Earlier this year Uganda’s Parliament debated legislation limiting the age of used cars imported into the country to 15 years. The bill was passed in May and came into force in September. We tell you here about how Uganda imposes ban on older car imports.
The bill is the Traffic and Road Safety (Amendment) Act 2018. The passing of the law followed strong opposition from MPs to a stricter bill. The previous proposal would have set the import limit to eight-year-old cars and older.
In addition to limiting the age of imported cars, Parliament approved an environmental levy on cars older than five years. The levy now extends from five-year-old to 15-year-old cars. The tax amounts to 50 percent of the car’s value. Used cars are the main contributor to the latest pollution figures in Uganda.
The move is welcome as it shows determination to cut emissions, Henry Musasizi, Chairperson of the Committee on Finance, Planning and Economic Development, said. Although he warned that the move could cause a major hit to job figures.
“The used motor vehicles industry comprises of car importers, forwarders totalling to 11,139 people. The ban on the importation of old vehicles will render 11,000 direct beneficiaries of this unemployed,” Musasizi said in May.
His proposal to reduce taxes on new cars to help Ugandans buy new instead of used has since faced rejection. The opposition’s leader, Winfred Kiiza, said that this would only run people out of business. Average wages mean that not many can afford new cars in Uganda.
According to the Parliament’s notice, there were calls for a total ban on imports of older cars. Figures show most road accidents are caused by older not mechanically safe cars. These accidents are also on the rise.
Uganda Joins its East African Neighbours
A similar ban to Uganda’s is already in full force in Kenya and Rwanda. Other members of the East African Regional Trade Block also defend this policy. In an interview with Deutsche Welle, Ofwono Opondo, Ugandan Government spokesperson, said the move could help local manufacturers. He added that the policy aims at a future where the majority of Ugandans can buy and drive new cars. Boosting the domestic automotive industry is one aim of the East African Regional Trade Block.
Kiira Motors Corporation, a company financed by the Ugandan government, is already taking orders for the Africa’s first solar-powered buses. The company has the technological capability and capacity to assemble these busses. These are the type of projects Uganda wants to develop.
- Importing Used or Salvage Vehicles from the United States into Jordan Auto Market
- Importing Used or Salvage Vehicles from the United States into Benin
- White Paper: Market Report for New and Used Cars Abroad
- Exporting Cars from the USA to Jordan
Each year Uganda collects over $110 million in taxes from used car imports. The country aims to raise the revenue further. This will help to strengthen the domestic car industry. Currently, the local car industry employs only a small portion of Ugandans.
However, the potential bump in used car prices could see the number of families unable to afford a car grow. There is no car loan system in Uganda, which makes this problem worse. So, the opportunities for most Ugandans to buy new cars are very restricted.
Dealers Welcome the 15-years Limit
The used car dealers did not receive the initial limit of 8 years proposed by the government well. Currently, more than 4,000 used cars are imported monthly. Many of these cars are up to 25 years old. The 8-year limit would have driven many out of business. Over 80 percent of used cars imported into the country are older than ten years. Uganda mainly imports cars from Japan and Europe.
Dealers stressed that the 8-years limit would sharply boost prices resulting in falling numbers of customers. It would also make current stocks of imported parts worthless. Since the extension of the initial age limit, dealers are only partially relieved. According to media reports, prices have already jumped by a $1,000 on average since the passing of the law. The sales figures have also seen a dramatic drop.
However, the Uganda Revenue Authority has put the onus on dealers. The dealers have to clear their lots of cars that are older than 15 years in order not to face losses.
There are Exemptions
Under the legislation passed, imports of utility cars such as cranes, fire fighting lorries, etc. are exempt from the limit. Also, agricultural vehicles and armored vehicles are also exempt according to the initial proposal. Except for the updated age limit, the initial proposal has remained mostly unchanged.
The exemptions extend to dealers that already have old long haulage lorries or agricultural vehicles in their lots. They are not subject to the Uganda Revenue Authority order.