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Local automotive parts sector will jumpstart economy

By Isaac Kalua | August 2nd 2020 at 00:00:00 GMT +0300

A story is told of the beggar who sat by the side of a road for more than 30 years begging for coins. One day, a passerby asked the beggar what was in the box he was sitting on. The beggar replied that the box was empty.

“Open the box and confirm what’s inside,” the passerby insisted.

The beggar obliged and to his shock, he found a treasure of gold sitting calmly in the box.

Here in Kenya, we are in a similar predicament with the beggar. As a nation, we continue depending on foreign loans and grants. As individuals, handouts, whether from relatives or politicians remain rampant. We should realise that we have the capacity to generate more revenue than what we receive from external sources. We need to open the proverbial box we are sitting on, and see if in fact, we are sitting on a box full of gold.

The National Treasury Cabinet Secretary Ukur Yatani recently gazzetted the Tax Procedures (Unassembled Motorcycles) Regulations 2020 legislation. Full implementation of this law can unlock some of the treasure that we have been sitting on for years. 

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This legislation has paved the way for local manufacture of some motorcycle parts. Within the next three months, authorised assemblers through local parts manufacturers will be able to manufacture seven motorcycle parts locally. A further seven parts will also be manufactured locally within the next 12 months. Most of what will now be manufactured locally include metal parts and battery fluid.

Such local manufacture creates much-needed jobs. The initial manufacture of seven parts within three months will create at least 4,000 jobs. This will instantly transform the motorcycle assembly sector in Kenya into one of the biggest private-sector employers. This will eventually save money for motorcycle buyers. There is already a growing market for motorcycles in Kenya and the East African region.

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The annual demand for motorcycles in Kenya is approximately 180,000 annually while in East Africa it is 680,000.

If we tap into this low hanging fruit exponentially, we will naturally become a hub of motorcycle manufacture and will eventually penetrate the entire African market through the African Continental Free Trade Agreement.

But even as we seek to expand our market reach, we need to streamline and optimise the motorcycle economy. Currently, there are 900,000 boda bodas in the country who make 32.4 million rides daily. Each of their riders earns an average Sh1,000 daily and spends Sh300 on fuel.

Consequently, they spend nearly Sh100 billion annually on fuel. They also each support the livelihoods of at least six people, which adds up to 5.4 million people. As such, the boda boda economy is worth Sh324 billion.

Given this increasingly critical role of boda bodas in Kenya’s economy, there is need to expand their value chain. Until now, the boda boda value chain has only been strong at the end user section, not the production stage.

That was largely because of minimal local manufacturer of motorcycle parts. Considering that a single motorcycle comprises of about 300 parts, we create multiple jobs for foreign countries every time we import these parts. 

Other sectors like steel, paint and energy will also benefit because they will be integral parts of the local manufacture value chain.

All these factors will create a conducive environment for investors, which will lead to a potential boon for Foreign Direct Investment into the sector. There will also be an increase in technology transfer from already established manufacturers globally. Such technology transfer will necessitate retraining of skilled laborers, which will expand the local manufacturing skillset.

Since the wearer of the shoe knows where it pinches most, local manufacture will customise different parts accordingly to suit the local demands and needs. Chief among this is safety. Anything that can be done at the manufacturer level to enhance safety will now be possible. This is because safety starts at the point of assembly and not at the point of sale.

Indeed, this local automotive parts manufacture is the gold we have been sitting on. Time is ripe. As we open the box let us think and act green.

– The writer is founder and chairperson, Green Africa Foundation. www.isaackalua.co.ke

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