Kenya's economy gets trucking

A rise in infrastructure projects in the country is spurring growth for Chinese truck makers

While sectors of the Kenyan economy such as agriculture, tourism and money market have taken a beating in the last few years, the nation's construction, automotive manufacturing and transport industries, each an important component of the economy, have flourished.

Industry players attribute the rise of the three industries, all interdependent and interconnected, to the growth in road construction and in demand for real estate.

A rise in government projects such as the Lamu Port South Sudan Ethiopia Transport corridor project, construction of geothermal and wind power generation plants plus the Standard Gauge Railway project have contributed significantly to the growth of these sectors.

Real estate investments, especially in major cities in Kenya such as Nairobi, Mombasa and Kisumu, have pushed industry players to invest in prime mover trucks and other heavy-duty vehicles.

The Wealth Report by global real estate consultancy Knight Frank in 2012 placed Nairobi as the world's fastest growing real estate market, beating cities such as Miami and Monaco. The annual report analyzes global property markets, wealth distribution and investments.

The growth in real estate and infrastructure projects in Nairobi has much to do with investors who view the capital as Africa's hub. Knight Frank's head of agency Anthony Havelock said in the consultancy's 2014 report that the Kenyan capital Nairobi is the most important African business center between the Mediterranean and Johannesburg.

The prospect of growth in infrastructure in Nairobi still appears promising, with the latest report ranking Nairobi 17th out of a list of 25 cities - the rest of which were Asian cities - that are expected to see the fastest growth in the number of ultra-wealthy individuals over the next decade.

"Nairobi is the only non-Asian city to feature in the top 25 cities ranked by growth, underlining the region's expansion and the increased openness of many of its economies," according to the report.

Infrastructure projects in the capital and other parts of the country have spurred growth in the light, medium and heavy-duty vehicle manufacturing industries as well as the construction and transport industries.

Foton East Africa Ltd, a subsidiary of Beijing-based Beiqi Foton Motor Co Ltd, entered the Kenyan market in 2010, establishing a head office in Nairobi and later completing one of the biggest assembly plants in East Africa.

Beiqi Foton Motor Co Ltd specializes in the manufacture of light and heavy trucks, agricultural machinery, sport utility vehicles and buses, all of which are now available in the East African market.

Foton established its $10 million assembly plant on a 40.5-hectare piece of land located in Syokimau, some 20 kilometers from the capital and next to the Jomo Kenyatta International Airport.

The assembly plant produces an average of 10,000 units of dump trucks, buses, prime movers and commercial trucks annually. Before establishing its assembly line, Foton had contracted a local vehicle assembler, Kenya Vehicle Manufacturer, to assemble double cab and single cab pickups for the company. KVM is based in Thika, an industrial town in central Kenya.

The company later spread to other parts of the country such as Meru, Mombasa and Nakuru counties before opening a dealership in Kampala, Uganda.

Foton made inroads into the Kenyan transport sector after last year's signing of a memorandum of understanding between the Nairobi city county government and the Beijing Commission of Transport to build and supply 2,000 buses for the county over a span of five years as part of the Kenyan capital's new Mass Public Transport System, which when implemented, is expected to streamline the chaotic public transport system and unclog city traffic.

The KSh6.4-billion ($70 million) project will be implemented in phases. Foton will supply 266 buses, build bus stations and install a traffic management system in Nairobi for the first phase.

Daniel Chweya, a sales consultant at Foton East Africa Ltd, said in January 2014, the Nairobi city-county government purchased 40 garbage trucks from the Chinese automaker, though the company has yet to finish supplying all the units.

"The Nairobi city-county government in January last year purchased 15 garbage trucks with a capacity of 10 metric tons. They also bought 25 dump trucks each with a carrying capacity of 25 tons for garbage collection in the city," he says.

Chweya also says the Makueni county government purchased a fleet of ambulances from Foton for the Kilome Sub-County Hospital.

"Our Foton View SC-2 is now very popular with hospitals because we build the ambulances from scratch. The Mbagathi District Hospital in Nairobi and the Kilome Nursing Home in Makueni all bought ambulances from us," he says.

The company also recently supplied Mount Kenya University with customized Foton buses to help students travel across the country for field excursions.

Chweya says the Foton brand is currently selling fast in Kenya mainly because the company's auto parts are readily available in the country. He also says the company has advantages over their competitors because it has several branch offices countrywide.

"We import complete knock down Foton trucks and assemble them at our Syokimau assembly plant. This gives us an edge over our competitors because we have ready parts in case of a breakdown," he says.

Complete knock down is a term used in the automotive manufacturing industry that refers to the auto parts needed to assemble a unit.

In Kenya, local vehicle assemblers are tax exempted when they import complete knock down units into the country as opposed to the 25 percent import duty charged on complete car imports.

The tax exemption has motivated several vehicle assemblers such as Tata and Toyota to start importing complete knock down units. Toyota Kenya last year started assembling the Japanese Hino buses and trucks in Nairobi, their first foray into the heavy-duty commercial vehicle assembly market. Many Kenyans drive Toyota pickups and cars.

One of the latest entrants into the truck market is Hong Kong-based SinoTruk, which is being imported to Kenya by Nairobi distributor Stantech Motors.

Stantech, which opened shop in 1997 as a small repair garage in Nairobi's industrial area, is also the local distributor of other Chinese auto brands such as Chery Tiggo sports utility vehicles, Grand Tiger pickups, Golden Dragon vans and buses and Jiangling Motors Co double-cabin pickup trucks.

Chery Motors East Africa Ltd has assembly lines in Egypt and Nairobi to export cars to Libya, Sudan, Ethiopia, Ghana, South Africa and Algeria.

In March 2012, the company supplied the Kenyan police and provincial administration with 760 Chery Tigo SUV vehicles. The SUVs came in handy during the 2013 general election when the Kenyan police faced a severe shortage of vehicles.

Another Chinese automaker making headway into the Kenyan market is AVIC International Beijing Co Ltd, which officially entered the market on Dec 12. The state-owned company based in Beijing formed AVIC-JAC Motors (East Africa) Ltd.

"Kenyan people are friendly and hardworking, the political environment is good, the investment policy is superior, the economy is growing fast and stable. It is a country full of hope," Wang Guangjun, vice-general manager of AVIC International Beijing and chairman of AVIC-JAC Motors (East Africa) Ltd.

The company aims at expanding into the wider East African market that includes Tanzania, Uganda, Rwanda and Burundi in the near future by setting up regional production, sales, service and parts centers.

Wang says JAC plans to introduce pickups and heavy-duty trucks to enlarge its product portfolio and that JAC plans to start a local assembly line and set up a service technology training school to cover the East African region.

For China Daily

(China Daily Africa Weekly 03/06/2015 page16)