NAIROBI, Kenya, Jun 7 – Sameer Africa is set to offshore its tyre making business to China and India as it plans to shut down its Mombasa Road Plant.
The firm’s Managing Director Allan Walmsley says it has been difficult to compete in the market with the influx of cheaper tyre imports.
“It’s not a matter of if, it’s a matter of when. It takes time, we need to make sure we cover the entire basis in the interest of the firm’s shareholders,” Walmsley said on Tuesday.
The firm which is the only tyre maker in the East African region made a pre-tax profit of Sh6 million in 2015 from a pre-tax loss of Sh69 million.
Walmsley reiterated that subsidized products were eroding Sameer’s bottom line, an issue that the regional economic bloc needs to address to protect local players.
“Kenya and other African markets are yet to implement initiatives such as countervailing and anti-dumping duties to counter the influx of subsidized tyres and other products from the East,” said Walmsley.
Chinese government subsidies on tyre exports, under-invoicing by tyre importers and the lack of policies to protect local manufacturers has compounded Sameer’s efforts to reap substantial profitability.
He says under invoicing by importers has reached endemic proportions across the region making the playing field very uneven for the local tyre manufacturer.
“The margin expectations of most of these importers are also low given their low operating costs. As a consequence, one of our leading sales channels, the dealer trade, continued to experience low business as most opted to directly importing their tyres from China,” he lamented.
The firm is exploring the establishment of additional retail outlets, as well as entry into Rwanda in the next two years.
Walmsley is optimistic that the introduction of LAPPSET, the standard gauge railway and other infrastructure projects in the northern corridor will significantly reduce logistics and transportation costs.
This he said will not only reduce the cost of inbound materials but also the distribution costs of manufactured goods.