NATIONAL Tyres Services (NTS), a retailer of new tyres and tubes, is battling the influx of smuggled tyres, new and used, which have claimed part of its market share. NTS operates 13 retail outlets throughout the country. In this article, NTS managing director Kennedy Mandevani (KM) shares some insights into the business with NewsDay business reporter Fidelity Mhlanga (ND). Below are the excerpts:
Business Interview: FIDELITY MHLANGA
ND: To what extent does the influx of second hand tyres affect your business?
KM: It used to affect our business. But two years ago, we lobbied the authorities who came up with the legislation to control inflow of second-hand tyres.
In fact, those tyres have now been banned. The police have quite been robust at the border, although some of those tyres are still trickling into the market.
We have also carried out a serious educational campaign to ensure that people buy tyres from a source they are familiar with. For used tyres, you don’t know where they are coming from and why they were dumped.
Tyres are basically a safety product and we cannot take a gamble with our lives. Even when things seem to be under control, you never know.
ND: What are the challenges affecting your business at the moment?
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KM: The biggest issue is the smuggled new tyres that are finding their way into the country. We urge the authorities to tighten border control so that these tyres also pay import duty and value-added tax.
It enables all players to compete on a level playing field. Once you smuggle a tyre, you can sell it at half the price because it does not pay import duty.
ND: Who is involved in this illicit business?
KM: It’s virtually anybody who can procure tyres and sell them here. These could be runners or established companies. The Zimbabwe Revenue Authority (Zimra) has got a list of who these culprits are.
We urge them to crack down on them. Whenever we’ve got information on this, we also pass it onto Zimra.
ND: What has been the response from Zimra?
KM: Sometimes they respond positively. But because this is a lifeline for most people, they can contain the problem this month and next month it rears its ugly head again.
ND: To what extent are smuggled tyres eating into your business?
KM: We have estimated smuggled tyres to be at 20% of the market, which is a lot in terms of lost revenue to Zimra and market for us. It also affects our tax base because if our market share suffers, it means we also pay less to Zimra.
ND: What is your current market share?
KM: All I can say is that we’ve got the lion’s share of the market. I can’t give you exact figures for market reasons. But we are the market leaders.
ND: Do you have any capital projects lined up for the last part of the year?
KM: We have budgeted around $300 000 for the renovation of our Graniteside branch to meet global standards. We are also set to open new branches, but at this stage, I can’t give you the exact number. We are looking at expanding our distribution footprint.
ND: What has pushed you to expand your branch network?
KM: What we do is, we monitor traffic flows. When we review our existing branch network and realise that it is failing to cope with demand, we can think of expanding it. If we think a particular area has growth in terms of traffic, then we’ll open a branch there.
Basically, traffic trends, traffic flows and our own projections of those flows determine whether we should grow our branch network or not.
ND: Are you targeting any particular areas or region for the branch network?
KM: We are looking at major towns. In other words, we are going for growth.
We are now profitable and it makes sense to expand now. Two years ago, we were in a loss-making position and we had to work on that to turn it around. Now that we are making profits, we are now going for growth.
ND: What measures did you put in place to return to profitability?
KM: I think it’s because of a continuous supply chain of products. Stocks have been affecting our operations and we have stocks now.
In the past, we would go for two weeks without stock. We have sorted out our supply chain now. We held meetings with our key suppliers overseas and they are giving us credit lines and that has assisted us in terms of supplying the market on a regular basis. We are now a reliable supplier.
ND: Who are your main suppliers?
KM: Our key supplier is a Japanese company called Sumitomo Rubber Industries Ltd. They are in charge of the Dunlop brand. We used to import truck tyres from Japan, but they have now localised production in Ladysmith, South Africa.
It’s good news for us and our customers because we can now get truck tyres from South Africa. Just to give you an idea, those tyres from Japan used to take three to four months to land here.
It only takes two weeks to get them from South Africa. So, in this case, the lead time is improved.
Also, they will be 15% cheaper. So, it’s good news for us and it is good news for the truck owners of Zimbabwe because we will be bringing in tyres at a cheaper price and on a regular basis.
ND: How is your retreading business?
KM: We get raw materials from South Africa and Malaysia and do the re-treading here. We have two factories, one in Harare and the other one in Bulawayo.
ND: Do you manufacture tyres?
KM: No, we recondition tyres or re-tread. All the new tyres that we sell are imported.