Chinese tyre imports hit Sh2.8bn as motorists shun locally made brands

A production line worker at Sameer Africa's plant along Nairobi's Mombasa Road. PHOTO | FILE 

By NEVILLE OTUKI

In Summary

• The tyre maker will now outsource from producers in the two countries-– a double whammy for the Kenyan economy in terms of job losses and waning industrialisation momentum.
• Chinese motorcycle imports also shrunk to Sh1.4 billion in the review period from Sh1.6 billion in the year to June of 2015 and Sh1.5 billion in 2013.

Kenya’s imports of cheaper Chinese tyres have grown 55 per cent over the past three years amid their rising popularity among price-sensitive motorists.

Official data shows that Kenya imported Sh2.8 billion worth of vehicle tyres from Beijing in the first half of the year, up from Sh2.5 billion in a similar period of 2015 and Sh1.8 billion in 2013.

This represents a growth of 55.5 per cent over the past three years, according to data from Kenya National Bureau of Statistics (KNBS).

While the low-priced tyres have been pocket-friendly to motorists, local manufacturers remain the biggest losers as their margins continue to shrink.

Local manufacturers have recently raised the red flag over the uncontrolled flow of Chinese tyres into East Africa, saying the cheaper Asian products undercut them, posing a threat to their business.

Sameer Africa last week announced it is closing its Yana manufacturing factory in Nairobi due to increased competition from cheaper Chinese and Indian imports.

The tyre maker will now outsource from producers in the two countries-– a double whammy for the Kenyan economy in terms of job losses and waning industrialisation momentum.

READ: Sameer shuts down Nairobi tyre plant

The KNBS data shows, however, that Kenya deeply cut its imports of Chinese vehicles and spare parts to Sh2.4 billion in the year to June compared to Sh11.9 billion in a similar period last year and Sh3.1 billion in 2013.

Chinese motorcycle imports also shrunk to Sh1.4 billion in the review period from Sh1.6 billion in the year to June of 2015 and Sh1.5 billion in 2013.

Asian manufacturers enjoy lower energy costs and are entitled to State subsidies, allowing them to gain market share in East Africa where cheaper products are in high demand.

China remains the biggest exporter of goods to Kenya with Nairobi’s imports from Beijing standing at Sh150.2 billion in the first half of the year. This is equivalent to 22 per cent of Kenya’s total imports in the review period that stood at Sh689.8 billion.

The World Bank early this year warned that increased Chinese imports could lead to Africa’s de-industrialisation even before the region enters the industrialisation stage.

Policy rethink

Analysts reckon that there is need for a policy rethink to lock out imports that local manufacturers can make, and letting in only capital goods such as machinery.

Sameer has over the years said that Kenyan government has failed to implement anti-dumping policies to counter influx of cheaper products from the East, stifling growth of local industries.

It has also blamed its woes on rampant under-invoicing by tyre importers across the region which makes the playing field uneven for local manufacturers.

Sameer reported a 9.1 per cent drop in net profit to Sh43.5 million for the six months ended June.

Its revenue shrunk 15.8 per cent to Sh1.4 billion in what it attributed to increased competition from the subsidised tyre imports.

The firm plans to diversify to the real estate market in the wake of flagging fortunes in the tyre manufacturing business.