Former President Uhuru Kenyatta test-drives a leased car with his successor William Ruto (right) at Uhuru Park on November 7, 2013. PHOTO | NMG
Taxpayers saved an average of Sh70 million a year under the lucrative government vehicle leasing programme against the Sh4 billion that its promoters initially projected.
The findings of a new study commissioned by the Treasury show that the Jubilee government saved a total of Sh638 million in nine years under the vehicle leasing deal that it had banked on to trim heavy upfront acquisition costs and check run-away maintenance costs.
At the time of the launch, Treasury officials had estimated that it would make savings of Sh4 billion annually under the scheme where the State pays a fee to respective dealers who then undertake to provide a certain number of insured and serviced vehicles over several years.
But an impact study of the motor vehicle leasing programme whose report was released Thursday revealed that it missed the target by a wide margin.
“Based on annual discount rate of 12.89 percent as per GOK [Government of Kenya] 5-year bond and the initial lease remittances under phase VI, net present value (NPV) computations translate to Sh79.78 million or a saving of Sh638 million for the 9 years,” Peter Makokha, the lead consultant for the study, said.
The data show the programme started in 2012 has so far made available 6,826 new vehicles to civil servants in key security sectors
Dr Makokha said that the findings imply that the government’s intervention under the programme made economic sense in the medium and long term.
The report shows the programme has stimulated the local automotive sector, boosting the declining fortunes of auto dealers and spurred manufacturing.
“The programme has injected over Sh80 billion to the economy, paid insurance premiums worth Sh2.08 billion, contributed Sh1.6 billion in taxes and offered a steady demand for fuel worth Sh2.3 billion,” said Dr Makokha.
The government previously bought vehicles from dealers and incurred the costs of insurance, maintenance and depreciation.
The original idea behind the vehicle leasing was for the State to access new vehicles using private sector capital and repay over a period of time. The savings made would be diverted to other priority sectors such as health and in infrastructure.
The vehicle leasing scheme especially sought to enhance mobility for security officers as part of the pledges made by the Jubilee administration.
Also read: Kenya Power mulls leasing vehicles
In 2013, the National Police Service had only 3,155 police vehicles nationwide and most of them were in a state of disrepair, impeding on ability of the police to respond to distress calls.
Aside from acquiring new vehicles for the police under the programme, the government also procured armoured personnel carriers and mine-resistant armoured personnel carriers that were deployed in the Coast and North Eastern regions.
The programme is currently in its sixth phase, with the consultant linking the 30 percent reduction in crime as the other benefit of the scheme.
“Time taken for the police to respond to distress calls has reduced by 50 percent while the number of incidences when they were called and could not respond has decreased to 22.1 percent from 49 percent in 2012,” said Dr Makokha.
In May, the motor vehicle assembler Isuzu East Africa handed over 48 double max pickups to the Ministry of Interior and Coordination, completing the last batch of the 210 vehicles under the leasing agreement.
The entire contract comprises 514 units, valued at Sh4.6 billion, including pick-up trucks, buses, and sport utility vehicles (SUVs).
Isuzu D-Max pickups are locally assembled and boosted the manufacturing pillar of the Big four Agenda set by the administration of former President Uhuru Kenyatta.
Dealers that won tender to supply under the programme included Toyota Kenya, Nissan dealer Crown Motors and Peugeot dealer Urysia.
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