Former Treasury Secretary Njuguna Ndung’u has been put in an awkward position over the allocation of more than Sh2.5 billion of public funds to pay taxes to a private electric vehicle company, sparking opposition from rival companies.
The Treasury has offered to settle customs duties on 10,000 electric motorcycles and 80,000 lithium-ion batteries imported by Africa Smart Mobility Solutions Kenya Ltd, giving the company a competitive pricing advantage.
It all started in September last year when the Ministry of Investment, Trade and Industry asked the Treasury to pay a 25% import duty on 10,000 motorcycles and 80,000 batteries.
Prof Ndung’u, who was replaced at the Treasury last week following a cabinet reshuffle, on September 6, 2023, informed the Kenya Revenue Authority that the state will pay import duty equivalent to 25 per cent of the cost of importing the bikes on behalf of Africa Smart Mobility Solutions Kenya Ltd – owned by Africa-focused e-mobility provider Spiro.
“After due consideration and in the public interest, the Minister of National Treasury and Economic Planning has undertaken to pay the customs duties due on 10,000 electric motorcycles and 80,000 lithium-ion batteries imported by Africa Smart Mobility Solutions Kenya Ltd,” Professor Ndung’u said in the letter to the Commissioner General of the Kenya Revenue Service, Humphrey Watanga.
Professor Ndung’u said the state would pay the taxes because the EAC Customs Act does not give the Cabinet Secretary the power to grant exemptions on customs duties on imports.
“This is in addition to the exemption from Import Decoration Duty (IDF) and Railway Development Duty (RDL) granted under reference letter: ZZ/TS/GP/30/2023 dated August 21, 2023 on the same electric motorcycles and lithium-ion batteries,” the former prime minister said in a letter seen by The daily business.
Competitors recently attracted to Kenya’s electric motorcycle revolution believe the tax agreement has left them disadvantaged and unable to compete with Africa Smart Mobility.
unstable situation
“This has left us in a very precarious position where our products are now very expensive, which kills competition and morale to invest in this sector,” said an executive at an electric bike company who asked not to be identified for fear of state retribution.
He added that Africa Smart Mobility products are being traded at a discount of up to 30 percent from market prices.
While all importers of electric vehicles enjoy a 16 per cent VAT and 10 per cent excise duty exemption following the implementation of the Finance Act 2023, the Treasury’s move has left Africa Smart Mobility Solutions Kenya Ltd with the additional benefits of exemption from import duty (25 per cent), IDF (3.5 per cent) and 2 per cent RDL.
The average import price of an electric motorcycle is $1,000 (Sh131,000 at current exchange rates) and a battery $700 (Sh91,700).
This means the state has committed to paying an average of Sh40,000 for each e-bike shipped by Africa Smart Mobility Solutions and Sh28,000 for the lithium battery.
For 10,000 motorcycles and 80,000 batteries, the exemptions are worth about Sh2.6 billion.
On 7 May 2024, KRA notified Africa Smart Mobility of tax exemptions on motorcycles and batteries.
“The shipment details are as stated in the Treasury letter; Bill of Lading No.: MEDUX6374144 and MEDUGW687438, Invoice No.: HWICZQ23030-1K, HWICZ23030-3K and HWICZQ23030-5K. Please use the exemption code Do050 to release the relevant shipment based on import duty, excise duty, VAT, IDF and RDL,” KRA said in a letter to the e-bike company.
Chief Treasury Secretary Chris Kiptoo and Mr Wattanga failed to respond to The daily business Inquiries were sent on July 24th.
Kenya is betting on electric motorbikes, its renewable energy supply and its status as a tech and startup hub to lead the region’s shift to zero-emissions electric mobility. A large share of the e-bikes are purchased on daily credit.
