Continental, Tanzania Negotiations “Complex”

According to Nairobi based news portal The East African, the nation of Tanzania is “struggling” to end the multi-billion dollar General Tyres East Africa (GTEA) partnership brokered with Continental AG in the mid-1990s. The East African states that Continental, 38 per cent shareholder in the venture, has been “feuding with the state” since 2006. The GTEA facility in northern Tanzania has been closed since 2007, with 400 workers locked out.

The dispute allegedly started in 2007 after Continental AG’s contract expired.  In July 2008, the Conti approached the Tanzanian government, 62 per cent shareholder in the GTEA venture, to renew the contract. But according to The East African it “failed to outline a concrete business plan on how to make GTEA profitable.” The news portal says that instead of outlining how General Tyre’s $20 million debts would be settled, Continental demanded the Tanzanian government pay an outstanding $3.321 million debt. The government refused to pay this, claiming the factory was responsible for settling debts.

According to Cyril Chami, Tanzania’s deputy minister for Industry, Trade and Marketing, talks between Continental AG and the government on terminating the contract “are complex as the German firm has made certain demands.” The East African reports one of these demands as being the restriction of GTEA sales to Uganda, Burundi and Tanzania should production resume. The news source also quotes Dr Chami as saying all the preconditions put in place by Continental AG indicate it is not keen on reviving the tyre factory. “Currently, the government is battling with Continental AG to end the existing deal and seek a new partner investor,” he said.

Continental AG spokeswoman Antje Lewe told The East African that soon after the agreement expired, Continental proposed to the Tanzanian government ways to make the technical assistance agreement “more robust and environment-friendly to enable technology transfer.” She added that General Tyres, as an international brand, belonged to Continental AG, and Continental AG will not be able to inject fresh money in GTEA.

The East African reports that almost $30 million is needed for GTEA to resume productions, more than two-thirds of this to cover existing debts.