14 November 2009
Bulawayo — The country's biggest tyre manufacturer, Dunlop Tyres, has shelved a toll manufacturing agreement with South African companies that saved it from collapse in 2006 when its operations were deflated by the country's rapid economic decline. A toll manufacturing arrangement is one under which foreign firms provide raw materials and finances so that local companies manufacture products on their behalf.
Dunlop entered into a toll manufacturing deal with Apollo Tyres of South Africa among other companies in the neighbouring country at a time when lack of foreign currency to purchase raw materials threatened the firm's survival.
Kennedy Mandevani, the Dunlop managing director, told Standardbusiness on Thursday that the manufacturing firm ended the toll manufacturing agreement as the company "now had sufficient funds to import raw materials on its own and can sustain its operations".
"We have converted from toll manufacturing to standard imports," he said.
"Instead of them supplying us with raw materials to manufacture tyres for them at a low cost, we are now sourcing our own raw materials and manufacturing tyres for them with a higher mark-up."
Mandevani said credit lines the company secured from South Africa had seen the company's operational capacity increasing to about 60% from 30% in February when the country's unity government was formed.
"In terms of production, in February we used to hover around five tonnes a day but we are now between 10 and 15 tonnes," he added.
By that time the company had resorted to three-day shifts a week due to a slide in production output.
The company had also sent some workers on forced leave as shortages of raw materials weighed down operations of the manufacturing firm.
The development hit hard various arms of government such as the Zimbabwe National Army, Zimbabwe Republic Police as well as the Central Mechanical and Equipment Department, which had placed huge orders of tyres from Dunlop.
Dunlop is one of the many local companies that entered into toll manufacturing deals with foreign companies when the sector was weighed down by a myriad of problems ranging from shortages of raw materials to a foreign currency squeeze.
Despite efforts by government to revive struggling companies through the Distressed Companies Fund the impact was minimal, forcing many to enter into toll manufacturing.
BY NQOBANI NDLOVU
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