Mr Daniel Bwambale is interested in Uganda’s automotive ecosystem. Photo/Courtesy
On November 2, 2023, Uganda’s Public Procurement and Disposal of Public Assets Authority issued a Circular; “Circular No. 7 of 2023, Revision of The Standard Bidding Document for Procurement of Supplies Under Open (National) and Restricted (Selective Bidding Methods).
At best, the PPDA should be a rule following institution fair to all and acts by its principles. It should as well do that. It is not private money that the entity is dealing with. It is money got from the bent backs of sweating citizens.
In the years since its set up in 2003, few circulars have had the heart stopping effect of Circular No. 7 in the breadth and depth of its effects on the economy and especially, the government and MDA vehicle fleet. The Circular has the net effect in relation to vehicle purchase by the government or its agencies of causing terrible financial loss.
This is not even far-fetched. Already, we have had a real estate company, Ms Albeity of Tilbury, London which was registered to “operate in leased and owned real estate”, supply two Mercedes-Benz luxury sedans to the Parliament of Uganda, which were priced above market rates and to compound the Ugandan taxpayers’ misery, had no after sales support.
On May 17, 2024, the first step in the process to challenge the PPDA was decided upon by the High Court Civil Division. It is premature to go into the merits and demerits of the decision as it was only an interlocutory relief.
There is, as usual, enough technical jargon to make one dizzy. This little write-up tries to examine, briefly, the impact such a circular will have on the automotive ecosystem in Uganda.
If you can’t read further, the effects are primarily two; it is economy killing in its scope and targeting of the Authorized Distributors, and extremely dangerous to the final consumers of brand new vehicles, the majority being the very top decision makers and owners of capital in Uganda.
There’s a difference between a Supplier and Authorized Distributor. One may know companies such as Cooper Motors Corporation, which sadly closed shop as a result of market changes, Victoria Motors, Motorcare, to list a few. These are Authorized Dealers/Distributors (ADs). The advantages that accrue to their clientele includes meeting warranty obligations in the territory they operate, after sales support, other technical stuff, legal obligations, and others, innumerable to list.
ADs have invested millions of dollars in establishing facilities that meet the exacting standards of manufacturers, human capital plus incidental investments. They have been a net positive. They regularly appear in Uganda’s Top 200 taxpayers and some have an Economic Operators Certificate from URA as a result of great compliance to hold tax practices.
Apart from corrupt practices and pandering to political pressures, what is the rationale behind the Circular? BUBU? Maria Namusoke trading as Mark H is one of the authorized dealers for Honda. Honda (U) Limited, owned by a Ugandan. It debunks the notion that the ADs are not Ugandan. Yamaha has two authorized dealers, like Honda. All owned by Ugandans.
Secondly, it is hard to argue that it is impossible for one to get an authorized dealers license. In any case, like in the M/s Albeity example above (a UK based firm), how would one argue that this opening of the floodgates to all kinds of nefarious characters helps Ugandans?
In the case before the courts of law, one of the parties to the dispute presented a forged letter from a company in Dubai introducing them as a dealer! This is what the PPDA is opening the PDUs, who have little capacity for enhanced due diligence
If you can’t meet the requirements to operate at the standards of the manufacturer, then taxpayers should shun you. Analogous to the banking sector, you cannot lower minimum capital requirements or change supervision rules or guidelines to aid a player that doesn’t meet the standard.
More dangerously to the consumers, we shall have reports of rebadged vehicles imported and sold as brand new, as few clients have the technical skill to tell that their vehicle is new or not. We risk losing out on customization and the in-depth data the ADs collect to aid the vehicle manufacturing process for the territories they operate in. Compliance risks such as vehicle recall campaigns may require Ugandans to go to other countries to get a service, plus a risk of the government getting sued because vehicles on the market have been found to be stolen or have an origin that cannot be verified were sold to its entities.
I don’t see a justification that can pass muster in the eyes of reasonable taxpayers.
Mr Daniel Bwambale is interested in Uganda’s automotive ecosystem.
