The day, July 1 will mark a major shift in industrial policy for the local motor vehicle assembly industry in Kenya. Importers of secondhand vehicles will not be able to bring in trucks of between three and thirty tonnes.
The age limit for buses has been reduced to zero, meaning that the importation of secondhand buses has been banned.
The age limit for imported prime movers will be gradually reduced to zero by July next year.
Predictably, the lobby for secondhand importers has been pushing back. We must all support this bold decision because we all know that the experience in newly industrialised countries has shown that countries that pursue informed and viable industrial policy start by providing very selective and targeted incentives to industries that they want to develop.
To get anywhere with manufacturing, you must discriminate. This is how you allow the sectors you have targeted to gradually grow into world-class players. When South Korea was at the stage of developing its local car manufacturing industry in the early ‘70s the average Korean had only one option: to buy a local car.
When you look at the trends in the rest of the world today, the picture you see is that all countries that have developed a significant local automotive industry started by imposing stringent restrictions on used vehicle imports. Examples here include South Africa, Morocco, Egypt and India.
Why should Kenya be an exception? We have had three local vehicle assemblers that have been in existence since the seventies, namely, AVA in Mombasa, KVM in Thika and Isuzu EA in Nairobi.
We disrupted the growth of the sector in the 1990s when we uncritically adopted the World Bank liberalisation policies that led to the growth of a large second-hand motor vehicles sector.
This is how the country ended up being turned into a mitumba economy. Today, we import upwards of 100,000 used cars in a year. We let the country be turned literally into an auto graveyard.
On the advice of the Washington consensus, we dismantled the legal regime and institutions we had created to support the growth of the sector. For instance, we used to have a system that was called ‘the no objection certificate’ that prohibited the importation of products that competed with those produced by particular local firms.
There existed a body that was known as the industrial Protection Committee — a key inter-ministerial body that was set up in the seventies as the government’s main agency for dealing with protection issues and policies for local manufacturers. We dismantled every law and mechanism that supported local production and value-added manufacturing in the automotive sector.
The local assemblers have only managed to survive the competition from cheap used imported cars through resilience and by the grace of God.
With a total assembly volume of 11,000 units in 2021, the local industry is barely utilizing 30 percent of its installed capacity- equivalent to 34,000 units per annum in one shift. Today, the industry has the potential to grow by 50 per cent. The industry is producing numerous pick-up models.
I recently visited the AVA plant in Mombasa and was pleasantly surprised to learn that Simba Corp has been assembling a saloon car there. With the right policies and, targeted support and incentives, Kenya will soon start exporting cars to the rest of the continent especially after the Africa Continental Free Trade Area has kicked in. Indeed, with an improved incentive regime the three assemblers have the potential to supply commercial trucks to the entire East African region.
I support the phased approach the government has chosen. As things stand the impact of the import ban on used buses and trucks will be minimal on the mushrooming car bazaar business. 80 per cent of the total imported vehicles are passenger vehicles, saloons station wagons, and SUVs that are not affected by the new policy.
The age limit for imported used passenger vehicles has been retained at eight years. And, with the rapidly growing government motor vehicle leasing programme where locally- assembled and used government vehicles are released to the market every four years, we a likely to see the emergence of a robust market for locally assembled good quality vehicles being sold through the bazaars.
We must all pray that the government will resist attempts by the used car imports lobby that has mounted a vicious campaign against the ban on imports of buses and trucks.