ZIMBABWE Stock Exchange-listed manufacturing concern National Tyre Services (NTS) says limited access to foreign exchange from the official market has resulted in a sharp drop in sales of new tyres as the economy battles an influx of imports.
BERNARD MPOFU
The company, which traditionally manufactured tyres locally, is now importing due to an influx of cheaper products from mercantilist states like China, highlighting the country’s high operating overheads.
While some are lobbying for protectionist measures to save local industry from collapse, critics however argue that some local firms are now beyond salvation due to their outdated business models and use of antiquated machinery which is not cost effective.
“Overall new tyre sales volumes for the first quarter declined by 26% compared to Q1 2021/22 [first quarter 2021/22], due to foreign inadequacies affecting importation of tyres from China and India, the company said in a said in a trading update for the period ending June 31.
“Services volumes for Q1 2022/23 decreased by 18% compared to the same period last year, as power outages affected branch operations during the period under review.”
Despite recording a decline in new tyre sales, retreading volumes increased by 6% when compared to the same period last year and sales volumes for premium tyres grew by 36% during the period under review.
Prior to 22 February 2019, the Zimbabwean economy was characterised by a multi-tiered pricing model. Under the model, a single product had different prices depending on the mode of payment, whether United States dollar, Real Time Gross Settlement (RTGS), mobile money or bond notes.
The multi-tiered pricing model was evidence of the emergence of a new currency, the Zimbabwe dollar (ZWL), which was being used alongside these modes of payment. The new currency, the ZWL, was then formally acknowledged through the issue of Statutory Instrument 33 of 2019 (SI 33) “Presidential Powers (Temporary Measures) Amendment of Reserve Bank of Zimbabwe Act and Real Time Gross Settlement Electronic Dollars (RTGS) Regulations, 2019.
The statutory instrument prescribed parity between the US dollar and the new local currency (the ZWL) up to the effective date of 22 February 2019.
The new functional currency (ZWL) was effective from 22 February 2019, instead of the fourth quarter of 2018 as evidenced by the separation of the bank accounts into foreign currency accounts and non-foreign currency accounts.
