General tyre revival faces challenges, experts caution

25Sep 2016
Aisia Rweyemamu
Guardian On Sunday
General tyre revival faces challenges, experts caution

REVIVAL of the Arusha-based General Tyre East Africa (GTEA) is on the spotlight following the closure of Sameer Group, a tyre production firm based in Kenya.

The Director of Policy and Advocacy of the Confederation of Tanzania Industries (CTI), Hussein Kamote, said this week that for GTEA to compete in the region, the government needs to come up with proper strategies on cheap tyre imports.

Kamote said the government needs to protect the local market through introduction of taxes on tyre imports if the factory is to be revived and survive.

Sameer Group is to close shop in Kenya by end of this month due to high production costs..
Kenya’s sole tyre manufacturer set plans to begin offshore production of its tyres by manufacturers based in China. The move will see the company stop manufacturing its Yana brand tyres and allied products at the Sameer Africa factory in Nairobi.

Since 2006, Sameer Africa Limited has seen a systematic reduction in its market share witnessing a decline from a high of 62 per cent in 2005, to only 25 per cent today.

Apart from cheap and subsidized imports, the company also cites the 2005 reduction in customs duties under the EAC Common External Tariff (CET), high cost of electricity and under-utilization of factory capacity to have also impacted the business adversely.

The decision shall therefore be reflected on the company’s earnings for the current financial year which are expected to be lower by more than 25 per cent of last year’s earnings during the same period. Despite the shift in operations, Sameer Africa says that there shall be no impact on customers, their end-users and the supply of the Yana brand to the East African market.

Kamote, however, noted that the move to protect the local tyre manufacturer would need the support of all member states of the East Africa Community (EAC), including convincing the World Trade Organization (WTO), of which Tanzania is a member.

“Reducing production costs while at the same time maintaining tyre quality is very crucial as it will easily market the product,” he said.

He also cautioned the government to learn from the closure of Sameer Group early this month, saying that that would be the best remedy for challenges in the industry.

Plans to revive GTEA may not take effect soon despite government directives to divert funds from the US$2.1 million Kibaha anti-mosquito pesticide factory to revamp the tyre factory.

NDC Corporate Affairs Manager, Abel Ngapemba, told The Guardian that the general tyre project is faced with a myriad challenges that stymie smooth operations.

“We are currently conducting a study to establish the needed technology for reviving the factory and determine investment costs,” he said.

University of Dar es Salaam in collaboration with the Tanzania Industrial Research Development Organization (TIRDO) has already been given the task to conduct a study that will pave way for the factory investment.

Ngapemba said NDC cannot give out a date for the start of operations of the factory.
Among other things, NDC has been commissioned to establish the technology needed for general tyre company, the cost of investment and production commencement timeframe.

Ngapemba also said that any investor to partner with the corporation will be required to conduct a feasibility study before embarking on investment.

The general manager for Bin Slum tyres Co. ltd, a dealer in tyre imports said the revival of general would have little impact on their his business as one factory can never carter for the tyre demand in the region.

General Tyre East Africa company was closed down in 2009 after operating on a loss of over $20m and efforts to revive it in 2008 proved futile after it was discovered that at least $28.984m would be needed to be injected in the firm.

The amount was to carter for the firm’s machinery refurbishment, factory operations and management, with other funds being directed to settle debts from banks.

According to various reports, with the old machinery, General Tyre East Africa is capable of producing at least 250,000 tyres per year, earning the country $63m if an average price per tyre is pegged at $250. Before its closure in 2009, GTEA had the capacity to produce 320,000 tyres annually.