By Kenneth Asiimwe and Job Lakal

Job Lakal Profile photo

On Wednesday 30th May 2018, Uganda’s parliament amended the Traffic and Road Safety Act 1998. In this amendment: the importation of vehicles whose date of manufacture spans 8 years or more were banned; the importation of cars that are 5 years old or more from date of manufacture shall attract an environmental levy payable at rates prescribed in the fourth schedule of the act; and motor vehicle registration fees have been varied.

The amendment however waived special purpose vehicles including heavy good-carriers, road tractors, construction vehicles and a few others. It will also not apply to motor vehicles which are in transit before the commencement of this Act (01 July 2018) and which arrive in Uganda by 30th September 2018.

This means from October 2018, one can only import cars manufactured in 2011 or after that and environmental levy will not be paid on cars manufactured from 2014.

Why ban importation of old vehicles?

Environmental pollution and high incidence of road accidents have reportedly been put forward as the key reasons for the new changes. Indeed, studies have shown that older cars emit more carbon. A recent publication named Kampala City as one of the most polluted cities in Africa. With regard to accidents, a 2014 study found that almost half of teen drivers killed in US roads were driving vehicles 11 years or older. It can be argued, therefore, that there is merit in warranting these amendments.

Potential benefits from the proposed ban

The policy may be instrumental in reducing environmental pollution as highlighted above. But this effect may accrue in an unexpected way. It may not be true that new cars emit less, because in the long run, “the hidden cost to the environment of each new car is a stack of pollutants, a heap of waste and a whole lot of precious fossil fuel”. Keeping your car longer is therefore more ecological. In this case, since cars will be very expensive, we are likely to see more keep their cars longer, hence older cars in Uganda streets like in Cuba. But this also means that accidents attributable to poor state of vehicles could increase instead.

Likely negative implications of the ban

An estimated 11,000 jobs may be lost, as noted by industry experts. Uganda’s used motor vehicles industry comprises of car importers (bonds), forwarders and auxiliary businesses such as insurance firms, spare parts dealers and car service points. All these are likely to see a decline in business.

On average, Uganda imports about 4,000 cars per month, majority of which are older than 10 years. This particular amendment is bound to make cars unaffordable to many Ugandans. Conservatively speaking, many of these cars cost an average of $5000 to $7,000. With the amendment, this figure will rise to $12000 to $ 16000.

Given Uganda’s percapita gross domestic product of about $615, the average Ugandan may never afford a car in their lifetime, many who own cars now will not afford the next one and will have to resort to public means whose current state is not enticing.

Further, as a result of the reduced demand, Government revenue from the used vehicles importation will decline sharply. The government is likely to lose UGX 182 billion in revenue annually.

Policy Alternatives

This policy option could work better if coupled with a net improvement in public transport. Few people will afford private cars and resort to public means, as an incentive, policies aimed at improving public transport should equally be improved, including having newer Omni-buses, better roads and a good rail system. Some of these would even counter-balance the unemployment effect.

Taxes on newer vehicles could also be reviewed to a level that makes them affordable at least to current motorists. Another way of discouraging old vehicles could have been to make it expensive to maintain them, by hiking their annual insurance charges and parking fees especially around the city. The latter could actually have an added effect of de-congesting the city.

In conclusion, while this policy change might have had its own merit, its effects could be surprising. As we fight pollution from the demand side, we should also make sure that the supply side (car manufacturers) is having its fair share of the fight, given that developed economies have polluted far much more.

Also, we need to have a more nuanced analysis of the policy choices we make, because in this case, we may end up with more old cars and more accidents.

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