Dealers, who won tenders for the lucrative government vehicle leasing programme, will wait longer to be paid after the Treasury failed to allocate Sh4.3 billion to clear pending bills in the financial year starting July.
PS Chris Kiptoo told Parliament that the Treasury has not factored in the money in the 2023/24 budget to support the security sector through the leasing of motor vehicles.
He told the National Assembly’s Finance and National Planning committee that Sh10.7 billion has been allocated in the budget for leasing motor vehicles in the new financial year.
Dr Kiptoo said Sh4.3 billion is needed to support the security sector and clear the pending bills incurred due to the non-release of the exchequer.
“I wish to bring to the attention of members the fact that the National Treasury did not get full funding for its programmes and projects, some of which are critical for the overall operations of the government,” he said.
“The security sector requires vehicles that can travel long distances every day. They also need vehicles that can navigate rough terrain.”
The PS defended the motor vehicle leasing project saying the government had realised value for money.
He said a study by the Treasury on the leasing programme shows that the project had contributed to savings.
Dr Kiptoo did not give the amounts that the government had saved through the leasing of motor vehicles.
Findings of a study released in November last year showed taxpayers saved an average of Sh70 million a year under the leasing programme against the Sh4 billion that its promoters initially projected.
The government previously bought vehicles from dealers and incurred the costs of insurance, maintenance and depreciation.
The findings commissioned by the Treasury show that the Jubilee government saved Sh638 million in nine years under the vehicle leasing deal that it had banked on to trim heavy upfront acquisition costs and check run-away maintenance costs.
At the time of the launch, Treasury officials had estimated that it would make savings of Sh4 billion annually under the scheme where the State pays a fee to respective dealers who then undertake to provide a certain number of insured and serviced vehicles over several years.
“Based on an annual discount rate of 12.89 percent as per GOK [Government of Kenya] 5-year bond and the initial lease remittances under phase VI, net present value (NPV) computations translate to Sh79.78 million or a saving of Sh638 million for the 9 years,” Peter Makokha, the lead consultant for the study, said.
The data show the programme started in 2012 had made available 6,826 new vehicles to civil servants in key security sectors by November.
“The programme has injected over Sh80 billion to the economy, paid insurance premiums worth Sh2.08 billion, contributed Sh1.6 billion in taxes and offered a steady demand for fuel worth Sh2.3 billion,” said Dr Makokha.
The government previously bought vehicles from dealers and incurred the costs of insurance, maintenance and depreciation.
The original idea behind vehicle leasing was for the State to access new vehicles using private sector capital and repay over a period of time. The savings made would be diverted to other priority sectors such as health and infrastructure.
The vehicle leasing scheme especially sought to enhance mobility for security officers as part of the pledges made by the Jubilee administration.
