Motorcycle taxi operators wait for customers at Luanda market, Vihiga County. Photo/FILE
Nation Media Group
By Neville Otuki
Posted Sunday, August 4 2013 at 18:26
Posted Sunday, August 4 2013 at 18:26
In Summary
- Motorcycle assemblers will now pay 25 per cent tax to import spare parts, which is the equivalent of duty paid for finished motorcycles under the customs union protocol.
- The new development will discourage new investors from setting up in Kenya due to the high cost of importing CKDs.
- It is also likely to keep motorbikes off the reach of many Kenyans.
Motorcycle assemblers have been slapped with a new
tax that is feared will make locally assembled bikes more expensive and
slow down the industrialisation process.
The assemblers until last month enjoyed a 15 per cent tax
waiver on imported motorbike parts, commonly known as completely knocked
down kits (CKD), as part of the government’s policy to encourage local
assembling of bikes to save foreign exchange and create jobs.
This means motor firms will now be forced to pay
the full 25 per cent tax to import spare parts, which is the equivalent
of duty paid for finished motorcycles under the customs union protocol.
The high import rates are likely to keep motorbikes
off the reach of many Kenyans due to high prices and diminish hopes of
significant job creation by investors setting up assembly plants in the
country.
The policy statement was announced in the East African Community Gazette on June 30 and came into force on July 1.
The regulation, however, imposes a condition that
manufacturers will continue enjoying the 15 per cent waiver only if they
source for motorbike parts from any of the EAC member states and turn
their back on imports from outside the bloc.
The notice identifies the various CKD parts to be
obtained in the region as main frame, suspension, seat frame, mudguard,
wheel rim, break gear and exhaust pipe.
The new development, which also affects other
Kenyan manufacturers under the remission scheme who are paying full duty
to enter other East African Community (EAC) states, will discourage new
investors from setting up in Kenya due to the high cost of importing
CKDs.
This comes even as two automakers — Honda and TVS —have set up motorcycle assembly plants in the country having been attracted to the local market partly by the duty remission scheme.
The two firms say the government should reverse the
decision by the EAC Secretariat considering there is no manufacturing
plant for CKD in East Africa with only the cottage industry producing
some parts.
Even then, these firms said they are not comfortable buying CKD (spare parts) locally citing low quality.
“We shall continue importing CKD due to quality
issues but at a higher price following the regulation,” Isaac Kalua, the
chairperson at Honda Motorcycle Kenya Ltd, said Friday.
Honda says the regulation may hurt their efforts to
manufacture affordable motorbikes in the country even as they target
low-end customers with the construction of an assembly plant in Nairobi
to be opened in October.
High operation cost could also discourage the firm
from hiring over and above its target number of local employees — 60 —
in the first year of operation.
Honda plans to assemble 100 units of 120cc daily. The units are popular with boda boda operators in the country.
By: Agencies
Honda plans to assemble 100 units of 120cc daily. The units are popular with boda boda operators in the country.
Nairobi – Kenya and Uganda
could decide by mid-July on the route for a crude pipeline linking their
newly found oil fields to the Kenyan coast, a vital step for oil firms
to make a final investment decision, a senior Kenyan ministry official
said.
Two possible routes have been proposed, one running through north Kenya to the coast in the Lamu region and a second following the route of an existing products pipeline further south that would run to the port of Mombasa.
Oil executives say they cannot make progress with their final investment decision on developing discoveries in Uganda and Kenya until the pipeline route and related costs are clear.
“We told the contractor to do a thorough analysis of the two routes and when it has done the analysis we will be able to meet and make a decision,” Joseph Njoroge, the principal secretary at Kenya’s energy ministry, said.
He said the analysis by Japan’s Toyota Tsusho should be completed in about two weeks, and a decision by Uganda and Kenya could happen a week or two later.
That means the decision on the route could be taken in “three weeks to a month” from now, he said, adding that construction could be completed “by about 2018 or 2019”.
Britain’s Tullow Oil, with stakes in Uganda and Kenya, said it expected to decide on whether to proceed with investment in late 2016. It has in the past suggested it could take a decision in early 2016.
France’s Total and China’s CNOOC are also investing in Uganda, while Tullow’s partner in Kenya is Africa Oil.
Two possible routes have been proposed, one running through north Kenya to the coast in the Lamu region and a second following the route of an existing products pipeline further south that would run to the port of Mombasa.
Oil executives say they cannot make progress with their final investment decision on developing discoveries in Uganda and Kenya until the pipeline route and related costs are clear.
“We told the contractor to do a thorough analysis of the two routes and when it has done the analysis we will be able to meet and make a decision,” Joseph Njoroge, the principal secretary at Kenya’s energy ministry, said.
He said the analysis by Japan’s Toyota Tsusho should be completed in about two weeks, and a decision by Uganda and Kenya could happen a week or two later.
That means the decision on the route could be taken in “three weeks to a month” from now, he said, adding that construction could be completed “by about 2018 or 2019”.
Britain’s Tullow Oil, with stakes in Uganda and Kenya, said it expected to decide on whether to proceed with investment in late 2016. It has in the past suggested it could take a decision in early 2016.
France’s Total and China’s CNOOC are also investing in Uganda, while Tullow’s partner in Kenya is Africa Oil.
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