Kicking the tyres Car ownership in Kenya

GET in a taxi in Nairobi and the dashboard will often be lit up with Japanese characters. Most of the cars that ply east Africa’s roads once had another life elsewhere, usually in Japan. As well as being right-hand drive, Japanese cars are favoured for being in better condition than other rusty hand-me-downs. Importers reckon that as many as 90% of second-hand vehicles in Kenya come from that country. Yet the booming trade is now being throttled by government intervention.

Kenya wants to boost its own fledgling auto industry, feeble though it is, so it is trying to make car imports harder. Vehicles shipped to Kenya increased by 40% to almost 110,000 a year between 2010 and 2015. But a drastic additional tax, which came into effect at the start of December, has already slashed imports by a third—bad news for buyers, and also for government coffers, which as a result of the falling numbers could end up with less cash.

A new import duty has been set at a flat rate rather than ad valorem, so it has more of an impact on smaller cars than big ones; and a higher tax is used for older cars than newer ones. It was also slapped on lorries, pickup trucks and other commercial vehicles. If you want to bring in a nearly new, top-of-the-range 4X4 you’re in luck. But most of Kenya’s burgeoning middle class buy smaller, older cars (Kenya does not allow vehicles older than eight years into the country) and taxes on some cheaper imports have more than doubled. For example, a seven-year-old car that sold for around $3,700 last year now costs $5,500.

The auto industry suffers its fair share of dodgy dealing. Sean Garstin, a Briton who imports around 100 cars to Kenya a year, recalls a customs official at the notoriously corrupt port of Mombasa demanding a 600,000 shilling ($6,000) bribe on top of the import duty of 850,000 shillings. Reports abound of older vehicles being smuggled across the border from Uganda to get around Kenya’s eight-year rule. Meanwhile, thousands of stolen British cars are making their way to the ports of Mombasa, Boma in Congo and Dar es Salaam in Tanzania, says Nathan Ricketts, a detective with Britain’s National Vehicle Crime Intelligence Service. Around 79,000 vehicles were stolen in Britain in the year to September 2015; around 40% of these will eventually be recovered. While there are no data for the number that end up abroad, Mr Ricketts, who found a stash of 28 high-end British vehicles in Kampala last year after tracking one via Oman and Kenya, estimates 80% of stolen vehicles spirited out of Britain eventually end up in east and central Africa.

Yet all the bribery and vehicles of dubious provenance have not sated the demand for second-hand cars. And cheap local ones have not materialised. Even relatively low taxes of 26% on car parts have not tempted more factories to look past high energy costs, a lack of skilled labour and the absence of a supply chain to set up shop in Kenya. That has not stopped governments ploughing money into doomed local manufacturers over the years. In the early 1990s, Kenya spent millions building just five prototype Nyayo Pioneer cars. Now Uganda, which has no vehicle-assembly factories, is repeating the feat, having splurged $70m on Kiira Motors since 2012. After producing test electric cars, and a solar-powered bus that broke down on its maiden drive, the government-owned company is planning to make 305 traditional pickup trucks in 2018. They will be sold for $32,000—having cost $100,000 each to make.

Private companies do not necessarily find things any easier: thanks to all the bureaucracy and lack of an established local manufacturing industry one Kenyan startup, Mobius Motors, has taken five years to produce its first 50 low-cost vehicles. African governments would do better to ease up on both the white-elephant projects and punitive import taxes if they want to help their citizens to drive.

Source: http://www.economist.com