Zim vehicle imports chew US$3bn in 6yrs
Zimbabwe’s motor vehicle imports have gobbled nearly US$3 billion over the past six years, amid fears the trend may decimate the country’s underpressure automotive value chain.
Besides, the country also spends millions on imported vehicle components and Electric Vehicle batteries given that most of the automobiles will be due for major repairs.
In response, the Ministry of Finance, Economic Development and Investment Promotion a few years ago outlawed the importation of cars over 10 years old.
Industry and Commerce Minister, Mangaliso Ndhlovu, disclosed this while launching a state-of-the art retreading plant in Harare this week built by Tiger Wheels and Tyre, one of Zimbabwe’s leading tyre suppliers.
In 2018, Zimbabwe’s vehicle import bill stood at US$570,9 million but bulked annually tremendously since.
Zimbabwe has become a net importer of mostly used vehicles and spare parts and accessories including tyres for the automotive industry from all over the world largely Japan, South Africa and the United Kingdom.
Despite frequent bouts of economic instability and high local currency inflation, Zimbabwe has become attractive to imports as traders chase the lure of US dollars after Harare adopted a US dollar-dominated multicurrency regime in 2009.
The situation has created immense pressure on local vehicle assemblers, such as State-owned Willowvale Motor Industries in Harare, and the country’s tyre manufacturers, including Dunlop Zimbabwe.
High import volume, including many products the country has the potential to produce locally, has militated against efforts to create jobs to accommodate hundreds of thousands of graduates and schools leaving the education system each year.
In the process, the country continues to lose billions of scarce foreign currency, at a time it has limited scope for borrowing after defaulting to multilateral lenders while years of economic meltdown sees Zimbabwe rated as a high risk borrower, constraining access to cheap longterm loans.
“Just to give you some numbers from the import bill analysis, we have spent close to US$3 billion on motor vehicles and over US$370 million on tyre imports, respectively, over the past six years.
“If this trend goes unchecked, then what we will have is a completely fragmented bus and truck value chain.
“Since the closure of Dunlop, there has not been any single local tyre manufacturer in Zimbabwe.
“This is despite the continued increasing numbers of motor vehicles we see on the roads,” he said.
The manufacturing industry is one of the country’s critical sectors of the economy.
According to data released by the Zimbabwe National Statistics Agency (Zimstat) last week, the country’s Volume of Manufacturing Index (VMI) increased to 135,24 in the second quarter this year against 113,65 in the corresponding period in 2023.
Analysts say this implies that productivity in the local manufacturing sector is on a growth trajectory and has the potential to fare even better.
VMI is an economic indicator showing relative changes in the volume of output in the manufacturing sector over time, in relation to a given reference period.
Although the manufacturing sector registered improvement in productivity in the second quarter of the year, the index for the transport and transport equipment sub-sector during the period under review, plummeted by 51,52 percentage points to 54,74.
In the second quarter 2023, the transport and transport equipment sub-sector under which the automotive value chain falls, stood at 112,83.
During the period under review, the paper, printing and packaging industry sub-sector also recorded a dip in VMI to 39 down from 205,63 in the second quarter of last year.
Analysts have attributed the decrease in VMI for the above two sub-sectors to several factors including rising costs of goods and economic uncertainty, forcing consumers of products from the transport and transport equipment sub-sector as well as paper, packaging and printing industry to rethink their expenditure on products from the two sub-sectors.
The dip in VMI for the two sub-sectors is also attributable to fluctuations in the cost and availability of raw materials and thus negatively impacting the growth of both sub-sectors.
This comes as Government ministries, departments and agencies have been accused of defying the Government directive for parastatals and public institutions to procure at least 80 percent of their vehicles from local industry.
The directive, which was issued in 2015 was meant to support the local vehicle industry as domestic assemblers were on the brink of collapse due to low volumes.
In an interview, economic analyst Mercy Shumba said consumers were shunning locally assembled vehicles preferring imports due to a number of factors among them, prices of the vehicles in the domestic market are considered expensive compared to imported cars.
“To promote sales and compete with cheap imports, domestic vehicle suppliers need to consider partnering with local financial institutions to offer affordable financing to reduce the ultimate price of the vehicle on the local market.
“There is also a need for offering a range of models to cater to different market segments,” she said.
In March this year, the Government banned second-hand vehicles that are more than 10 years old from the date of manufacture, and those bringing any would be compelled to return them to the country of purchase at their own expense.
Statutory Instrument 54 of 2024 cited as Control of Goods (Import and Export) (Commerce) (Amendment) Regulations, 2024 (No. 10), deleted the old 2021 need for an import licence for older cars and replaced it with a pure ban plus a re-export requirement.
The motor industry in Zimbabwe has been in existence for over 50 years, and has historically proved to be a strategic sector in terms of meeting the motor vehicle needs of the economy, employment creation, value addition and significant contribution to GDP.
Over the past 15-26 years, however, the industry lost its dominance in supplying the local market with its automotive requirements, having been overtaken by foreign-produced vehicles, components and spare parts, according to a report by the Ministry of Industry and Commerce.
As the influx of cheap imported second-hand vehicles, components and spares flooded the market at the expense of the local assemblers and component manufacturers, the result was a complete shift from locally assembled to imported vehicles.
As a consequence, motor vehicle imports gobbled an average US$500 million per year in foreign currency during the period 2009 to 2014, mainly on second-hand vehicles. From the highest level of over 20 000 units per year in 1997 to between 5 000 and 6 000 units per year in 2009, Zimbabwe’s market for new locally manufactured vehicles shrunk significantly, whilst second-hand vehicle sales increased to over 60 000.
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