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LETTERS: Nuts, bolts of making Kenya industrial hub

Imported used cars
Imported used cars: Reducing their number will cut pollution. --FILE 

Just last week, a parliamentary committee suspended the implementation of a ban on importation of eight-year-old used cars after motor vehicle dealers complained.

The debate on importation of used motor vehicles and spare parts in Kenya and in the region has been on for more than a decade. Kenya banned the importation of used spare parts in 2009 on safety and quality.

An outcry followed the ban and a task force — I was a member of the team — was formed to assess the situation on quality, pricing, availability, and safety.

The team established that the use of second-hand spare parts was thriving due to non-availability of new parts locally and counterfeiting.

Apart from the technical difficulties of setting up industries for the ever-rising models, the task force observed that taxation also made local products not to compete favourably with imported parts.

Nonetheless, it observed that the country has capacity to produce tyres, tubes, batteries, windscreens, oil filters, gaskets, bushes, suspension springs, seats, seat belts, oil seals, air cleaner element, shocks, and spark plugs.

Producing other products required improved capacity, especially for popular models, which included ball joints, tie rod ends, rack ends, brake cables, clutch cables, bearings, rubber bushes, clutch plates, pressure plates, release bearings, shock absorbers and all other safety related parts.

Th task force recommended incentives for local manufacturers and that ban on importation be phased out gradually as local capacity is developed.

Harmonisation of age limit for used vehicle imports in EAC is yet to be concluded. Although Kenya is implementing eight-year rule, the rest of the member States are either implementing a 10-year rule or no age limit.

On age limit for used motor vehicles, the East African Business Council commissioned a study in 2014 on behalf of the EAC. I led the team.

We engaged, among others, revenue authorities, environmental authorities, referral hospitals, traffic police and insurance companies. Others were ministries of transport, trade and industries, motor vehicle assemblers, transport companies, auto bazaars, and standards agencies.

One of our findings was that more than 85 percent of the vehicles imported into the region were used within an average age of about 15 years and annual CIF (costs, insurance and freight) of $2.01 billion (Sh200bn) compared to taxes collected over the same period of about $596 million (Sh60bn).

The impact on safety, health and environment was evident as economic losses due to road accidents was estimated at average four percent of GDP while increased poor air quality in urban centres was a major contributor to acute respiratory diseases and greenhouse gases.

The old vehicles are not efficient, thus hurting productivity and raising maintenance cost.

Government revenues

Limiting age of imported used vehicles will raise average price. In the short term, this will affect small enterprises, low-income earners and reduce government revenues. However, in the long term, this is likely to reduce traffic congestion, leading to a substantial increase in productivity, reduction in fuel consumption, improve air quality and road safety.

Used motor vehicle business makes the region more of a trading economy than an industrial and technological hub.

The use of second-hand goods always affects or slows down industrial and technological development.

A systematic phase-out of implementation of age limit while increasing capacity of local manufacturers will spur local demand, thus encouraging and accelerating technology and industrial development in the region.

To mitigate on the impact of age limit, there should be a policy change covering transport planning and land use to promote public transport.

There is also a need to develop laws on domestic, regional and international trade including taxes, subsidies, incentives and import/export regulations.

Finally, road transport standards are necessary for management of road transport vehicles from design, manufacture, operations, scrappage and disposal.

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