The Motor Industry of Zimbabwe held their annual congress for 2018 in Vic Falls at the end of November with members from around the country flying in on a chartered flight, to attend three days of presentations. The latter were designed to allow members to make informed decisions, and to push the organisation’s quest to make “doing business” in Zimbabwe, easier.
Delegates arrived in the town, which surrounds one of the seven natural wonders of the world, to work and within two hours of landing, were ensconced in the convention room and being welcomed to the opening of congress by MIAZ President, Simplisio Shamba.
As facilitator on the first day, Shamba acknowledged the visiting dignitaries and invited guests, amongst whom were a delegation of South African motor industry representatives. He started proceedings by introducing the Honourable R Moyo, Minister of State for the Matabeleland North Province, who welcomed everyone to his province and wished delegates a successful congress.
The Minister of Industry & Commerce, Hon. Nqobizitha M Ndlovu (M.P.) officially opened the congress and raised expectations for the future of the local motor industry, with the country’s government commitment to the sector, and some of his ministry’s budget proposals to be submitted in the next quarter. Mininster Ndlovu presented his overview of the Motor Industry Sector, which included Zimbabwe’s Motor Industry Development Policy (MIDP) 2018 – 2030, launched in June this year, to guide and direct the growth of the sector.
In its implementation he focused on the development of the industry value chain and cluster, mobilising financial assistance to stimulate demand, procurement of vehicles from local assemblers, franchise arrangements and recapitalising the sector through investor encouragement . He said the programmes must be private sector led.
“In terms of special economic zones (SEZ’s), on application and approval, investors will be allowed to establish in SEZ’s … they will enjoy all the benefits afforded companies established in these SEZ’s such as:
0% corporate tax in the first 5 years and 15% thereafter.
Free importation of capital equipment and inputs.
0% capital gains tax.
Exemption from non-residents tax on dividends, fees and royalties.
100% ownership of companies.”
Government is working on appropriate incentives to encourage exports,” he said.
Ndlovu went on to say: “the new government is positive towards business and has a willingness to restore a normal relationship with the international community, showing respect for investor concerns by the removal of investment pediments like the indigenisation and economic empowerment regulations, as well as the establishment of the One Stop Investment Centre (ZIDA).”
The minister highlighted his 2019 budget proposals for the motor industry, which included:
Tax incentives for the creation of new jobs
Customs duty, import VAT and surtax on imported motor vehicles payable in foreign currency, with effect from 23 November 2018 (this excludes commercial vehicles).
The measure is envisaged to reduce imports of second hand cars which compete with new vehicles on the market.
He concluded saying:”It is my earnest hope that the motor industry and government, working together, can turn the economy around. We need to look seriously at our core commitments, each co-operating partner should play their part and together we can revitalize the motor industry. We hope to create an export orientated industry, with strong global and regional alliance to ensure globally competitive quality and optimal capacity utilisation. The motor industry must be co-ordinated and well positioned to ensure value addition and job creation, capitalising on improved market access with, amongst things an affordable vehicle.”
He urged delegates to look beyond the current economic challenges. With those statements Minister Ndlovu officially opened the 2018 MIAZ congress.
Next at the podium was the Economic Regulation Manager from the Zimbabwe Energy Regulatory Authority (ZERA), Learnmore Nechitoro who addressed the challenges of the electric power sector in Zimbabwe. Nechitoro outlined the relevant laws, the sector structure, generation; transmission & distribution constraints, as well as the performance of Kariba and IPP participation and requirements. He discussed the revenue collection challenges, saying the utility owed in excess of $1 Billion. In his conclusion he stated the country had enough resources to supply itself and export to the region, saying the low cost of hydro and solar power will act as catalysts in the reduction of overall electricity costs.
At the onset of her Post Budget 2019 Analysis presentation, Christina Muzerengi of Grant Thornton and Associates jovially reiterated that she was “only the messenger” regarding her detailed summary and analysis of the 2019 Zimbabwean Budget proposal.
As part of her analysis, Christina mentioned that the 2019 National Budget constituted the first macro-fiscal financial framework for implementing the Transitional Stabilisation Programme (TSP), which is an initial stepping stone towards realising Vision 2030. This is designed to guide not only the fiscal, but also the monetary and other economic policies during its subsistence.
Word from the President of Zimbabwe has been very clear “that there is no alternative to a strong, sustainable and shared growth except through expenditure cuts” and the budget is testimony to that. A shortage of forex remains a contentious issue in Zimbabwe, whereby it is illegal to trade in forex, however it is required that all taxes must be paid in forex and not bond notes.
Of concern to the overall economy in Zimbabwe is that in less than a year government had borrowed $4billion, which saw the domestic debt doubling to the current levels of $9.5billion. Wages are a major driver of government expenditures (around 90% of revenues), with 40% being allowances for senior government officials.
Certain revenue enhancing measures in the 2019 budget include, excise duty which will go up by 7 cents per litre on diesel and paraffin and 6.5 cents on petrol.
A “money transfer tax” will be introduced, which is calculated at the rate of US$0.02 on every dollar transacted for each transaction. Road traffic offenses will be moved from the Standard Scale of Fines with a maximum monetary value of $30 to levels 8 to 10, which attract a maximum fine of US$700 and imprisonment for a period not exceeding 12 months, with effect from January 1, 2019.
In conclusion, Christina mentioned that big “take home” from the 2019 budget is that the “USD is equal to bond note, but the bond note is not equal to USD”.
Buying or selling forex attracts a 10 year jail sentence, but paying duty in forex is permissible, no questions asked and finally, whilst it is the government that is undertaking the austerity measures, the impact cascades to all citizens. A reduction in government spending implies projects and programmes, which were benefiting society are stopped, while an increase in taxes naturally reduces incomes.
On these sobering notes, delegates retired for dinner and to prepare for the next day’s sessions.
Past President of MIAZ, Ian Teasdale was first up on the second day of congress, giving an insight into the automotive industry in Zimbabwe. Teasdale’s review of the history of local assembly in the industry – from the pre UDI beginnings of Zimbabwe’s auto industry to the current scenario – provided an enlightening perspective on the industry as a whole. He concluded with the thought that Zimbabwe should be seriously considering bus assembly and motor cycles as potential growth points for the industry In his opinion.
These thoughts dovetailed nicely with the presentation by His Excellency R. Masakui, the Ambassador of India. The ambassador unpacked India’s Automotive Industry (Automotive Mission Plan) AMP 2026, which envisages that the Indian Automotive Industry grow 3.5 – 4 times in value to approximately US$ 280 Billion by 2026, based on a base case with average GDP growth of 5,8% during the period.
Autoforum can provide the full details of this presentation on application and it will be covered in the Jan/Feb 2019 issue.
The medium and long-term prospects of the SA Automotive Industry were presented by Louis Bles, industry consultant to Autoforum, based on data supplied by Naamsa, Naacam, RMI and the AIEC.
Bles provided interesting analogy’s between the two countries’ auto industries and detailed the programmes in place in SA that help to both protect and grow our local industry, whilst identifying growth areas and targets within the region and internationally.
After a refreshment break, Autoforum’s publisher presented a combined paper on the importance of SA’s export markets to sustainable growth in our industry.
Thanks to the kind assistance of Dr. Norman Lamprecht from AIEC, the presenter was able to incorporate detailed data on the official export statistics relating to both the region and Zimbabwe in particular. Delegates were urged to think laterally in terms of market potential and look to their neighbours for growth in the industry. All the delegates received copies of both the AIEC Export manual in hard and soft copy, as well as the Sept/Oct issue of Autoforum.
Automechanika Jhb Show Director, Tracy Gounden presented the stats from the 2017 show and highlighted some of the compelling reasons for attending the 2019 exhibition, which included skills development zones, experiential areas, interactive workshops, activation zones and increased sector representation.
Gounden expanded on the African Road Show schedule to seven countries, confirming Zimbabwe’s dates as the 18th and 19th June 2019.
With a depiction of the 2019 show layout, she enticed a number of the delegates to attend next year’s show.
Lunch was followed by Dr. John Pedzapasi, Director in the Ministry of Transport and Infrastructural Development, responding to specific questions from the association and its members, a number of which focused on the state of the national and local roads in Zimbabwe and provisions for their rehabilitation.
Pedzapasi announced that $200 million had been set aside for this and that the 2019 budget made allowance for the continuation of these projects.
He said that the Beit Bridge – Harare – Chirundu highway rehabilitation would likely be an internal project, undertaken by the ministry.
An unscheduled brief by Raymond Manyika from the Motor Industry Pension Fund reminded members of the mortgage scheme available to members, which had been facilitated by the pension fund with the banks. Manyika detailed the success of the scheme and urged members to utilise this facility when looking to purchase their houses.
Raymond was followed by Dr. Nathan Chikono, General Manager of Econet Insurance, who discussed challenges faced by the insurance companies with the difficulties encountered in sourcing replacement parts and panels, and with the current restrictions in terms of available foreign currency. He said the scarcity of replacement parts was forcing some panel beaters to source used parts in order to keep vehicles on the road. Insurance companies were forced to write off some vehicles due to the cost of sourcing new aftermarket parts and panels, which often totalled more than the insured value. Autoforum raised the question of safety critical parts and their fitment – used parts being fitted opens up question of legal recourse in the event of an accident or fatality. Chikono responded that the insurance companies would probably look at used body panels only.
Focus was then directed to the Petroleum Industry with Ronand Bescoe, MD Total Zimbabwe, addressing the major challenges in this sector. In terms of supply, the oil companies facing hard currency shortages added to limited credit facilities, have led to the current situation with no buffer in the system, which is causing panic buying and in turn forcing an increase in the market price.
The fluctuating ethanol blending ratio in conjunction with challenging logistics and additional costs, combined with an increase in licensed fuel importers (40 in 2016 to 57 in 2017) are some of the factors affecting the suppliers. Bescoe commented on the commercial challenges facing the sector, saying: “This is a capital intensive industry. Maintenance costs are not sustainable with high inflation and the requirement to import spare parts. There is a need to review the wholesale and dealer margins. Dealers are currently trying to operate on a margin of 6 cents/litre. “
On the regulatory front, there has been an increase of licensed retail sites from 229 in 2012 to 540 at the end of 2017and a change in specifications from RON95 to RON 93 are expected to drive costs higher in the current market. He reiterated his comment that the hard currency shortage is exacerbated by increasing market price and that the same US$ brings far less molecules into the retail pump.
Another of the South African contingent, Sbonelo Mbatha, a multi fuel retail franchisee and co-founder of PetroCONNECT SA, responded with a presentation on the challenges faced by the SA Petroleum Industry. Mbatha addressed the current outlook of the fuel retail sector in SA today and differentiated between the categories of service stations. He spoke passionately on the subject of goodwill or business value and transformation in the sector. Mbatha described the differences between high and low-density sites, equating the local stations of Mbare and Borrowdale and concluded that fuel retailers will need to join forces for a better margin.
The final day of congress facilitated by MIAZ immediate past president, Luckson Gwara, opened with a master class presentation on the auto technician’s toolbox in the 21st century from Wayne McLean of Highveld Garage Equipment, based in Pretoria. McLean focused on modern technology and the equipment and training required to cope with it. He explained to the delegates how a lot of the equipment should not only be charged out on the flat rates based on time, which modern equipment reduces through efficiency, but also the expertise required in analysis, which could increase the profitability of the shop.
Delegates were then introduced to Andre Froneman of Hurricane Equipment, who captured their attention with some of the emerging technologies in collision repair. Froneman’s presentation resulted in his being asked to provide demonstrations on plastic repair and quick dent repair, after the official close of the congress, using some of the equipment he brought to the congress. Froneman was inundated with requests to purchase this equipment, but due to the import restrictions imposed by customs, he had to unfortunately decline these offers with a promise to provide quotes to the interested parties.
The collision repair theme continued with an enlightening presentation on auto refinish technologies and trends, from Paul Rathbone of BASF Coatings Services. He covered the various solvent and water-borne paint technologies and continued into Basf’s Reflow technology in their clear coats and UV curing. Rathbone introduced the company’s Ratio concept Plus – a professional consultancy offer to increase efficiency and develop new and profitable business areas. Rathbone concluded with a vision of the body shop of the future.
The final presenter was Brains Muchemwa, MD of Outlink Capital, who titled his presentation “Zimbabwe – Economic outlook 2019”. He raised the questions of the bond note and its cousins – RTGS, whether it would be phased out early in 2019 and if adopting the Rand is the best way forward? After analysing the economic data, Muchemwa summarised by stating that Zimbabwe was officially in moderate-to high inflation territory and that the country required policy consistency, and a return to normalcy with the Reserve Bank of Zimbabwe’s role in the economy critical. He said there was a growing domestic confidence, but said that businesses need to preserve balance sheets.
MIAZ President, Simplisio Shamba, thanked attendees and guests for contributing to another successful event, officially closed the congress and invited delegates to explore the Falls, prior to an evening social diner and their departure early the next morning.
Autoforum would like to thank MIAZ and their Executive Director Ms Masoka for an excellent congress, with lively debate from the delegates and informative speakers.
The congress was professionally conducted and we all left with an enlightened view of the motor industry in Zimbabwe.
