Why e-mobility could make or break East African economies
Monday July 03 2023
An electric vehicle is plugged into a charging station in TJ&U garage in Nairobi, Kenya on May 24, 2023. PHOTO | LUCY WANJIRU | NMG
When Uganda’s first locally made electric vehicle hit the road in 2011, it embodied more of Kampala’s innovative youth than the country’s push for more environmental-friendly means of transport, and far less of the economic stability and prosperity electric mobility could bring.
The first Kiira electric vehicle was designed in 2009 by a group of Makerere University students and would later culminate in the creation of the state-owned Kiira Motors Limited, which built the continent’s first electric buses and put Uganda miles ahead of its East African peers in the journey to e electric mobility.
But today, the success of electric mobility holds much of the fate of not just Uganda’s economy, but nearly all African countries that are net oil importers and have suffered devastating effects of climate change in the recent past.
Read: Insight into Africa’s share in heavy burden of climate change
Warren Ondanje, managing director of the Africa Electric Mobility Alliance (AfEMA), argues that e-mobility is crucial for countries in the region, now more than ever, and government incentives for the budding industry are fundamental for its growth.
“There is currently a significant pressure on foreign exchange due to fossil fuel importation, and that presents an opportunity for us to start designing solutions that will capitalise on the available electricity on our grid, which is mostly green,” Ondanje told The EastAfrican in an interview.
In the latest Kenya Economic Update, the World Bank said by accelerating uptake of electric vehicles, Nairobi will not only significantly ease the pressure on foreign exchange resulting from oil importation but will reap a tonne of economic benefits pegged on the transition.
Read: Kenya Power to pilot transition to electric vehicles
According to the World Bank, Kenya and other emerging economies bank heavily on transitioning to e-mobility to maintain economic resilience, since without that, they might no longer be able to sell products in some of their key export destinations, including the European Union and the United States.
New rules by the EU and US, which seek to reduce emissions resulting from products sold in their markets across their entire value chains, could soon bar exports from the region, which could significantly impact countries’ foreign exchange reserves, throwing the economies into doldrums.
“It is also expected that cross-border regulations and standards with a focus on logistics footprints will be implemented in the near future. The impact of these regulations will have broad consequences across international markets because of the importance of the European Union as an importer,” the global financier said in the Kenya Economic Update, released this month.
Mainstay agriculture
Accelerating uptake and use of electric vehicles across freight and value chains of countries’ key exports, which in the region are mostly agricultural, can therefore, help guarantee their continued access to the world’s largest export destinations, hence protecting their economic stability, World Bank said.
“Addressing the energy demand and reducing fossil fuel consumption in Kenya can help tackle both the country’s trade deficit and environmental concerns,” World Bank said.
Read: East African countries in $8b investment plan
“The transport sector, especially road transport, presents opportunities to reduce imported fuel consumption through energy efficiency measures and fuel substitution, considering that internal combustion engines play a significant role in energy consumption in this sector,” the bank added.
Uganda
Uganda in 2018 commercialised Kiira Motors and injected Ush144 billion ($39 million) to strengthen the company’s ability to deliver more electric vehicles. In similar efforts, the ministry of science, innovation and technology has since been created to steer e-mobility.
So far, Kiira Motors has developed four Kayoola electric buses, which can go for up to 300 kilometres on a single charge, which makes them ideal for urban operations in a city like Kampala, where at least 10 percent of Ugandans reside.
The government has also given Kiira Motors 100 acres of land in the industrial city of Jinja, on which the construction of the electric vehicle assembly plant – which is projected to produce at least 5,000 EVs every year – is ongoing.
Read: BUWEMBO: Why Kampala’s new electric buses won’t ‘glide’ very far
Tanzania
Tanzania, which has the highest number of electric vehicles in the region – currently estimated at 5,000, has made little efforts to boost the sector until this year, when new tax incentives have been introduced to boost the sector.
Finance and Planning Minister Mwigulu Nchemba, while reading the coming financial year’s budget, asked parliament to exempt excise duty on parts and engines of electric vehicles.
“This is intended to enhance the use of electricity and natural gas available in the country and save forex used to import fuel,” Dr Nchemba said.
At the same time, the government has also introduced a 5 percent excise duty on vehicles with engine capacity of more than 1,000 cubic centimetres to discourage new purchases in favour of EVs. Petrol prices are also set to rise after the introduction of an excise duty of Tsh20 per litre and increment of the fuel levy by Tsh100.
Felchesmi Mramba, permanent secretary at Tanzania’s Ministry of Energy told The EastAfrican that aside from the tax incentives, the government plans to partner with private-sector players to ensure there enough charging infrastructure for EVs in the country.
Read: Tanzania takes lead in EA's e-mobility race
Kenya
In Kenya, similar tax incentives have been implemented to discourage the use of fossil fuels in transport while encouraging the growth of the e-mobility industry. In the latest wave of new taxes, value-added tax has been doubled to 16 percent to reduce its demand.
In 2019, the government had halved excise duty on imported electric four-wheelers to 10 percent. This year, the government has further waived import duty on electric two and three-wheelers, and exempted all EVs from VAT. A special electricity tariff for the EV charging infrastructure has also been introduced.
The Bus Rapid Transport project – which involves the use of electric buses for public transport, will receive Ksh1.1 billion ($7.8 million), about 11 percent of the $72 million the State had pledged for the project, from the exchequer in the 2023/24 financial year, also a boost to the e-mobility sector.
According to Mr Ondanje, due to the high upfront cost of electric vehicles, the tax incentives will be crucial in accelerating uptake because without them, EVs will remain unaffordable.
“The incentives will provide a tremendous relief for the buyers or the end consumers of the e-mobility products. They will also trigger the market to move a little bit faster,” he said.