Tanzania government steps in as cargo volumes fall at Dar port

The Tanzanian government, concerned by the decline in cargo volumes at the Dar es Salaam port, is planning a stakeholders meeting to come up with ways to increase business.

Tanzania Ports Authority Director General Deusdedit Kakoko said cargo traffic at the port declined by 800,000 tonnes between the 2014/15 and 2015/16 financial years.

The Parliamentary Committee for Industry, Trade and Environment is planning a stakeholders meeting that will include Prime Minister Kassim Majaliwa, officials from the Tanzania Revenue Authority, port authorities, ship owners, transporters and major clients in the region.

The president of the Tanzania Freight Forwarders Association, Stephen Ngatunga, is optimistic that “the meeting will bear fruit.”

At the centre of the debate is whether the 18 per cent value added tax charged on auxiliary services attached to in-transit goods since July 1, 2016 has led to the loss of clients from Zambia, Uganda, Malawi, Rwanda, Burundi and the Democratic Republic of Congo.

Finance Minister Philip Mpango said the VAT is not an issue, but technocrats in government institutions that deal with cargo have differed with him.

Mr Mpango said VAT is levied only on auxiliary services on the process between cargo arrival at the port and its evacuation, and not on the goods themselves.

An agent of a Dubai-based shipper, which used to bring in 10,000 vehicles per month, said the number of cars offloaded at Dar port by their ships is now 3,000 per month. He said they have diverted their cargo to Mombasa port, which they find more affordable.

“Our single major cost at Dar port was the usual stevedoring charge of about $500,000 per month for the 10,000 trucks offloaded. Today, each of these trucks is charged 18 per cent VAT on top of the stevedoring charge. This cost is not recoverable,” he said.

VAT payment

In principle, VAT should be shouldered by the final consumer, who may be in Zambia, Burundi, Rwanda, Malawi, Uganda or the DRC. Recovery of VAT takes place after the payment has been made in the said countries and not before.

Shippers say that what matters is the fact that the VAT charged constitutes a major overhead, enough to make any ship owner think twice before choosing the Dar port.

Dr Mpango argues that since the VAT only came into force in July, it cannot be blamed for the decline in cargo volumes.

READ: VAT on tourism and port services to stay

They argue that the reduction in cargo is part of a general global trend.

Tanzanian media reported the Tanzania Ports Authority Director General Deusdedit Kakoko as saying last week that a drop in cargo volumes was not only being experienced in the country, but also in Kenya and South Africa.

Mr Kakoko said that according to a report by TPA officials who visited the countries, the port of Durban in South Africa registered a 10 per cent decline in cargo volumes in the first quarter of this year, and that in Mombasa volumes dropped by 1.5 per cent over the same period.

He cited China’s economic downturn as one of the reasons for the decline of cargo volume at many ports.

However, last week, 13 ships arrived at the port of Mombasa, and only three docked at the Dar port.

Opponents of this view don’t dispute the fact that there has been a general decrease in cargo volume at ports around Africa since last year, but believe that the introduction of VAT at the Dar port has aggravated the situation in Tanzania.

Mr Ngatunga said reverberations from Tanzania’s bid to introduce VAT on transit cargo had spread across the region months before its actual implementation at Dar port.

On April 3, the state-owned Daily News quoted Hebel Mhanga, then acting Dar port manager, as saying, “Though VAT is yet to be enforced, it has scared importers into looking for alternative ports in the region.”