HARARE - Willowvale Mazda Motor Industries, Zimbabwe's largest car assembly plant, has been forced to beg the government for a bail-out after declining sales volumes caused a spectacular meltdown in its diversified motor industry, putting 210 jobs at risk.
The plant, which until recently built Mazda vehicles sourced in CKD form from Japan, has given in to persistent and critical shortages of foreign exchange in Zimbabwe necessary to import assembly kits.
The company has also been pillaged by the government, and last year a parliamentary committee ordered Police Commissioner Augustine Chihuri to explain why he misrepresented to it the number of vehicles that the police force purchased from the car dealer in a controversial deal.
The government owns Willowvale through the Industrial Development Corporation, which has a 75 per cent stake in the car dealer through Motec Holdings Private limited.
Parliament’s Portfolio Committee on State Enterprises and Parastatals Management on Industrial Development Enterprises, which probed the car assembly plant, painted a grim picture of the state of affairs at Willowvale, recommending an urgent bail-out for the country’s biggest and sole car manufacturer – which the portfolio committee, headed by Zvishavane Runde MP David Mavima, said had been hard hit by a dramatic slump in sales of new cars amid high production costs.
“Although the company has vast machinery at its disposal there is no production taking place and the workshops were deserted leaving the company with no option but to pay idle workers and other unavoidable fixed costs,” the portfolio committee report tabled by Mavima said.
The committee urged the government to intervene immediately in the car industry crisis.
In the meantime, Willowvale has stopped production at almost all of its facilities. The dramatic collapse has been described by one industry expert as ‘carmageddon.’ Willowavle’s vast operations and machinery, which has potential to assemble all kinds of vehicles, are silent, including equipment and machines for assembling parts, spray-painting and big ovens that dry paint.
A senior government source signalled this week that a direct financial bail- out ‘could not be ruled out’ given that Willowvale was a strategic resource which could earn the bankrupt unity government money. At stake at Willowvale are the livelihoods up to 210 people employed directly by the car-maker and supplier and the thousands of people whose jobs depend indirectly on the motor industry.
“The company has no liquid cash since its cash is tied up in stock,” Mavima told Parliament. “Thus the company is finding it difficult to pay 210 workers most of which are now idle because of no production.”
The company has also failed to secure credit facilities from lending institutions because of uncertainty in the car business, and a crippling US$3.4 million debt to Japanese car spares supplier Itochu.
Business sources insist there will be ‘no blank cheques’, although direct state aid has been given to Willowvale as a last resort. Authoritative sources say assistance in sourcing finance to pay the Itochu debt would be granted, with the ministry of Finance acting as surety.
Government sources said the bail-out package was modelled along a ‘special liquidity scheme’, or bridging loan. The source said: “It is absolutely important that the unity government props up the car industry. Zimbabwe’s economy may be turning the bend, but the motor industry is still in depression, look at Willowvale. Demand for cars has fallen off a cliff.”
Post published in: Economy