An economist weighs in on the prices of building materials

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By Alex Nelson Malanga

Dar es Salaam. With the government urging manufacturers to lower the prices of construction materials, analysts have proposed several measures, including the cautious issuance of import permits, to stabilize prices.

Reports indicate that the prices of cement, steel bars and iron sheets have soared in recent months in a rise that analysts link in part to ongoing construction projects being implemented thanks to the use of Covid-19 funds.

In response to the rising cost of building materials, Minister of Investment, Industry and Trade Ashatu Kijaji on Monday ordered companies to set product prices based on actual costs of production and transport.

Dr Kijaji ordered all regulators to crack down on hoarders and those running black markets and crack down on companies that were now forming a kind of cartels to raise prices.

In Dar es Salaam, prices for 12mm reinforcement bars reportedly jumped from 23,000 shillings to 27,000 shillings each.

Prices for iron sheets increased between Sh3,000 and Sh10,000 depending on the type and gauge.

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Prices for Twiga cement in Mwanza have risen from Sh18,500 to Sh22,000 while that of Dangote has risen from Sh19,000 to Sh21,000.

But analysts who spoke to The Citizen yesterday were of the view that apart from dialogue between the public and private sectors, the government could take several other short- and long-term measures to stabilize prices.

Measures, they suggested, include creating space for imports to alleviate the shortage, reducing price distortion and providing incentives to local manufacturers to increase production.

Others are the reduction of charges and levies on cross-cutting sectors, the diversification of import sources and the strengthening of the industrial development policy to stimulate production.

Honest Ngowi, an economics professor at Mzumbe University, said that in times of building material shortages and rising prices, the government should allow imports, but with added caution.

He said the country has a mandate to protect local industries, but at the same time moral requirements to protect the end consumer, suggesting the need to strike a balance between the two.

“To fill the gap, the government should allow imports, at least in the short term,” Professor Ngowi recommended.

“But while we do this, we must continue to prepare the ground for local industries to prepare for the production of products whose quality and quantity correspond to the demand.”

Professor Ngowi also expressed the need to diversify import sources so that importers can have a variety of options and choose where prices are competitive.

“We need to stimulate the supply side of the economy if we are to meet the challenge of scarcity and thus bring prices down,” he suggested.

Dr Abel Kinyondo from the University of Dar es Salaam School of Economics reiterated the views, suggesting that whenever necessary imports could be allowed, but with great caution.

He said that if the issue of imports could not be handled carefully, local industries that generate jobs and tax revenue for the government, risked dying of natural causes.

“Allowing imports is a solution, but not sustainable. We have to be very careful,” insisted Dr Kinyondo.

In an effort to curb price distortion, he said it was high time the Fair Trading Commission (FCC) got tough by cultivating a culture of regular market surveillance.

Trade expert and economist Donath Olomi said if the shortage challenge were to last for long, imports could be the option despite their threats to local industries.

“It should be the last resort. The best option should be the use of policy measures to address the shortage,” Dr Olomi said.

The country, he recommended, could respond to shortages by offering incentives to local manufacturers, with the aim of bolstering their own domestic supplies.

Confederation of Tanzanian Industries (CTI) Trade Policy Specialist Frank Dafa opined that for manufacturers to reduce prices, the government should step in and help them reduce operational costs.

“This can become a reality by improving the shape of transport infrastructure and increasing the supply of electricity,” Dafa said.

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