Buses, trucks producers in quandary

Bus and Truck industry has slammed Government over “inconsistent policies” that players argue continue to bleed the sector and downstream value chains as imported buses, trucks and coaches flood the market.

The sector has fallen victim to the influx mainly of imported buses, a position that has triggered inadequate off-take of locally manufactured buses. They argued the Government owned enterprises and local bus operators were major culprits whose insatiable appetite for foreign made buses has seen the country exporting millions of dollars.

It is common knowledge that Government is the biggest consumer in any economic setup. However, there are arguments that the State has been neglecting the local content strategy (with regards to the bus and truck industry) which advocates for the consumption of locally sourced resources.

In 2022 the Government introduced Statutory Instrument 66 of 2022 which gave Zupco a green light to import over 500 buses duty-free, while S. I 138 of 2022 allowed individual companies to import 20 buses.

Resultantly it has fomented unfair competition from foreign suppliers who continue to take advantage of the open market that has evidently emerged in Zimbabwe.

This is a show of policy inconsistency which mainly negates the local content strategy that advocates for enhanced consumption of native resources by companies to stimulate industrial activity and employment creation.

An inefficient bus industry has lethal effects that include loss of employment along diverse downstream industries including the iron and steel industry, engineering companies, and a long list of firms that feed into the sector.

On the other hand, a vibrant bus and truck manufacturing industry benefits upstream industries that provide inputs such as bolts, batteries, steel sheets, tyres, upholstery, paint, and carpet manufacturers among others.

Main players in the sector include Deven Engineering, Amalgamated Bus Industries, Willowvale Motor Industries, and AVM which are all situated in Harare, and Quest Motor Corporation in Mutare.

All have been severely affected by the influx of these heavy-duty vehicles despite their excess capacity.

Quest Motors is the hardest hit as local dealers and Government departments continue to import similar models of buses and trucks that the company produces locally.

One of the players, AVM Africa highlighted that it intends to reduce import bill on buses and delivery trucks by 44 percent by 2025 and increase the number of people directly employed in the production of buses and trucks from less than 50 in 2020 to over 4500 by 2025.

AVM buses have 65 percent component of locally sourced raw materials and 35 percent of imported components which include Completely Knocked Down (CKD) and Semi Knocked Down (SKD) assembly kits.

The rural and urban passenger transport solution provider said it intends to increase the number of locally produced buses by 2025.

While giving the sector appraisal at the first-quarter value chains review workshop for 2023, AVM Africa managing director, Jacob Kupa, implored the Government to formulate a deliberate policy in support of local assemblers of buses and trucks.

“We have been seeing a lot of policy inconsistencies on part of the Government where Statutory Instruments have been put in place to import buses but at the same time, we are supposed to manufacture buses, who then will we be making them for? It is as good as saying you must close shop,” said Kupa.

He said that the business was suffering from a lack of funding particularly long-term funding for the manufacture of buses.

Lack of orders from locals was hampering the funding process.

“We have been facing constraints in the sector which include a lack of affordable long-term funding, to manufacture buses but we need orders.

“Banks say you want to manufacture a bus for Zupco, we say yes and then they finance. In the absence of that we are stuck, even the value chain from the steel industry going down also need this, to support the bus manufacturing industry,” he said.

Like any other business in the country, the business is suffering from erratic power supply citing that current operations at the plant were being powered 60 percent by generators which is a costly exercise.

He said access to foreign currency to import kits was also a challenge adding the Reserve Bank of Zimbabwe (RBZ) needed to expedite the allocation process.

Weighing in, Sylocious Chaturuka, an Industrial Economist and Engineering Iron and Steel Association of Zimbabwe representative, said Government should live up to its word and promote local content strategy.

“We know that Government is the biggest consumer in any economy but the Government itself is not supporting its own local industries and this is where we are actually falling short. Government should have a procurement policy that reserves a certain quota for local suppliers so that we promote ocal production not to import 100 percent.

“We do have companies that are producing iron, the boards, and sheets that are used in bus making but you are importing the whole bus. What we are you saying to the local industry. We find ourselves also importing whole components of tractors but we have other components which can be produced locally.

Why not import the lacking components and allow other producers to produce locally so that we also promote local industry,” Chaturuka said.

However, participants at the event implored the bus maker to improve the shapes of their buses and make them modern.

In response economic analyst, Victor Bhoroma, indicated that the quality of a product could only be improved through more orders, for them to import and upgrade necessary technologies and that required more capital.

“Look at the first Huawei phones, they were not good phones but look at what they have now, locally if you look at the G Tide back then and the GTel that we have today, it is now a good phone because it is a function of capital and investment. Those countries that export quality to Zimbabwe were once where our bus and truck industry is today and there was a deliberate policy on part of their governments to improve the quality,” said Bhoroma.

According to the sector, estimated annual production with current equipment stands at 240 units per year but production can be increased by 200 percent with assembly line upgrades and working additional shifts.-ebusinessweekly