Tanzania's largest container glass manufacturer, Kioo Limited, has expanded its production capacity to approximately 3.5 times the domestic demand. This expansion has created an immediate challenge for the company, as the domestic demand is not growing fast enough to absorb the increased output. As a result, Kioo is now looking to regional export markets to utilize its additional capacity. The company's General Manager, Vineet Verma, emphasized that exporting has become a structural requirement for maintaining economic utilization of the plant.
Kioo's expanded plant has the capacity to supply all glass containers currently consumed in Tanzania for various products such as beer, spirits, soft drinks, water, and food packaging. This leaves a substantial capacity for exports to regional markets. However, the company faces significant challenges, including high energy costs, limited export support, and trade barriers, which undermine its competitiveness in these markets. These challenges hinder Kioo's ability to effectively compete with glass manufacturers from countries such as Egypt and South Africa.
One of the major concerns for Kioo is the high energy costs, particularly the natural gas price, which is more than twice the price available to glass manufacturers in Egypt and South Africa. Additionally, electricity tariffs add further pressure to production costs. These increased costs make it difficult for Kioo to compete in regional tenders. The company also lacks effective export incentives, such as rebates, duty drawbacks, and freight support, which are available in some competing markets.
The excise-duty treatment on glass containers entering some regional markets further raises the landed cost of Tanzanian products. This makes it challenging for Kioo to export its products to these markets. According to Verma, regional markets should be the natural destination for production exceeding domestic requirements. However, the current challenges faced by Kioo may hinder its ability to achieve this goal.
Kioo is not only a significant employer but also a major contributor to the Tanzanian economy. The company directly employs more than 900 people and supports an estimated 2,500 additional jobs through various activities such as cullet collection, transport, warehousing, engineering, packaging, and distribution. Verma emphasized that glass is a recyclable material and does not leach into its contents, making it suitable for beverage packaging.
The company is seeking a broader policy discussion on packaging, particularly for alcoholic beverages. Kioo aims to engage the government and regional trade bodies on the challenges it faces. The company believes that without more competitive energy costs, effective export incentives, and improved access to regional markets, the export volumes required to support the expansion may not materialize.
Kioo Limited is determined to overcome the challenges and explore export opportunities in regional markets. The company's expansion has created new opportunities for growth, but it also requires a supportive policy environment to achieve its goals. With a renewed focus on exports, Kioo is poised to increase its presence in the regional market and contribute to Tanzania's economic growth.
Key points
- Kioo Limited's expanded production capacity is approximately 3.5 times the domestic demand.
- The company faces significant challenges, including high energy costs and limited export support.
- Kioo directly employs more than 900 people and supports an estimated 2,500 additional jobs.
