Barbara's literature - The Bicycle Supply Situation in Tanzania

	Barbara Gruehl Kipke The Bicycle Supply Situation in Tanzania 14.11.1995 to 25.11.1995
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	BICYCLE SUPPLY SITUATION I would hereby like to express my sincere thanks to the national team (Dr. Rwebangira & Ms. Moshi) as well as to the PPUs in both Temeke, Dar es Salaam (Ms. Tembele - Team Leader and Ms. Milambo - Urban Planner) and Morogoro ( Mr. Mkupete - Team Leader, Mr. Kalobelo -Project Engineer, Ditenya - Project Sociologist). PRODUCT BICYCLE MANUFACTURE Discussion with: NABICO, Production Manager & Felician Itemba, General Manager, Tel. 74413 In 1994, approx. 25000 units were produced and sold. In 2 shifts they have the capacity to produce 150000 units (ie. approx. 20% of capacity is being produced). Only a few ladies bicycles are being produced. The level of vertical integration is being reduced because it is more profitable to import than to produce locally (eg. chains were previously produced at NABICO but are now imported). Although NABICO could theoretically produce 80-90% of a bicycle, they in fact presently manufacture approx. 55%. NABICO pays 5% import duty on raw materials. Swala bicycles cost 36000 TS wholesale while NABICO-made Phonexi bicycles cost 39000 TS to the wholesalers. According to the General Manager, NABICO could be producing at 3/4 of the cost if there was more efficient purchasing and improved production planning. Apparently, TATA has offered to purchase NABICO at 250000 US$ only. Presently, NABICO is owned by NDC (National Development Corporation). Hindrances: The general manager considers it a liability that TATA consultants are involved in NABICO because their interests are in conflict with NABICOs interests (eg. TATA is a major Indian bicycle producer and would like to take over the Tanzanian market by supplying directly from India). A bicycle wholesaler confirmed this opinion by saying that they are shown NABICO invoices at the import department where they can see that NABICO is paying too much for its components. This wholesaler thinks TATA is taking a commission in India and perhaps others (TATA consultants?) receive a certain percentage. Furthermore, NABICO has 300 Million TS in work-in-progress which binds capital. In addition, NABICO has 350 Million TS in prepayments! In some cases, there has even been double payment! Remaining questions: (Dr. Rwebangira) - Copy of their credit scheme programs (to their employees and previously to government institutions) - Profit & Loss Statement - NABICOs ability to offer a Swala bicycle as a prize TRICYCLE MANUFACTURE Discussion with: Mr. Mushtaq Ali Shah, Director of Gajjar Garage Ltd. Sales Outlet: Pugu Road (Tel. 863699) & Production: Gerezani Area (Keko) P.O. Box 182, Dar es Salaam, Tel./FAX: 865832 The company started up in 1989 when there was rationing and the automobile business was uncertain. Mr. Mushtaq took the initiative and had 30 tricycle samples sent to him so that he could test them. He chose the type that could carry heavy loads. Mr. Mushtaq considers the Chinese quality to be much better than the Indian makes. His business is a joint venture with a Chinese State Company in Peking who own 49%. Initially the Chinese trained the Tanzanians for 2 years. Now Mr. Mushtaq can train his employees himself. Presently there are 6 employees who produce approx. 50 tricycles/month. Mr. Mushtaq used to import 1 container/year (a container containing either 150 or 300 tricycles) while he is now purchasing 2 containers/year ie. business is improving. The tricycles are merely assembled from parts that are imported from China (except the wooden platform that is produced locally). The tricycles cost 135000 TS to the end consumer. In comparison, hand carts cost about the same amount. Initially the tricycles were sold at cost (ie. 65000 TS in 1989) but now Mr. Mushtaq is earning a 10% margin. His margin is even higher on spares. He imports tricycles at 105 US$ per tricycle ie. 65000 TS for parts plus 33000 TS in labour costs in Tanzania. At present, tricycles represent approx. 30% of his business whereas German automobiles make up 70% of his business. Tricycle tires cost 8000 TS because they are sturdier than bicycle tires. The tricycle tires require replacement about every 1 1/2 years. The tricycle drivers prefer the smaller tires because they are faster. Mr. Mushtaq also produces disabled tricycles. He can produce tricycles to order (eg. ice cream tricycles). These Chinese-style tricycles can carry 350 kg load. Mr. Mushtaq has even seen tricycles carrying a sick person to Muhimbili Hospital at 3 a.m. in the morning (ie. a cycle ambulance). His sales slogan outside his sales outlet on Pugu Road says: Use tricycles - they are cheaper - they are easier (comfortable) - they are good for farmers Mr. Mushtaq exports to other East African countries such as Zambia, Kampala, Uganda and he is trying to get into Malawi. He also sells a lot of tricycles to Ifakara, Tanzania. He says Shinyanga has up to 6 bicycles in a household but no tricycles. Hindrances: 2-3 containers cost Mr. Mushtaq 2-6 Million TS in import duty (ie. ?? %)! He is paying 5% import tax. Weaknesses: Apparently the tricycles can only be repaired in his production facility (in Keko) or at one repair location along Morogoro Road. Potential: Mr. Mushtaq is willing to lend out a rickshaw of his for a day for a bicycle/tricycle promotion event BICYCLE IMPORT NABICO, Mr. Itemba Said that bicycle importers have to pay 40% import duty but the bicycle importers keep the declared value artificially low. Bicycle importers in Dar es Salaam say they pay 30% import duty. Even though their invoices are lower, they have to pay import duty according to NABICO invoices. BICYCLE TYPES One cyclist said he bought a bike with gears but then took off the gears! because he was advised that the gears would break when carrying heavy loads. He has kept the gears to eventually put on another bicycle. Ladies bicycles: Ladies sometimes prefer gents bicycles because they are sturdier to carry loads. Furthermore women can carry small children on the top cross bar (ie. it can be a "children's carrying aid"). BICYCLE ACCESSORIES Even a gents cross bar can be used by women as a "children's carrying aid". BICYCLE INFRASTRUCTURE BICYCLE PARKING Guarded bicycle parking is feasible in Morogoro at the central market, the Municipal office and the hospital. Even if they charged 5 TS / hour, if they guarded 80 bicycles (which is not much) they would earn 400 TS like the bicycle repairers. PRICE PRICING Cost of motorized-. eg. City Engineer Fuel costs: 15 litres * 400 TS/litre 6000 TS Repairs: 70000 TS Total: approx. 80000 TS which is more than a Phoenix bicycle per month. BICYCLE CREDIT SCHEMES Paybacks on credit schemes are considerably different: Mr. Kiiza: - Regional engineers office has virtually 100% payback on 60 bicycles based on salary deduction (refer to Annex of application form). He has received 1.4 Million TS back which he can reinvest in further bicycles for employees. No interest is charged while repayment is 3500 - 4000 TS/month ie. 12 to 14 months repayment 2 bicycles have been stolen but had to be paid in fall anyways. - SIDO checks up on applicants to see if their indications hold up and require the street chairman to co-sign. They have approx. 50% payback. SIDO charges 20% interest. Mr. Batinamani: - National Bank of Commerce (NBC) has the worst track record. They have had 15% payback and will probably write-off the other 85%! NBC charges at least 25% interest. BICYCLE REGISTRATION Remaining questions: Morogoro: - Do they pay bicycle registration fees? BICYCLE TAXES - refer to import duty BICYCLE INSURANCE The feeling is people can easily misuse insurance schemes so it should not be included in the first instance. As we become familiar with the level of theft we can experiment with insurance schemes because we would know if there is fraud on a large scale. PLAGE (DISTRIBUTION CHANNEL S) BICYCLE DEALERS (BICYCLE SALES OUTLETS) Dar es Salaam: Bicycle wholesalers may have approx. 10% margin. If they can manage to bypass import duties they can add an additional 30%! Mohammed Enterprises, Mr. Shabbir Ghadiyali, Indira Gandhi/Morogoro Rd. P.O. Box 20660, Dar es Salaam, Tel. 33977/30679/35504/25246 FAX: 46616/33977 Mohammed Enterprises has been in business since 1985. They are in the general import/export business. They sell bicycles and spares to wholesalers/retailers and individuals. Business is very irregular depending on different harvests from year to year. Mohammed Enterprises sells about 10000 to 20000 bicycles/ year if not more. They only sell the cheaper Chinese-type of Phenix bicycles that have a special front guard to protect the fork (approx. 2kg of steel). Nevertheless the bicycle is apparently of lower quality due to the lower quality of the pedal section, the fly wheel & hub section and the steering connector. These Phenix bicycles are sold at 38000 TS which is 25% cheaper than a Chinese Phoenix bicycle. Mr. Ghadiyali said the goal should be to bring consumers and business people together (ie. meet both of their needs). Nikko Agencies Ltd., Mr. Mohammed Daya Aggrey Street, P.O. Box 6732, Dar es Salaam Tel. 31523/28470/37603 & FAX: 44628/28839 Nikko sells both bicycles and bicycle spares in addition farming equipment since 1982. Nikko Agencies sell about 5000 bicycles per year. He says he only earns 2500 TS/bicycle margin (ie. 5% margin!). Sell approx. 5 % ladies bicycles. They sell Indian bicycles - mainly Avon. Sell about 400 mountainbikes where they get a 5000 TS margin (ie. buy at 45000 TS and sell at 50000 TS -Indian 1 -gear mountainbike). Nikko has to pay 30% duty on NABICO prices rather than on the prices they actually pay which are lower. 75% of the bicycles might be used in Tanzania while 25% may go to neighbouring countries. Nikko doesn't import directly because other companies get 90/120 deferred payment while Nikko gets 30 days deferred payment from the Tanzanian importers (eg. Industry Company). Nikko has tried credit schemes to regular customers but they ended up not repaying. Nikko used to have a company together with his elder brother but it split up. Then Nikko cooperated with Romo but they disagreed so now they hardly speak to one another. Nikko says bicycle prices should be reduced to meet the needs of the user. Romo NTC, Mr. Mosi, Deputy Managing Director, Mkwepu Street, P.O. Box 3 10 1, Dar es Salaam Mr. Masele, in Charge of trading activities of NTC XAAbel Mwakyami, NTC1 . %1 curycLlll 3 Tel. 46065 FAX: 38366/43021 NTC recently started importing bicycles. In 1994 they imported 9900 gents bicyles. 8585 went to Rajani Metals, Dar es Salaam who sold them in Mwanza in exchange for cotton. They were mostly Phoenix bicycles with 190 Flying Pigeon bicycles. NTC buys the bicycles for 53 US$ cif plus 30% Import duty plus 1.5% insurance (ie. total costs of 39000 TS). Their highest sales price is 46000 TS while the average sales price is 44000 TS (ie. 5000 TS margin which is more than 10% margin!). Morogoro: General Impressions: There is a lot of fragmented competition. Margins are low so that bicycles may even be "loss-leaders" to get customers to step inside and buy other products. More money is earned on spares. There are Indian, Arab and apparently one African bicycle retailer. Mainly Phoenix bicycles are sold with considerably fewer Avon bicycles being sold along with a number of 12-gear mountain bikes (Adams). There were absolutely no ladies bicycles that Gould be bought in Morogoro!! There were no Swala bicycles in Morogoro at the time. Only one retailer had a wide variety of bicycle types. Some retailers sell "complete bicycles" including the light, the lock and a pump whereas other retailers prices are based on "bare-bones bicycles" that at least include a bell and a stand. The prices quoted are prices that were indicated without any bargaining. In fact, bargaining can reduce the price. The bicycles are bought in Dar es Salaam completely-knocked-down (CKD) and assembled in Morogoro. None of the bicycle dealers from Morogoro showed up for the bicycle suppliers luncheon at Morogoro Hotel! It will take some effort to get them on-board (refer to Annex: Food for Thought). Mr. Nanji Mr. Nanji main business is bicycles as well as bicycle spares with a small amount of electrical goods sold. Mr. Nanji sells between 50-55 bicycles per month. He mainly sells Phoenix at 49000 TS "bare bones". He sells childrens bikes at 32000 TS. Mr. Nanji offered to order a ladies bicycle at 50000 TS for a Chinese ladies bicycle. He was considering tomorrows customer in addition to his business today. His Store sign Said "Bei Nafu Sanaa". Adam's, Mr. Majidi or Malik Adam's main business is electronic goods. Bicycles are just a side-live. Adam's sells 2 Phoenix bicycles per day at 55000 TS complete bicycle. They sell 3 mountain bikes in 2 months. An adult ATB with 12 gears costs 100000 TS-, a youth ATB costs 90000 TS, a child's ATB costs 80000 TS without a carrier. Students and Asians mainly buy ATBs for Sports. Family Care Ltd, A. G. Abdulah Family Care has a wide variety of blcycles. Sometimes they have ladies bicycles in stock. They say, however, that some women buy gents bicycles. Ladies bicycles are bought for personal transport rather than for carrying loads. Customers preferred choice: Phoenix sell 5-10/month at 53000 TS Customers 2nd choice: Avon sell 5-10/month at 43000 TS Customers 3rd choice: Swala sell 2-3/month at 40000 TS Family Care purchases a bicycle CKD in Dar es Salaam for 36000 TS. 800 TS/cycle for transport from Dar es Salaam & 800 TS / bicycle assembly = approx. 2500 TS margin ie. approx. only a 5% margin! Their customers are mainly farmers. N. Shamshu Kilosa - woman salesperson Shop belongs to wife of Mr. Nanji. Sells bicycles, auto spares, electrical goods and stationary. Sell approx. 15 bicycles per month. Sells Phoenix only. She indicated competition was increasing. Opera Shopping Centre Relatives of Adams (refer above). Sell a wide variety of products. Sell 15 bicycles per month (both Phoenix & Avon). A bare-bones bicycles costs 45000 TS. Ambika Enterprises, Mr. S. Kakar, Tel. 3332, Lumumba Str. Ambika sells bicycles/ some bicycle spares as well as paints/light bulbs Sell Phoenix at 55000 TS (complete bicycle), whereas Avon bicycles cost 44000 TS to the end consumer. Ambika sells approx. 3 bicycles/month according to an employee. Bicycles are only given to the customer if they pay the full amount in cash. Some customers pay 1/2 and pay the other sum when they can afford it at which time they then get the bicycle. BICYCLE TAXIS (refer to Bicycle Rental in Morogoro) BICYCLE RENTAL Dar es Salaam: A lot of bicycle hirers are involved with bicycle repair as the other half of their business. Their indications that they are earning about 3000 TS/day result from a mixed calculation including both repair and rental. King Sheba has had 8 bicycles stolen in a year (while he only has 3 rental bikes presently) while a rental outlet (Mr. Ramadhani Jaza) has had 3 bicycles stolen within a year and a half (out of 6 bicycles he rents out) but all those 3 bicycles have been recovered! The bicycle hirers report stolen bicycles to the police (the police stated that about 3 bicycles are stolen per month in Temeke). The rental rate is generally higher in Dar es Salaam than in Morogoro (ie. 100 TS/ 1/2 hour). ATB bicycles rent out for 200 TS/hour. Few or no women rent the bicycles. King Sheba doesn't rent out to women because he is worried about women getting the bicycles stolen easier while they are renting the bicycle. They leave the rental bicycles in their homes at night. Morogoro: Bicycle hirers earn quite good incomes. One hirer has 10 bicycles that he lends out at 50 TS per half hour and 100 TS per hour.Most hire in the 50-100 TS range. A bicycle hirer can earn 3 000 TS/day in revenues. His 2 employees earn 10000 TS/month. Bicycle repairs are 2000 TS/bicycle/month. Revenue-. 3000 TS * 30 days = 90000 TS less Labour costs 10000 TS * 2 = 20000 TS less Repair costs 2000 TS * 10 = 20000 TS less Storage costs ??? Profit approximately 50000 TS which is equivalent to approx. 1 bicycle per month profit. Bicycle hiring is open from 7 a.m. to 18:00 every day including Sundays. People hire who live in the area or work in the area. Risks: - A bicycle hirers main risk is to have his bicycles stolen. If a bicycle is stolen, he reports it to the police. Remaining questions: - How many bicycles are stolen from bicycle repairers? BICYCLE REPAIR Bicycle repairers have already formed an association ! whereas bicycle hirers have not. Bicycle repairers have no formal education repairing (primary school leavers). They would like further education in order to be able to repair bicycles better. Bicycle repairers earn low incomes (400 TS * 30 days = 12000 TS ie. lower than the minimum wage!). A bicycle spare parts dealer in Kariakoo, Dar es Salaam charges 3500 TS for China-made rubber tubes while tires cost 9000 TS. Pedals cost 1100 TS from China. Remaining questions: How long does it take to finish different types of repairs? PROMOTION TEACHING CYCLING Teaching cycling can be easier on a ladies bicycle because children don't have to do acrobatics around that top cross bar thereby lessening the chances of falling down and having an initial fearful experience. One father said he could not teach his teenage daughter how to cycle so he told his younger son to teach the daughter for him. GENDER ISSUES Women sometimes sit on the rear carrier of the bicycle. One cyclist said his wife once trembled all the way while sitting on the back because she was afraid of falling. Refer to potential cyclists. POTENTIAL CYCLISTS Temeke, Dar es Salaam: Calculations show that it is worthwhile to buy a bicycle in order to transport water to the individual households instead of using the hand carts! Assumptions: average cost of water from hand cart/20 litres: 100 TS average cost of water from tap/20 litres: 20 TS average no. of 20 litre jerry cans: 5 jerry cans/EUday 5 jerry cans/HH/day * 100 TS = 500 TS/day vs. 5 jerry cans/day * 20 TS = 100 TS/day = 400 TS savings/day At bicycle price of 50000 TS / 400 TS savings / day = 1/3 of a year to break-even!! In fact, sometimes the price of 20 litres of water can go up to 300 TS in the dry season! These potential cyclists are not taking advantage of this less expensive means of obtaining water because they don't have access to 50000 TS in Cash ie. a credit scheme would be of great help to this target group. Since carrying water/ obtaining water for the household is a woman's Chore, the credit scheme would be needed for women. Even in the households where the men fetch the water with hand carts to sell it, these men leave the water supply of their own household up to the women! Women can carry up to 60 litres on a bicycle suggesting the women would have to make 2 trips to the cheaper water source. A further advantage of such a scheme is that the women would be certain they were getting clean water rather than worrying about whether the water came from the nearby polluted river. Morogoro: Nurses at hospital - Daily bicycle hiringe, Charge 500 TS/day Work days/month 20 Total monthly cost: 10000 TS 5 months 50000 TS = price of a bicycle at interest rate of 30% 1/2 years interest on 50000 TS 7500 TS ie. these nurses could break-even on their bicycles within half a year! Their problem is also Cash - they could easily be involved in a salary deduction scheme! Women who are head-loading 30 kg can convert to cycling at achieve 60 kg transport of goods at one time while travelling at least 3 times as fast ie. a 6-fold productivity increase. What is the similar calculation for men? Men can head-load (?) ?? kg while they can transport 120 kg by bicycle travelling at least 3 times as fast gives a productivity gain of ??. BICYCLE PROMOTION Morogoro: - Bicycle repairer at the central market is a sports cyclist and could be asked rohen the next rally is to take place in Morogoro. They usually take place on weekends or holidays and involve around 50 people BICYCLE CULTURE It already exists in Morogoro. ANNEX: Things to Do Dr. Rwebangira: - get Information from NABICO an production and sales figures over the past years profit and loss Statement in 1993 application for bicycle credit scheme for NABICO employees former bicycle credit scheme for teachers Mr. Mosi Import department: No. of imported bicycles Bicycle Types Tax department/import duty department To what extent are reductions in import tax duties possible? Dept. of Economic Affairs To what extent are bicycles considered to improve the efficiency of the economy ie. mobility is prerequisite to a functioning economy Dept. of Transport To what extent is NMT (KBM - Kutembeya, biciceli, mikokoteni) included in development plan? Are cycle paths part of design specifications? Can they imagine bicycle credit schemes? Insurance Companies Could they imagine a bicycle insurance scheme? Could they imagine an insurance scheme for bicycle hirers? Remaining questions: refer to NABICO (Dr. Rwebangira) ITV apparently has been covering transportation issues recently ie. tricycle issues (according to Mr. Mushtaq) and NABICO (according to Mr. Itemba) refer to bicycle rental refer to bicycle registration refer to bicycle repairers Workplan for Morogoro PPU: 1) Produce a map with all bicycle dealers bicycle hirers bicycle repairers bicycle parking marked on it. Report on FGDs - Women cyclists/non-cyclists - Bicycle hirers/bicycle repairers Cycling Action Plan for Morogoro (including all 20 "spokes of the wheel") time plan for implementation pictures of - bicyle dealer bicycle hirer bicycle repairer (including tools) informal bicycle parking - cyclists: women/men bicycle hirer with 2 women on Sundays close-up of bicycle hirers mudguard cose-up of sayings on bicycle Convene 2nd bicycle suppliers forum to introduce Cycling Action Plan Barbara Kipke's return to Morogoro to follow up on bicycle supply activities.
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