Motor vehicle dealers are set for good tidings after the National Treasury allocated itself an additional Sh5.9 billion, most of which has been earmarked for the motor vehicle leasing programme.
A new mini budget for the current financial year, which ends in less than a fortnight, shows that the Cabinet Secretary for National Treasury John Mbadi increased his docket’s allocation to Sh122.9 billion from Sh117 billion.
Recurrent expenditure, under which line the motor leasing programme falls, increased by Sh4 billion, while capital expenses took Sh1.9 billion of the increment.
“The change in current expenditure comprises additional funds to cater for the motor vehicle leasing programme, operations and maintenance, reduction in the provision for personnel emoluments to reflect the actual requirement, and reallocation of funds,” said the Treasury.
The government relies on the leasing programme to equip security personnel with motor vehicles. The exchequer has leased 10,741 vehicles this financial year, up from 8,000 in the previous year.
Some of the dealers who have benefitted from the leasing contracts include Isuzu East Africa, CFAO Mobility Kenya (which sells Toyota models, among others), and Simba Corp.
Besides the vehicle franchise owners, leasing brings other partners on board, including banks, insurers and intermediary lessor firms, which are indirectly on the government payroll.
In December last year, the government disclosed that it was looking to lease electric vehicles in a bid to cut fuel expenses under the leasing programme.
The Treasury invited electric vehicle assemblers to lease medium duty pickups, 4x4 double cabs, single cab pickups, caravans, buses and large trucks in the December advert. It is yet to disclose the results of the tendering process.
The Treasury said the shift to electric vehicles would save it Sh984,580 annually on fuel expenses per unit. It revealed that its daily fuel requirement was 15 litres per vehicle, which translates to Sh90,000 monthly and Sh1.08 million annually.
The exchequer opted to lease rather than buy vehicles as it was deemed a cheaper option. Leasing enables the government to avoid heavy upfront cost of acquisition and the headache of disposing of the depreciated units. It also pays a pre-agreed amount to the dealers for maintenance, taking away unpredictability on its books.
Treasury has previously disclosed the leasing model, introduced in 2013, has cumulatively saved the government Sh2.69 billion over a nine-year period. The government had estimated it would be saving Sh4 billion annually under the leasing programme.
The increase in capital expense by Sh1.9 billion was attributed to programmes supporting small businesses and renewal of software licences for programmes that support government systems.
“The change in capital expenditure is on account of additional funding under the Supporting Access to Finance and Enterprise Recovery Project, renewal of Oracle licences, public financial management reforms, and rationalisation of expenditure due to low absorption,” said the exchequer.
