As the economy gradually re-opens following various levels of Covid-19 induced lockdowns, including level four which was eased last week, businesses anticipate improved performance due to increased economic activity across sectors. For battery manufacturers, prospects are bright on the back of the growing vehicle population in the country. The sector however still bemoans limited foreign currency to import raw materials and other essentials required among other challenges. Our business reporter Enacy Mapakame (EM) talked to the Battery Manufacturers Association chairman Mr Kudzai Pasipanodya (KP) and discussed the state of the sector and prospects. Below is an excerpt of the interview.
EM: What is the current state of the battery manufacturing industry in Zimbabwe? What are the challenges you face as a sector?
KP: Battery manufacturing industry has been growing in tandem with the increasing vehicle population. The industry has been granted the essential service status during the lockdown and overall capacity utilisation stood at 90 percent.
However, we still face a number of challenges and these include raw material shortages due to exportation of processed lead and scrap batteries affecting process flow as well as forex availability to fund for raw materials that are not locally produced.
EM: Manufacturers have generally bemoaned the influx of cheap and often poor-quality imports, what is the situation in your industry?
KP: We manufacture as much of the battery components as is possible locally. The presence of the furnace and plastic plant reduces the overall costs of production. This significantly reduces the bill of materials and thus allows us to price our batteries competitively.
Wider distribution network for the customer convenience and offering of 12 months warranty with strong after sales services give us a competitive edge over the competitors (imported battery traders). Importation of locally produced batteries remains a challenge hence the industry needs protection from the Government.
EM: How has Covid-19 affected the battery making sector in Zimbabwe? What needs to be done to narrow the effects of the pandemic on the sector or narrow effects of other challenges faced?
KP: During the first month of lockdown, we lost 90 percent of local sales volumes, but we recovered after we were declared an essential service. The sales volumes recovered to around 80 percent of normal sales.
However, there has been an increased cost of business as we comply with the new regulations. Reduced trading hours has also affected customers buying patterns and overall reduction of volume into the local market is now being felt due to the prolonged lockdowns.
EM: Despite all the challenges, where do you see opportunities?
KP: We are seeing growth in vehicle population, which results in increased demand as well as broadening market driving towards reduced emissions fossil fuel and need for increased energy densities in battery packs (lithium-ion, Maintenance free batteries).
EM: There is growing demand for lithium batteries in the developed world for electric vehicles. What is the future for the traditional vehicle car battery manufacturer in Zimbabwe?
KP: The sector is strategically positioning itself to be a player in the lithium-ion battery field. The growing demand for lithium batteries is for storing power for the electric vehicles, however the traditional battery won’t go away soon because the other accessories are powered by lead acid batteries mainly maintenance free.
EM: What opportunities are there in Zimbabwe to venture into lithium battery making?
KP: A quick glance in the vehicle market will show the presence of hybrid vehicles most notably, the Honda variety. This market presents an opportunity for the lithium-ion industry as both Lithium-ion and Ni-MH (Nickel Metal Hydride) are used to cater for this market.
The demand for increased energy densities in standby applications presents an opportunity for the Lithium-ion field as these batteries provide high energy storage capacity for a relatively smaller size. However, the overall amp hour cost for lithium is still very high for the customers and it’s not economically viable to start manufacturing considering the demand.
EM: Is there enough capacity for this and is there buy in from the market?
KP: Lithium technology manufacturing requires a huge capital outlay. The industry plans to enter this market tentatively in phases. Already, enquiries on the lithium technology are on the rise in the market and technological advancements make it inevitable for the market to seek lithium-ion batteries.
EM: How readily available are the raw materials in Zimbabwe?
KP: Lead acid batteries are mainly manufactured from recycled lead. Exportation of scrap batteries and processed lead has affected our industry due to shortage of lead, hence there is a need for the Government to protect the local industry and enable us to reduce the production costs.
Currently, we are augmenting our supplies by importing from regional markets we supply our products. Zimbabwe boasts of the largest lithium reserves in Africa with proven deposits in Bikita, Goromonzi, and Kamativi.
Due to the complexity of the processing of the ore to the point where the lithium-ions are intercalated into the battery electrodes, it will take time to fully realise the benefits of the presence of these reserves.
EM: Very soon, the Treasury will be going into the market for input into the 2022 National Budget. What ideas would you give the Finance Ministry as a sector?
KP: The difference between interbank and parallel market rates is now huge and affecting the credibility of the auction system. There is need to revisit some of the assumptions. We also think Reserve Bank of Zimbabwe (RBZ) retention of 40 percent is now a threat to companies’ capitalisation and if it can be reduced to around 25 percent.
Additionally, income tax at 2 percent plus 1 percent bank charges now becomes a significant cost of doing the business and our proposal is to allow a deduction under income tax or be treated as prepayment.
We also propose export incentives to be brought back as payment or tax deduction as most exported goods face competition from products from other countries which extends up to 20 percent of export incentive.