Campaign for joint East Africa vehicle assembly engages top gear
Tuesday December 04 2018
Second hand cars aligned at the port of Mombasa after being offloaded from the Cargo ship on October 24, 2018. PHOTO FILE | NMG
East African states are moving towards an integrated automotive market through the establishment of the Regional Automotive Industry Platform of East Africa.
They hope it will serve as an incentive for global automotive manufacturers to invest in the region in both assembly and component manufacture.
At their 19th Ordinary Meeting held in Kampala in February this year, the heads of state directed the EAC Council of Ministers to explore the possibility of developing the automotive industry by reducing importation of used vehicles from outside the region and thereby make the region more competitive.
The new platform (Raipea) aims to help the region save more than $2 billion in car import costs annually.
It is expected to identify and profile vehicle types and components that can be produced or manufactured in the region for intra-EAC trade first, and then for export.
Win-win scenario
“The immediate task for the platform will entail assessing each country’s comparative strengths/capacities in automotive production and component manufacturing and propose a win-win scenario for collaboration in assembly and manufacture of components,” says the statement by Permanent Secretaries that was adopted by the Council.
The region hopes to mirror the success of countries like South Africa, Nigeria and Morocco, which have managed to develop their own automotive industries through strong and extensive co-ordination at the national and regional levels, which has ensured policy coherence, technical guidance, and steering in the direction and evolution of the industry.
The Sectoral Council on Trade, Industry, Investment and Finance at its meeting three weeks ago, approved the terms of reference for the establishment of Raipea.
The EAC Secretariat is now expected to factor in the cost for undertaking a study on the economic feasibility of affordable vehicle manufacturing in the region, in the EAC budget for the 2019/2020 financial year.
Age limits
On the age limits for imported vehicles, the Council gave two partner states that had not stated their national positions one year to comply.
The region is racing against time to finalise talks on proposals to lower the age limit for imported used cars to five years by 2021.
Currently, Kenya has an eight-year age limit for imported used cars, with Tanzania having a 10 year limit, while Uganda has a 15-year limit.
Rwanda, Burundi and South Sudan, will be the most affected given that they do not have any age limits for imported used vehicles.
“Used vehicle imports accounts for 70-85 per cent of the EAC total market. Also, the EAC Partner States do not have a harmonised policy for the importation of used vehicles leading to trade diversions, loss of revenues, and risks related to road safety, and environmental health risks,” the technical experts said in their report.
The EAC last year reactivated talks on the harmonisation of age limits for imported vehicles and setting up assembly plants, having put it on hold following recommendations of a study by EAC Committee on Industrialisation which warned against sudden implementation of the harmonisation process without reducing the number of vehicles imported into the region.
The indecisiveness of the two countries is said to be holding back the region from adopting common position on the matter and the one year deadline given to them, which expires in October 2019, is meant to bring the entire process to a close.
Textile and leather sector
In the Kampala Summit, the heads of states directed the Council to make the region more competitive by prioritising the development of a competitive domestic textile and leather sector that will give East Africans a wider range of choices in terms of affordable, new and quality clothes, shoes and other leather products.
In September, the EAC Secretariat commissioned a study on regional strategies for the cotton, textiles and apparels; and leather and footwear sectors. The strategies are expected to be finalised in April next year.
The ministers are now looking at propping up cotton production in the region as an easier alternative to reviving the textile sector.
There is also concern that most of the cotton lint produced in the region are exported the tune of up to 90 per cent, with the remaining hardly adequate for local value addition by millers.
“There is a need for partner states to create a revolving cotton lint bank/buffer stock as in the case of Uganda to ensure constant availability of local cotton lint to local spinners.
“There is a need for various mechanisms by which partner states can support full value addition to cotton lint and seed to improve farmer’s prices and stop being price takers as well as increase output,” the ministers said.