Textile importers give govt two weeks, threaten to close shops

Garments and textile fabrics importers, under Kampala City Traders Association (Kacita) have threated industrial action in the face of government’s refusal to waive tax requirements imposed on goods whose orders had been placed before implementation of the new tax measures.  

In a press briefing reacting to government’s position in Kampala yesterday, Mr Thadeus Musoke Nagenda, the Kacita acting chairman, said the new tax measures were not only in breach of General Agreement on Tariffs and Trade, which stops unfair increase, but had been indented to push out some traders with the intention of creating a clique of monopolistic importers, who would use the new measures to disguise as local manufactures.  

Kacita also argued that it was important that government maintains the 25 per cent levy for both goods brought in before and after the new tax policy implementation to “allow members clear goods based on transaction as opposed to weights (kilogrammes) implemented under the new tax measures. 

“We … give government a two-week ultimatum to ensure that the tax rates are harmonised, and in failure to do so, Kacita, together with its garments members, will be left with no choice but to have their shops closed down with effect from September 1 or opting for any other alternative means of showing our dissatisfaction,” Mr Nagenda said yesterday. 

Traders, through Kacita, United Attire Traders Association, United Tailors Group and Manufacturers Association, among others, have since May petitioned government to review taxes on imported garments, which, under the new regime were revised upwards from 25 per cent to 35 per cent or a charge of $3.5 for every kilogramme while taxes for textile fabrics were increased to 35 per cent or $3 per kilogramem.

In an August 4 letter, Finance Minister Matia Kasaija, said that whereas the private sector had valid arguments against the new tax measures, government, through advice of Uganda Revenue Authority, had found it necessary to protect some local manufactures by stopping importation of garments and fabrics that are manufactured within the country. 

Therefore, he said, the Finance Ministry had recommended that textile fabrics and garments that are not manufactured in Uganda and cannot be adequately sourced locally, shall have an import levy of 35 per cent, while textile fabrics and garments that are manufactured within Uganda and can be adequately sourced locally shall hold an import levy of 35 or a specific duty rate of $3.0 per kilogramme (for textile fabrics) and 35 per cent or $3.5 per kilogramme) for garments).

However, during the press briefing, Mr Nagenda highlighted that through an independent survey conducted by the business community, it was found that local manufacturers had no capacity to supply demand given that they produce only 3 per cent of consumed garments and fabrics in Uganda.  

“ … all of them have been in the market with capacity to supply less than 3 per cent of market demand while some have even closed,” he said, noting that most of the imported garments were hard to be produced here since they are so specific with no material to manufacture them.  

The research, he noted, had also proved that most of the reported local manufacturers that government is seeking to protect, will instead be given a window to import the same goods and enjoy monopolistic market tendencies where issues of pricing and quality are determined by a few players. 

Kacita also noted that at least 97 per cent of garments and fabrics that are consumed in Uganda are imported, which therefore, in the event of any disruption, the industry will adversely be affected as well as impact the larger economy. 

In a statement Kacita also highlighted that under the new tax measures, a 20 feet container that would previously be cleared at between Shs80m and Shs100m, had almost tripled to between Shs280m and Shs300m. 

In support of the new tax  measures   
Mr Daniel Birungi, the Uganda Manufacturers Association executive director, yesterday told Daily Monitor that anything that protects local manufacturers and capacity is a welcome move that will improve local production. 

“Certainly, anything that protects local capacity and encourages local manufacturing is a welcome move because it then means that rather than export jobs, we retain those jobs here more so in a period when the economy is just recovering from the effect of Covid-19,” he said but noted that the import of used clothes continues to be a challenge not only to the textile sector but also to the leather sector as a whole.