Source: Unpacking the secondhand vehicle policy ban – The Standard February 25, 2018
BY TATIRA ZWINOIRA
ZIMBABWE’S motor industry policy will phase out secondhand vehicles leading to an eventual ban with the intended goal of stimulating the local motor industry to its former heights seen in 1997.
At its height, the motor industry sold 20 000 units annually but due to the downturn of the economy and rise in secondhand vehicles, that number has been on a nosedive in the period 2000 to 2017.
The motor industry policy — Zimbabwe Motor Industry Development Policy (ZMIDP) running from this year to 2030 — found that if properly supported, it has the potential to produce up to 40% of motor vehicles locally.
“Zimbabwe’s motor assembly sector has a comparative advantage over its neighbours (other than South Africa) as it already has two existing assembly plants and two existing bus manufacturers that are operational.
The motor industry sector needs high investment and huge capital outlay and this creates a barrier for new entrants,” he said.
“A vibrant ZMIDP would unlock value chains as there would be demand in the local componentry sector. Potential exists to produce up to 40% of motor vehicle components locally.
Zimbabwe can leverage on these value chains by supplying the region with components.”
ZMIDP seeks to take care of two of the local motor industry’s two biggest problems — imported secondhand vehicles and increasing the capacity of local players.
The scourge of imported secondhand vehicles has affected the local motor industry to the extent of triggering a 12,54% annual drop in new car sales over the years.
“There are currently no controls or restrictions on the importation of pre-owned vehicles. Used cars and trucks are currently being imported into Zimbabwe by small independent dealers and individuals either for private use or for re-sale,” the policy said.
This secondhand importation of vehicles has been growing by 87,45% annually over the years.
In 2016, secondhand imported vehicles totalled 62 619 against
3 393 new vehicle units sold.
ZMIDP will implement the introduction of “The Pre-Shipment Inspection Policy” for importation of secondhand vehicles.
This policy will entail the mechanical and structural inspection of the secondhand vehicles at source such that vehicles that fail to meet the set standards are not allowed into the country.
ZMIDP will look at expanding surtax on all vehicles including not just ones that are less than five years old.
To import a vehicle, a person has to pay customs duty of 45%, surtax of 35% (only for vehicles older than five years) and value-added tax of 15%.
The expanding of surtax will make it more expensive to import vehicles.
These measures will go into effect once the ZMIDP goes through Parliament with a target of fully banning imported secondhand vehicles by 2030.
ZMIDP found that the growth of these secondhand imported vehicles was between the periods of 2000 to 2017 when government policy reduced import duty for completely built-up units (CBU).
The reduction was to a level where they no longer countered the heavy subsidies enjoyed by neighbouring countries making it cheaper than the local motor industry resulting in a gradual dominance of secondhand imported vehicles.
ZMIDP will be capacitating the motor industry that has seen new vehicles declining, with a goal of creating a local secondhand vehicle market.
“As you can see, the policy has been said to be valid up to 2030.
I think here we are trying to buy time where we allow the economy to improve and allow assemblers to get investors and thereby retooling,” Motor Industry Association of Zimbabwe president Simplisio Shamba said.
“Once that happens, I think you remember what used to happen before where we used to have vehicles being assembled locally and we were buying those vehicles locally as those vehicles were recycled.
We can do the same thing here.”
He said once the vehicles are recycled, they could be sold at an affordable price.
Government will make all parastatals and departments buy only from the local assemblers to ensure they have a market so that the cars can be eventually recycled.
ZMIDP will pursue five strategies to grow the motor industry — importation of semi-knocked down (SKD) and completely knocked down (CKD) kits; government support; control secondhand imports; categorisation and regulation of the motor industry; the development of the motor industry value chain and clusters; and addressing the issue of variety.
Under the importation of CKD kits, the import duty will be maintained at 0%. Government will maintain that level with the exception of components which could be substituted with locally produced components that meet the specifications of the vehicle manufacturer.
“Any such component that is locally available and imported as part of a CKD kit will be subjected to the duty rates as per the general tariff schedule,” the ZMIDP stated.
For SKD kits, a five-year moratorium will be given to SKD assemblers to migrate to CKD assembly.
Government will also include education and awareness campaigns to let the public in on benefits of buying locally assembled vehicles, mobilising affordable long-term lines of credit, and export incentives for local assemblers to encourage exports.
It will implement tax incentives on locally produced vehicles and make the motor industry a special economic zone.