President Uhuru Kenyatta’s government may have just undercut itself and its highly touted big four agenda especially the manufacturing pillar with the importation of buses from
The government has once again changed tune indicating that the planned acquisition of high-capacity buses to help with decongesting Nairobi will favour South African manufacturers.
This has not gone down well with Kenyans where the youth unemployment rate stands at 26.21 per cent according to the International Labour Organisation (ILO) estimates between 2007 and 2017.
The United Nations Development Programme (UNDP) ranked Kenya as having the highest unemployment rate in East Africa region last year.
In the ranking, one in every five youth in Kenya is unemployed. This is despite the fact that hundreds of thousands of youth are graduating every year with the numbers stacking.
With this reality, the Kenyan government is planning to buy 64 buses from South Africa to use in the Bus Rapid Transport System (BRTS) in the country whose transport system is chaotic.
The importation from South Africa comes just months after Isuzu East Africa launched two high-capacity buses with a speed limit of 60kph and passenger capacity of between 62 and 100.
Isuzu said that the buses were locally assembled specifically for Kenya’s BRT system.
In response to the Transport secretary James Macharia statement last week over the importation of the buses, the Kenya Association of Manufacturers (KAM) says that the government has erred in procuring the buses from outside the country yet the vehicle manufacturers have the capability and capacity meet the government’s demand.
In a statement, KAM said manufacturing, as a key pillar in the big four agenda for the country means that local sourcing towards the growth of the sector and the consequent provision of jobs to citizens cannot be understated.
“In our endeavour to grow the sector at 35 per cent per year to achieve the desired 15 per cent GDP contribution by 2022, the Buy Kenya Build Kenya Strategyshould be rigorous and should prevail for both the short and medium term,” said the statement adding, “This is especially so for products that can easily be manufactured within the country.”
KAM says that as the largest procurement entity in the country, the government, where possible, ought to direct its spending on locally manufactured goods with a view of supporting the big four agenda.
“Currently, the manufacturing sector’s contribution to the GDP is 8.3 per cent, with a registered growth of 0.2 per cent growth in 2017. Favouring imports over local content, as seen in the recent importation of 64 Bus Rapid Transport (BRT) buses, bypassing our local bus assemblers and bodybuilders, goes against the agenda to boost the sector’s ability to provide employment locally and increase its GDP contribution towards the country’s economic goals.”
The Association states that the Local Vehicle Assemblers have a production capacity of 34,000 units per annum, which makes them capable of producing the required number of high occupancy buses for the project.
“It is also worth noting that engaging local assemblers to deliver these buses means a shorter lead-time for delivery when compared with those being imported. Additionally, locally assembled buses have been tested and proven in the Kenyan market, where they are known for their durability and low maintenance cost. Local engineers have the knowledge to design and engineer these buses for local operating conditions.”
Subsequently, a well-established aftersales network for parts, maintenance, service and repairs for local buses already exists to ensure the success of the BRT system.
“We also need to consider that many apprentices locally will be trained under this project in order to sustain an up-to-date, functional system.”
The local bus Complete Knock Down (CKD) kits attract 0 per cent import duty and excise duty, in which case the local buses would be more affordable than imported buses-which would attract 25 per cent import duty and 30 per cent excise duty.
KAM says that at the moment, Kenya is a twin deficit economy.
“This means it has both fiscal and current account deficits. A current account deficit occurs when a country imports more than it exports. Clearly, importation of the BRT vehicles risks exacerbating the current account deficit which has been worsening over the years, as well as, stifling government’s efforts to industrialize under the big four agenda.”
It adds, ‘If we are to realize the desired goals in the big four agenda, it has to be demonstrated through commitment to the 40 per cent local content procurement regulation, especially in critical infrastructural projects and decisions.”
By so doing, KAM says this will, in turn, encourage further investments in the sector by both local and foreign investors, increasing government revenue and more importantly offering productive jobs.
Macharia said last week that the government plans to buy the buses from South Africa after local passenger service vehicle bodies’ fabricators “failed to meet the required specifications”.
In November last year, the EU committed a Kshs5 billion grant towards the Sh9.6 billion BRTS which will have five corridors including the Mama Lucy Hospital-Donholm to the CBD, Limuru-Kangemi-CBD-Imara Daima –Athi River to Kitengela road, Rongai, Bomas-CBD-Ruiru-Thika- Kenol-Murang’
Macharia said they are yet to establish the total amount of money to be spent on the buses estimating that each would cost Kshs25 million bringing the total cost of the 64 units to about Sh1.6 billion.