Auto makers, who is the fairest of us all? This is the question
whose answer informs the region’s policies crafted to attract and retain
vehicle manufacturers.
Rwanda seems to have started
off as the favourite, followed closely by Uganda with both countries
reeling off numerous incentives.
Last year, Volkswagen established a unit for sub-Saharan Africa, targeting Rwanda, Kenya, Ethiopia and Tanzania.
Come
January, Rwanda bagged a $20 million deal with Volkswagen for a new
vehicle assembly plant. This, it is said, was a result of incentives
including tax breaks, and a supportive policy which the VW just couldn’t
resist.
“We chose Rwanda because VW received strong
support from the Rwandan government and co-operation from Rwanda
Development Board,” Thomas Schafer, chairman and managing director of
Volkswagen South Africa said.
RDB is championing the
Smart City agenda, a perfect fit for VW Mobility Solutions that will see
newer cars on Rwandan road, through car pooling and corporate leasing
programmes.
Still on incentives, VW was offered a space in the Kigali
Special Economic Zone, meaning the firm will enjoy a 10-year tax free
regime. VW was also provided with a designated, serviced land complete
with electricity connection and water at discounted rates.
Earlier
in 2016, Uganda enacted several preferential policies, such as a
dedicated customs and tax administration unit to provide a one-stop
service for imported and exported goods.
The
government offered tax exemption for the auto assembly business when
importing equipment and raw materials besides a waiver on corporate tax
for the first 10 years of operation.
On its part,
Tanzania amended its Finance Bill to lower corporation tax for vehicle
assemblers, from 30 per cent to 10 per cent, as an incentive to hasten
production and boost the country’s industrialisation drive.
Plants in many cities
This
amendment was welcome news to General Motors, which had announced plans
to set up a car assembly in Tanzania as Uganda was putting up one
through the Zhong Da Group.
The Hyundai Group is also said to be interested in working with Uganda’s Kiira Motors for a new auto assembly plant.
All
these are welcome developments but a former trade adviser at the EAC
Secretariat, Yusuf Abdalla, asked the the region to rethink the auto
assembly plants policies by focusing more on tax incentives.
“We
need to grow as a region and cultivate the ability to negotiate as
governments on what brand we can manufacture exclusively then sell to
the rest of the world,” said Mr Abdalla.
For example,
South Africa gives tax rebates and refunds on certain investments which
have helped its auto assembly sector grow. The auto industry, which
employs about 100,000 people, is the third largest contributor to the
country’s GDP, and accounts for around 12 per cent of exports.
Data
from National Association of Automobile Manufacturers of South Africa
shows that the country exported 173,000 vehicles to Europe in 2016 out
of the more than 600, 000 produced, up from 116,000 in 2015, with
forecasts that production will rise by 50 per cent to 900,000 units a
year in the next two years.
Challenge
For
Kenya, the biggest impediment has been the legislation and lack of
incentives. In 2016, Treasury Cabinet Secretary Henry Rotich scrapped
excise tax on locally assembled cars in a bid to spur the manufacturing
sector. The removal of the excise duty saved assemblers a flat rate
payment of $1,500.
However, Kenya has refused to budge
on incentives touching on corporate tax, rejecting calls for giving tax
holidays to attract more assemblers.
“Auto assembly
investors are looking for long-term opportunities that are safeguarded
by friendly policies. Or they’ll head elsewhere,” said Dave Williamson,
the factory manager at Associated Auto Assemblers Ltd.
No comments :
Post a Comment