Dealers such as DT Dobie and Toyota Kenya have been spared the loss of multi-billion shilling deals since the government is the biggest customer. Fredrick Onyango
The government has frozen plans to lease vehicles over buying new cars for at least two years due to reduced interest from ministries, offering dealers a reprieve while dashing hopes of leasing companies.
Treasury has put on hold the plans because a number of ministries preferred to buy their own cars over leasing, in a move that is unlikely to ease the budgetary pressure on the rising cost of buying and maintaining vehicles.
“We have shelved the proposal to lease government vehicles because of non-cooperation from the key consumers such as the police,” said Finance minister Uhuru Kenyatta.
Treasury had sought vehicle leasing companies to provide at least 1,800 vehicles in a policy shift meant to slash acquisition and maintenance costs.
The development places a lid on the emerging leasing industry in Kenya, which has started enjoying increased business as corporations cut on asset purchases.
Vendors offering fleet management solutions might also need to wait a little longer for State contracts as the now-scuttled plan had intended to outsource the services to private sector.
Vehicles dealers such as DT Dobie, Marshals and Toyota Kenya have been spared lose of multi-billion business deals since the government is the biggest customer. The dealers recorded sharp drops in sales of new cars which took hard knocks since the post-global financial crisis.
Data from the Kenya Motors Industry Association indicates new car sales peaked at 13,135 in 2008, only to drop to 10,364 in 2009 before making marginal gains last year to 11,050.
As the government opts for the more expensive alternative, the taxpayers will continue shouldering the ever-rising acquisition costs exaggerated by the weakening local currency.
The Finance minister said the government will review the earlier proposals to lease, by incorporating views from the ministries in the hope of re-introducing it in the 2013/14 budget. “The earliest we could re-introduce the proposals to lease is in two years after wider consultations because we believe it would be in the best interest of the nation to cut no-essential expenditure,” Mr Kenyatta said.
Last year, the government invited new auto dealers and leasing firms to provide of a wide range of vehicles with the successful bidders owning, insuring, and maintaining them while the government would only pay for using the vehicles over a few years at an agreed cost.
But with the scuttled plans, the bidders who had submitted their competitive quotes are not likely to receive any feedback, with Treasury saying that it did have any contractual obligation with them. This means that Treasury will have contravened its terms as advertised on expression of interest, which read in part: “Prior to the expiration of the period of tender validity, the procuring entity will notify the successful winner in writing that its tender has been accepted.”
Government estimates in the 2011/12 budget shows an allocation of Sh221 million for purchase and maintenance of vehicles. This provided the strongest signal yet that the leasing plan has been frozen, with major dealers saying that the government had not relented on purchases of new vehicles.
“The government continues to buy new vehicles from us,” said Ms Rita Kavashe, the managing director of General Motors East Africa.
Industry insiders blame the freeze on the unfavourable local vehicle market besides alleging that corrupt and powerful bureaucrats are against losing control of the multi-billion shilling public transport budget.
