Advertisement

Tanzania plans to revive tyre maker

Saturday January 24 2015
Tyre

Solideal Loadstar tyre factory in Sri Lanka. The Arusha-based manufacturing plant started production of tyres in 1971. PHOTO | FILE |

Tanzania is in talks with six multinational companies over plans for a joint venture to revive General Tyre East Africa, the giant tyre manufacturing plant in Arusha.

The state-run National Development Corporation (NDC) said that three Asian corporations and another three from America, Europe and Africa have approached the government, seeking a partnership to revive General Tyre, which used to supply tyres throughout East and Central Africa.

“We are finalising our due diligence and talks to end a troubled partnership with Continental AG of Germany in a bid to transfer the General Tyre assets to NDC. After that, we will negotiate with prospective companies,” NDC’s acting director of heavy industry Ramson Mwilangali told The EastAfrican.

Continental AG, with 26 per cent shares, has since 2006 been embroiled in a dispute with the government over a poor supply chain and low production levels, which resulted in the closure of the company in 2009, locking out about 400 workers.

In July 2008, the firm petitioned the Tanzania government, which owns 74 per cent of General Tyre, for a renewal of the contract. But reports said it failed to outline a concrete business plan on how to make General Tyre profitable.

READ: Tanzania to inject $20m to revive General Tyre

Advertisement

Continental AG was asked to explain how General Tyre’s debts amounting to $20 million by December 2008 would be settled. But Continental AG demanded to be paid an outstanding debt of $3.321 million.

“If all goes well, General Tyre should resume operations in early 2016,” said Mr Mwilangila.

Records show that before its closure in 2009, the factory’s capacity was 320,000 tyres per annum. The firm is expected to employ nearly 400 workers and produce 1,000 quality, heavy-duty tyres a day. This means that, without interruptions, the plant could produce 250,000 tyres a year, earning the country $63 million if an average price per tyre is $250.

General Tyre will first supply tyres for all government vehicles before it markets to the private sector in the country and in East Africa.

Tanzania, East Africa’s second largest economy, has seen vehicle imports increase by nearly 70 per cent in a single year. The country had registered 93,009 cars by the end of 2011, compared with 55,144 in 2010.

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.

The revival of General Tyre offers a much-needed alternative 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.

Many African countries prefer importing low-priced Chinese tyres rather than the expensive European and American brands.

Gasper Mpehongwa, a lecturer at Tumaini University, said the revival of General Tyre will create competition for Sameer Africa Ltd — the only East African tyre manufacturer — leading to better quality at lower prices. Former General Tyre sales manager Phillip Mweta said the EAC tyre market is huge and even having two local manufacturers will not satisfy it.

“General Tyre will be producing 250,000 tyres a year, mainly for heavy duty vehicles, but the estimated demand for heavy duty tyres in Tanzania alone can hit two million tyres per year,” said Mr Mweta.

In the four years since General Tyre closed shop, Sameer Africa 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.

READ: Tyre firm GTEA to be revived under state-owned corporation

Advertisement