NAIROBI, Kenya, Sept 1 – Kenya’s sole tyre manufacturer Sameer Africa plans to begin offshore production of its tyres by manufacturers based in China and India.
The move will see the company stop manufacturing its Yana brand tyres and allied products at the Sameer Africa factory in Nairobi.
This will also see to the closure of the manufacturing facility in Nairobi.
Managing Director Allan Walmsley has said the move was necessitated by competition from cheap and subsidized tyre imports entering the markets.
Since 2006, Sameer Africa Limited has seen a systematic reduction in its market share witnessing a decline from a high of 62 per cent in 2005, to only 25 per cent today.
Apart from cheap and subsidized imports, the company also cites the 2005 reduction in customs duties under the EAC Common External Tariff (CET), the high cost of electricity and under utilization of factory capacity to have also impacted the business adversely.
“As a result, the company will incur a one-off charge in respect of plant and inventory impairment and employee severance costs estimated at approximately Sh725 million,” Walmsley said.
The decision shall therefore be reflected on the company’s earnings for the current financial year which are expected to be lower by more than 25 per cent of last year’s earnings during the same period.
Despite the shift in operations, Sameer Africa says that there shall be no impact on customers, their end-users and the supply of the Yana brand to the East African market.
“Yana Tyres will continue to be engineered under the supervision of the company’s own chemists and engineers. We will also continue to expand our Summit Tyre offering for all markets and we will continue to distribute Bridgestone tyres in Kenya, Tanzania and Uganda,” said Walmsley.
Additionally, the company says it will also continue to invest in research and development to offer the market tyres that are purpose-built for African roads even as it continues with the roll-outs of its Yana Tyre Centre offering across East Africa.
The move comes at a time when the government is lobbying for the establishment of more manufacturing plants to set base in Kenya even as it works on improving Kenya’s ease of doing business.
Implementation of the decision begins September 30th 2016.