18 May 2014

Zimbabwe: IDC Moves to Recapitalise Willowvale Mazda

THE Industrial Development Corporation (IDC) plans to inject US$4 million into Willowvale Mazda Motor Industries (WMMI) as it moves to recapitalise the struggling car assembler.

IDC general manager Mike Ndudzo said last week that the money to recapitalise WMMI would be raised from the disposal of IDC's two units -- Deven Engineering and Amtec Private Limited.

Ndudzo said WMMI required a supportive completely knocked down policy. He said the absence of such a policy would stymie WMMI's revival.

"It's a dynamic thing, but if people continue to support the coming in of second-hand car imports, such that there is no market for Willowvale, we will be out of that business."

Under the completely knocked down system, vehicles are imported in parts and not as an assembled unit.

These kinds of units generate employment in the target country as more machinery and manpower investment is needed to assemble the components to make vehicles.

Ndudzo said IDC would raise a total of US$8 million from the sale of the two entities with Deven raising US$3,5 million while Amtec would raise US $4,5 million.

"Between the land and property for Deven, the valuation was US$3,5 million and with Amtec, we are talking about US$4,5 million. We have to pay our debts and will end up with half of the amount," Ndudzo said.

WMMI has been struggling to stay afloat as their cars are beyond the reach of many at a time second-hand vehicles, mainly from Japan, have flooded the market.

The company recently retrenched 101 employees.

IDC argues that countervailing duties remained suspended for completely built unit vehicle imports, leaving the field uneven against South African assemblers who enjoy 40% rebate on the exports to Zimbabwe. This has rendered South African assembled vehicles cheaper in Zimbabwe than in South Africa.

"The world over, vehicle assembly which drives the motor componentry business is utilised as an industrialisation strategy, and is therefore buttressed by government policy and fiscal support," IDC said in its latest report.

Zimbabwe has had in place a motor industry policy vacuum since the collapse of the Vertically Integrated Company policy at the inception of the Economic Structural Adjustment Programme in 1991.

IDC said its requests to government for a completely knocked down policy has not received any response.

"This has demoralised existing international partners, while potential new investors approached for contract assembly point out this deficiency as a hindrance to new investment in the sector," IDC said.

"Even the Presidential directive regarding procurement of locally assembled vehicles by public institutions was being circumvented through specification of vehicle models in tenders and condition of employment service argument designed to exclude locally assembled vehicles."

WMMI is a joint venture company between the government of Zimbabwe, through IDC, and two Japanese companies -- Mazda Motor Corporation (the supplier of vehicle kits) and Itochu Corporation (a trading partner).

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