KEPSA (Kenya) has registered continuous growth in its GDP in the recent past, thereby creating a promising environment for investments. Agriculture, manufacturing, wholesale, retail, and financial services are the highest contributors to Kenya’s GDP, and as a result, they have been prioritized under the economic pillars of Kenya Vision 2030.
The Kenya Vision 2030 policy provides the national development goals in promoting inclusive and sustainable growth to make Kenya a globally competitive and prosperous nation.
Automotive play a very critical role in the economy by facilitating the free movement of goods and people. Therefore, the KEPSA fully supports any policy intervention aimed at building the market for local products while lowering the cost of doing business for the global competitiveness of our products and services.
Globally, the automotive industry has been a pillar of industrialization for many economies and a key driver of macroeconomic growth and technological advancement.
The industry has consistently contributed heavily directly and indirectly to the GDP, foreign investment, employment, and innovation in developed countries such as Germany, the United States, Japan, South Korea, Italy, China, and several other emerging economies.
If we take a look at a country like the United States, the auto industry is one of its most important industries. It has historically contributed 3 – 3.5 per cent to the overall Gross Domestic Product (GDP). According to international estimates, the average annual turnover of the world automobile industry is more than 2.75 trillion.
In Kenya, the automotive industry has the potential to significantly contribute to the manufacturing sector’s growth, and the government target to increase its share of the GDP from the current 9.2% to 15% by 2022 as part of the Big Four Agenda.
This will also be instrumental in achieving the aspirations of Vision 2030, of creating a globally competitive and prosperous country with a high quality of life.
The automotive industry has a long value chain creating both backward and forward linkages. The backward linkages include design and manufacture for vehicle bodies and other components, not forgetting that the automotive industry consumes steel, iron, aluminium, plastic, glass, carpeting, textiles, computer chips, rubber, and much more.
The industry creates forward linkages through vehicle dealers, garages, leasing firms, insurance firms, and financial institutions among others.
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As stated, the Private Sector is in support of any policy that will support the growth of local businesses. Therefore, we support the Ministry of Industrialization, Trade, and Enterprise Development’s initiative to develop a National Automotive Policy (NAP) which will help to grow the Automotive Industry.
The Policy which gives a regulatory and institutional mechanism to develop the industry is a plus for the Country. Passing the Kenya Standards 1515 which lowers the importation age of trucks, buses, and prime movers is an important incentive to increase the volume of vehicles produced locally hence attracting investment into the Industry.
Foreign Direct Investment (FDI) is widely believed to be a catalyst that promotes economic development. As many countries compete to attract FDI, it becomes important for the policymakers in the country to understand the effect of FDI on productivity.
Policies that reduce vehicle importation age are normal for countries that want to develop a sustainable automotive industry like South Africa, Morocco, and Egypt who are also our competitors when it comes to the African Continent Free Trade Area.
The Automotive Industry has a great potential for creating more jobs than the importation of used vehicles, basically because of the big value chain. The Automotive Industry can create 5 to 11 more jobs within its value chain for each job in the assembly plants.
With a current total assembly volume of 11,000 units in 2021, the local industry is barely utilizing 30% of its capacity which is 34,000 units per annum on one shift. In this case, by implementing the Standard, the industry has the potential to grow by more than 50%.
The Local automotive industry can grow the country through technology transfer since the automotive industry is one of the fastest adopters of technology.
Carole Kariuki – Chief Executive Officer, KEPSA
