Suspend General Tyre,House team tells NSSF( Via The Citizen)
Tuesday, 22 March 2011 22:58
By Edward Qorro
The Citizen Reporter
Dar es Salaam. The parliamentary committee on Public Organisation Accounts (POAC) has directed the National Social Security Fund (NSSF) to suspend the sale of General Tyre Tanzania Limited pending directives from the government.
The POAC chairman, Mr Kabwe Zitto, yesterday disclosed to The Citizen that NSSF should come up with plans of reviving the beleaguered company other than selling it.“Don’t even attempt to sell this company… why selling it while the country still needs it,” he queried.
According to NSSF managing director, Mr Ramadhan Dau, the company owes his office an outstanding debt of Sh15 billion, compelling them to render it for sale.
Mr Dau said that it was imperative to sell the company, as the money obtained would pay back NSSF debt. “We want to safeguard our members’ interests; we cannot achieve this if General Tyre is not delivering,” noted Mr Dau.
The NSSF boss said they had initially thought of seeking for a strategic investor, Firestone Tyres from Kenya, to take over the company but nothing has materialised out of the agreement so far.
When asked how NSSF was planning to recover the debt, Mr Dau said that the government would guarantee 85 per cent, whereas the remaining 15 per cent would be sorted out by NSSF itself.
For his part, Mr Zitto said there was a need of reviving all public companies and that selling them was not the best option of keeping the firms afloat.“Just hold on, don’t rush into selling it, as we are still waiting for further directives from the government,” he added.
Two years ago, the General Tyre closed operations, as the state planned to revive the Arusha-based factory amid the influx of cheap imported tyres, mainly from China.
The then deputy minister for Industry, Trade and Marketing, Dr Cyril Chami, was quoted as saying that the government was determined to revive the company and was holding talks with Continental AG of Germany, to terminate the existing contract so that a new partner could be sought to invest in the company.
Continental AG had apparently refused to re-invest in the company, saying that tyre manufacturing was no longer its priority. Dr Chami said productivity at the factory started to deteriorate at the end of 1990’s because of both importation of second-hand tyres and an increase in tyre vendors who provided cheaper options to customers.
But despite the government’s decision to ban the importation of second-hand tyres, General Tyre still failed to recover, and as the going got tougher, the factory was driven to borrow money from various foreign banks, including HSBC and City Bank, to service its operations.
The then deputy minister said the factory failed to repay the loans, forcing the government to provide a bond in 2005, for the factory to get Sh15 billion loan from NSSF to service the bank loans.
However, he said, the factory failed to get another loan that would enable it purchase materials for productions, and it was forced to close down in 2009.
The company was in the 1970s and 1980s one of the largest employers and commanded respect for its contribution to socio-economic development of Arusha.The once giant motor vehicle tyre manufacturing company used to supply its products to the Eastern and Central Africa before closing down two years ago.
Meanwhile, Mr Zitto commended NSSF for presenting an unqualified audit opinion before his committee.
“You have done a remarkable job, we have not come across any irregularities in your report. Keep the good work up,” remarked Mr Zitto.
Source: The Citizen