Regional countries urged to maintain 25 per cent tariff on vehicle imports

A traffic jam in Kigali. The East African Business Council wants the tariff maintained to spur local industry. Sam Ngendahimana.

The East African Community partner states need to maintain the 25 per cent Common External Tariff on both new and used fully built motor vehicles imported in the regional bloc, says the East African Business Council (EABC).

According to the EABC, this would boost the productivity of local motor vehicle and motorcycle assembly plants.

EABC is a regional body bringing together private sector associations and corporates from the six-member bloc.

The call comes shortly after EAC Partner States of Rwanda, Tanzania, Kenya, and Uganda unveiled their budgets for the fiscal year 2018/2019 on June 14.

In their budget proposals, the four partner states put up various measures to protect local manufacturers in the region through high import duty on ranges of products.

All four countries read their budgets under a similar theme dubbed; ‘Industrialisation for Job Creation and Shared Prosperity’.

Among the products that will pay higher levies are; palm oil and stearin, edible oils, nails, tacks, drawing pins, corrugated nails staples, safety matches, potatoes, mineral water, edible offal, sausages, textiles, footwear as well as Iron and steel products.

“It is praiseworthy to see that the EAC governments are keen to offer appropriate protection, incentive structures and support for the growth of domestic nascent industries in the region, “said EABC chief executive officer, Lilian Awinja.

However, according to the EABC, the proposals in relation to the motor vehicle and motorcycle industry “are bitter-sweet.”

In the recent budget proposals, Rwanda grants stay of application of EAC-CET and apply a duty rate of 10 per cent instead of 25 per cent on road tractors for semi-trailers, motor vehicles for transport goods with a gross weight exceeding 20 tons and buses for transportation of 50 persons and above.

Rwanda also granted stay of application of EAC-CET and apply a duty rate of 10 per cent instead of 25 per cent for motor vehicles for transport of goods with a gross weight exceeding five tons but not exceeding 20 tons.

But Deus Kayitakirwa, the Director of Advocacy at the Private Sector Federation, said: “We are actually yet to validate it [EAC CET], at EAC level. What we have right now is simply a country position.”

“For us, we are at 25 per cent considering that, as we speak, there is actually no made-in-Rwanda car. But we have the Volkswagen project.”

The CET – which is supposed to be revised every five years – was introduced in January 2005 when the EAC Customs Union Protocol came into force. Rwanda joined the Community in July 2007. A review of the CET has delayed for the nearly two years now.

Uganda, among others, proposes to reduce import duty from 25 per cent to zero per cent on motor vehicles exceeding 20 tons; reduction of import duty from 25 per cent to 10 per cent on buses for transportation of more than 25 persons.

“Uganda’s proposed ban on importation of motor vehicle of 15 years and above from the year of manufacture, is commendable as it paves the way for the region to embark on harmonization of age limits of imported vehicles, to boost the motor vehicle industry,” said Awinja.

“It is also admirable to see that in the budget proposals, EAC Partner States agree to grant a duty remission on the importation of completely knocked down (CKD) kits at a rate of 10 per cent for a period of one year, this encourages local manufacturing and assembly of motorcycles.”

Completely knocked down refers to fully disassembled items – such as an automobile, bicycle, or furniture – that is required to be assembled by the end user or the reseller. Goods are usually shipped in CKD form to reduce freight charged on the basis of the space occupied by the item.

According to EABC, motor vehicle manufacturing and assembly is a volume driven industry due to high cost of plant investment. The capacity of motor vehicle assembly plants in the region is under-utilized and is confronted by intense competition from imported second had vehicles mainly from Japan and United Arab Emirates.

This, it is noted, hiders the development of local content supply base, which is dependent on high volume of production.

Keeping stride with last year momentum, the theme of the 2018/19 Budget for all East African Partner States was “to build an industrial economy that will stimulate employment and sustainable social welfare”.  

To achieve that each country unveiled budget estimates mainly focused on spending on infrastructure, promoting local manufacturing and creating jobs.

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