The Sunday News
TYRE manufacturing company Apollo Tyre Zimbabwe (formerly Dunlop) has seen production capacity at its Bulawayo factory increasing to around 50 percent from 30 percent compared to the same time last year although efforts to ramp up production were being weighed down by the continued influx of imported second hand tyres.
ATZ managing director Dr Kennedy Mandevani told Sunday Business in a wide ranging interview on Wednesday that Government had promised to ban the importation of the second-hand tyres, a move that could see the company regain its former glory and increase capacity utilisation.
“Recently we engaged the Ministry of Industry and Commerce to present our case not only as ATZ but the tyre industry. Because it’s not only affecting this company but it’s affecting basically everybody who is a bona fide trader.
“So the Ministry of Industry (and Commerce) heard our case. We said second-hand tyres mean foregone revenue to Government because when they are imported the dealers say the tyres are for retreading when in fact they are for sale. So they come in duty free or others are smuggled. So Government is losing out on revenue arising from these second-hand tyres,” Dr Mandevani said.
He said Government agreed on the proposal to ban and promised to initiate requisite legislation to effect the ban.
“The ministry agreed with our proposals and promised to ban them so we are just waiting for that Statutory Instrument. So if second-hand tyres are banned I tell you our sales will start increasing. We will start generating revenue not only for ourselves but for the fiscus as well because Government is not getting anything from the selling of second-hand tyres,” Dr Mandevani said.
The Bulawayo-based company is the only tyre producer in the country. It produces the Dunlop and Regal trademarks while there are five retreading firms and a number of dealers trading in different brands.
“I think immediately after dollarisation sales improved and three years later sales reached a peak and started declining because of certainly two things. The first one is competition from the Far East. Those tyres are not as good as ours and are actually cheaper.
“The other problem is the influx of second-hand tyres. It wasn’t a big problem four years ago but now it is as you know the informal sector is growing in this country whether it’s tyres or clothes or cars or tomatoes we have a big informal sector,” Dr Mandevani said.
He said most of the new tyres that find their way into the country were being offered to local dealers as consignment stocks, a situation which presented unfair competition to players in the local industry due to the prevailing liquidity crunch. Consignment stock is stock legally owned by one party, but held by another, meaning that the risk and rewards regarding the said stock remains with the first party while the third party just keeps them.
“We can’t offer consignment stock because the issue is with the liquidity crunch in Zimbabwe. The financing of the working capital for tyres is very important. So you can’t give consignment stock or extended credit which outside companies can afford because they borrow at interest rates which are much lower than in Zimbabwe. For example in Zimbabwe the borrowing rate is 12 percent in other countries it’s five percent,” Dr Mandevani said.
To boost revenue, Dr Mandevani said the company was not only looking at local sales but also exploring other markets in the region while fortifying its traditional markets, South Africa and Zambia.
“Recently we explored the Angolan market and we are also looking at Mozambique and possibly DRC. We will service DRC via Zambia because products that enter Zambia end up filtering into DRC. Certainly in terms of performance South Africa is doing very well followed by Zambia then the others,” Dr Mandevani said.
He, however, said efforts to grab the market niche in Zambia were being stifled by the Zambian Government’s decision to remove duty on goods from non-Comesa countries culminating in the influx of cheap tyres from the Far East.
“There are discussions in Zambia to reinstate that duty in which case we will end up selling more tyres into Zambia. We wait for the next budget from Zambia where they are likely to announce duty on tyres and other commodities and we will take it from there,” Dr Mandevani said.
Efforts by the company to penetrate the Angolan market were being subdued by the fact that the market largely prefers radial tyres against the background that it mostly manufactures cross ply tyres.
The company is in the process of introducing a number of new range of tyres which are presently being imported by dealers.
“We are looking at new sizes. Well I can’t tell you now because we are still developing them but we are certainly going to extend our product range through the introduction of new sizes and those new sizes are currently being imported by dealers but very soon they will be buying from us.
“We are very bullish about the future unlike most dealers. Most tyre dealers are what I call fly-by-night. They are in Zimbabwe simply because there is the US dollar. If you remove the US dollar they will disappear overnight.”
