Car lease firms set for Sh3bn in pending bills windfall

Dealers who won tenders for the lucrative government vehicle leasing programme, are set to receive a Sh3 billion windfall after the Treasury allocated the money to settle outstanding bills in the mini-budget.

The Treasury gave the funds under Supplementary Estimates 1 of 2023/24 to cater for the pending bill that was carried over from the financial year ended June, 2023.

The National Assembly’s Finance and National Planning committee, which is scrutinising the mini-budget, heard that the budget for leasing motor vehicles has been increased from ShSh8.8 billion to Sh11.8 billion.

“The Strategic Interventions Programme (operating expenses) has been increased by Sh3 billion. The programme initially had an allocation of Sh8.8 billion for the approved estimates of the 2023/24 financial year for security operations and motor vehicle leasing programme,” reads a brief by the Parliamentary Budget Office (PBO).

“Motor vehicle leasing programme specifically focuses on security police vehicles, including fueling and maintenance. The increase in allocation aims to settle outstanding bills owed to service providers.”

The Treasury last week tabled the Supplementary Estimates I under President William Ruto’s administration cut development expenditure but increased the budget by Sh187.3 billion. The budget cuts come in the wake of missed tax targets, huge debt repayment obligations, and spending pressures from critical sectors such as education and health.

The PBO, a think tank that advises MPs on fiscal matters, said the Supplementary Budget I proposes an increase in allocation to Sh11.8 billion for security operations and motor vehicle leasing programme.

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The committee will meet with the Treasury on Tuesday to provide the details of all pending bills owed to car dealers.

“We want to know the exact details of this pending bill and why the leasing programme costs have been increased by Sh3 billion,” Benjamin Lang’at, the vice chairperson of the committee, said.

The Treasury had in June failed to allocate Sh4.3 billion to clear pending bills that were carried over from the 20222 budget to the current financial year.

Principal Secretary Chris Kiptoo had told Parliament that the Treasury had failed to factor in the money in the 2023/24 budget to support the security sector through the leasing of motor vehicles.

He told the Finance and National Planning committee that Sh10.7 billion had been allocated in the budget for leasing motor vehicles in the new financial year.

Dr Kiptoo said Sh4.3 billion was 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.

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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.

The vehicle leasing scheme especially sought to enhance mobility for security officers as part of the pledges made by the Jubilee administration.

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