Car market in doldrums as Govt tightens screws on tax evasion
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.