Why global carmakers are skirting Zim

Source: Why global carmakers are skirting Zim – NewsDay Zimbabwe

BY FIDELITY MHLANGA
FOR Emmanuel Masodzi, a Harare resident, driving a brand new vehicle has always been one of his dreams.

Masodzi reckons that a day will come when he will unwrap a brand new vehicle and drive comfortably with his family.

For someone who is in his mid-20s, the only cars he has so far driven are second-hand imports from United Kingdom and Japan

“It is my wish to buy a brand new car. How grateful will I be to purchase a vehicle from a local car-manufacturer. If the government could create jobs for us, I would drive a new car. But for now, I cannot afford it. It hurts me to see my agemates from other countries purchasing new cars easily,” he said.

Emmanuel’s dream can only materialise if authorities fix the problems bedevilling the country’s economy.

Experts say, for the country to have robust car-manufacturing plants, the government has to put in place efficient monetary policies that incentivise banks to offer long-term affordable loans for citizens to purchase cars of their choice.

They say there is a need for the country to ensure ease of doing business, an efficient tax regime, among other policies.

Willowvale Mazda Motor Industries (WMMI), Zimbabwe’s biggest carmaker, which used to employ more than 800 people at its peak in the 1990s, is now a pale shadow of its former self.

It is a mammoth task to revive car manufacturing plants in the country because of the general economic crisis, and sector-specific problems.

In 2017, government announced that the firm had reopened after entering into a joint venture with Beijing Automobile International Corporation. However, there has not been much production four years down the line.

Authorities have also tried in vain to support local car assembling.

Through Cabinet circular number 16 of 2011, government ordered that WMMI and Quest Motors, another carmaker based in Mutare, be the only suppliers of vehicles to parastatals, government ministries and other State enterprises.

The strategy was meant to create a market for the two vehicle assemblers.

But the directive was never followed by government officials.

Instead, authorities have continued to import top-of-the-range vehicles, spending the much-needed foreign currency on imports that they could avoid if they had taken heed of their own policy.

As part of several strategies to rebuild the automotive sector, government in 2018 unveiled the Motor Industry Development Policy, which was designed to take the motor industry to the next level by promoting local assembly and exportation of motor vehicles into the region.

The policy looked beyond the regional markets, lining up an ambitious plan to ship cars to the rest of the world.

This was expected to increase capacity utilisation of car assemblers from a level of less than 10% to full throttle.

The policy, which covers the period 2018 to 2030, is based on five strategies.

These include assembling semi-knocked down and completely knocked down kits, government support, control of second-hand imports, categorisation and regulation of the industry and the development of the motor industry value chain and cluster.

The new policy comes nearly 30 years after the demise of the last industry policy, called the Vertically Integrated Companies policy, which was terminated in the early 1990s after government embarked on the Economic Structural Adjustment Programme.

This year government moved to limit the proliferation of second-hand imports into the country by banning the importation of vehicles manufactured over 10 years ago.

Nonetheless, these actions have not attracted giant car assembling firms to set up production facilities in Zimbabwe.

Last week, car manufacturing entity, Nissan raised alarm over the proliferation of grey imports into the country saying they were scuttling prospects to set up vibrant car assembly plants.

Nissan sub-Sahara regional general manager Linda Mazimhaka told journalists at the launch of the new Nissan Navara that there were no incentives to set up a manufacturing plant in the country.

As such he implored authorities to come up with a vibrant automotive policy.

“What I will say is needed in Zimbabwe, the regulation has to be up to standard,” Mazimhaka said.

“They need to sort out grey imports because what pushes people to go and buy cars from beyond the borders is the price. So, even if we bring an assembly plant in Zimbabwe, we still have to compete with those grey importers. So it does not make any sense because the investment is so high, yet your return on investment is too little.

“Hence, the first thing that is needed is to work with government and try and reinforce on the regulation — what we call the automobile policy.

“Once that is done then we move to the second phase which is looking on the financial side of it.”

Amtec Motors managing director Lucas Taruvinga said Zimbabwe needed to take a leaf from South Africa in restricting second-hand vehicle imports.

“If you look at all the serious markets, talk of south Africa, for example, you will never bring a grey import into South Africa.

“Even if you are a returning citizen having been working in the UK, Thailand or United States of America and you are returning to South Africa, they make it so difficult for you to bring a car into South Africa so that you leave it there and buy a new car in South Africa.”

“The grey imports that are coming to Zimbabwe via South Africa come on carriers because they don’t want them on their roads. That’s how strict they are,” Taruvinga said.

The setting up of a local plant will open floodgates of opportunities for other companies in the value chain such as tyre makers, paint manufacturers, spring makers, battery makers, glass makers, windscreen makers, among others.

Economist John Robertson said car assembly plants would generate huge business for companies in the value chain.

“Prohibiting second-hand car imports would generate the right conditions for our own assembly works, plus factories that could take over production of local content such as radiators, exhaust systems, seats, batteries and shock absorbers,” Robertson said.

“The main suppliers will be happy to supply kits if we keep a steady stream of orders and pay on time.”

Economist Victor Bhoroma said the country had market affinity for popular brands like Nissan and Toyota but there were some problems that required urgent attention.

“Zimbabwe as a market has a capacity to set up a local manufacturing plant for most of these popular brands especially Nissan and Toyota. Collectively we are importing more than 50 000 second-hand cars into Zimbabwe which is worth about US$200 million every year,” Bhoroma said.

“When you look at car sales for new units probably plus or minus 4 000 units per year, which means the market for setting such a plant is there.

“However, part of the issues that we have with the local industry is the repatriation of dividends for shareholders who may want to invest in Zimbabwe.

“The issue of monetary policy inconsistency and cost of doing business locally might be expensive to produce the cars such that the retail price will be more than US$20 000 while various local consumers will be able to import a unit at US$4 000. These are some of the issues that keep investors at bay.”

Economist Takudzwa Chisango said Zimbabwe was producing costly vehicles which were out of reach of the domestic market.

“Local motor assembly industry should firstly be inward looking in terms of its market and then graduate into the export arena,” Chisango said.

“As such, competing in the export market with, inter alia, Japan and Germany-made vehicles is a tall order.

“The overall cost of doing business in Zimbabwe is very high coupled with a market riddled with volatilities.

“Resultantly, attracting investment into such an unpredictable and highly volatile market is difficult, and the corresponding policy reaction by government does not send an investment attraction signal to investors who are indispensable to ignite the local motor assembly industry,” he said.