Henry Rotich’s Sh9b leasing fund to excite motor dealers

By Macharia Kamau

NAIROBI, KENYA: The Government has shown strong indication of leasing motor vehicles, three years after the plan was mooted. The move is expected to save  the State costs associated with buying and maintenance of its fleets.

The National Treasury wants to lease 1,200 vehicles at cost of Sh3 billion this year for the National Police Service Transport.

This is expected to boost vehicle and equipment leasing industry that is still at its fledgling stages.

The latest move targeting the Police Service is said to be a pilot project. If  successful, it will in the coming years be replicated to other government ministries and departments.

The idea to lease motor vehicles by Treasury was initially proposed in the June 2010 Budget by President Uhuru, who was then the Finance Minister. The plan was, however, shelved for what Treasury then said was refusal to cooperate by ministries and other State agencies, including the then Police Force.

Business interest

In the 2013/14 Budget statement read on Thursday by National Treasury Secretary, Henry Rotich, the Government said it would spend Sh3 billion over the next financial year to hire 1,200 vehicles for the police service. These, he said, would make police patrol visible everywhere to respond to any reported crime efficiently.

Treasury has already invited bids for the provision of leasing services. In an advert published on Wednesday, the Ministry said it is reviewing the manner in which official transport services are provided to ensure efficiency and cost effectiveness.

“As part of this review and efforts to deal with the challenges of providing official government transport services, leasing of vehicles for the National Police Transport Service is expected to commence in the financial year 2013/2014,” said Treasury in its invite for bids from vehicle and equipment leasing firms.

“At present individual ministries, departments and agencies produce and manage their own vehicle fleet and transport services to facilitate public service delivery. This mode of delivery has often been accompanied by increasing costs of transport services without commensurate improvements in service delivery.” Treasury said the firms contracted to provide the services would have personnel deployed in State offices to oversee the running of the fleets. “Firms that will get the contracts will ensure that the vehicles are in working condition throughout, as well as have their personnel embedded with the leasing agencies to help in the management of the leased fleets,” said Treasury.

“The leasing arrangement envisaged shall include insurance, scheduled and unscheduled maintenance, replacement of non-functional vehicles... implants in government offices to monitor the fleet and capacity building for government fleet management personnel,”

Paul Njeru, the chief executive of Vehicle and Equipment Leasing Ltd, a player in the leasing industry, said the plan would save the Government billions shillings that would have gone to buy and maintain its own vehicles. “The Government’s budget for leasing the vehicles for the police force is Sh3 billion per year, this is in comparison to Sh12 billion that Treasury would have paid up-front to buy the vehicles. The initial cost would be in addition to regular maintenance in subsequent months, which is now the headache that will be borne by the contractor,” he said in an interview.

“Leasing will save Treasury Sh9 billion that will be deferred to subsequent years and can be used in other more pressing areas. It will also save the State costs incurred in running its own fleets,” claimed Njeru.

He noted that due to heavy usage, some of the vehicles are grounded within two to three years of operations, hence leasing can be a huge win for the State.  He reckons that the leasing plan would foster growth in both motor vehicle and leasing industries.

He said leasing is unlikely to crowd out the private sector that has already taken up leasing to service their operations.