HomeBusiness DigestDunlop explains repercussions of closure

Dunlop explains repercussions of closure



CLOSE to 800 jobs are under threat in Bulawayo after Dunlop Zimbabwe, the country’s sole tyre manufacturer, shut down its factory due to biting foreign currency shortages.


<
P>Dunlop’s closure will render about 30 000 people employed in the downstream tyre industries jobless.


Our senior business reporter, Shakeman Mugari (SM), spoke to Dunlop’s managing director, Phil Whitehead (Whitehead) about the situation at the company.


Following are excerpts from the interview:


SM: Mr Whitehead, there have been conflicting media reports about the situation at Dunlop Zimbabwe. Some say Dunlop has closed down while others say you have reduced capacity. What it the correct position?


Whitehead: The situation on the ground is that the factory is not operating. It has not been operating since September 30.


SM: That means you are out of business now or should I say you are going out of business completely?


Whitehead: We are closed yes but we are not going to shut down completely. We have no intention of closing down completely. We have a massive investment in Zimbabwe, it would be foolhardy to disinvest because we have a massive investment here.


SM: The major problem is of course foreign currency. When was the last time you received foreign currency from the Reserve Bank of Zimbabwe (RBZ)’s auction floor?


Whitehead: Well, we last received foreign currency on July 15. That was our last allocation. It was about US$300 000 and that is only enough to meet our needs for one week’s supply of raw materials.


SM: You say the last allocation was on July 15 but you only closed on September 30. How have you been operating for eight weeks without foreign currency?


Whitehead: We had stocks of raw materials that kept us going during that time but once they ran out we had to stop.


SM: And how have you been paying your external creditors and what are they saying about your delay in payments?


Whitehead: We have had to talk to our creditors. Normally our creditors are 30 days but we have stretched them to 90 days. That is how we have got this far. But then there comes a time when outside suppliers say enough was enough. They now need their money for supplies they made to us and that is why we cannot continue until we get foreign currency to pay them for more supplies.


SM: Have you talked to the central bank about the crisis and did you also engage the government about it?


Whitehead: I talked to the governor (Gideon Gono) before he went for the IMF meeting (September) about the situation here and he said we must keep the factory running and they would sort (out) the problem when he comes back. But since then nothing has happened. We have been in talks with them including the government. We have had many meetings. I have called and sent many emails to the authorities about the situation.


SM: And what do the central bank and the government say?


Whitehead: The Reserve Bank says they are looking at it. In fact we are still in dialogue with them. They might be expressing their commitment but we have reached a stage where all we need is the money (foreign currency) to survive as a company.


SM: The country is virtually broke in hard currency terms. Do you think the money will come?


Whitehead: I just hope so because if we don’t get it we might have to close down completely.


SM: What has happened to the 800 workers employed by Dunlop?


Whitehead: They are on full paid-leave. They are still using their leave days but these are also running out.


SM: And if they exhaust their leave days what happens?


Whitehead: They might have to move to unpaid leave and that would be a disaster for many of them.


SM: There has been so much noise about Dunlop’s closure. What is really the importance of Dunlop in the economy? Can you give us a breakdown of your customers?


Whitehead: My biggest client is the government. Dunlop supplies almost all departments of government with tyres. I mean the army, police, Willowvale and the CMED. All those get their tyres from Dunlop and if we don’t manufacture tyres there will be a crisis. Where would all those get their tyres? We also supply our accredited dealers and all companies that do retreading would be affected severely.


SM: The closure will certainly affect your exports?


Whitehead: We export to South Africa, Malawi, Mozambique and Zambia. Last year Dunlop record exports of US$687 000 and that is foreign currency needed for the country. The tyre market is very competitive, there are dealers in tyres imported from China, Malaysia and South Africa who are likely to take that market from us if we stop supplying. Once we lose it, it will be difficult to regain it.


SM: How would your closure impact on the tyre market in Zimbabwe?


Whitehead: The prices will go up drastically and the country will lose a lot of foreign currency trying to import tyres. You should realise that every imported tyre costs the country twice as much foreign currency as a Dunlop-manufactured tyre. So instead of the US$300 000 that Dunlop needs a week, the country would now need US$600 000.


SM: How about the impact of the closure on the general public.

Whitehead: There are two levels of the impact. First, it means the prices of tyres would now be exorbitant because people who deal in imported tyres will charge a parallel market rate because they are getting the foreign currency from the black market.


It won’t be surprising to have tyres costing between 5-8 times more than what they are going for now. Also realise that the rainy season is approaching and this is when worn-out tyres have to be replaced because they are dangerous. This danger includes buses, commuters and everyone.


SM: That’s about transport. What about the impact on the people’s lives?

Whitehead: In general, in means every company that relies on Dunlop products would be in trouble. It means the workers of both Dunlop and related companies might be out of work. We alone have 800 employees who have maybe thousands of dependants. There are 30 000 people employed in the downstream industry that relies on Dunlop. Those people might lose their jobs.


Events leading to shutdown


* July 15: Dunlop receives about US$300 000 from the Reserve Bank of Zimbabwe’s foreign currency auction, enough to import one week’s supply of raw materials. It was the last foreign currency allocation that the company received.


* July 22: The company starts its efforts to talk to deputy governor Edward Mashiringwani but with limited success. The company has been trying since then to get an audience with him but his schedule and requests for appointments have denied Dunlop access to him.


* August 5: The company starts efforts to talk to the RBZ governor to appraise him on the desperate situation at the company but with limited success, again because of his busy schedule. Dunlop also seeks support from economist Eric Bloch who is on the RBZ’s advisory board.


* August 21: Letters are written from Bloch and Dunlop to RBZ explaining the situation at the company and the urgent need for foreign currency.

* August 29: Mashiringwani is said by Gono to be “helpful and responsive” on the issue.


* September 2: A report on the situation at Dunlop is presented to Gono.

* September 7: Like Mashiringwani, Gono is reported to be “helpful and responsive” on the issue.


* September 12: Dunlop moves to a three-day working week for the first time since October 2004. This was followed by a four-day week then back again to a three-day week.


* September 14: Another letter is written to the central bank explaining the urgency of the matter.


* During the same period Dunlop communicates on a regular basis with faxes, email and personal appointments to Resident Minister, Ambassador Cain Matema and Minister of Industry and International Trade Obert Mpofu. In all communications the company explains the situation and its effect.


* September 30: Dunlop shuts down its factory and sends workers on paid-leave. The workers start using their leave days.


* October 17: There are reports that some of the workers have used up their leave days and the company is contemplating sending them on forced leave.


* October 18: Dunlop says it is still in talks with the relevant authorities to find an urgent solution to the crisis.

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