Introduction
In a move aimed at bolstering Zimbabwe’s domestic vehicle assembly sector, the government has announced the suspension of customs duty on single and double cab semi-knocked down (SKD) motor vehicle kits. This decision, outlined in Statutory Instrument 194 of 2024 by Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube, is set to positively impact the automotive industry, potentially reducing vehicle prices and creating jobs.
Suspension of Duty on SKD Vehicle Kits
Starting January 1, 2025, a duty suspension of zero percent will apply to single and double cab SKD motor vehicle kits imported or taken out of bonded warehouses by approved assemblers. This move aims to encourage local manufacturing by reducing costs for approved assemblers. The suspension will remain in effect until December 31, 2029, giving the local automotive industry a significant boost over the next five years.
Public Service Buses: Duty Suspension Terms
The duty suspension for public service buses will take effect from January 1, 2025. However, it will only apply to buses imported before November 28, 2024, and cleared for consumption by February 14, 2025. After this period, the suspension will no longer be applicable, and duty will be imposed on all buses imported into Zimbabwe. This will provide a window for local bus manufacturers to increase their production capacity and reduce Zimbabwe’s reliance on imports.
Economic Impact: Price Reduction and Job Creation
The suspension of duty is expected to lead to a reduction in the prices of locally assembled vehicles, benefiting consumers by making vehicles more affordable. Furthermore, this policy could result in the creation of both direct and indirect jobs within the automotive and related sectors. The Zimbabwe Industrial Reconstruction and Growth Plan (ZIRGP) outlines a comprehensive strategy to stimulate domestic vehicle production, focusing on local assembly of buses and trucks. ZIRGP is expected to produce 100 locally assembled buses and 80 trucks annually, saving Zimbabwe over US$12 million and generating more than 300 jobs.
Supporting Local Industry and Enhancing Manufacturing
The policy forms part of Zimbabwe’s broader economic strategy to boost local manufacturing. The ZIRGP outlines several interventions, including repealing Statutory Instrument 138 of 2022, which imposed a 40 percent duty on Completely Built-up Units (CBUs), and introducing a 10 percent duty waiver on SKD kits for local assembly. Local procurement of vehicles, especially by government entities, is also a key component of this plan, with efforts focused on scaling up the production and purchase of locally assembled vehicles.
The Role of the Motor Industry Development Policy (MIDP)
Launched in 2018, the Motor Industry Development Policy (MIDP) has aimed to attract foreign direct investment (FDI) into Zimbabwe’s automotive sector. While it targeted attracting 10 percent of total FDI into automotive assembly and components manufacturing by 2030, the policy has not yet had the desired effect in stimulating the sector. However, the government’s efforts to promote local procurement and assembly are seen as a necessary step toward achieving MIDP’s goals.
The Road Ahead for Zimbabwe’s Automotive Sector
Despite past challenges, the Zimbabwean automotive industry remains a strategic sector in the country’s economy. Companies like Quest Motors, Willowvale Motor Industries, and Deven Engineering have long advocated for policies that promote local vehicle production. The government’s focus on enhancing local procurement and assembly will be crucial in revitalizing the sector, particularly in terms of public transportation.
Conclusion
The duty suspension on SKD vehicle kits is a significant step towards reviving Zimbabwe’s automotive industry. While it addresses short-term challenges, the success of the broader industrial development plan will depend on continued government support, private investment, and consistent policy implementation. If successful, the initiative could transform Zimbabwe into a self-sufficient automotive producer, reducing reliance on imports and creating long-term employment opportunities.
