The National Treasury’s decision to allocate over KES 2.5 billion of public funds to cover import taxes for a private electric vehicle (EV) firm has sparked significant controversy. Former Treasury Cabinet Secretary (CS) Njuguna Ndung’u is under scrutiny for this commitment, which has stirred opposition from rival firms.
The Treasury’s offer to settle import duties for 10,000 electric motorcycles and 80,000 lithium-ion batteries imported by Africa Smart Mobility Solutions Kenya Ltd. (ASM), a company owned by Africa-focused e-mobility provider Spiro, has been perceived as an unfair advantage.
This move originated in September last year when the Ministry of Investment, Trade, and Industry requested the Treasury to pay 25 percent import duty for the motorcycles and batteries.
In a letter dated September 6, 2023, Prof. Ndung’u, who was replaced following a cabinet reshuffle, informed Kenya Revenue Authority (KRA) Commissioner General Humphrey Wattanga that the state would cover the import duties for ASM.
“After due consideration and in the public interest, the CS for the National Treasury and Economic Planning undertakes to pay the import duty payable in respect of the 10,000 electric motorcycles and 80,000 lithium-ion batteries being imported by Africa Smart Mobility Solutions Kenya Ltd,” Prof. Ndung’u stated.
He clarified that the state would cover the taxes because the East African Community Customs Law does not empower the Cabinet Secretary to exempt import duties. This commitment was in addition to previous exemptions on Import Decoration Fee (IDF) and Railway Development Levy (RDL) granted via a letter dated August 21, 2023.
The tax deal has caused discontent among other companies in Kenya’s burgeoning electric motorcycle sector, who argue that it undermines fair competition. An executive from a rival electric bike company, who requested anonymity to avoid state reprisals, expressed frustration
“It has left us in a very precarious position since our products are now expensive, which is killing competition and the morale to invest in this sector.”
The executive further highlighted that ASM’s products are now sold at nearly a 30 percent discount compared to market prices. While all electric vehicle importers benefit from exemptions on 16 percent Value Added Tax (VAT) and 10 percent Excise Duty following the Finance Act, 2023, ASM enjoys additional exemptions from 25 percent Import Duty, 3.5 percent IDF, and 2 percent RDL.
The average import price of an electric motorcycle is $1,000 (KES 131,000), and a lithium battery costs $700 (KES 91,700). Consequently, the state’s commitment translates to paying approximately Sh40,000 per electric bike and KES 28,000 per battery imported by ASM. For the 10,000 motorcycles and 80,000 batteries, these exemptions amount to around KES 2.6 billion.
