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Afghan businessmen wary of the future

Local businessmen struggle to keep their factories going amid violence and tax hikes.
Last modified: 8 Feb 2013 08:46

The Tabasom Raisin Factory looks like the picture of Afghan success. It processes 50 tonnes of raisins a day. They arrive from Afghan farms, and are sorted according to size and quality.   

Large wooden crates full of them are loaded into large machines in the washing room. Here the raisins are washed twice and then make their way to the processing room where a combination of sophisticated machines and Afghan women sort them to make sure there aren't any foreign objects - stones, dirt or sticks - in the raisins.  

The company employs 180 workers, about half of them women.

"The women are much better than men at sorting the raisins," General Manager Asadullah Aziz says.

"At first we had shifts of men and shifts of women on the sorting line. The women were better every time, so now we just use women."

The women wear matching green uniforms. To get into the work area, everyone has to wash and sterilise their hands – the turnstile into the sorting room won't work, until the hand cleaning gel is used.

Aziz is no stranger to the raisin business. His family has been in it for more than three decades, first in import and export, and now processing. He operates a similar factory in Iran.

The Iranian factory is more profitable he explains, because there are no taxes. In fact, he says he gets a bonus payment from the Iranian government every year – a percentage of his exports.

In comparison, he pays tax twice on his raisins in Afghanistan. Twenty percent business tax plus twenty percent on his exports.

"The Afghan government says it supports investment but not compared to neighbouring countries, in terms of export," Aziz says.  "Export is important for the country. Our neighbouring countries support exports, our government does not support the way they do and it doesn't support factories."

In 2012, the company's export costs doubled because of political tensions between Afghanistan and Pakistan.

"Problems with our transit route through Pakistan means we now have send goods through Turkey." Aziz explains.  "It costs more. For example, through Pakistan it's $200 a tonne, through Turkey it's $350 to $400 a tonne."  

Aziz says he has a factory here because he wants to support his country and its people. He has bought land so the company could double its raisin production and build a facility to make their own boxes.

But for now, expansion plans are on hold. Like many Afghans Aziz does not know what the business climate will look like here in the next few years, as international forces leave and international aid money wanes.

Promoting local companies

The Afghan government is trying to reassure Afghans there won't be any big changes in 2014. It has launched a TV and billboard ad campaign encouraging people to buy Afghan products and President Hamid Karzai did the same at a recent trade conference.

"A lot of incentives will be provided for promoting of local companies - tax reduction, income tax reduction, access to land," says Mohammed Ibrahim Shams, vice president for investment at the Afghan Investment Support Agency.

But businessman Mustafa Sadiq says he doesn't feel supported at all. Until recently, his Omaid Bahar Juice factory was touted as proof Afghanistan was worthy of investment.

Then in December 2012, a truck full of explosives blew up next door. The target was a company that worked for NATO, but the blast blew away the walls of the company's cold storage unit and  destroyed millions of dollars of fruit pulp - halting juice production.

Sadiq says he isn't sure if he will rebuild, and he has been offered no compensation by the government.

"I am shocked to see that the government doesn't care about its people, about its farmers," he says.

His juice factory purchased fruit from 50,000 Afghan farmers, in many cases the farmer's entire crop.

"We were the first to introduce contract farming," Sadiq says. "So that the farmers knew they could make a profit with what they were growing."

But this year they may not make anything from the Omaid Bahar factory. Sadiq has not decided whether he will rebuild.

"I may just have to leave Afghanistan," he said as he shrugged his shoulders. "I am not sure whether I want to do business here anymore."

He knows he will need to decide sometime early in 2013, so that the farmers will know whether his company will buy their fruit, or they will have to try to sell it elsewhere.