ENTRY LEVEL MOTOR VEHICLE COMPARISON: ZIMBABWE SOUTH AFRICA

Introduction Zimbabwean motor Industry has been struggling for some time with few players involved in the assembling of cars. The companies have no capacity to supply the Zimbabwean market and the cost of production at Mazda is very high. The motor industry has been asking for protection for a long time but little has improved in terms of cost to the consumer and capacity to produce. We have to note that entry level sedans are a necessity for the day to day running of a business hence they should be available at low cost. This paper compares the cost of several entry level vehicles for Zimbabwe and South Africa with the hope that policy makers would adopt a policy similar to the one adopted by South Africa. Cost of Vehicles Buying a Brand New entry level motor vehicle in Zimbabwe is considerably hard and too expensive. Quest Motor Corporation is currently selling the cheapest brand new car locally, a Chery QQ3 0.8litre for US$11 265 which, if compared to South Africas selling price for the same model vehicle for R69 900 (US$8 694.03 - as of official rates on the 25th of January 2012) This car is US$2 570.97 more expensive in Zimbabwe. Quest Motor Corporation also has in stock the Chery QQ3 1.1litre being sold for US$13 365 (R107 454.60) as compared to South Africas official selling price of the same model of R94 900. The Chery vehicles from Quest Motor Corporation are reportedly Demo models and they come with a 2 years/50000km warranty, compared with South African models which come with a 3 years/100000km warranty. The South African models are also reportedly not assembled locally but however still come out cheaper than the local models. Quest Motors are expected, however, to start assembling these vehicles locally by next month but this then is set to increase the vehicles selling prices locally. This complements the fact that the Zimbabwean environment proves to be more expensive than our neighbours. Buying an entry level vehicle in South Africa is cheaper and one has a wider variety to choose from with 17 different cars selling for under R100 000, whereas in Zimbabwe based on the exchange rate of US$1-R8.04 theres only one model to choose from.
Sources: South African Car Magazine, Quest Motor Corporation, ZIMRA, SARS, The Economics of MIDP and The South African Motor Industry Frank Flatters (Queens University, Canada)

ENTRY LEVEL MOTOR VEHICLE COMPARISON: ZIMBABWE SOUTH AFRICA

A general overview of Duty charged is that overall Duty charged on importing a vehicle into Zimbabwe is relatively more than that charged in South Africa. Motor Vehicles in South Africa normally attract Customs Duty of 36%, compared to Zimbabwes of 40% on brand new vehicles manufactured within the last 5 years. VAT locally is pegged at 15% compared to that of South Africa which is 14%. The significant difference could be attributed to the implementation of a manufacturer Motor Industry Development Programme (MIDP) for the South African Motor Industry. The MIDP was initiated in 1995 to help the Motor Industry adjust to South Africas reintegration into the global economy. Nobody within the motor industry is compelled to take part in the programme although the design of the programme is of such a nature that it offers many benefits to those who do participate. It was designed to help the industry adjust and increase its competitiveness. The programme comprises of four components: A gradual reduction in import duty on both vehicles and components, An export-import completion scheme under which vehicle and components exporters can earn tradable Import Rebate Credit Certificates (IRCCs) to offset duties on imported vehicles and components, Access to the standard duty drawback program for exporters, under which all import duties paid on components and intermediate inputs used in exported vehicles and components can be rebated, and A duty free allowance on imported components of 27% of the value of vehicles produced for the domestic market. In conclusion, Zimbabwe should consider adopting a similar approach to that taken by our neighbor South Africa as this Program has proved beneficial to its Motor Industry. The MIDP was designed to help an inefficient, high cost and uncompetitive motor industry which is also the particular case with our local industry. Adoption of a related program will likely assist the industry to also achieve international competitiveness. It possibly will assist the local industry to convert itself from a high cost import substitution structure to an outward oriented one in which

Sources: South African Car Magazine, Quest Motor Corporation, ZIMRA, SARS, The Economics of MIDP and The South African Motor Industry Frank Flatters (Queens University, Canada)

ENTRY LEVEL MOTOR VEHICLE COMPARISON: ZIMBABWE SOUTH AFRICA

firms could reduce costs by producing fewer models at higher scales of output, as was the case with South Africa.

Sources: South African Car Magazine, Quest Motor Corporation, ZIMRA, SARS, The Economics of MIDP and The South African Motor Industry Frank Flatters (Queens University, Canada)