Car mar­ket in dol­drums as Govt tight­ens screws on tax eva­sion

The African - - BUSINESS FOCUS -

THE Tan­za­nia car mar­ket is not as flour­ish­ing as it were be­fore the com­ing to power of Pres­i­dent John Magu­fuli af­ter the Oc­to­ber 25, 2015 gen­eral elections. A spot sur­vey done by this re­porter shows that car sales have dras­ti­cally gone down due to what econ­o­mists and big and medium car re­tail­ers de­scribed as an eco­nomic cri­sis that the coun­try was un­der­go­ing.

Ex­perts at­trib­uted the sit­u­a­tion to Pres­i­dent Magu­fuli’s move to curb cor­rup­tion, eco­nomic sab­o­tage and em­pha­sis on fru­gal­ity in the gov­ern­ment and its in­sti­tu­tions, ram­pant mis­use of re­sources and diver­sion monies al­lo­cated for de­vel­op­ment projects. These bold mea­sures are seen as a thorn in the car busi­ness sec­tor­both for im­porters and mid­dle­men traders.

Phys­i­cal vis­its to some of the car yards and show rooms, re­vealed that some of the in­vestors in the im­por­ta­tion of cars have been forced to aban­don the busi­ness and some traders have closed shop al­to­gether be­cause the busi­ness is in dol­drums for the time be­ing.

Those in­ter­viewed said since Pres­i­dent Magu­fuli as­sumed the pres­i­dency, the busi­ness en­vi­ron­ment has changed—it is now dif­fi­cult to sell cars, un­like in the past one or two years. Some car sales agents said they were then able to sell be­tween five to 10 ve­hi­cles per month but not now.

The sit­u­a­tion has com­pletely changed now and that one is lucky to sell one ve­hi­cle a month. This they ob­served they were fac­ing dif­fi­cult to pay rent for the car yards or show rooms.

Paschal Kiria an agent for Planet Mo­tors Ltd, sit­u­ated along the Ali Has­san Mwinyi Road at Na­manga in Dar es Salaam, says the car busi­ness al­most has come to a stand still af­ter the new ad­min­is­tra­tion came to power. He says peo­ple just shop win­dow they en­quire about car prices but they don’t buy them.

“Busi­ness has be­come un­sta­ble al­most has come to a stand­still since the gov­ern­ment eva­sion and strength­ened mea­sures for col­lec­tion. Presently, it is now usual to end a month with­out sell­ing a sin­gle car while the com­pany is re­quired to pay rent and salar­ies,” he said.

“Prior to that one would sell at least three cars up to five and some times 10 cars per month,” he points out, adding:

“Be­fore strin­gent gov­ern­ment mea­sures one was able to im­port cargo and upon ar­rival at the port, you pay half of the re­quired land­ing bill and the other half, af­ter sell­ing the mer­chan­dise, but not now.

It has been stopped and when you en­ter the port of­fices you’re not lis­tened to and in­stead di­rected to the pay­ment win­dow in the true spirit of Hapa kazi tu.

“Brother go and pay at the win­dow as we are busy here, no one would like to spoil his work for a kick back of one mil­lion shilling you your­self no doubt you are aware of the need for speedy work,” you are told says Kiria. He says this has be­come a stum­bling block to most busi­nesses.

Kiria points out that be­fore that some busi­nesses im­ported cars through ‘ pa­nya routes’—un­of­fi­cial routes or through big con­tain­ers which in­di­cated dif­fer­ent contents and there­fore suc­cess­fully evaded pay­ing taxes and found the trade lu­cra­tive and opened branch of­fices in other towns, but it is now over.

Ghalib Ghalib an of­fi­cial at the Harib Mo­tors car sales yard at Mbuyuni Dar es Salaam, cor­rob­o­rates says it is wrong for the gov­ern­ment to al­low the use of the Amer­i­can Dol­lar as a mode of pay­ment. But he at­tributes also the fall of car sales to non-avail­abil­ity of car loans to em­ploy­ees.

“As an ex­am­ple, the Dol­lar has gone up and it is a mis­take that the Gov­ern­ment of Tan­za­nia pegs the shilling to the Dol­lar. If a customer gets a nine mil­lion shillings car loan to­day, when you tell him that the Dol­lar has gone up and that he ought to pay USD 5000, he would not be able to pay due to the fall of the shilling against the Dol­lar. Also the fis­cal poli­cies are not good be­cause there are open car loans and thus most em­ploy­ees fail to ask for a car loan,” he says.

“The Gov­ern­ment has failed to con­trol this dol­lar­iza­tion of the econ­omy—mak­ing it dif­fi­cult for most Tan­za­nia em­ploy­ees to buy cars and get car loans. Dur­ing the past ad­min­is­tra­tion it was pos­si­ble for a com­pany to sell up to 19 ve­hi­cles a month, but now the mar­ket is down and peo­ple come and en­quire about prices and go away.

“This sit­u­a­tion has forced some of the busi­nesses to close and trans­fer them to other coun­tries such as Uganda where taxes are lower.

“And if this con­tin­ues for a year, we would also be forced to pull out of Tan­za­nia and do busi­ness else­where,” says Ghalib.

Badru Hamdo of Sayed Cor­po­ra­tion, sit­u­ated at Na­manga in Dar es Salaam, ad­mits that the busi­ness cli­mate is not good, but hopes that it will im­prove in the next two or three months as most crops would have been sold.

“In­creased Cus­tom du­ties have also con­tributed to the fall of car sales as prior to this, if one im­ported 50 cars at a goal, cus­tom duty was re­duced by 200,000/- per each car—mak­ing it pos­si­ble to sell them at com­pet­i­tive prices and still make profit. But now it is not the case. A car which used to sell at Tsh.12.5m. be­fore the elections, the same is be­ing sold at Tsh.14 to 15 mil­lion,” says Hamdo.

He says as of now, in post elec­tion ev­ery car has an av­er­age in­crease of be­tween Tsh.2m per ve­hi­cle com­pared to pre-gen­eral elections prices last year. On­line Busi­ness The car busi­ness peo­ple also blame the so­cial me­dia for the low car sales per­for­mance as many peo­ple have switched to on­line sales.

The clo­sure of some of the illegal en­try points such as Tun­duma in Momba and Ka­sumulo in Mbeya, have also led to low sales rates as ve­hi­cles im­ported through those points were not charged cus­tom du­ties—and there­fore sold cheaply.

But the en­try of the Dar es Salaam, Rapid Trans­port (DART) is pos­ing an­other chal­lenge to car deal­ers and im­porters be­cause it is per­ceived that car sales will fur­ther dwin­dle be­cause peo­ple won’t see the need to buy cars be­cause of an im­proved fast trans­port sys­tem. Dar es Salaam is billed as the big­gest car mar­ket in Tan­za­nia.

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