the licence because the sector has been underperforming. The whole idea of industrial rebate is to encourage value addition. But what happens with the roofing sheet sector is that their value addition is very minimal; hence, the decision to have it removed,” the source said.

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