Germany tyre manufacturer Continental AG has finally agreed to offload its 26 per cent stake in the once thriving General Tyre East Africa (GTEA), hence giving a leeway to the government of Tanzania to scout for strategic investor to revive the plant.
Industry and Trade Minister Abdallah Kigoda made the revelation to ‘Daily News’, noting that the ‘marriage’ between the two was a holdup for the government, which is the majority shareholder at 74 per cent, to look for potential investors.
“Discussions between the government and the German firm have lasted for almost the past three years.
Since they agreed to sale their shares to the government, we are now headed in the right direction to revitalize GTEA,” Dr Kigoda said in a telephone interview.
The minister said he was hopeful that the marriage would officially be ended mid next month, after the government pays off Continental AG for its 26 per cent stake.
Dr Kigoda was, however, not in a position to state the actual amount to be paid to the German company, revealing though that experts in the ministry have already worked on the figures. Our sources indicate that the amount could be slightly above 40bn/-.
Prospective investors from Malaysia, South Africa and United States, among other countries, have expressed interests to acquire the tyre manufacturer in Arusha, according to the minister. GTEA started production in 1971, becoming the first tyre manufacturer in East Africa.
During its heyday, it produced about 1,000 tyres a day, with installed capacity of producing 320,000 units per annum. The once giant motor vehicle tyre manufacturing company used to supply its products to the Eastern and Central Africa.
Its supremacy in the industry started to deteriorate owing to mismanagement of the company on one hand and importation of second-hand tyres on the other.
The tyre manufacturer was established in 1969 through a partnership between the government of Tanzania and General Tyre USA, before the latter sold its shares to Continental AG of Germany in early 1990s.
In 2005, Continental AG sought and acquired a loan of USD $10 million dollars (approximately 16bn/-) from the National Social Security Fund (NSSF) through a government’s guarantee to revitalize the factory, but failed to make any headway.
The amount is said to have now soared to 14 million US dollars (approximately 22.4bn/-) in accumulated interests. GTEA suspended production in 2007 when Continental AG demanded yet another loan of USD $2 million dollars (approximately 3.2bn/-) from the government.
The request was however turned down as it came to light that the initial loan was misused. The Arusha-based company is now under the National Development Corporation (NDC), which has been mandated to spearhead its revitalization in collaboration with the private sector.
Regarding the 10 million US dollars that GTEA owes NSSF, Dr Kigoda hinted that the loan could be turned into equity.
“It depends on discussions between the NDC and NSSF; but the way I see it is the latter could agree that the loan be turned into equity in the company,” the minister explained.
To start with, the envisaged new GTEA would start production using imported raw materials but the minister said plans were also underway to revamp rubber farming in Kilombero and Muheza to provide the firm with its key ingredient.