Kiira Motors funding hurdles persist as project approaches critical point

December 29, 2019 in Business, Companies by Editor

Uganda’s green mobility pioneer Kiira Motors has sounded the alarm over a widening funding gap, warning it could impact the June 2021 target for delivery of a motor vehicle assembly line that is currently under construction in Jinja.

Speaking during a recent site visit, Mr. Allan Muhumuza, the business development manager at Kiira Motors Corporation KMC, observed that the funding gap is projected to widen to UGX 49.5 billion by July 2020. The project is currently short by UGX 26.5 billion after treasury released only 20, of the UGX 44 billion that was required for the current financial year. That was in action to a UGX 2.5 billion shortfall in fiscal 2018/19.

“The cumulative funding gap for the first two years now stands at UGX 26.5 billion, “Muhumuza said.

“It is going to widen further because just like this year, only UGX 20 billion has been approved for fiscal 2020/21 against a requirement of UGX43 billion. That will take the shortfall to UGX 49.5 billion,” he added.

Mr. Keith Muhakanizi the Permanent Secretary to the ministry of finance ministry and Secretary to the Treasury, confirmed that there had been shortfalls in funding KMC’s budget. “It is not for lack of will but we have a problem with cash flows, so we have not been able to support KMC’s full requirements,” he told 256BN.

The four-year project is supposed to see the building and commissioning of a 22,000 square metre assembly shop by June 2021. Although construction of the facility will continue, Muhumuza cautions that it will not be possible to kit it out with the associated rigs and tooling. That would push back the time for commencement of commercial activities beyond 2021.

“It is these financial releases that informed the roadmap which put us at June 2021 for start of production. We will be able to continue with the construction but we shall not achieve all the milestones we ought to have achieved by then.

“Things to do with plant machinery and equipment will be out of the picture. That means the production timeline will be impacted because you need to install and test that equipment long before commissioning,” Muhumuza says.

Apart from fiscal 2018/19 when UGX 21.5 billion was released against a budget of UGX 24 billion, subsequent years have seen sharp cuts in allocations. For instance less than half of the required UGX 44 billion required under the current financial year, was approved for release. Another UGX 43 billion was due for release during fiscal 2020/21 but only UGX 20 billion has been provided for under the medium term expenditure framework.

According to Muhumuza, National Enterprise Corporation, the main contractor for the civil works, could even deliver the completed facility by September 2020 if resources were front-loaded.

KMC has so far put two of its Kayoola electric buses on the road. The first bus that was assembled in China arrived in the country in September while a second unit that has been locally assembled by Ugandan technicians hit the road last week. Construction of a third bus from scratch using mostly locally available materials for the body and chassis will start early next year.

The two buses on the road will be used to run a 12 month market validation study that will inform a business model for rolling out electric buses in other urban centres beyond Kampala and beyond national borders. The study will establish key operational requirements such as charging infrastructure, ticketing and revenue management.

Muhumuza says given the novelty of electric transportation in the region, it is important that KMC does not simply give its customers a piece of equipment but rather a complete solution that addresses the key pain points of operators.

KMC which has used the facilities at the a military facility in central Uganda to build put together the second unit of the Kayoola electric bus says it can  build up to 96 buses a year using the four static stations there. The facility in Jinja has been designed with an annual output of 5000 buses and trucks a year.

KMC Chief Executive Isaac Musaasizi says the assembly activities in Nakasongola have been used to determine how fast local teams could be brought to speed to assemble vehicles.

“We now have evidence that it is possible to bring a new team up to speed very quickly to participate in the manufacture of buses. We have also learnt that it is possible for us to start developing the domestic supply chain.

“However, most of the people we have approached about supplying us with steel or anything else want an indication of the minimum order quantity. So we need to establish the initial minimum order quantities early so that we can consolidate the domestic supply chain for the materials,” Musasizi said.

According to Musaasizi, there are materials such as steel and aluminium which the local market is ready to supply. Luwero industries also has advanced materials research labs as well as computerized metal fabrication facilities which can be used to make some of the components going into the Kayoola.

“We are keen to consolidate the domestic supply chain for materials in the short term. But we are also seeing a lot of potential for local collaboration especially when you consider the capacity that is scattered across the different institutional arrangements in the country,” Musasizi said.