Dunlop gears for re-opening: Acquires new machinery and seeks $12m working capital

AUTO TYRES Zimbabwe, previously known as Dunlop Zimbabwe, is set to resume operations at the beginning of next year after acquiring modern tyre-making equipment that will enhance competitive production.

The Bulawayo-based giant factory stopped production at the end of last year citing working capital and foreign currency constraints to procure critical raw materials.

“The directors of the company have been actively sourcing funding and are close to accessing the required working capital. NSSA and local financial institutions have been approached and the plan is to re-open at the beginning of the year 2018,” director, Mr Benson Samudzimu, told Business Chronicle yesterday.

“The company has been registering ex-employees since volumes are expected to double and eventually treble to what the company had been averaging in 2016, resulting in a higher level of direct employment.”

He said the modern tyre manufacturing equipment was purchased by shareholders (value not disclosed) in July this year. Mr Samudzimu said the new equipment would widen the range of tyres that Auto Tyres will produce and hinted that commissioning of the new line would be done before the start of production. He said the firm was now seeking working capital to resume operations using a lean production model that reduces costs.

At its peak, Dunlop Zimbabwe used to employ up to 2 000 workers directly with significant impact downstream along the value chain. Zimbabwe now relies on imported tyres following the demise of local manufacturers, a trend that contributes to the high import bill.

Mr Samudzimu said the revival of Dunlop would not only reignite the Belmont Industrial area but create more job opportunities beyond the previous employment levels.

He said Government restrictions on importation of second hand tyres coupled with the general shortage of foreign currency in the country has resulted in reduced tyre imports, thereby creating a compelling case for locally produced tyres. On average Zimbabwe consumes tyres worth about $150 million, he said, all of which are presently being imported.

“Auto Tyres Zimbabwe has the capacity to produce 6 000 tons of tyres per year worth $50 million and this can be increased to its glory days of over 7 000 tons per year.

“The amount of foreign currency injection required to produce up to 5 400 tons per year is $12 million, which would save the country at least $50 million in hard currency if we produce locally,” said Mr Samudzimu.

“Additional foreign currency can be earned from exports into the region where we used to export before. There is an opportunity to rescuscitate the tyre production industry in Zimbabwe. With enough working capital the tyre factory can be re-opened and retrenched workers can be rehired.”

Dunlop used to export to countries such as Zambia and South Africa. Zoomway (Pvt) Limited, an indigenous company, acquired 51 percent shareholding in Auto Tyres Zimbabwe in April last year. Previously the company was a subsidiary of Apollo Tyres. Mr Samudzimu said while the firm was open to mutually beneficial partnerships, it also required a cocktail of fiscal support measures to ensure viable tyre production.

“The Ministries of Industry and Commerce and Finance have done a lot thus far but in addition to that assistance, there is a need for working capital and machinery.

“Furthermore, foreign currency guaranteed availability is necessary for cost effective tyre production as at the moment most companies are now using unorthodox sources of foreign currency to remain in business,” he said.

In order for production to remain viable, Mr Samudzimu said the tonnage produced has to be at a certain economic minimum level, which could not be reached without additional working capital and foreign currency to pay for raw materials.

He said it was this dilemma that resulted in unsustainable losses forcing the firm to suspend operations. In the long term, Mr Samudzimu said Dunlop would work on easing costs by procuring more energy efficient equipment.

He said the company would not be allowed to die given the demand for locally manufactured tyres.

BY Prosper Ndlovu