Forex crisis hits WMI car production
WILLOVALE Motor Industries, which last year partnered Beijing Automobile International Corporation (BAIC) to assemble vehicles, is failing to meet its initial production targets due to shortage of foreign currency.
In terms of the arrangement with BAIC, WMI targeted initial sales volume of 490 for the period to December 2017, which was expected to rise to 940 units in 2018. The deal would see it assemble 3 000 units by third year. While the WMI has started with pickup truck assembling, plans in the future entail production of other types of vehicles among them sedans and SUVs.
The deal with the Chinese saw the formation of Beiqi Zimbabwe, a joint venture between China’s fifth largest car manufacturer, BAIC, WMI and Astol Motors. However, critical shortage of hard currency threatens the initiative. Industrial Development Corporation, majority shareholder in WMI, chairman Hebert Nkala told The Herald Business in an interview yesterday that the noble project was being hampered by lack of foreign currency.
“BAIC have been a very good partner, they have a production plant that would put Willovale back as a major producer of vehicles and employer of people. Car assembly is very labour intensive and we are very excited about that.
“But we are not meeting the production targets that we had set out because of unavailability of nostro funding. So, we are discussing with the Governor of the Reserve Bank and we hope that as soon as that nostro funding is unlocked, we will get back to quite some serious production,” he said.
Acute shortage of foreign currency in Zimbabwe has seen the central bank allocating hard currency in terms of a priority list for equitable distribution and to ensure that critical and essential needs can also access it.
Mr Nkala could however not say what amount the company required in terms of hard currency, referring the question to BAIC managing director Ben Kumalo. Mr Kumalo further referred the question to MWI managing director Dawson Mareya who did not pick calls to his mobile phone.
WMI is not the only local firm trapped in the quagmire of suffocating forex crisis, but the majority of companies in Zimbabwe. Zimbabwe is facing serious shortage of foreign currency due to low investment, negligible foreign direct investment and limited access to external lines of credit.
While little is realised from exports, investments and other hard currency sources into a country battered by nearly two decades of economic crisis, some of the country’s foreign currency is also illegally spirited out. It was expected the vehicle assembly deal with BAIC would create about 5 000 jobs and generate millions in taxes. About $1,3 million in Value Added Tax was expected to be generated from March to December, 2017. WMI will be assembling pickup trucks known as BAIC Great Tiger.
For a start, WMI will assembly the vehicles from semi knocked down kits and this would later be upgraded to assembling of completely knocked down kits. Prior to the deal with BAIC, WMI had be closed for five years. The WMI, had not been producing after it stopped production in 2012 when capacity plunged to below 4 000 units from a peak of 18 000 vehicles per year in 1997.
The company has taken a have battering from nearly two decades of economic meltdown of Zimbabwe’s economy, which has reduced demand and eroded disposable incomes. Further, WMI has also not been helped by State institutions, departments and ministries violation of Government directives to procure all vehicles from the State vehicle assembler.
An average of 7 000 new vehicles are imported into Zimbabwe each year with only 10 percent of these produced in local assembly plants, mainly WMMI and Quest, with the balance imported, mainly from South Africa. Second-hand vehicles imports top 53 000 annually from across the globe, most of them life expired and not compliant with global emission standards.