Spending local: Also a good move by President Magufuli

By Editor

 The next time you buy your children’s favourite biscuits imported from South Africa, you may have to dig a little deeper into your pockets. It is anticipated that price for goods imported from outside the East Africa Community will increase in the not so distant future.

 

Why? Well you have President John Magufuli to thank for that. Last week as he chaired the East Africa Community Heads of State Summit in Arusha, the president ordered the EAC Council of Ministers to submit a report on trade levies for imports coming from outside the EAC. 

President Magufuli explained that the move will help wean off the EAC’s donor dependency and as part of that measure, he suggested the member states make room in their budgets to contribute to the regional body.

 

The move would effectively see consumers opt for more affordable local goods over expensive imports. This in turn would increase business for local producers and to meet the increased demand, they would increase their production capacity which means more job opportunities.

 

This expansion in production would serve to realise yet another Magufuli election pledge, to industrialise the country, a will he wants to see realised across the EAC. 

 

To produce more, companies would increase their production capacity which other than human resource means an increase in equipment and raw material and even set up of new plants all together, effectively industrialising the country.

 

It seems like a win-win situation for local businesses and communities but that is not what analysts think.

 

On the contrary, there are concerns that; “levying imports would, apart from hurting consumers, make EAC commodities less competitive in external markets. The prices of commodities such as fuel, food, cars, machinery and second-hand clothes — the most common goods sourced from outside EAC — and those exported outside the region including agricultural goods, are likely to go up.” 

 

This is so because as appealing as the EAC market, over 140 million strong, may be, higher taxes may make the market less attractive. But as the norm, this increased expense on suppliers will simply be transferred to the consumer inform of higher prices as pointed out earlier.

 

If destination countries take similar measures and increase the price of our exports making them less attractive to buyers compared to cheaper options from other countries. Should that be the case, then our economy would take a hit because revenue from exports would fall. 

So this puts us in a dilemma but in the interim, President Magufuli’s double edged sword plan is expected to work. 

 

Levy on imports will increase revenue that will fund EAC’s projects instead of waiting for donors and on the hand higher prices of imports will make consumers turn to local goods boosting local businesses and if this increased demand is sustained then the country will soon see new factories mushrooming as will service businesses to cater for the related logistics. 

 

All this activity will create more and more jobs a scenario that will see household incomes increase taking the people out of the clutches of poverty. So again, to President Magufuli we say, a job well done.

SOURCE: THE GUARDIAN