Giant General Tyres EA Ltd Revival in the Offing
By ADAM
IHUCHA -- Six
multinational companies have showed interests to enter into joint
venture with Tanzania in a bid to revive a once giant tyre manufacturing plant
in the East and Central African region.
Fresh details from
the state-run National Development Corporation (NDC) show that three Asian
corporations, one each from America, Europe and Africa had approached Tanzania,
seeking the partnership deal to breathe life into the General Tyre factory in
Arusha (GTEA).
Though couldn’t share
the names, NDC's Acting Director Heavy Industry, Ramson Mwilangali only
says that there were major firms from India, Malaysia and China as well as one
each from America, Europe and South Africa interested to bring capital and
technology into GTEA.
“We are finalizing
our due diligence and talks to end a troubled partnership with
the Continental AG of Germany in a bid to transfer the GTEA assets to
NDC. After that we will embark on negotiating with the prospective
companies” Mr Mwilangali explains.
Continental AG of Germany, with 26 per cent shares in the once giant
tyremaker in East and Central Africa, has since 2006 been feuding with the
state.
The stand-off, partly due to a poor supply chain and production level,
resulted in the indefinite closure of GTEA in 2009, locking out nearly 400
helpless workers.
In July 2008, the firm engaged the Tanzania government, which owns
74 per cent of GTEA, for renewal of the contract. But reports say it failed to
outline a concrete business plan on how to make GTEA profitable.
Investigations have revealed that Continental AG was to explain in
detail how General Tyre’s debts amounting to $20 million by December 2008 would
be settled.
Instead of presenting ideas on this, Continental AG demanded to be paid
an outstanding debt of $3.321 million. But the Tanzania government flatly
refused, saying the factory was supposed to settle the debts.
“If all goes well, we are ought to sort out all the technicalities
within this year. Idea is to see GTEA start operating by early 2016” Mr
Mwilangila told a visiting Deputy Minister for Industry, Trade
Due Diligence
According to the ongoing due diligence several machines of the GTEA are
still in good shape and can produce at least 250,000 tyres per year.
Available records show that before its closure in 2009, GTEA’s capacity
was to produce 320,000 tyres annually.
The state is preparing to pump in over $20 million to breathe life into
the defunct GTEA, whose production lines stalled in 2009 due to, among other
factors, importation of cheap tyres.
Industry and Trade Minister Dr Abdallah Kigoda said in an earlier interview that private investors were also putting in money to make the firm operational by mid-2013, to cater for the growing demand for quality tyres in the country and beyond.
Industry and Trade Minister Dr Abdallah Kigoda said in an earlier interview that private investors were also putting in money to make the firm operational by mid-2013, to cater for the growing demand for quality tyres in the country and beyond.
The firm is expected to employ nearly 400 workers and produce 1,000
quality and heavy-duty tyres a day. This means that, without interruptions, the
plant could be producing 250,000 tyres a year, earning the country $63 million
if an average price per tyre is taken as $250.
General Tyre, the only tyre plant in the country, will start off by supplying tyres for all government vehicles before it enters the private sector market in the country and region.
Tanzania, East Africa’s second largest economy, has seen vehicles imports rise by nearly 70 per cent in a single year, reflecting an emerging middle class produced by an improved economy and greater social welfare.
The country had registered 93,009 cars of different types by the end of 2011, compared with 55,144 in 2010. The official government data, which does not include government, police, army and donor funded vehicles, shows that 67 per cent of registered vehicles were light passenger vehicles with a carrying capacity of less than 12 passengers.
Chinese tyres
The revival of General Tyre offers a quick fix, not only for the country, but also for East Africa in general, which imports the bulk of its tyres from China, Japan, India and Dubai. The cheap imports have been blamed for the increase in road accidents.
General Tyre, the only tyre plant in the country, will start off by supplying tyres for all government vehicles before it enters the private sector market in the country and region.
Tanzania, East Africa’s second largest economy, has seen vehicles imports rise by nearly 70 per cent in a single year, reflecting an emerging middle class produced by an improved economy and greater social welfare.
The country had registered 93,009 cars of different types by the end of 2011, compared with 55,144 in 2010. The official government data, which does not include government, police, army and donor funded vehicles, shows that 67 per cent of registered vehicles were light passenger vehicles with a carrying capacity of less than 12 passengers.
Chinese tyres
The revival of General Tyre offers a quick fix, not only for the country, but also for East Africa in general, which imports the bulk of its tyres from China, Japan, India and Dubai. The cheap imports have been blamed for the increase in road accidents.
For instance, in 3013 there were 23,842 road accidents causing 4,002
deaths in the country, an increase of 1.1 per cent from the year before,
according to the head of Traffic Division, Mr Mohammed Mpinga.
In 2012, there were 23,578 accidents resulting in 3,969 deaths, whereby
Dar es Salaam led by having 12,983 accidents representing 54 per cent of the
total national figure.
According to the police, motorcycles were the leading causes of road
accidents as motorbikes caused 1,098 accidents last year alone representing
18.1 per cent of the total number of accidents.
Police reports blame most of these road accidents on reckless driving
and tyre bursts.
Chinese tyres are gaining popularity in several African markets. Many African countries are price-sensitive markets and prefer to import low-priced Chinese tyres rather than the expensive European and American brands.
As a result, China has emerged as a leading exporter of tyres to African countries like Tanzania.
Analysts say most illegally imported tyres have a quality problem emanating from storage; some are poorly stored in godowns in hot places like Dubai for months, which seriously compromise quality.
Dr Gasper Mpehongwa, a lecturer at Tumaini University, said the revival of General Tyre will pose competition for the only East African tyre manufacturer, Sameer Africa Ltd, leading to improvements in quality and lower prices.
“General Tyre will make tyres that can withstand our poor roads,” Dr Mpehongwa explained.
Former General Tyre sales manager Phillip Mweta said the EAC tyre market is so huge that even having two local manufacturers will not satisfy it.
“General Tyre would be producing only 250,000 tyres a year, mainly for heavy duty vehicles, but the rough estimated demand for heavy duty tyres in Tanzania alone can hit two million tyres per year,” Mr Mweta explained.
In the four years since General Tyre closed shop, Sameer African has dominated the EA market with its Yana and Firestone brands.
General Tyre, which was once the largest industrial plant in the region, started production of tyres in 1971. At its peak it was making 1,200 tyres a day.
In the late 1990s and mid 2000s, the state-owned plant changed ownership several times with the divestiture from public corporations by the government.
Analysts are however sceptical that it can bounce back to its production levels of the 1970s and 1980s, citing changes in technology.
Chinese tyres are gaining popularity in several African markets. Many African countries are price-sensitive markets and prefer to import low-priced Chinese tyres rather than the expensive European and American brands.
As a result, China has emerged as a leading exporter of tyres to African countries like Tanzania.
Analysts say most illegally imported tyres have a quality problem emanating from storage; some are poorly stored in godowns in hot places like Dubai for months, which seriously compromise quality.
Dr Gasper Mpehongwa, a lecturer at Tumaini University, said the revival of General Tyre will pose competition for the only East African tyre manufacturer, Sameer Africa Ltd, leading to improvements in quality and lower prices.
“General Tyre will make tyres that can withstand our poor roads,” Dr Mpehongwa explained.
Former General Tyre sales manager Phillip Mweta said the EAC tyre market is so huge that even having two local manufacturers will not satisfy it.
“General Tyre would be producing only 250,000 tyres a year, mainly for heavy duty vehicles, but the rough estimated demand for heavy duty tyres in Tanzania alone can hit two million tyres per year,” Mr Mweta explained.
In the four years since General Tyre closed shop, Sameer African has dominated the EA market with its Yana and Firestone brands.
General Tyre, which was once the largest industrial plant in the region, started production of tyres in 1971. At its peak it was making 1,200 tyres a day.
In the late 1990s and mid 2000s, the state-owned plant changed ownership several times with the divestiture from public corporations by the government.
Analysts are however sceptical that it can bounce back to its production levels of the 1970s and 1980s, citing changes in technology.
They said the machineries were not only outdated but the factory was
still using the old tyre manufacturing technologies which has failed to catch
up with changing vehicle designs.
They accused the government for having failed to 'protect' the factory, which they said produced good quality tyres in the region, from unfair competition with cheap and sub-standard imported tyres.
They accused the government for having failed to 'protect' the factory, which they said produced good quality tyres in the region, from unfair competition with cheap and sub-standard imported tyres.
