Bakers yet to benefit from tax waiver on wheat imports

When government scrapped tax on wheat imports this financial year, importers, bread-makers and bread lovers, as well as other businesses that use wheat flour expected prices to drop. Wheat importers were paying 35 per cent worth of import tax before July 1, 2014. The tax incentive has been extended for another year in the 2015/16 national budget. However, bread-makers and bread lovers say the exemption has not done much, noting that many bakers have closed shop over the past few years due to high operational costs and wheat prices have remained high. The bakers told The New Times that the exemption benefitted only wheat importers. “I used to buy a 25 kilogramme bag of wheat flour at Rwf7,000 when I opened my bakery in 2005; the price went up to Rwf13,500 in 2013. However, last year when tax waiver was implemented the 25kg bag of wheat flour was at Rwf16,000,” says Eugene Nsenga, the owner of La Planette Bakery in Kayonza District. “Since then, I have been barely managing and I am contemplating closing the business.” Nsenga says he invested all his savings in the bakery, making it hard for him to switch businesses. He adds that the high cost of packaging materials is also a threat to bakery business. Augustine Shema, the chairman of Bread Manufacturers Association (BMA), says the scrapping of duty on wheat imports had no impact on wheat and wheat flour prices. “Only wheat importers benefited from the exemption. The sector has continued to struggle with high cost of production. In fact, 12 factories stopped operations in the past two or so years; more are likely to follow soon,” he said. “We urge the government to scrap Value Added Tax (VAT) on wheat to ease pressure on our businesses.” Shema adds that the sector has also been affected by high power charges. He says they appealed to Rwanda Energy Group over the issue and were advised to work at night when charges are low. He however says that power rates are still high at night for small confectioneries. Industrialists, bakers inclusive, pay Rwf96 per unit when they operate from 11pm to 7am, compared to Rwf126 charged during the day. All the charges are VAT exclusive. Honore Ntabomvura, the sales manager of Nyarugenge City Market-based House of Cakes, says wheat importers did not reduce prices despite the waiver provided by government in the current budget. “Wheat flour constitutes over 95 per cent of bread; so when prices are high, this affects us. Otherwise, if production costs reduce, we will also review prices of our products,” he said. He was however optimistic that government’s emphasis on energy development in the 2015/16 fiscal year budget could result into reduced power rates. Sandra Kwizera, the managing director of La Gourmandise Bakery in Gisozi, Gasabo District, says bakers’ profits have declined because of the high production costs. Bread costs between Rwf500 (half a kilo) and Rwf1,500 (kilo), depending on brand, location or whether one bought it from a supermarket or ordinary shops. This little changed compared to same time last year. Chrysologue Ngendahayo, a resident of Nyarugenge District, said bread prices have increased since last year, adding that he used to buy the bread at Rwf500 (half a kilo), but it has increased to Rwf600 today. business@newtimes.co.rw

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Bakers yet to benefit from tax waiver on wheat imports