via Madza motor industries faces collapse – The Zimbabwe Independent May 22, 2015
WILLOWVALE Mazda Motor Industries (WMMI) faces collapse due to a combination of hostile factors that include the prevailing harsh economic environment, reduction of protective duties, as well as the removal of exchange control safeguards — all of which have left the hitherto thriving automobile company on its knees.
WMMI is no longer producing cars — it stopped in 2012 when production plunged to below 4 000 from a peak of 18 000 vehicles per year in 1997. In a wide-ranging briefing this week, Motec Holdings chairman and general manager of the Industrial Development Corporation of Zimbabwe (IDCZ) Mike Ndudzo confirmed WMMI has since suspended production of cars.
Willowvale is 60% owned by Motec Holdings, which in turn is 75% controlled by the state-owned IDCZ and 25% by Itochu of Japan. Motec also owned motoring firms Amtec, Autologistic Services and Deven Engineering, while IDCZ has been disposing of its subsidiaries.
“The new car market was mainly the corporate sector and commercial farmers, and after a period of about five years these vehicles would find their way into the local second-hand market from individuals. Around 2000 when government embarked on the land reform programme, the commercial farmers who were the bulk of our clients left the country and this caused the collapse of the car market,” Ndudzo said.
“It is at this point of informalisation of the industry that the demise of organised, completely knocked down (ckd) operations came, as the new car market contracted below the minimum economic off-take threshold for ckd operations,” he said.
“Hence WMMI first had to scale down operations and later close pending resuscitation or reinstatement of a protective policy.”
Ndudzo added: “At its peak performance in 1997 WMMI produced 18 000 cars per annum on single shift, being 9 000 each for WMMI in Harare and Quest in Mutare. The demand for new vehicles then was estimated at 25 000.”
It is not economically viable for WMMI to import material to assembly less than 4000 units. WWMI used to import ckd kits which are then assembled locally, he said.
“The ckd business requires a minimum economic off-take of at least 4 000 units per annum to justify the fixed logistical cost by the suppliers to pack and ship these for local assembly,” Ndudzo said.
“The local assemblers were protected by tariffs and non-tariff barriers in the form of exchange control authority to allocate foreign currency for imports for vehicles except for ‘no currency involved’ transactions by those with funds sources outside.”
Contrary to beliefs that WMMI has no capacity to assembly cars locally, Ndudzo said the company was in fact affected by the land reform programme and subsequently by the hyper-inflationary period which led to government dumping the local currency in favour of the United States dollar.
“After dollarisation and during the Government of National Unity, protective duties were reduced and the exchange control protection fell off and it became a free-for-all, with vendor importers and individuals able to import on internet sales with no hindrance, hence the flood of 62 000 vehicles per year and up to 2000 per month this year of mainly second hand vehicles,” he said.
Last week, motor industry sources said WMMI did not have the capacity to assemble cars locally after government, through circular number 16 of 2011, ordered that unless otherwise cleared by authorities, operational vehicles should come from local assemblers.
As a result, parastatals have been ordered to buy vehicles from WMMI or Quest Motor Corporation, supposedly in line with government’s latest economic blueprint, ZimAsset.
However, Ndudzo said WMMI would need six months before it can start assembling cars locally.
“WMMI will need to do some quick-hit refresher training for all staff recalled, procure the jigs and wait for a lead time of some six months before it can restart local assembly,” he said.
Ndudzo also said currently WMMI has a few key employees like engineers who are still working.