Business

High operational costs pushing up inflation in building industry

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Construction works on the Entebbe-Kampala Expressway. Delays in clearing of goods resulted in increased suppliers’ operational costs which were passed onto the final consumer. FILE PHOTO 

By FARIDAH KULABAKO

Posted  Thursday, March 6  2014 at  02:00

In Summary

Contributing factor. Introduction of a Single Customs Territory led to delays in clearing of goods.

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Kampala.

Increased operational costs resulting from the introduction of a Single Customs Territory in East Africa saw constructors pay more for inputs in December last year compared to December 2012.

Latest Uganda Bureau of Statistics (Ubos) Construction Sector Indices show prices in the construction sector rose by 0.9 per cent in December last year, compared to a 1.7 per cent decline registered over the same period in 2012.
Mr William Anguyo, the principal statistician in charge of Business and Industry Statistics at Ubos, said the introduction of a Single Customs Territory (SCT), which was new to clearing agents, led to delays in clearing of goods, resulting into an increase in suppliers’ operational costs which were then passed onto the final consumer in form of high prices.

Single Customs Territory
The SCT, whose pilot phase began in October 2013, seeks to increase efficiency and reduce the cost of doing business by clearing and collecting import duty at the first point of entry.

The pilot phase featured fuel and clinker importers, and this explains an increase in the operational costs for diesel and Bitumen which are some of the inputs used in the construction sector especially for road construction.
According to the Uganda Revenue Authority, the gradual implementation of the SCT is meant to avoid a massive switch over of the clearance of goods within the region.

Under the new trading system, the five East African countries including Uganda, Kenya, Tanzania, Rwanda and Burundi must have customs officials stationed at all points of entry into the community to

Stiff competition lowers cement prices
It is important to note that the sector posted a 0.8 per cent decrease in prices of cement due to stiff competition amid low demand, concrete products due to availability of cheaper raw materials, iron sheets and electrical wires due to a fall in the exchange rate during the period.
A bag of cement costs Shs25,000, down from Shs30,000 in September last year.

Cement production in the country has increased following the entry of new players such as Moroto Cement whose production capacity is estimated at 3,000 metric tonnes daily.