The 43-year-old tyre manufacturing firm, General Tyre East Africa (GTEA) will soon be revived following the Tanzania government decision to place it under the state-owned National Development Corporation, which will team up with the National Social Security Fund in the process.

According to Zitto Kabwe, the chairman of the Parastatal Organisations Accounts Committee, the government stands to lose Tsh32 billion ($20 million) if the company is declared bankrupt and will have to pay Tsh44.8 billion ($28 million) to acquire shares of Continental AG.

“It is a wise decision for the government to revive since it means job retention and creation and will also be a source of revenue for the government,” said Mr Kabwe, adding that: “It is vital for the government to revive other companies which are under-performing and those that are about to be declared bankrupt for the sake of the country’s economic future.”

Mr Kabwe also noted that Tanzania needs to have its own manufacturing industries to stimulate the economy and provide for the needs and wants of the local and international market as well.

In the early 1970s to the late 1980s, GTEA was one of the largest tyre maker in East Africa with a production capacity of about 1,000 tyres a day, supplying to the eastern and central African market.

The company was established in 1969 under a partnership between the Tanzania government and General Tyre USA before it sold its shares to Continental AG of German.

Continental AG acquired 38 per cent stake in the company in the mid 1990s leaving the government with a majority shareholding at 62 per cent.

Information shows that productivity at the factory started to decline at the end of the 1990s when imported and second-hand tyres flooded the domestic market.

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In the year 2005, the firm acquired a loan of about Tsh16 billion ($10 million) from NSSF under the guarantee of the government to revitalise the factory but it failed to do so.

The debt is said to have appreciated to $14 million due to accumulated interests.

GTEA stopped production in 2007 when Continental AG demanded yet another Tsh3.2 billion ($2 million) loan from the government, which turned down the request.

Minister for Industry and Trade, Dr Cyril Chami told The East African in Dar es Salaam that the Continental AG has apparently refused to discuss with the government on the way forward.

“The government cannot therefore let the property remain idle. We have to bring the plant back to operation,” he said.

“NSSF will acquire shares in GTEA as part of compensation for $10 million loan it advanced to the company in 2005,” said Dr Chami.

Following the order by the President Jakaya Kikwete directing NDC to seek investors to revive the plant, the Attorney-General is working on a Government Notice to announce the placement of GTEA under NDC.

Dr Chami further said that; “NSSF has already shown interest to invest in the company. NDC will discuss with NSSF to determine requirements for revamping the company.”