A special audit by the Treasury has recommended a ban of fully-built imported vehicle units (FBUs) from the lucrative multi-billion-shilling State car leasing programme on job creation concerns.
FBUs are vehicles that are fully built by a source manufacturer and then shipped for sale into the country.
The Treasury audit said the FBUs compromised jobs and local investments as envisaged by the government lease programme launched in 2013.
“Suspend leasing of FBUs or have them locally assembled,” the audit said in a recommendation that is expected to rattle car manufacturers and leasing firms involved in the scheme.
The audit further recommended that locally assembled electric vehicles be introduced in the car lease scheme and deployed in non-operational tasks on a pilot basis.
The multi-year car leasing programme, now on the seventh cycle with more than 8,000 vehicles mainly leased out to the National Police Services, was designed to provide efficient and cost-effective transport to the government extension workforce by providing cheap access to vehicles.
The audit by the Treasury, however, revealed some gaps in the leasing scheme, which hindered its optimal performance including a lack of an effective management structure that guarantees operational efficiency.
The assessment has now recommended the creation of a special unit at the Treasury to oversee the car lease programme.
“Operationalise the government transport policy by setting up the fleet management department at the National Treasury,” the audit urged.
“Anchor a robust and integrated fleet management solution at National Treasury so that vehicles transmit seamlessly onto the same platform.”
The study by the Treasury further wants a monitoring and evaluation firm appointed to track the performance of the leasing scheme besides shaking up the current restrictive refuelling deals where vehicles are locked to particular pump stations.
“Deploy a universal fuel card so that fuel is accessed across a multiplicity of stations,” said the study.
The car lease scheme has a cocktail of participants including the original equipment manufacturers such as Toyota Kenya, Isuzu EA, CMC Motors, ECTA, Mobius, Simba Motors Corporation, and CFAO.
The scheme also supports leasing companies including RentCo, Rentworks, NCBA leasing, Coop-Bank Fleet Africa, Star Rentals, and Avenue Car Hire as well as insurance and financial institutions such as CitiBank, Coop Bank, NIC, NCBA, ABSA, Equity Bank, and KCB.
The Treasury said the car leasing programme has significant milestones, including the creation of 1,813 jobs directly and 100,000 jobs indirectly, revitalised the automotive sector with more than 10,000 vehicles assembled, and provided business worth Sh 400 million to parts and accessory manufacturers.
It said the scheme has also increased the percentage of local content in assembly from 9 percent to 38 percent and helped the government to leverage savings amounting to Sh 2.69 billion.
“The programme provides the insurance sector with business worth Sh700 million in premiums annually, remits annual taxes totalling Sh1.6 billion to KRA (Kenya Revenue Authority), and provides a steady market for oil products amounting to Sh 2.2 billion annually” the Treasury added.
The 7th cycle of the car lease programme comes as a major boost to dealers who are contending with poor sales after customers cut motor vehicle purchases on the back of high prices.
The increase in vehicle prices has seen demand drop amid a tough economic environment for individuals and businesses.
It further includes accessory manufacturers such as Robbs Magic, Sai Raj, and NMC and also vehicle assemblers comprising KVM, AVA, and Isuzu Assembly alongside other service providers.
