A.... ....... . ....., -. Ian G. Heggie j ; , . T . lF . I . : :, , ., IF RECENT WORLD BANK TECHNICAL PAPERS No. 189 Frederick, Balancing Water Demands with Supplies The Role of Management in a World of Increasing Scarcity No. 190 Macklin, Agricultural Extension in India No. 191 Frederiksen, Water Resources Institutions: Some Principles and Practices No. 192 McMilIan, Painter, and Scudder, Settlemnt and Deuelopment in the River Blindness Control Zone No. 193 Braatz, Consercing Biological Diversity: A Strategyfor Protected Areas in the Asia-Pacfic Region No. 194 Saint, Universities in Africa: Strategiesfor Stabilization and Revitalization No. 195 Ochs and Bishay, Drainage Guidelines No. 196 Mabogunje, Perspective on Urban Land and Land Management Policies in Sub-Saharan Africa No. 197 Zymelrnan, editor, Assessing Engineering Education in Sub-Saharan Africa No. 198 Teerink and Nakashima, Water Allocation, Rights, and Pricing: Examplesfrmn Japan and the United States No. 199 Hussi, Murphy, Lindberg, and Brenneman, The DevelopnEnt of Cooperatives and Other Rural Organizations: The Role of the World Bank No. 200 McMillan, Nana, and Savadogo, Settlement and Development in the River Blindnss Conttrol Zone: Cas Study of Burkina Faso No. 201 Van Tuijl, Improving Water Use in Agriculture. Experinces in the Middle East and North Africa No. 202 Vergara, The Materials Rewlution: What Does It Meanfor Devloping Asia? No. 203 Cleaver, A Strategy to Develop Agriculture in Sub-Saharan Africa and a Focusfor the World Bank No. 204 Barghouti, CromwelL and Pritchard, editors, Agricultural Technologisfor Maret-Led Devclopment Opportunities in the 1990s No. 205 Xie, Kuiffner, and Le Moigne, Using Water Efficiently: Technological Optims No. 206 The World Bank/FAO/UNIDO/Industry Fertilizer Working Group, World and Regional Supply and Demand Balances for Nitrogen, Phosphate, and Potash, 199192-1997/98 No. 207 Narayan, Participatory Evluation: Toolsfor Managing Change in Water and Sanitation No. 208 Bindlish and Evenson, Evaluation of the Performance of T&V Extension in Keya No. 209 Keith, Property Tax A Practical Manual for Anglophone Africa No. 210 Bradley and McNamara, editors, Living with Trees: Polciesfor Forestry Management in Zimbabwe No. 211 Wiebers, Integra Pest Management and Pesticide Regulatin in Developing Asia No. 212 Frede&ksen, Berkoff, and Barber, Water Resources Management in Asia, Volume I: Main Report No. 213 Srivastava and Jaffee, Best Practicesfor Moving Seed Tehnology: New Approaches to Doing Business No. 214 Bonfiglioli, Agro-pastoralism in Chad as a Strategyfor Suroivar An Essay on the Relationship between Anthrpology and Statistics No. 215 Umali Irrigation-Induced Salinity: A Growing Problem for Develpment and the Environment No. 216 Carr, Imprving Cash Crps in Africa: Factors Influencing the Productivity of Cotton, Goffee, and Tea Grown by Smallholders No. 217 Antholt, Geting Readyfor thE Twenty-First Century: Technical Change and Institutional Moderni n i Agriculture No. 218 Mohan, editor, Bibliography of Publiations: Technical Department, Africa Region, July 2987 to Deceber 1992 No. 219 Cercone, Alcohol-Related Problems as an Obstade to the Dervopnt of Human CzpitaL Issues and Policy Optins No. 220 Kingsley, Ferguson, Bower, and Dice, Managing Urban Environmental Quality in Asia No. 221 Srivastava, Tamiboli, English, lal and Stewart, Cnseing Soil Mie and Fertlity in the Warm Seasonally Dry Trpis No. 222 Selvaratnam, lnnvations in Higher Education: Singapore at the Competitive Edge No. 223 Piotrow, Treiman, Rimon, Yun, and Lozare, Strategiesfor Fanily Planning Promotion No. 224 Midgley, Urban Transport in Asia An Operational Agenda for the 1990s No. 225 Dia, A Governance Approa to Cril Service Reform in Sub-Saham Africa (List continues on the inside back cover) WORLD BANK TECHNICAL PAPER NUMBER 275 AFRICA TECHNICAL SERIES Management and Financing of Roads An Agenda for Reform Ian G. Heggie The World Bank Washington, D.C. Copyright C 1995 The International Bank for Reconstruction and Development/miE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, US.A. All rights reserved Manufactured in the United States of America First printing March 1995 Technical Papers are published to communicate the results of the Banlks work to the development com- munity with the least possible delay. The typescript of fthis paper therefore has not been prepared in accor- dance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibi ty for errors Some sources cited in this paper may be infornal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affilated organizatis, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatso- ever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to copy por- tions for classroom use is granted through the Copyright Clearance Center, Inc., Suite 910,222 Rosewood Drive, Danvers, Massachusetts 01923, US.A. The complete backdist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and idexes of sub- jects, authors, and countries and regions. The latest edition is available free of charge from the Distribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Wash,igton D.C. 20433, USA., or from Publications, The World Bank, 66, avenue d'I(na, 75116 Paris, France. ISSN: 0253-7494 Ian G. Heggie is the principal infrastructure economist in the Enviromnentally Sustimable Development Division of the Africa Technical Department of the World Bank Library of Congress Cataloging-in-Publication Data Heggie, Ian Graeme. Management and financing of roads: an agenda for reform / Ian Heggie. p. ca. - (World Bank technical paper; no. 275) Includes bibliographical references. ISBN 0-8213-3143-4 1. Roads-Maintenance and repair-Governme-rd policyt-Africa, Sub- Saharan. 2. Roads-Maintenance and repair-Economic aspects- Africa, Sub-SaharanL 3. Roads-Africa, Sub-Saharan-Deterioration. L Title. IL Series. HE367A452H43 1995 388.1'14-dc2O 95-2089 CIP APRICA TECHNCA6L DEPARENT SERIES Tednical Paper Sere No. 122 Dessing SpportforMieutepr Lsumjbr Sub--Saa Afrco No. 130 Kiss, edita¢ Livmg ih Wdif WUfe RIwOU nWMt w Lied Paituoimrn in Afib No. 132 Mwphy, asley, and Curry, Famrs' E _ imt as a Src ofPmdudion Dt: Mthoddl Guid sfor erin Afi No.135 Walhe, Grndle, NedL and Bachin, Daiy Dev_opment in SubaSad Afric A Stdyof Imm and Optioms No.141 R somn, Gaviri, and urscut Rwal Roads in Sub-Sahara Afriw Le;muf Worl Bank No.142 Kiss and Meerman, Inftrted Pest Mangeent nd African Agritu No. 143 Gn*t, Gray, and Eg1i, Forest Pricing and Concession Polikf:Managing he Igh Forests of West and Cenfrad Afica No.157 Critcheyq, Rej, and Sezmec, Watr Havt infr Pln Prodticdon, voL Th Cae Shdies ad Condluionsfor Sub-S saro Africa No.161 Rivessm and Carapebs, Intemedide Manm Tosport in Sub-S dan Afie: Its PdaFe jbr huprovig Rural Thret and lWnspor No.165 Keliaghan and Graeamy, Using Examinations to bnprve Eductim A Study in FourtenAfia No. 179 Speirs and Osen, Indrnous Intgrated Farming Sysms in the Salhd No.181 Mining Unit, ndustry ud EneWr Division, Streyfor Afric Mining ND.188 SIlverntan Publicu Sector EwJmnPoiyandSetor Ivst ntPr No.194 &nt Lniesia in Afric: Stbiizio and Reitaliation No.196 Maboguje, Pmixctiw on Urban Land and rbanm MAlngernt Polius in SubS*dh Afri ND 197 Zymelmna editor, Aswes En8gnng Etducin in S 9Sarn Africa No. 199 Husi, Murphy, Linbeg and Breneman, 7he Deveopmen afCooperative ad Offe Rral Oiurations T.e RlRde ofthe Waid Ba* No. 203 Ceave, A Strtgy to Delop Agriculu in Sub-Sdam Afri and a Foafir the World Bak No. 208 Bindlish and Evenso Ealuati of the Peomneof TWV Ex n Kiny No. 209 Keith ProperVty T A Practical Maua JbrAngocpkn Africia No.214 Borflio, Aga i inChadasaStrteyijrSwrSvsu AnEssayon *wc tt * bewe Anhoogyand Staistics No. 218 Mdun, editoe, BiZ loph qfNbhcabons Tecid Dqere, Afric Regio-Jul 1987 go Decmb 1992 No. 225 Dia, A Goea Appmac to CivSrvice Reform in Sub-Sahrn Afric No.226 ,ndi, Evenson, and Gbetibowo, Evauaion of 7T&V-Bsod Exesion in BAum Faro No.227 Cook, editor, hrltaay Rtment in AfrSecd Ppesfrom a Coa ca m Envinnnt aid Settlements wa in Aftica No.232 Ceghtney, hTr ort and ECc }Peo rmIN A Srvy ofDeeong Counes No.238 Heath, Ld lRights in CAt drorc Suwvey and Piesfor Project Intervention No.250 Rangeey, Muan, Anderse, and Lyle, Intntind Ri1 Basin Oia imw n 5bSur AfSics No.251 SIaarma, Rietbergen Heino. and PateL A StraeWfor the Fores Sedwo in Sub-urmn Afric Discussion Paper Series No. 82 Psacharopoulos Why Eduaimol Poic Con FsL An Oviw of Seected Afra Epeences No. 83 Craig, Comparative Afrkan Epeiences in Implemnting Educatndl Pliies No. 84 Kiros, Implmenting Educatin Poldes in Ethiopia No. 85 Esiwani, Implemnting Edctin Poliies in Kenya No. 86 Galabawa, huplkmnting Educatio Policies in T1mmi No. 87 Thelejani, Implemnting Educatina Poliies in LSothO No. 88 Magaluia, Impleetng Edu atin Polie i Swazind No. 89 Odaet, Iplementing Educai n Polis in Uganda No 90 Achola, Implementing Educationa Policies in Zmbia No691 Maravany, Itpmeting Eduation Poie in Zimnwe No.Q 1 Russell, Jacobsen, and Stanley, brnational Miation and Develmet in Sub-SSun Aftc, wL L Overview No.102 Russe, Jacobsen, and Sanley, Idnratfna ation nd De _elop m t Sub-Saurnn Afria, vTL It Cowmy Anayses No. 132 Fuller and Habe eitkos, Adjusting Edu d Plw: Conving Reore while Raiig Sdwl Quty No. 14 Jaeger, ThEeE s of Economc Pbolces on Africa Agricudtuw Frm Past Hann to Ftm llOp No. 175 Sh Massige, and Bovin, Reource MAagemaet and Pastr bIbnttu Buldng in the WestAfia Sahe No 181 Lariboray and Elmedf, Combating AIDS oad Other Sexualy Tramitd Dises in AfrxiL A Riew of the World BanksAgendafr Adrn No. 184 Spurling Pee, Mkamanga, and Nkwanyana, Agriulura Reerch in Souhen AfricaA Framework forAdion No.211 Weiberg, Dwnt, Fuc as KX , and Leo4 Rw ng Agr4clt Ralrch i th Sahe A Prposed FmimeworkjrAdion No 219 Thlllairajah, Daelpment of Rurl Finncil Mfikas in Sub-Saharn Africa No 230 Sait, Razsig fth Prooutivity of Womn Farmes in Sub-SahnranAfi No. 231 Bagchee, Agriulural Extension in Africa No. 234 Keck, Sharma, and Feder, Population Growth, Sh8fin Cultivation, and Unsusta_nable Agriculura Devopnent A Cas Sudy in Madgasr N. 242 Bigs, Moody, van Leeuwen, and White, Africa Can Compeek Export Opporuns and Challeges Jbr Gannents ad Home Pducts in the ES. Makt Na. 251 Aryeetey, Baah-Nuakch, DugIeby, Hetige, and Seel, SWu and Demad rFiace of Sma Enter in Ghaa No. 252 Pinto and Mrope, Projeci8ng the GovernanceApprach to Civil Sevice RgJb- An En _iimmt Assessmntfor Preparing a SectI Adfustment Loan in the Gambia No. 258 Thomas and Muvandi, How Fast is Frtiy Decliing in Botwaa and Z Cmbakre? No. 259 Sm-bner, Polics Afftng Ferlity and Conrceptie UsAn AssesnuoTwelve Sbaarn Countries No. 260 Popiel, Finacial Sysems in Sub-Saharan AfricwA Conmprtiv Stud CONTENTS FOREWORD ix ABSrRACr xi ACKNOWLEDGMENT xiii ABBREVUITIONS xv OVERVIEW 1 PART I PRELIMINARIES 5 1 IRMODUCrTION 7 2 BACKGROUND 9 2.1 Importance of Roads and Road Transport ............ ....................9 2.2 Impact of Poor Road Maintenance ............................... 12 2.3 Past Efforts at Refomn ............................... 15 2.4 The Road Maintenance Initiative ............................... 17 3 THE BASIC ISSUES 19 3.1 Institutional Framework ........................... 19 3.2 Human Resource Constraints ........................... 19 3.3 Inadequate Financing Arrangements ........................... 23 3.4 Lack of Clear Responsibilities ........................... 24 3.5 Ineffective Management Strucures ........................... 27 3.6 Weak Management Systems ........................... 29 3.7 Inefficient Work Methods ........................... 30 4 APPRoAcH To REFoRm 33 4.1 Regional Approach ....................... 33 4.2 Country Initiatives ....................... 34 4.3 Sharing Experience ....................... 36 4.4 Role of the Donor Community ....................... 38 PART II AGENDA FOR REoRM 41 5 BASC BUIDING BLocKS 43 5.1 Ownership .4.......... 4 5.2 Fmancing .......... 44 5.3 Responsibility ........... 45 5.4 Management .......... 45 v 6 OWNERSHIP 47 6.1 Concept of Ownership ........................................ 47 6.2 Grass Roots Organizations ........................................ 49 6.3 Ways of Involving Road Users ........................................ 51 6.4 Setting up a Roads Board ........................................ 53 7 AN ADEQUATE AND STABLE FLOW OF FUNDS 61 7.1 Choosing a Clear Market Signal ............... ......................... 61 7.1.1 Selecting Appropriate Charging Instruments .................. .......... 61 7.1.2 Administrative Considerations ........................................ 62 7.1.3 Fuel Smuggling ........................................ 68 7.2 Pricing and Cost Recovery Policies ...................... .................. 69 7.2.1 Basic Principles ........................................ 70 7.2.2 Practical Considerations ........................................ 72 7.2.3 Financing Maintenance ........................................ 72 7.2.4 Financing New Investment ........................................ 73 7.2.5 Financing Road Rehabilitation ........................................ 74 7.2.6 Managing Urban Road Congestion ........................................ 75 7.2.7 Likely User Charge Structure ........................................ 75 7.3 Managing the Revemnes ........................................ 76 7.3.1 Establishing a Road Fund ...................... .................. 77 7.3.2 Review of Existing Road Funds ........................................ 79 7.3.3 Designing a Road Fund .................. ...................... 84 7.3.4 Allocating Funds ........................................ 85 7.3.5 Disbursing Funds ........................................ 87 8 ASSIGNING RESPONSILiTY 91 8.1 Basic Principles ........................ 91 8.2 Managing the Road Network ........................ 93 8.2.1 Single-Tier Systems ........................ 93 8.2.2 Two-Tier Systems ........................ 94 8.2.3 Three-Tier Systems ........................ 96 8.3 Managing Road Traffic ........................ 97 8.4 The Basic Organizational Model ........................ 99 9 INTRODUCING SOUND BUSNESS PRAcrICEs 101 9.1 Defining the Mission ............................... 101 9.2 Human Resource Requirements .............................. 104 9.3 Management Structure ............................... 105 9.4 Management Information Systems .............................. 107 9.5 Financial Accounting Systems .............................. 112 9.6 Sning Managerial Accountability .............................. 116 vi PART m FINALE 119 10 CONCLUSIONiS 121 10.1 General Conclusions ....................... 121 10.2 Role of the Donor Community ....................... 125 REFERENCES 127 ANNEX 1. Impact of Road Maintenance on Vehicle Operating Costs 131 ANNEX 2. The Inverse Elasticity Rule 136 ANNEX 3. Estimatng Road User Charges: A Worked Example 139 ANNEX 4. Tables for Esimating Optimal Maintenance Requirements 145 APPENDICES 149 vii FOREWORD Road transport grew rapidly after the second world war. It carries 80 to 90 percent of the region's passenger and freight transport and provides the only forrrm of access to most rural communities. To handle this traffic, African countries expanded their road networks considerably during the 1960s and 1970s and also built new roads to open up more land for development. By the end of the 1980s, there were therefore nearly two million km of roads in Sub-Saharan Africa. These roads are some of the region's largest assets, with replacement costs amounting to nearly $150 billion. In terms of assets, employment and turnover, these roads are truly big bushiess. In spite of their importance, most roads in Africa are poorly managed and badly maintained. The poor state of the road network is reflected in the large backlog of deferred maintenance. During the past 20 years African countries have spent far too little on routine and periodic maintenance and, as a result, nearly a third of the $150 billion invested in roads has been eroded through lack of maintenance. Africa has been living off its assets. To restore only those roads which are economically-justified, and to prevent further deterioration, will now require annual expenditures overtihe next ten years of at least $1.5 billion. The balance ofthe network requiring restoration will either have to receive minimal maintenance, or be handed over to lower levels of government. Experience gained under the Road Maintenance Initiative (RMI), suggests that the key concept required to overcome the above problems is commercialization: bring roads into the market place, put them on a fee-for-service basis, and manage them like any other business enterprise. However, since roads are a public monopoly, and ownership of most roads will remain in govenmuent hands for some time to come, commercialization requires complernentary reforms in four other important areas. These are referred to as the four basic building blocks. They focus on: (i) creating ownership by involving road users in management of roads to win public support for more road funding, to control potential monopoly power, and constrain road spending to what is affordable; (ii) stabilizing road finacing by securing an adequate and stable flow of funds; (iii) clarifying responsibiirty by clearly establishing who is responsible for what; and (iv) strengthening magement of roads by providing effective systems and procedures, and strengthening managerial accountability. The RMI is a component of the Sub-Saharan Africa Transport Policy Program (SSATP), which is a collaborative framework set up to improve transport policies and strengthen institutional capacity in the Africa region. SSATP papers are addressed to public and private sector policy- makers, and to managers and staff attempting to imnprove the performance of the transport sector in Africa. They also attempt to facilitate dialogue among the donor community to build consensus on the key policy reforms required to achieve the above objectives. Kevin M. Cleaver Director Technical Departnent Africa Region iX ABSTRA CT Road tanprt is thc dominant mode of transport in Sub-Saharan Africa (SSA), crrying close to 90 percent of dte region's passenger and freight transport, and providing the only access to rural comunifies where over 70 percent of Africans live. Despite their importance, most of the region's nearly 2 million km of roads are poorly managed and badly maintined. By 1990, nearly a third of the $150 billion invested in roads had been eroded hrough lack of maintenance. To restore anly those roads that are ecomicaly jusified and prevent fiuther deteioration will require annual expenditurs of at least $1.5 billion over the next ten years, or more than double the requiremen of regular maintenance. To find sustainable solutions to these problems, the United Nations Economic Commission for Africa (UNECA) and the World Bank laundhed the Road Maintenance ntiative (RMI) as part of the Sub-Saharan Africa Transport Policy Progrm (SSATP). With support from a number of bilateral donors, the Iniative has spent the last six years working with Afiican countries to identfy the causes of poor road maitoennc policies and to develop an agency for reforming them. Te key concept to emerge fiom the debate on how to srengthe financing and managemnt of roads is commerialiaon; bring roads into the marketplace and put them on a fee for service basis. However, since roads are and uill larely remain a public monopoly, comrcialization requires compl y refioms in four important areas called the four basic builkng blocks: (i) cre-ate ownesip by involvng road users management to win public support for adequate funding and control of the agencies; (ii) secure an adequate and stable flow of fimds; (iii) clarify who is reponilec for what; and (iv) strengthen managemnt by adoption of private sector management prctices. A number of Sub-Saharan Afiican countries are in the process of implementing refims tords the commercial nmnagement of their roads. These reforms include involving road users in management though road management boards, securng an adequate and stable flow of funds though road tariffs/road funds, and increasingly nmerciaiglprivaizing the exeution of engineering services and road works. xi ACKNOWLEDGMENT This report was prepared by [an G. Heggie, Principal Infiastructure Economist (Africa Technical Departnent) and Task Manager fbr the Road Maintenance Initiative (RMI), while Annex 1 was prepared by W.D.O. Paterson. The report was prepared under the overall direction of Jean H. Doyen (Division Chief) and Snorri Halgimsn (Infasirucure Adviser), Environmentally Sustainable Development Division. The report is based on work carried out under the RMI, which is a regional capacity-building initiative working to put road maintenance on a sustainable long-term basis. The RMI is financed by the govenmments of Denmark, Finland, France, Germany, Norway, Sweden and Switzerland, and by the EEC and World Banl. Substantive inputs to the report were made by current RMI staff: Gerad Paget, Thor Wetteland and Anne Balcerac de Richecour. Former RMI staff: Bernard Becq, Jukka Isotalo, Stein Lundebye and Cavelle Creightney also made important contributions to the report. Support and assistance was provided by the RMI Country Coordinators: J. Obi Eta (Caneroon), I. Kimambo (Tanzania), N. Kudenga (Zimbabwe), D. Magpnda (Kenya) 1. Mwedde (Uganda), A. Ntilivamunda (Rwanda), P. N. Obidilke (Nigeria), and T. Sankalimba (Zambia). A nurnber of other people also made important contnbutions to the report, including Anil Bhandan, Rodrigo Archando-Callao, Rachel Kranton (University of Maryland), Christina Malmberg Calvo, Gerhard Metschies (GTZ), Malcolm Mitchell (South African Roads Board), Bill Paterson, John Roome, Alan Ross (consultant) and Andreas Schliessler (ECLAC). The report was reviewed by staff from all Bank regions and was also reviewed by Professor Ken Button (Loughborough University of Technology), Professor Kenneth Small (University of California, Irvine) and Dr. Richard Robinson (consultant and former staff member, TRRL). The report was edited by Ilyse Zable and fonnatted by Marie-Laure Cossa. xiii ABBRE VIA TIONS General.: AADT Average annual daily traffic GHA Ghana Highway Authority HDM III = Highway Design and Maintenance Model, Version Three ICB = International Competitive Bidding ILO = International Labor Organization IMF = International Monetary Fund IMSC = Inter-Ministerial Steering Committee LCB = Local Competitive Bidding MOF = Ministry of Finance MOW = Ministry of Works PER Public Expenditure Review PS = Permanent, or Principal Secretary SATCC = Southern Africa Transport & Communications Commission SLRA Sierra Leone Roads Authority SRMC = Short Run Marginal Costs SSA = Sub-Saharan Africa SSATP = Sub-Saharan Africa Transport Policy Program UNECA = United Nations Economic Commission for Africa VOCs = Vehicle Operating Costs Country Abbreviatdons: CAR = Central African Republic RW = Rwanda CM = Camneroon TA = Tanzania KE = Kenya UG = Uganda MAG = Madagascar ZA = Zambia UNI = Nigeria ZIM = Zimbabwe Umt of Meawrent: S = US Dollars CBR = California Bearing Ratio EIRR = Economic Internal Rate of Retum ESAL = Equivalent standard axles ESAL-n = Equivalent standard axles times distance traveled GDP = Gross domestic product GNP = Gross national product GVW = Gross vehicle weight IRI = International Roughness Index km = Kilometer in/lm = Meters per kilometer NPV = Net Present Value SNC = Modified Structural Number vpd - Vehicles per day veh-hn = Number of vehicles times distance traveled xv OVERVIEW Road transport grew rapidly after the second world war and is now the dominant form of transport in Sub-Saharan Africa. It carries 80 to 90 percent of the region's passenger and freight transport and provides the only form of access to most rural communities. To handle this traffic, African countries expanded their road networks considerably during the 1960s and 1970s, and they also built new roads to open up more land for development. Therefore, by the end of the 1 980s, there were nearly two million km of roads in Sub-Saharan Africa, including 610,000 kn of main roads. These roads are some of the region's largest assets. Their replacement costs amount to nearly $150 billion, and required annual expenditures on routine and periodic maintenance to keep them in a stable long-term condition are between $1.5 and $2.0 billion. In terms of assets, employment, and tumover, these roads are truly big business. However, in spite of their importance, most roads in Africa are poorly managed and badly maintained. Almost without exception, they are managed by bureaucratic government roads departments. The poor state of the road network is reflected in the large backlog of deferred maintenance. It would take nearly $43 billion to fully restore all roads requiring immediate rehabilitation or reconstruction. African countries have spent far too little on routine and periodic maintenance during the past 20 years and, as a result, nearly a third of the $15 0 billion invested in roads has been eroded through lack of maintenance. Africa has been living off its assets. To restore only those roads that are economicaLHy justfifed and to prevent further deterioration will require annual expenditures over the next ten years of at least $1.5 billion. This amounts to nearly one percent of regional GDP. The balance of the network requiring rehabilitation or reconstruction will either have to receive minimal maintenance or be handed over to lower levels of govemment and local communities. The economic costs of poor road maintenance are borne primarily by road users. In rual areas, where roads often become impassable during the rainy season, poor road maintenance also has a profound effect on agricultural output. When a road is not maintained - and is allowed to deteriorate from good to poor condition - each dollar saved on road maintenance increases vehicle operating costs by $2 to $3. Far from saving money, cutting back on road maintenance increases the costs of road transport and raises the net costs to the economy as a whole. It is estimated that the extra costs of insufficient maintenance in Africa amount to about $1.2 billion per year or 0.85 percent of regional GDP. About 75 percent of these costs are in the form of scarce foreign exchange. It is no wonder that road user organizations, particularly those in Tanzania, Zambia, and Zimbabwe, have expressed a willingness to pay for road maintenance provided the money is spent on roads and the work is done efficiently. The Africa Road Maintenance Initiative, launched by the United Nations Economic Commission for Africa and the World Bank, has spent the past six years working with African countries to identify the underlying causes of poor road maintenance policies and develop an agenda for reforming them. What has emerged is that poor road maintenance policies are attributable to the institutional framework within which roads are managed. They are not managed as part of the market economy and this biases managerial incentives. There is no clear price for roads, road expenditures are financed from general tax revenues, and the road agency is not subjected to any rigorous market discipline. Roads are managed li'ke a social service. Poor terms and conditions of employment create furither difficulties, as do lack of clearly defned responsibilities, ineffective and weak management structures, and a lack of managerial accountability. Road agencies are unlikely I to operate efficiently until they are faced with some form of competition, or a competition surrogate. Competition is the primary factor that motivates managers to cut waste, improve operational performance, and allocate resources efficiently. One of the first lessons to emerge from the Road Maintenance Initiative was that attempts to improve road maintenance policies cannot focus on maintenance alone. Poor road maintenance policies are a subset of the wider issues of managing and financing roads as a whole. This insight quickly led to a wider debate about what might be done to strengthen the management and financing of roads. The key concept that emerged from this debate was commercialization: bring roads into the marketplace and put them on a fee-for-service basis. However, since roads are a public monopoly, and ownership of most roads will remain in government hands for some time, commercialization requires complementary reformis in four other important areas. These are referred to as the four basic building blocks. They focus on: (i) creating ownership by involving road users in management of roads to win public support for more road funding, to control potential monopoly power, and constrain road spending to what is affordable; (ii) stabilizing road finmac ig by securing an adequate and stable flow of funds; (iii) clarifying responsibility by clearly establishing who is responsible for what; and (iv) strengthening management of roads by providing effective systerns and procedures, and strengthening managerial accountability. These four building blocks represent the core of the reforms. They are interdependent and ideally should be implemented together. Without all four, the reforns may achieve only part of their objective. You cannot solve the financing problem without the strong support of road users. And you cannot win the support of road users without taking steps to ensure tht resources are used efficiently. And you cannot improve resource use unless you control monopoly power, constrain road spending to what is affordable, and increase managerial accountability. And you cannot hold managers accountable unless they have clearly defined responsibilities. There is nevertheless scope for flexibility. The reforms can be introduced in different ways, and the content of each building block may differ, depending on country circumstances. They can move sequentially or in paralleL and both sequencing and the pace of reform can vary. Furthermore, since the message emerging from the Road Maintenance Initiative is still evolving, the reforms need to be monitored and the results used to modify the message as new information becomes available. Ownership. Major policy reforms in the road sector are unlikely to succeed without the active support of road users. They are the people who use the road network and also pay for it. Given that current allocations for road maintenance are erratic and well below the levels needed to keep the road network in a stable long-term condition, the first building block thus involves winning public support for more road funding. However, support for more road funding through user charges requires that steps be taken to ensure that road agencies do not operate as public monopolies, and that no more is spent on roads than the country can afford. The key step to be taken is thus to involve road users in road management, since this is generally an essential precondition for getting them to willingly pay for roads on a fee-for-service basis. At the national and regional level, road users are generally involved in management through road management boards. These are fairly common in Africa, and there are at least eight funct;oning boards in Benin, Central African Republic (CAR), Mozambique, Rwanda, Sierra Leone, South Africa (the oldest, originally established in 1935), Tanzania, and Zambia. The Board of the Ghana Highway Authority, originally established in 1974 but suspended by the military government in 1981, is about to be reinstated. The Boards in Benin, Rwanda, Sierra Leone, South Africa, Tanzania, and Zambia include private sector representatives (two, one, three, three, four and seven respectively), while that 2 in Mozambique is currently exploring ways of including private sector representatives. Ghana intends to have three private sector representatives when the Board is reinstated. Financing. The second reform aims at establishing an adequate and stable flow of funds. All governments in Africa are seriously short of fiscal revenues. Budget allocations for road maintenance rarely exceed 30 percent of requirements, and it is simply not feasible for govemments to increase these allocations under present fiscal conditions. Improved revenue mobilization is essential. Several African countries are addressing this issue by introducing an explicit road tariff consisting of vehicle license fees and a fuel levy. The tariff is collected independently from government sales and excise taxes and, in the best examples of collection arrangements (CAR, Ghana, and Zambia), the fuel levy is collected on an agency basis and deposited directly into a Road Fund. This prevents the proceeds from being siphoned off and spent on other public programs. The intention is (i) to create a clear miarket signal to encourage road users to demand value for money and (ii) to link revenues and expenditures to impose a hard budget constraint on the road agency, so that more road spending means a higher tariff, while a lower tariff means less road spending. The tariff is generally set to eventually cover all costs of maintaining main roads and part of the costs of maintaining urban and rural roads. The remaining costs of maintaining urban and rural roads are financed by local taxes. Most of the countries with Road Funds have agreed procedures for allocating funds between different road agencies. Some use simple formulas (Ghana and Mozambique), others use formulas that are modified in relation to needs (Tanzania and Zambia), while others base them on a complex assessment of needs (South Africa). Responsibility. The third building block concentrates on creating a consistent organizational structure for managing different parts of the road network. This requires two things: (i) clear assignment of responsibility among different government departments and different levels of government and (ii) clear assignment of responsibility among the individual road agencies. The arrangement needs to be based on an accurate road inventory, functional classification of roads, designation of appropriate road agencies, fornal assignment of responsibility to each road agency, and clarification of the relationship between the road agency and the parent ministry. Responsibilities to be assigned include those for operation, maintenance, improvement, and development of the road network, for traffic management and for road accidents caused by the road agency's own negligence; and for the adverse environmental impacts associated with roads and road traffic. At the community level, where roads are generally managed by village councils, higher- level road agencies may provide technical advice but usually leave the local communities to do most of the work on a self-help basis. Financial support from the center is generally limited to meeting the costs of bought-ow materials. Rural roads under the jurisdiction of central govemments are generally managed by central government feeder roads departnents. Those under the jurisdiction of local governments are generally managed by district councils. Since district councils have limited technical and financial capacities, they are usually encouraged to have their roads managed under contract or to merge with other district councils to create sufficient scale economies to enable the combined network to be managed by a larger road agency. Urban roads are usually managed by urban district councils, while the main trunk road network is generally managed by a central government road agency. International transit routes are critical for Africa and sometimes deseve special tratent. They may either be managed by a dedicated section at the main road agency, as is effectively done in Zambia, or as separate toll roads, as in South Africa. The main road agency usually has responsibility for overall regulation of road traffic, including enforcing axle-weight regulations, which is sometimes done in conjunction with the road transport industry (as in Zambia). 3 Urban road agencies normally oversee activities that affect urban areas, for example, parking control and routing of heavy vehicles in cities. Road agencies should take charge of examining the potential environmental impacts of new road schemes. Management. The final building block focuses on creating a more business-like road agency. Once road users are involved in management of roads, they generally press for the introduction of sound business practices to ensure that their constituents get value for money. They expect clear management objectives, competitive terms and conditions of employment, consolidated budgets, commercial costing systems, and effective management information systems. The most important issue requiring attention is the wide gap between terms and conditions of employment in the public and private sectors, and the impact that this has on staffing and staff morale. An engineer in the private sector in Cameroon normally receives a total remuneration package twice as large as his public sector counterpart (the ratio is five in Tanzania and nearly nine in Zambia). As a result, several road agencies have lost most of their staff or are being managed by expatriates eaming international salaries paid by intemational donor agencies. You cannot manage a road agency on a sustainable basis with expatriates or with demoralized local staff who spend most of their time supplementing their incomes. Any serious reform program must address these issues. Tanzania is now trying to define a competitive remuneration package for road agency staff that can be provided within existing civil service regulations. Once staff are adequately paid, other reforms should concentrate on giving each road agency a clear mission and effective management structures, including appropriate management infonration systems, good accounting systems, and more managerial autonomy so that managers can act commercially. The Ghana Highway Authority has made great progress in this direction by strenlining staffing and disciplinary procedures and introducing a road management system. It has also developed a corporate plan that forms the basis of an annual contract plan between the Authority and the government. These reforms improve market discipline, provide managers with the freedom to operate commercially, and strengthen managerial accountability. They also encourage a more objective approach to setting priorities, comparing in-house to contract work, and evaluating labor-based work methods. Finally, auditing procedures also need to be improved to ensure that the public gets value for money from road spending. Ile aim is to ensure that funds allocated for roads are spent on road works and that the work is carried out according to specification. Where possible, both financial and technical audits should be carried out by independent auditors. Technical and financial audits are now being used on the rural access roads proam in Kenya and on road maintenance programs in Burkina Faso and Senegal. The technical audit usually covers all contract work as well as work done though force account on a sample basis. 4 PART I Preliminaries 1 INTRODUCTION This report follows up on the World Bank's policy study, Road Deterioration in Developing Countries, published in 1988. This study showed that, in the eighty-five countries that had received World Bank assistance for roads, allocations for road maintenance had been so low that nearly 15 percent of the capital invested in main roads -roughly $43 billion, or about 2 percent of GNP - had been eroded by the lack of maintenance. The specific figure for the Africa region was $5 billion, or about 3.3 percent of GNP. As a result, a quarter of the main paved road network, together with a third of the main unimproved network, needed to be reconstructed or would have to receive minimal maintenance. Reconstruction - which would cost $40 to $45 billion world-wide -could have been avoided by spending a mere S12 billion on preventive maintenance. The study also argued that if countries did not improve road management, the eventual costs of restoration would increase by two- to three times and the vehicle operating costs (VOCs) by even more. The study listed several reasons for this sorry state of affairs. Road authorities were not directly affected by road deterioration and came under no immediate pressure to do anything about it. Road users, on the other hand, were slow to see the link between poor road conditions and higher VOCs and, even when they did, were rarely sufficiently organized to do anything about it. The cause of the problem was lack of public accountability. Additional financial resources could not, by themselves, solve the problem of road deterioration. What was needed was reform of the institutional base of the road sector. The organization, staffing, and perfonnance of the institutions responsible for roads had to be improved. The study offered few specific solutions but did give some direction. It pointed out that road agencies were usually public monopolies and had too many responsibilities. They were responsible for planning, controlling, and executing construction and maintenance programs. Furthermore, they devoted too many staff, funds, and facilities to the execution of road works. Too much work was being done through force account. In most countries it would be desirable to separate these functions and trnsfer the execution of road works to the private sector or to a specialized government construction agency. This would clarify responsibilities, improve incentives, and strengthen accountability. Road agencies also needed better management information systems to improve the planning of investment and maintenance programs. Finally, the study argued, every effort had to be made to increase internal accountability, perhaps by mobilizing the media and nongovernmental organizations to help politicians and the public become aware of the high costs of insufficient maintenance. The study was an important milestone in the debate on road maintenance policies and gave impetus to a number of initiatives designed to better understand the underlying causes of poor road maintenance policies. It also encouraged road agencies to address these institutional issues through a clearly articulated reform program. The Road Maintenance Initiative (RMI), a major component of the Sub-Saharan Africa Transport Policy Progran (SSATP), was one of these initiatives. The RMI dialogue has now reached the point where tentative conclusions can be drawn about the most effective way to promote road policy reforms and the broad outline of the reforms themselves. The present report therefore summarizes the lessons learned from the RMI program since its inception in 1988, and uses them to develop an agenda for reform. However, since the conclusions are tentative and the RMI message is still evolving, the lessons 7 energing from the progran need to be monitored. The results of the monitoring can then be used to modify the proposed policy reforms as new infonnation becomes available. The report is written for a nontechnical audience and is directed at African policy makers, Bank management, Bank staff, officials in other development agencies, and senior officials in Africa - both public and private - interested in improving the perfonnance of the road sector in Sub-Saharan Africa (SSA). 8 2 BACKGROUND This chapter examines the current state of the road sector in SSA. It looks at the economic and financial importance of roads and shows that, in spite of their importance, most roads are poorly managed and badly maintained. It then examines the economic impact of poor road maintenance policies, reviews past attenpts to refonn them, and concludes by outlining the scope and purpose of the RMI program. 2.1 IMPORTANCE OF ROADS AND ROAD TRANSPORT Road transport grew rapidly after World War II and is now the dominant form of transport in SSA. Roads cany 80 to 90 percent of the region's passenger and freight transport and provide the only form of access to most rural communities. To handle this traffic, African countries expanded their road networks considerably during the 1960s and 1970s. They also built new roads to open up more land for development The result was that, by the end of the 1980s, there were nearly two million km of roads in SSA, including 610,000 km of main roads, 938,000 km of rural roads, and 143,000 km of urban roads. These roads are some of the region's largest assets. Their replacement costs amount to over $150 billion, and required annual expenditures on routine and periodic maintenance to keep them in stable long-term condition are between $1.5 and $2.0 billion.1 In terms of assets, employment, and turnover, particularly with maintance fully funded, Africa!s roads are truly big busiess. They are generally far larger than railways or national airlines (see Table 2.1 and Figure 2.1). The main road network includes about 5,000 kn of freeways and dual caniageways, 190,000 kan of paved two-lane roads and 414,000 kan of gravel roads. These roads carry modest volumes of taffic; no more than 10 percent carry over 1,000 vehicl per day (vpd). Motorization levels are low and more than 25 penent of traffic consists of heavy vehicles. Since a number of African countries are land-locked, the main road network also includes several heavily trafficked intnational transit corridors. Toll roads are uncommon, although ten continuous roads in South Africa are operated as tol roads under private sector management contacts (see Box 2.1). Ghana is examiniin the option of operating five trunk roads under private sector concession agreements. Mauritius is exmining a similar arrangement for a major trunk road in Port Louis, and Mozambique is planing a build- operate-transfer (BOT) toll road between Komatipoort on the South African border and Maputo. Although tolls are collected on high-density roads in some other countries, toll revenues are generally tated as general tax revenues (as in Nigeria). Only rarely, as in Chad, Ghana, and Rwanda, are road toll revenues used to support road maintenance. The rural road network comprises over 938,000 krn of clasified roads and an unknown length of unclassified roads. These roads carry light traffic, usually less hm 100 vpd, and consist mainly of two-lane, all-weather gravel roads and seasonal earth tacks. They onnect the main agrcultural areas to local maket towns and the main road network. These roads play a particularly important role in Africa, since agriculure accounts for 33 percent of Africa's GDP, 66 percent of its labor force, and 40 percent of its exports About 70 percent of Afiica's population lives in rural areas. RCPlacement cost ar based on rd lengths included in Appendir 1. Replaement costs are assumd to be $500,000 per km for a dual carriageway, S250,000 per km for a paved road, and $50,000 per km for a grve! road. No allowance has been mde fbr the cost of repacing stres 9 Table 2.1 AssMe, Employment, and Turnoverfor Roads, Ravways, and Alines in Seected Countres, Early ]990 CS, million and number) CM KE MAG UNI RFW TA UG Z4 ZIM Main RoadAgenc' Total assetsa 1,850 3,766 1,228 6,205 358 1,417 666 1,426 2,410 Staff 8,683 14,931 2,531 3,580 8,488 8,479 4,515 4,261 5,815 Tunoverb 53 107 34 191 11 46 17 48 52 National Railway Total assetsC 617 900 46 700 - 250 240 350 500 Staff 4,300 21,000 4,875 26,000 - 12,000 6,357 8,500 17,654 Tunover 74 70 8 low - 63 10 27 122 National Airline Total assetsc 96 300 95 420 22 37 20 132 227 Staff 1,758 2,720 1,230 4,540 216 1,062 na 2,300 2,000 Tumnover 130 168 93 118 11 32 na 172 68 Ng.2: For country name codes, see inside front cover. - Not aWplicable. a. Based on replacement costs, less maintenance backlog. b. Annual maintenance quirements (from Table 3-4), plus 20 percent for new investment (the figure of 20 percent was recommended as a guide for budgeting purposes during the course of the RMI Phase I seminars). Country variations are mainly due to variation in the length of roads that are paved. c. Based on the replacement costs oftotal fixed assets, or the replacement costs estimated from historic costs. Source: Appendix 1 and 2, World Bank sector and project reports, and World Bank task managers. Fure 21 Relcemen Costs of Tmransport Infrastrcture in Selected Afncan Countris, 1990 (million dollars) *Nmlbonai Roads * Local Govemnuet Roads 5e000 -U-------- _ Nabonal Raluay _ 4Q=- N-NSfnal Adne 2 = - ------- -_ _- -- -- -- ---- -- -- CM KE MAG UNI RW TA UG ZA ZIM Note: Values am cuanvt meplacenent cost. Forty peicant of local govemment rads.. assua d to be in poor condidon. Souce: Table 2.1 10 Box 21 TOMReuAdshrSouthAfdca South Africa currently has 10 continuous toll roads totaling 685 km in length. The roads are either completely new, or have been significandy rebuilt The legislation under which these roads are tolled requirs, among other things, that (i) a free altenaive paralle route should be available for motorists who do not wish to pay the toll and that (ii) the Ministry of Transport determine the amount of the road toll, based on recmmnendations submitted by the South African Roads Board. The toll rate is set at a percentage of the savings cxpectd to accrue to motnists as a result of the road (i.ec, it is generally set to capture 75 perent of the benefits), and is increued periodically to accunt for inflation (but is never raised higher in real terms than the initial calculated toll rate). The toEI system operates on an open basis (i.e. motorists can use sections of road between toll plxms without paying the toll) to reduce the impact on local residents, and commuters who regularly use the routes enjoy substantial discounts by using frequent-user cars The Deprtment of Transport, on behalf of the South African Roads Board, manages and controls the road loans and employs contractors to operate and maintain the roads on thre to five year contc The private sector companies were set up at the invitation of the Department of Transport and there are now four companies operating the ten toll roads (one company manages five roads, one manages three roads, and the remaining two companies each manage one). None of the roads is wholly self-financing. The concept applied in designing the fmancing schemes is alled the loan supporabk by revenue (LSR) approach. The LSR is determined by calculating the projeses present worth over a period of 30 years at a 4 percent discount rate. This determines the size of the loan that could be repaid from toll revenues over 30 years at a bonowing rate 4 percent above the rate of inflation. The balance of the capital is provided in the form of National Road Fund loans, which bear no interest until the toil road has met its conmmcial money market obligations Since traffic is growing, and tolls are indexed for inflation, toll income grows fast than operaing costs. Although the toll roads start off making losses, they are expected to break even after seven to nine years, pay off the accumulated deficit during the next seven to nine yeas, and then pay off the pripWal amoMt ofthe loan and make profts during the renaining twelve to sixteen years of the project!s life. There were three sources of finance: (i) the Department of Trnsport floated capital market ans carying a govemment guarantee, with rpayment periods that varied between 3 and 20 years (with a pronounced concentation on loans shorter than 10 years), (ii) potntial private sector concessionaires borrowed short-tem money in the form of money-mariket loans (responsibility for tbese loans was taken over by the Depabutent of Transport in April 1991); and (iii) the National Road Fund made so long-trmn loans on which interest was payable on a flexble basis. As of 31 March 1992. the loan portFolio included $206 million in capital market loans (on which the average financing chage during 1992 amounted to 9.8 percent), S286 million in money market loans (on which the avrage financing charge during 1992 was 15.6 percent), and 5460 million in loans from the National Road Fund (on which the average iterst paid during 1992 was 2.2 percent). The Department is curny in the process of converting short-taerm money maret loans into long-tcrm debt Overl income for all toll facilities during 1992 amounted to SS3.1 miDlion ($51.5 million in toil revene while overall xpenditres were SlOA million (running costs, $16.7 million; audit fees and depreciation, $6.3 million; and financing cos, $7.4 million). The overal deficit for the year was thus S43 million. Since the overall deficit carried forward from the previous year was $71.0 million, the overall deficit at the end of 1992 (to be caried forward into 1993) was Sl 19.3 million. There are also about 143,000 km of urban roads. They consist mainly of paved two-lane roads, although some of the larger urban areas contain some dual carriageways. Most countries contain less dtan 1,000 kn of urban roads, and only Nigeria and South Africa bave lare urban networks (Nigeria has about 22,000 kn and South Africa has 60,000 kn). Traffic volumes in urban areas are higher than on the main road network and traffic congestion is a serious and growing problem in some cities (e.g., Abidjan, Accra, Cape Town, Durba, Johannesburg Lagos, Port Elizabeth, Pretoria, and Nairobi) and is an emerging problem in othes The importance of roads in SSA is reflected by the fact at road spending typically absorbs 5 to 10 percent of the government's recurent budget and 10 to 20 percent of its development budget Total road expenditures currently account for over one percent of regional 11 GNP. Furthermore, in many countries, a significant proportion of the central government's disbursed and outstanding debt is attributable to road loans. The road sector also absorbs a great deal of grant finance, mainly for procurement of construction and maintenance equipment. Even a relatively small national road agency often owns $25 to $50 million worth of plant and equipment. 2.2 IMPACT OF POOR ROAD MAINTENANCE In spite of their importance, most roads in Africa are poorly managed and badly maintained. Almost without exception, they are managed by bureaucratic govemrnment roads departments. The poor state of the road network is reflected in the large backlog of deferred maintenance. It would take nearly $43 billion to fully restore all roads classified as being in poor condition (i.e., requiring immediate rehabilitation or reconstruction).' In other words, African countries have spent far too little on routine and periodic maintenance during the past twenty years. As a result, nearly a third of the $150 billion invested in roads has been eroded through lack of maintenance. Africa has been living off its assets. Restoring only those roads that are economically justified and preventing further deterioration will require additional annual expenditures over the next ten years of at least $1.5 billion. This amounts to nearly one percent of regional GDP and would increase current road spending from one percent to nearly two percent of regional GDP. The remaining roads in poor condition will have to receive minimal maintenance or be handed over to lower levels of government and local communities. The economic costs of poor road maintenance are bome primarily by road users. In rural areas, where roads often become impassable during the rainy season, poor road maintenance also has a profound effect on agricultual output. When a road is not maintained - and is allowed to deteriorate from good to poor condition - each dollar saved on road maintenance increases VOCs by $2 to $3.3 Far from saving money, cutting back on road maintenance increases the costs of road transport and raises the net cost to the economy as a whole. It is estimated that the extra costs of insufficient maintenance in Africa amount to about $1.2 billion per year, or 0.85 percent of regional GDP. About 75 percent of these costs must be paid with scarce foreign exchange. During prepamtion of the Integrated Roads Project in Tanzania, it was estimated that the annual economic costs of poor road maintenance were between $100 and $150 million. Likewise, during an RMI workshop in Kenya, it was estimated that the $40 million annual shortfall in road maintenance expenditure increased VOCs by about $150 million per year. In general, road maintenance and rehabilitation projects produce economic rates of return of over 35 percent.4 2 The length of the main road network in poor condition is given in Appendi 2. It is estimnated that 50 percent of the rural network and 30 percent of the urban network is in poor condition. The cost of rehabilitating/ reconstructing roads is assumed to be $230,000 for paved roads and S36,000 for gavel roads. A paved road in good condition, carrying about 500 vpd, requires resealing or light overlays, costing about $23,600 per km. every seven years to keep it in good condition. This has a net percent value (NPV), discounted at 12 percent over twenty-five years. of S17,688 per km. Without maintnance, the road will deteriorate from good to poor condition. This will incease vehicle operating costs by about $5,000 per kmn, which has an NPV, when discounted over twenty-five years, of $39,200 per kn (Thriscutt and Mason 1989, p. 29-30). The benefit/cost ratio of a fully-funded road maintenance progrm is thus between 2 and 3. A recent analysis of the Operations Evaluation Department (OED) database, covering 341 road projects evaluated between 1961 and 1988, found that the averag economic iaternal rate of return (EIRR) for pure road maintenanc projects was 38.6 percent. The analysis was carried out for the 1994 WorldDevelopment Report. 12 The impact of low road maintenance expenditures on vehicle operadng costs is illustrated in Box 2.2. It compares the costs and benefits of several road maintenance strategies: patching, surface-treated reconstruction, and asphalt-concrete overlays. It then calculates their average annual cost-effectiveness and overall NPV, discounted over twenty years. It shows all maintenance strategies to be highly cost-effective, with annualized benefit/cost rmtios which vary from 3.4 to 22.1. In other words, on an annualized basis, each dollar spent on patching saves at least $3 and can save as much as $22. Each dollar spent on road maintenance pays for itself several times over in reduced VOCs. The above analysis, though based on the roughness of the road pavement, does not fully reflect pothole danage. Most vehicles are not designed to deal with the sharp and repeated shocks caused by potholes. This is particularly true of loaded freight vehicles, and trucking companies are well aware of the extra costs that poor roads impose on road transport operations (see Box 2.3). One of the trucking associations in Zambia has recently carried out a small survey to try to estimate the additional costs associated with potholes. It concluded that they added over $14,000 per year to the cost of operating a large truck and trailer combination. It is no wonder road transport associations keep pressing for better road maintenance and express a willingness to pay for it. Poor road maintenance also rises the long-term costs of maintaining the road network. Maintaining a paved road for fifteen years costs about $60,000 per km. If the road is not maintained and allowed to deteriorate over the fifteen-year period, it will then cost about $200,000 per Iam to rehabilitate it. In other words, rehabilitating paved roads every ten to twenty years is more than three times as expensive, in cash terms, as maintaining them on a regular basis, and 35 percent more expensive in terms of NPVs discounted at 12 percent per year. The same is true of gravel roads. Maintaining a gravel road for ten years costs between $10,000 and $20,000 per km, depending on climate and traffic volumes. On the other hand, leaving it without maintenance for ten years will require rehabilitation costing about $40,000 per Ian. Rehabilitating gravel roads every ten years is thus twice as expensive, in cash terms, as regular routine and periodic maintenance, and between 14 and 128 percent more expensive in trms of NPVs discounted at 12 percent per year. Two factors have contributed to the above short-sighted policies. First, lack of market discipline has encouraged governments to minimize their own (road maintenance) expenditures, disregarding the impact that this has on total road transport costs (road maintenance costs plus VOCs). Second, maintenance is normally financed under the recurrent budget, and recurent revenues are nearly always in short supply. Since donors have been willing in the past to finance rehabilitation under the development budget (often on a grant basis), govnents had every incentive to capitalize road maintenance and charge it against the development budget Rehabilitation, rather than recurrent maintenance, became the optimal solution. Donors quicldy recognized this mistake, and most will no longer finance rehabilitation programs until sustainable road maintenance policies have been introduced. 13 Box 2.2 Imnact of Road Mailtenance on Vehicle Operading Costs (VOCs) The following example analyzes the impact of road maintenance on VOCs. It compares a limited number of potential road maintenance strategies aganinst a base case which consists of routine maintenance only at a cost of $322 per km (i.e., off-carriageway work). The five maintenance strategies evaluated in this example include: (1) patching; (2) surface-treated reconstruction (flexible pavement with a crushed stone base and double bitumen surfaec treatment) initiated when surface roughness reaches 7 IRI (m/kin). with patching; (3) surface-treated reconstruction as above, without patching; (4) asphalt-concrete overlay, initiated when surface roughness maclhes S IRI, with patching; (5) asphalt-concrete overlay, initiated when surface roughness reaches S IRI, without patching. The analysis examined these strategies over a twenty-year period during which traffic was assumed to grow at 3 percent annually. The net present values of each option were calculated using a 12 percent discount rate. The results are summarized below for roads in both poor andfair condition for initial average daily two-way traffic volumes (AADTs) of 500 and 1,000 vpd. Seventy pcuAent of the traffic consists of trucks. To make the tables undastandable to a wider audience, expenditures on maintenance and VOC savings have been expressed as annualized cash outlays and savings. The benefit/cost ratios likewise show the annualized cash payoff from each strategy. The tables also include the NPV for each strategy. Road maintenance is shown to be highly cost-effective, with benefit/cost ratios varying from 3A to 22.1. When roads are in fair condition and there is no budget constraint, an asphalt concrete overlay produces the highest NPV. When roads are in poor condition. surface-treated reconstruction produces the highest NPV. The incremental benefit/cost ratios Hlustrate the optimal sequencing of maintenance strategies when the budget is constrained. Patching is always cost-effective, particularly when trafic flows are high. When roads are in fair condition, overlay strategies are more cost-effective than rcoonstruction stregics. When they are in poor condition, reconstuction strategies are more cost-effective than overlay strategies. Poor condition, AADT = 500 vpd Poor condition. AADT 1.000 vpd S trteg 1 2 3 4 5 1 2 3 4 5 Increased maintenance a 568 9,278 9,276 5,978 5,977 628 9,295 9.268 6,254 6,252 VOC savings D 2,29 1 31,507 31,477 27,872 27,872 6,039 66,680 66,171 60,886 60,866 B/C rteo 4.0 3.4 3A 4.' 4.7 9.6 7; 7.1 9. 9. NPV, S milla 16. 216. 216.0 211.1 211.1 53.1 561. 556.1 532.1 532.4 Incr. B/C 4. 1.1 1.1 4.' 4.7 9.6 I. 1. 9. 9. Sequencing e 1 3 . - 2 1 3 2 - Farcondinon, ADT= 500 vpd Fair cwdition, ADT = .000 vpd Staegy 1 2 3 4 5 1 2 3 4 5 Increased maintenance a 546 1.799 2,370 2,868 2,866 606 3,011 4,677 3,399 3,520 VOC savings0 3.310 8,259 9,348 13,259 13,228 13,371 31,976 36,141 40,418 40,947 Benefdtcost c 6.1 4.6 3.9 4.6 4. 22.1 10. 7.7 11. 11. NPV, S mill 27.0 62.8 67.8 99.8 99. 125.2 283. 307.9 361.X 364. Incr. B/C 6.1 4.0 3.3 4.7 4. 22.1 7. 5. 21. 17. Sequencingf 1 2 - 3 - 1 2 . 3 a. Annualized expenditurcs in addition to routine maintenance, dollars per year. b. Annualized savings attributable to above maintenance spending, dollars per year. c. Iten b divided by item a. d. Per 1,000 km. e. The preferred incremental options are going from I to 4 or 5, and then from the best of thesc to 2 or 3. f The preferred increnental options are going from I to 2 or 3. and then from the best of these to 4 or 5. Source: Annex 1. 14 Box 2.3 How Potholes Affect Vehicle Operaing Costs Potholes causc immense damage to vehicics. To better understand the addidonal costs associated with potholes, the Federation of Zambian Road Hauliers interviewed truckers to compare the running costs of a truck and trailer combination on a road with potholes with those on a road without potholes. Thc vehicic considered was a combination tractor and trailer with twenty-two wheels. The costs estimated are those over and above normal running costs. On a road with bad potholes. a driver can either pursue a defensive strategy or ignore the potholes and carry on as usual. If he follows a derensive strategy, he first slows down and changes gears He then has to negotiate the loaded truck and trailer, weighing betwcen 44 and 50 tons, through the potholes. This causes extra stress on the tires, wheel bearings, spring assemblies, spring hangers, chassis, cross-members, engine mountings, gcar box mountings, brakes, steering assemblies, and shock absorbers. Having negotiated the potholes, he accclrates and changes gears again. On the other hand, if he ignores the potholes, he will drive through them at his regular speed, resulting in more damage to the vehicle and tires and increasing the risk of accidents. Thc axle pressure now increases by at least three times. The survey rmsulted in the following annual cxpenditurcs over and above normal running expenditures. It ignores cxtra fuel consumption, damage to goods, down-time of trucks undcr repair, and accidents caused by potholes and sharp pavement cdges. Quantity Item Unit price (dollars) Annual cost (dollars) 10 Extra tirms and tubes 595 5,952 1 Extra clutch and pressure plate 1,071 1,071 4 Extra wheel bearing 201 803 I Extra set of brake shoes 1,050 1,050 I Extra set of springs 1,667 1,667 4 Extra spring hangers and bushes 113 452 -- Welding, electrodes/oxyacetylene for body, chassis and cross member damage engine, gearbox, and cabin mountings 952 952 I Extra stecring assembly 1,874 1,874 4 Extra shock absorbers 128 510 Total annual costs attributable to potholes 14,333 Source: Fcderation of Zambian Road Hauliers Ltd., February, 1992. On the assumption that each truck travels 70,000 km per year, the above expenses raise VOCs by over $0.20 per veh-km. Since the average cost of operating a large articulted truck on a good road is about SI .20 per veb-kan, potholes thus increase VOCs by at least 17 percent, since the additional costs of fuel, down-time, and damage to goods are not included. Furthermore, with virtually all the needed spare parts imported from abroad, the extr costs must be entirely foreign exchange. 23 PAST EFFORTS AT REFORM During the past twenty years, the donor community has made strenuous efforts to improve the operation and maintenance of roads. To help overcome the maintenance backlog, it has supported substantial road rehabilitation programs and has attempted to reform road maintenance policies through dialogue and technical assistance. Between 1975 and 1986, external funding for road projects amounted to about $6.5 billion, and annual commitments are cwuently running at about $1.0 billion per year. The World Bank is providing about $350 million per year, other donors $450 million, while the remaining $200 million is coming from local budgets. 15 Most reforn efforts concentrated on strengthening management of roads, improving user-charging policies, and increasing allocations for road maintenance. The initiatives nevertheless lacked a comprehensive vision, focused on technical rather than institutional solutions, and were generally implemented in a piecemeal fashion. Although some attempts were made to rationalize and decentralize management of roads, little effort was made to deal comprehensively with weaknesses in the road agency's organizational structure, low pay scales, shortages of qualified staff, lack of staff motivation, and lack of managerial accountability. Instead, most initiatives concentrated on reducing force account work, introducing maintenance management systems, and restructuring govemment equipment pools. These initiatives were accompanied by complementary efforts to simplify government procurement procedures to facilitate the use of local contractors, strengthen the local construction industry, introduce maintenance and equipment management systems, and strengthen axle-weight enforcement to reduce damage to road pavements caused by over-loaded vehicles. The most successful initiatives dealt with reducing force account work, simplifying procurement procedures, and strengthening the local construction industry (for examples of such initiatives, see Box 9.1). The remaining initiatives had little lasting impact due to shortages of qualified staff, managerial indifference, and resistance from strong vested interests. Efforts to reform user-charging policies focused on encouraging governments to adopt user charges based on short-run marginal costs (variable road maintenance costs, plus the costs of road congestion).5 The aim was to encourage best use of the road network and ensure that heavy vehicles covered the costs of the damage they did to the road pavement. These efforts were partly successful. Taxes paid by heavy vehicles were often increased following studies of road user charges, but no countries proved willing to accept strict short-run marginal cost pricing for roads. Governments could not see the point of using short-run marginal cost pricing on uncongested roads, saw no reason why road users should be subsidized by other sectors of the economy, and were not persuaded that the proposed arrangements made fiscal sense.6 Attempts to improve financing of roads concentrated on increasing allocations for road maintenance and attempting to use earmarking to secure a stable flow of funds. The government was asked to set aside part of its general tax revenues (usually specified as a percentage of overall fuel tax revenues), deposit the money into a Road Fn, and use the proceeds to finance maintenance of the core road network. However. apart from pointing out the economic costs of deferred maintenance and suggesting reallocation of funds from construction to maintenance, little advice was offered on where the additional revenues might come from and how the Road Fund should function. The International Monetary Fund opposed earmarking on grounds that it undermined unified budget management and Ministries of Finance also objected to Road Funds. As a result, most Road Funds suffered from systemic problems: (i) deposits were erratic; (ii) A pricing practice in which price is madc equal to short-run marginal costs (i.e.. the costs of producing the last unit sold. plus a mark-up to clear the market). The rationale was that. subject to certain assumptions about production costs and other matters. such a pricing rule would maximize economic welfire. See, for example. Churchill. A.. Road User Charges in Central Ameica, World Bank Staff Occasional Paper No. 15, Johns Hopkins University Press Baltimore, 1972; and Walters. A. The Economics of Road User Charges. Johns Hopkins University Press, Baltimore. 1968. 6 With little road congesdon, such charges would be set equal to variable road maintenance costs which would only cover about half the costs of operating and maintaining the road network. 16 withdrawals were frequently delayed; (iii) govemments borrowed money to finance other public programs; and (iv) expenditures were loosely controlled. Therefore, most Road Funds failed to provide an adequate and stable flow of funds. 2.4 THE RoAD MAINTENANCE INITuTIVE Against this background the RMI was launched by the United Nations Economic Commission for Africa (UNECA) and the World Bank under the auspices of the Sub-Saharan African Transport Policy Program (SSATP), in an effort to identify the underlying causes of poor road maintenance policies and develop an agenda for reforning them. The program is administered by the Africa Technical Departnent in the World Bank and is financed by the govemments of Denmark, Finland, France, Gennany, Norway, Sweden, Switzerland, and the EEC. Finland, France, and Norway provide three senior staff to work on the program.7 The initial phase of the RMI program focused on raising awareness of the need for sound road maintenance policies and on identifying why current policies were ineffective and unsustainable. The second phase then moved on to country initiatives in nine target countries: Cameroon, Kenya, Madagascar, Nigeria, Rwanda, Tanzania, Uganda, Zambia, and Zimbabwe. The country programs initially focused only on main roads and concentrated on promoting reforms in three main areas: (a) planning, programming, and financing; (b) operational efficiency; and (c) institational and human resource development. During the initial stages of the policy dialogue, RMI staff urged stake-holders to identify the underlying causes of poor road maintennce, suggested possible ways of dealing with them, shared experiences from other parts of Africa and the rest of the world, and employed consultants to prepare background papers on different aspects of the road maintenance problem. This quickly led to three important insights. First, it had always been assuned that the Ministry of Finance (MOF) would play a key role in developing sustainable road naintenance policies. So strong was this belief, some of the initial country initiatives sought to interest the MOF in road maintenance by exploring the basic financial issues through Public Expenditure Reviews (PERs). However, it quickly became apparent that the MOF did not hold the key and that the secret to success lay in involving the private sector. Futhermore, these are the people who use the roads and also pay for them. Their representative organizations - chambers of commerce, road transport associations, and farmer organizations - are strong and influential. Their support will often overcome otherwise insurmountable bureaucratic resistance, whether it comes from the Ministry of Works (MOW) or the MOF. Second, many of the systemic problems associated with poor road maintenance policies -weak programming and budgeting, undue emphasis on force account work, and inefficient plant pools - were symptoms of a deeper problem. The real causes were weak or unsuitable institutional arrangements for managing and financing roads, and the impact this has had on staff incentives, staff motivation, and managerial accountability. Until the institutional framework is 7 Finand withdrew fion the progran in mid-1993. 17 improved, it is almost impossible to overcome the numerous technical, organizational, and human resource problems which hamper sound road maintenance policies. Third, it showed that attempts to improve road maintenance policies cannot focus on maintenance alone, nor can they focus only on the maintenance of main roads. Poor road maintenance policies are a sub-set of the wider issues of managing and financing roads as a whole. In fact, the problems are most acute at the regional and district levels, where institutional weaknesses are greater and finances in shorter supply. These insights automatically caused the two-way country dialogue to evolve into a wider debate about the institutional arrangements for managing and financing all types of roads. The following chapters describe the work of the RMI program, the way it handled the process of policy reform, and the resulting agenda for refonn now being implemented in the nine target countries and elsewhere. is 3 THE BASIC ISSUES This chapter concentrates on diagnosis. Why have governments in SSA been pursuing ineffective and unsustainable road maintenance policies? Although there is no simple answer, there are some common threads. The main problems are of an institutional nature and this affects incentives. They include: serious human resource constraints (as pointed out in the road deterioration policy study), inadequate financing arrangements, lack of clearly defined responsibilities, inefficient management structures, and weak management systems. These cause road agencies to be inefficient. This chapter looks at these problems and tries to understand what went wrong and why. 3.1 INSTIrUIONAL FRAMEWORK Part of the reason for poor road maintenance policies is attributable to the institutional framework within which roads are managed. They are not managed as part of the market economy and this biases managerial incentives. There is no clear price for roads, road expenditures are financed from general tax revenues, and the road agency is not subjected to any rigorous market discipline. Roads are managed like a social service. Road users pay taxes and user charges, and the proceeds are nearly always treated as general tax revenues. Instead of being financed through user charges, roads are thus financed through budget allocations determined as part of the annual budgetary process. These allocations bear little relationship to underlying needs (i.e., to the cost-effectiveness of road expenditures at the margin) or to road users willingness to pay. Revenues and expenditures are completely delinked. There is no hard budget constraint (i.e., there is no direct link between revenues and expenditures), no price to ration demand (do we want more or less of particular road services?), and expenditures are not subjected to the rigorous tests of the market place (how much road spending can we really afford?). The above framework biases managerial incentives and affects the way roads are managed. First, since road users do not directly pay for roads, they are not forced to choose whether and how to make the journey or to hold the road agency accountable for the way it spends its budget. Second, the absenoe of a firm link between revenues and expenditures encourages road users to demand more road spending because it is financed from general tax revenues and does not affect payments for road use. Third, without a hard budget constraint and pressure from road users, the road agency does not have to manage resources efficiently. The government rarely provides clear objectives (in practice, road agencies are often rquired to employ too much labor and to build roads which are uneconomic), managers face few incentives to cut costs (major cost reductions may simply lead to reduced budget allocations), there are few sanctions, staff cannot easily be disciplined, and managers are rarely penalized for poor performance. 3.2 HUMAN RESOURCE CONSTRAINTS Human resource constraints are the single most important issue facing most road agencies. They suffer from an acute shortage of technically qualified staff and still employ far 19 too many unskilled workers.! The scale of the problem with technical staff is clearly illustrated in Table 3.1. Of the nine road agencies included in the table, one has collapsed (Zambia), two are close to collapsing (Malawi and Mozambique), and four are heavily dependent on expatriates (Botswana, Lesotho, Namibia, and Tanzania). Salaries in some road agencies are so low that daylighting has become part of the status quo.! Salaries are not only well below those in the private sector, but are frequently below the living wage (the minimum salary needed to feed and clothe a famnily). Annual median salaries vary from an adequate $10,000+ in Botswana, Lesotho, Namibia, and Swaziland to $6,000 in Zimbabwe (the road agency is just about holding its own, but 75 percent of its engineers and 60 percent of its technicians are under the age of 34), $4,000 in Malawi, $2,200 in Mozambique, $950 in Tanzania, and $650 in Zambia. This has caused "a rapid exodus ... of experienced and competent technical staff to the private sector and prastatals ... The main reason has been offers of far better compensation ... and more generous fringe benefits."" The situation is similar, or is rapidly becoming so, in most other African countries, (see Table 3.2). This table, which covers the nine countries participating in the RMI program, shows that vacancies at the professional and managerial levels are major problems in Kenya, Uganda, and Zambia. It also shows that road agencies in Rwanda, Tanzania and Zambia are heavily dependent on expatriate engineers paid international salaries by multilateral and bilateral donors ($35,000+, plus allowances)." The shortage of technical staff, together with the incidence of daylighting and moonlighting, are entirely attributable to the growing disparity between civil service salaries and those for comparable positions in the private sector (see Table 3.3). An engineer working in the private sector generally earns more than twice as much as his public sector counterpart (in Tanzania and Zambia, it is five and nine times respectively). Real salaries have also declined sharply. A young engineer in Tanzania eamed about $250 per month in 1970. His real salary now is a mere $20 per month. The same is true in Nigeria. Until about five years ago, a young engineer earned about $1,000 permonth. This has now fillen to $150 per month. Roads departments paying qualified technical staff a fraction of the going market wage either end up with high vacancy rates (as in Kenya, Malawi, Mozambique, Uganda, and Zambia), employing expatriate road managers paid through donor-financed technical assistance programs (as in Botswana, Lesotho, Namibia, Rwanda, Tanzania, and Zambia), or with part-time staff forced to supplement their incomes by moonlighting, daylighting, manipulating allowances, and pilfering."2 Daylighting is now a systemic problem in Africa. Too many technical staff hold second jobs and owe their loyalty to another employer. And this problem cannot be solved through training, bonded studentships, and improved allowances. There is no point training staff who only spend a fraction of their time on the job. Likewise, bonded graduates have no interest s After independence. most govcrnments systematically expanded the civil service, often by a factor of two or thrce, to deliver on electoral promises and reduce unemployment. Road agencies were a key target for cmployment programs, and many now have two to three times the required number of laborers on their books. 9 Daylighting refers to the practice of doing another full-time job during regular working hous 10 SATCC, (1993). I I Some countries, like Botswana and Lcsotho, also recruit regional expatriate engineers, who are paid annual salaries of about SI 5,000, plus allowances. 12 'We want them to come to work. Wc want them to work five days a week. We want them to work 40 hours a week. We don't want them to have to do something else in order to surive and we want them to kccp their hand in their own pocket." Comments by E.V.K. Jaycox. Vice President, Africa Region. at a conference on Capacity Building: The Missing Link in African Develm, Reston, Virginia, USA, May 20, 1993. 20 in making a career in the roads department and simply count the days to the end of their bonding period. Improved allowances are equally ineffective since they are discretionary, subject to change and are not bankable (i.e., cannot be used as security for mortgages and other loans). You cannot manage a road agency with a demoralized, part-time staff. Table 3.1 Number of Siaff wad Salary Scales In SA VCC CounhTes, 1991-92 Annual Number of staff Road Kilometer salary range Country Local Expatriatesa Vacant Total" Length (kIm) perstqf (1992/93 dollars) Botswana 8,328 Engineers 6 15 15 36 231 8,076- 18,811 Technicians 78 5 1 84 99 8,076- 14,702 Lesotho 3,076 Engineers 10 11 11 32 96 8,076-18,811 Technicians 24 0 2 26 1IS 8,076 - 14,702 Malawi 14,145 Engineers 19 9 27 55 257 1,873 - 6,195 Technicians 42 0 1 43 329 132 - 2,953 Mozanbique 29,175 Engineers 10 1 34 45 648 2,070 - 2,283 Teclmicians 35 0 78 113 258 869- 1,781 Nanibia 39,516 Engineers 2 10 6 18 2,195 12,440-21,925 Technicians 16 1 16 33 1,197 9,415-21,925 Swiland 2,800 Engineers 3 1 1 5 560 8,746 - 10,383 Technicians 18 0 4 22 127 3,905 -6,155 Tananiad 28,030 Engineers 211 37 0 248 113 928 -957 Technicians 270 0 0 270 104 n.a Zambiad 20,783 Engineers 1 6 24 31 670 481 - 820 Technicians 3 1 22 26 799 305 - 596 Zimbabwed 18,400 Engineers 56 6 3 65 283 3,977 -7,973 Technicians 65 0 0 65 283 3,850 - 7,196 a. Expatriates are foreign engineers paid international salaries by donors. Some countries also recruit regional expatriates. b. Total refers to total number of approved posts. c. Length of network divided by total approved posts. d. Number of engineers in Tanzania, Zambia, and Zimbabwe from Table 3.2. Source: SATCC, (1993) 21 Table 3.2 Number of Road Agency Staff by Category and Source: Sdected Main Road Agencies CM KE MAG UN! RW TA UG ZA ZIM Professional and managerial Local 203 215 51 335 44 211 72 I 56 Expatrate 5 2 2 - 14 37 5 6 6 Vacant - 26 - - S - 19 24 3 Subtotal 208 243 53 335 63 248 96 31 65 NoJl,OOOkm 6 4 5 6 11 9 12 2 4 Technicians Local 693 381 287 419 86 949 225 4 250 Vacant - 154 - - 12 - 94 61 - Subtotal 693 535 287 419 98 949 319 65 250 NoJI,OOOkm 21 S 20 7 17 34 40 3 14 Other regular staf Local 7,782 10,892 2.191 2.828 8,327 7,282 4,100 4,178 5,500 Vacant - 3,261 - - - - - - - Subtotal 7,782 14,153 2,191 2,828 8,327 7,282 4,100 4,178 5,500 NoJl,OOOlun 236 224 ISO 48 1,425 260 508 201 298 Grand total 8,683 14,931 2,531 3,580 8,488 8,479 4,515 4,261 5,815 - Not available Notes: For country name codes, see inside front cover. Other regular staff include laborers and casuals. No./l,0OO kan is based on number of approved positions. Source: RMI Country Coordinators. Table 3.3 Incomes of Piblic and Privae Sector Engineers: Selected CoUAtrJs, 1993 (dollrs per mondh) CM KE MAG UNI RW UG TA ZL ZIM Public salary 377 170 - 154 186 99 70 70 370 Private salary 777 465 - 334 661 360 350 600 600 Public/private 2.1 2.7 n.a. 2.2 3.6 3.6 5.0 8.6 1.6 - Not available. n.a. Not applicable. Note: Comparisons are of salaries and allowances for graduate engineers with three to four years practical experience. Conversion to dollars at January 1994 exchange rates, after CFAF devaluation. Source: RMI Country Coordinators. 22 3.3 INADEQUATE FINANCING ARRANGEMENTS Financing arrangements are crucially important. Without an adequate and stable flow of funds, road maintenance policies will not be sustainable. That is an important part of the problem in Africa. Road maintenance expenditures in virtually all countries are well below the levels needed to keep the road network in stable long-term condition. In most countries, they are less than half the estimated requirements and, in some, less than a third (see Table 3.4). Furthennore, the flow of funds is erratic. Budget allocations are often cut at short notice in response to difficult fiscal conditions, funds are rarely released on time, and actual expenditures are often well below agreed budget allocations. As a result, roads throughout the region continue to deteriorate, rural roads regularly become impassable during the rainy season, and the large backlog of road rehabilitation continues to increase. Between one quarter and one half of the main road networks included in Table 3.4 are in poor condition and need to either be rehabilitated or downgraded to roads which receive minimal maintenance. The main reason why road maintenance is underfunded is that road users pay very little for the use of the road network (see Table 3.4). They pay the usual import duties, excise taxes and sales taxes, but so does everyone else. Road user charges - in the fo m of vehicle license fees, a specific surcharge added to the price of fuel (the fuel levy), and international iransit fees - rarely cover more than 50 percent of expenditures on maintenance and, in some countries, barely cover 25 percent (see Box 3.1 for an explanation of how to separate road user charges from general tax revenues). Most road expenditures are still financed from general tax revenues (listed in Table 3.4 as government grants) and donor-financed loans and gants. This is not necessary. Roads can be commercialized, put on a fee-for-service basis, and treated like any other public enterprise. An added complication is that funds for road maintenance are allocated as part of the annual budgetary process. Under this arrangement, each ministry must compete for funds during the annual budget negotiations and, at least in theory, funds are allocated to finance those expenditures with the highest economic return. However, if that were true, road maintenance would not be underfunded. As Table 3.4 and Box 3.1 clearly show, allocations for maintenance are well below the optimal requirements (defined as a maintenance strategy which produces an EIRR of over 12 percent), even though the economic return at the margin is frequently well over 100 percent. The budget allocation process is flawed and politicized, and funds are unfortunately not allocated to finance expenditures with the highest retum. Large spending ministiies, particularly those spending large sums on maintenance, nearly always lose out in the budget debate. Maintenance can always be postponed in the hope that better fiscal conditions are around the corner. lhey rarely are, and road maintenance continues to be cut or deferred. Given this inherent structural problem, it is no wonder that both Japan and the U.S. - both generally considered successful economies with well-developed budgetary systems - use earmarking to secure a stable flow of funds to support their road expenditure programs (see Box 3.2). Another reason road maintenance is underfunded is that some countries still spend too much on new investments (mainly upgrding existing roads and construction of feeder roads). A review of nineteen SSA countries has shown that, between 1986 and 1988, 58 percent of road expenditures were devoted to new construction or improvement, 17 percent to reconstruction and rehabilitation, and a mere 25 percent to routine and periodic r.aintenance. Countries continue to upgrade existing roads and build new ones even when there are no funds to maintain them. One of the reasons for preferring construction over maintenance is that maintenance is financed under 23 the recurrent budget, while investment is financed under the development budget. Since donors are willing to support the development budget, development funds are less constrained than recurrent funds, which are mainly financed from domestic revenue sources. However, a more important reason for fhvoring new construction is that contracts tend to be larger (hence offering greater opportunities for gratification payments) and are politically more visible and glamorous. Table 3.4 Main Read Expendthures, Fbiancing, andActual and Requrded Mabitenance In Sekcted Conbics CM KE MA G UNI RW TA UG ZA ZIM 1991/92 199/92 1991/92 1991/92 1991/92 1991/93 1991/92 1991 1990191 CFAF KI; FMG Naira FRW 7Sh USh Kwacha ZS (bill) (mill) (bill) (mill) (mill) (bil) (bill) (mill) (mill) Road expendturesa 16.5 112.4 100.0 750.0 1,000.0 11.3 32.0 935.0 247.0 Financed by Road usersb 0.6 23.0 20.0 24.0 500.0 2.8 5.3 105.0 45.0 Government Grants 12.2 40.5 10.0 656.0 na. 5.0 21.0 522.0 187.0 Donors 3.7 48.9 70.0 70.0 n.a. 3.5 5.7 308.0 15.0 Maintenance expentures RequiredC 12.0 132.9 52.3 2,167.8 1,137.8 11.6 13.5 2,468.0 123.6 Actal 7.5 29.1 15.0 570.0 550.0 4.8 4.4 305.0 89.7 Maintenance shortfll 4.5 103.8 37.3 1,597.8 587.8 6.8 9.1 2,163.0 33.9 Actuallrequred (perment) 63 22 29 26 48 41 33 12 73 n.a. Not applicable a. Road expenditures are generally below requirements because of shoriflls in regular road maintenance allocations. b. lncltdes license fees, international transit fees, and fuel levies (where applicable). c. Maintenance requirements based on: paved = S4,000 per kIn; gravel = $1,000 per km. Source: World Bank Sector and Project reports and World Bank Task Managers. 3A LACK OF CLEAR RESPONSIBILIIES A lack of clearly defined responsibilities adds to the above problems. It is often unclear which agency is responsible for managing different parts of the road network, controlling overloading, managing urban traffic, intervening to improve road safety, or intervening to reduce the adverse environmental imnpacts associated with road traffic. Responsibility for roads is often spread among half a dozen central govemment ministries and a whole range of local govemment agencies. For example, in Ghana during the carly 1970s, construction and maintenance of trunk roads was handled by the Public Works Department; feeder roads construction fell under the Department of Social Welfare and Community Development (maintenance was left to regional organizations); the Cocoa Marketing Board, Volta River Authority and timber cormpanies constructed roads to serve their own needs; and city and municipal councils dealt with city and town roads. The departnents of agricuure, 24 tDurism and wild life, and lands also build roads in Botswana, Kenya, Tanzania, Zambia, and Zimbabwe. Moreover, traffic regulation and enforcement, is often handled by a separate transport ministry and the police. The fragmentation of responsibility, together with the separation of responsibility for construction from that of maintenance, leads to duplication, confusion, and a lack of coherent management policies. Box 3.1 Sepauhg Road User Chargesfrom General Tax Revmues The taxes and charges paid by road users are either: (i) clearly identifiable as specifilc charges for use of the road network (e.g., tolls, fuel levies paid into a road fund, and vehicle license fees); (ii) clearly identifiable as general revenue taxes (e.g., value added taxes, corporate income taxes, and trade protcction taxes); or (iii) may be used to both collect user charges and gcneral tax revenucs (e.g., impoit duties, cxcise taxes, and sales taxes). Since it is fairly easy to identify the taxescharges which fall into categories (i) and (ii) this box concentrates on ways of dealing with category (iii). When road user charges are combined with other genral taxes, they are added to cxisting indirect taxes (eg., taxes on goods and services and import duties). Indirect taxes generally differentiate between consumer luxuries, other conmxer goods, intermediate goods (including raw materials), and capital goods. Within each category, items are treated in a fairly consistent way, although there are exceptions since tax rates also reflect other fiscal objectives (e.g., promoting domestic vehicle assembly, energy conservation, and protection of local industry). The following four-step procedure is suggested as a means of separating road user charges from general revenue taxes * First, examine the tax code to see whether trnusport services are exempted fomn general taxation. The tax code nsually states how services are to be treated and will usually list exempted items. If not, examine the various revenue headings to see whether transport is de facto exempted. For example, if aviation kerosene and aircraft spare parts bear general taxes, then the presumption is that transport is not exempted. • Second, there will usualy be prior information available to show how the overall tax rate has been built up and, within the overall rate, how much represents the road user charge. For exanple, irs China, the purchase tax on new vehicies includes an added vehice pwthasefee, which is credited to a special fund to support road construction. Such prior information often enables road user charges to be separated f*om general revenue taxes. * Thid, when there is no prior information, examine the tax code to see how the taxes levied on road users compare with the taxes levied on other goods and services. For example, trucks are usually classified as plant and equipment. If the tax schedule levies the same tax rate on trucks as it does on all other plant and equipment, then there is no road user charge added to the tax rate. On the other hand, if the rate is clearly higher than on other plant and equipment, the difference may represent a road user charge (the diference represents the maxmmu amount which can be considered a road user charge since the additional element may reflect other fiscal objectives). * Fourth, when it is not possible to identify the tax rate applicable to road users, the analysis has to rely on the average tax rate for all similar goods. For example, the rates applicable to individual items of plant and equipment may vary widely, and in such cases ther may be no alternative but to use the average rate to represent the rate applicable to that category. This is calculated by dividing the tax revenue collected from that group (cg, general sales taxes, excise taxes, and import duties on plant and equipment) by the base value ofthese items. The difference between the tax levied on road users and the avaage tax rate on the group as a whole can then be teated as the user charge (again, the amount represents the maximum amount which can be considered a road user charge). A recent study has applied the above method to eight countries (Argentina, Bangladesh, Bolivia, China, Indoreuia, Mexico, Tanzania, and Turkey) and showed that import duties, sales taxes, and excis taxes rarely include an additional element representing a road user charge. Indirect taxes are nearly always general revenue taxes and play no part in mobilizing revenues to support spcnding on roads. 25 Box 3.2 EarmarkAng bI Japan and United States Japan introduced a special funding system for roads in 1954, and the United States did so in 1956. Both involved earmarking ecrtain road-related taxes and depositing them into a special account. or road fund. The Japanese special funding system was introduced to meet the needs of the post-war road improvement program and was "based on the concept that road users who enjoy the benefits of improved roads should bear the burden fnr their improvement."' The United States special account was introduced to finance construction of the interstate highway network and was based on the user-pay concepL The concept involves two elements: first, the user pays, and second, the govement credits the user fees directly to a highway special account Earmarking in Japan: Japan has an elaborate system of eamarking national and local taxes to ftnance the maintenance, improvement and construction of roads. At the national level, earmarked tax revenues consist of all the gasoline tax and half of the tax on liquid petroleum gas (LPG). One quarter of the gasoline tax is paid directly into the Road Improvement Special Account. while the remainder passes through the government's Generl Account before being deposited into the Special Account. At the local level, earmarked tax revenues consist of: (i) tax revenues collected by the national government and then passed on to the local government and (ii) tax revenues collected by the local government itself. Item (i) includes the other half of the tax on LPG (spent on roads in the Tokyo Metropolitan Area, Hokkaido, prefectures, and designated cities), one quarter of the motor vehicle tonnage tax (spent on roads in cities, towns, and villages), and a local gasoline tax (43 percent spent on roads in the Tokyo Metropolitan Area, Hokkaido, prefectures, and designated cities; 57 percent spent on roads in cities, towns, and villages). Itern (ii) includes a local diesel fuel tax (spent on roads in the Tokyo Metropolitan Area, Hokkaido, prefecurs, and designated cities) and the motor vehicle purchase tax (30 percent spent on roads in the Tokyo Metropolitan Area, Hokkaido, and prefectures, 70 percent spent on roads in cities, towns, and villages). Earmarked revenues at boih the national and local levels are supplemented by general tax revenues and in the case of the national govenmment, are also deposited into the Road Improvement Special Account to ensure comprehensive management of the funds. The tax rates are set during the preparation of the Five Year Road Improvement Programs. The Ministry of Construction prepares the programs in consultation with the local government and then submits them to the Ministry of Finance for approval. Afler consultations, new tax rates are agreed upon and these are then written into a new proper tax law, which remains in force for the next five years. Earmarking in the United States: The US Federal Highway Trust Fund exists only as an accounting mechanism. The taxes earmarked for the Trust Fund are deposited into the geneml fund of the US Treasury and a paper transfer of these taxes is made to the Trust Fund as needed. Earmarked tax revenues in excess of those required to meet current expenditures are invested in public debt and interest earned is credited to the Trust Fund. The Trust Fund finances the federal-aid highway program. administered by the Federal Highway Administration (since 1982 a portion of the Fund has also been used to finance mass transit projects administered by the Urban Mass Transportation Administration). Revenues from the highway portion of the Trust Fund are used to reimburse states for expenditures on approved projecs These include periodic maintenance, road improvement. new construction, road safety progams, studies, and other highway related expenditures. The Trust Fund does not finance routine maintenance. Trust Fund revenues are derived from a variety of highway user taxes, including: (i) motor fuel taxes on gasoline, diesel. and gasohol. (ii) a graduated tax on tires weighing 40 lbs or more; (iii) a 12 percent retail tax on selected new trucks and trailers; and (iv) a heavy-vehicle use tax on all trucks with a gross vehicle weight (GVW) over 55,000 lbs. Tax rates are adjusted as part of the regular budgetary proces The user-pay concept is well established in the United States All but six states and the District of Columbia now dedicate their user-fee revenues to special highway or transportation accounts. 26 In addition, individual road agencies rarely have clearly defined responsibilities. For example, it is often unclear whether trunk reads in urban areas are a responsibility of the main road agency or the urban municipality. In the latter case, it may also be unclear which agency is meant to pay for the maintenance of these roads. This has created problems in Zambia, where such roads are under the jurisdiction of local authorities but are meant to be financed through the central governnent budget. The lack of clearly defined responsibilities is even more acute in rural areas. Few rural roads built during the past twenty years have been formally assigned to a legally-constituted highway authority. Many were financed on a grant basis by multilateral and bilateral donors, using funds channeled through central government departmnents dealing with agriculture, fisheries, and tourism. In many cases, there were no set arrangements for transferring managerial responsibility to an established road agency and clarifying responsibility for maintenance. Local road agencies may therefore not know which roads they are supposed.to maintain, and a significant number of rural roads thus go unclaimed and unmaintained. The reverse is also true. Somne gazetted'3 roads have reverted to bush and the designated road agency can no longer fid them! This has happened in both Uganda and Zambia. Most road agencies are likewise unclear about what their responsibilities are regarding axle-weight enforcement (this usually being left to the police). Should they actively intervene to manage urban taffic (and enforce parking and other traffic regulations)? Should they willingly accept civil liability for accidents caused by defective design and maintenance policies? Should they seek compensation from third parties for damage done to road infrastructure (usually by road accidents)? Do they have a responsibility to identify and mitigate the environmental impacts associated with roads and road traffic? Although many of these problems are aggravated by a shortage of technical staff and underdeveloped legal and administrative systems, the core problem is the lack of clearly defined responsibilities. Which ministry is responsible and to which agency has it assigned that responsibility? 3.S INEFFECFIVE MANAGEMENT STRUCTURES These problems are worsened by the curious management structures under which most roads are managed (they are not really managed, but administered). At the central government level, the main road network is usually managed in one of three ways. It is either managed: (i) as part of a combined Ministry of Works, Transport and Communications (Botswana, Uganda, and Tanzania); (ii) as part of a more narrowly focused Ministry of Works or Transport (Madagascar, Rwanda, Sierra Leone, Zambia, and Zimbabwe); or (iii) under a sharply focused Ministry of Roads and Highways (Ghana). Local government roads may either be handled directly through a centrl road agency (Sierra Leone), through a separate departnent forming part of a central road ministry (Ghana), or through a ministry of local government, which usually delegates most day- to-day operations to the local authorities themselves. The typical structure for a combined ministry is illustrated in Figure 3.1. A more focused ministry is similar, but simpler, while a special-purpose ministry provides the simplest model of all. 13 The process of gazeing assigns responsibility for operating and maintaining the roid to a legally constituted highway authority. 27 FJ;re 3.1 7)pIca Management SlruJure of a Mintsry of Works and Thiasporr Ninbtw Pemnnaunt ft.bd omh Hadquarers srikes * Od *Accounns * WXar__ ___ _ *Persv a Trainkig *hAdIr *Progr a Evatin II 'Pbnng ung Research One or two dMWr PeFmanet SKMf eleculal WmV. The model illustrated in Figure 3.1 is cumbersome and largely ineffective as a framework for promoting a more commercial approach to the management of roads. Reporting lines are long and tortuous, regional engineers often report directly to the permanent secretary (PS) (instead of through the director of roads), numerous support services are shared (and hence suffer from conflicting priorities), and the entire structure is lopsided. The road function typically accounts for about 70 percent of the ministry's budget (particularly with maintenance fully-fimded), and yet the roads department is usually placed alongside other functions which are small (meteorological services) or in the process of being contracted out (mechanical services). This distracts the attention of the deputy PS, through wo -n roads must report The director of roads is also way down in the hierarchy, occupying the position of a line manager rather than chief executive of a large and important department.'4 T-his contrasts with the position of parastatals which have a board, chief executive, and several line managers. The parastals report directly to the PS. The present management structir. is thus an anachronism and dates back to the time when expenditures on roads were roughly the same as they were on public buildings and govermnent plant and equipment. 4 In Tanzania, the total remuncration package (ircluding all allowances) of the director of roads is two-thirds ffiat of the managing diector of Air Tanzania and 40 pacent that of the managing director of Tanzania Railways In ZiDbabweC, the ratios arm 70 percent and 50 pecent, respectvely. The managing direcrs of the airlinc and railways also have nmore tax-free allowances and other perks Even more inconsistent, in Tanzania, the head of the former Ministy of Works plant pool now receives a total remuneration package 10 timCs higher than the drector of roads 28 The more focused ministry overcomes some of the above problems, since reporting lines are more direct. Furthermore, in a more narrowly focused transport ministry, there is better intermodal coordination, but the ministry remains lopsided, the management structure remains weak, and the director of roads remains a line manager. The special purpose ministry in Ghana provides the simplest model, although the same objective could be achieved by restructuring a larger, heterogeneous ministry. Roads in Ghana are managed through three line agencies which all report directly to the permanent secretary. The Ghana Highway Authority, which has a commercial managenent structure, marsages main roads, and the Departments of Urban Roads and Feeder Roads manage urban and rual roads respectively. Finally, there is the question of the local govemment ministries which handle local authority roads. They vary enormously. At one extreme, there are large force account agencies like the District Development Fund (DDF) in Zimbabwe, which manages a large road netw-,rk on behalf of local councils (the DDF is part of the Ministry of Local Govemment), while at the other extreme there may be a few people in the Ministry of Local Government who liase with local authority roads departments, but do very little for them. At the local authority level, it tends to be even more confused. There is often no such thing as a roads department (new roads often fall under the Development Committee and road maintenance under the Finance Committee), making it difficult to identify who is responsible for what. At the local level, management structures are therefore weak or nonexistent. 3.6 WEAK MANAGEMENT SYSTEMS The above confusion and poor management structures provide managers with little incentive to introduce and develop effective financial accounting systams and management information systems. Current financial accounting systens provide little information to support informed management decisions. There is no revenue account (hence no cash flow statement), accounts are kept on a cash basis, investmerits are written off as a cash expense as soon as they are incurred (i.e., road agencies do not depreciate assets or keep a balance sheet), and the accounting system uses very broad cost headings which involve a great deal of aggregation. Items like Administradon and Electrcal and Mechanical frequently cover several fimctions, and there is no simple way of identifying the specific expenditures attributable to roads. Most road agencies therefore cannot tell how much they spend on routine and periodic maintenance costs (some periodic maintenance costs being charged to the recurrent budget and some to the development budget); the breakdown of costs between overheads, labor, and equipment; and the unit costs of shoulder repairs, regraveling and cleaning drains. Such poor accounting systems make it difficult, if not impossible, for managers to establish consistent spending priorities Likewise, there is a dearth of effective management information systems. Numerous attempts have been made to introduce such systems, but with litle success. Many fail as boon as the consultants who have installed them leave. A recent review has shown that a mere 10 percent of countries in Africa compile basic traffic count and road inventory data, while data on pavement condition, surface roughness, and pavement strength are virtually nonexistent"15 No more than 10 percent of African countries have functioning routine-maintenance management systems and pavement management systems to determine network-wide maintenance priorities. Is This is based on a sample of deven countries. Of these, only one kept valid and oDmplete inventoiy data, one had a fincioning maintenanc management systen, and one had a fimctioning pavenent management system. 29 Even fewer supplement such physical planning tools with performance budgeting systems. The remaining countries have neither the data nor the mechanisms and staff needed for analysis. You cannot manage a large road network efficiently without some form of management information system. 3.7 INEFFICIENT WORK METHODS These problems all lead in the same direction: toward road agencies which do not operate efficiently. Few road agencies in Africa manage resources aggressively enough to achieve maximum value for money. Instead, they deliver poor quality services based on their (usually inadequate) annual budget allocations. This is clearly exhibited in the undue emphasis on force account work, inefficient operation of government plant pools, and lack of interest in labor-based work methods. These are characteristics of agencies which face no market discipline and have poorly motivated managers who are not held accountable for results. A great deal of maintenance, particularly routine maintenance, is still carried out by force account. This continues in spite of its variable quality and (usually) higher cost. Although cost comparisons are often inconclusive, in-house work exposed to private sector competition nearly always results in dramatic increases in efficiency, with costs falling by as much as 30 percent. Contract maintenance can also improve quality. It is easier to control and helps to develop the local construction industry. However, it will only work effectively when procurement procedures are straight-forward, and there is a healthy local construction industry and a stable flow of funds to pay the contractors. The road agency must also have enough qualified staff to process contracts, supervise the work, and deal with arbitraion issues. Contract maintenance is not a panacea. Inefficient government plant pools are another symptom a of lack of market discipline. Most road agencies own millions of dollars worth of heavy plant and equipment, much of it procured under World Bank loans or furnished on a grant basis by well-meaning bilateral donors. Even a relatively small road agency may own plant and equipment worth $50 million or more. Utilization rates for this equipment rarely c'ceed 20 to 30 percent, compared with 80 to 90 percent in the private sector, and the economic losses associated with these low utilization rates can amount to over $23 million per year." The superficial reasons for such low utilization rates include poor management systemns, lack of standardization, shortages of fuel and spare parts (or shortage of foreign exchange to purchase them), and shortage of trained equipment operators and mechanics (mainly due to poor terms and conditions of employment). However, the real reasons are related to lack of a stable work load (i.e., inadequate road maintenance allocations and an erratic flow of funds), lack of transparent management systems (i.e., costing systems which clearly spell out the costs of low utilization levels) and lack of managerial accountability. No one knows, or cares, that equipment is underutilized. Lack of interest in labor-based work methods is also symptomatic of lack of market discipline. Not only are labor-based methods often much cheaper (in Tanzania and Ghana labor- 16 The calculation is based on a plant pool worth $50 million, with an average utilization rate of 25 percent instead of 8S percen T.he equipment is depreciated over 8 years, using straight line deprciation, a 12 percent interest rate, and maximum utilization of 1250 lhs per year. 30 based contracts are coming in at about 30 percent below traditional contract prices),'" they are often more reliable because govemment plant pools are in such disarray. Labor-based work methods nevertheless face some genuine difficulties. Government procurement procedures often discourage the letting of small contracts, particularly to one-man contractors who cannot be expected to follow standard bidding procedures. Donor policies, with their emphasis on international competitive bidding (ICB) and preference for financing foreign exchange expenditures, add to the bias against labor-based work methods. However, there are other reasons: labor-based work methods offer less scope for gratification payments (equipment and workshops offer ample scope for supplementing incomes), and management is under no direct pressure to find the cheapest and most effective way of getting the work done. Road agencies are unlikely to operate efficiently until they are faced with some form of competition or a competition surrogate (i.e., until they are subjected to some forn of market discipline). Competition is the primary factor which motivates managers to cut waste, improve operational performnance, and allocate resources efficiently.'" 7 Accurate cost comparisons are difficult since they are dependent on the costing system used, market conditions and die governrnentms reputation as a reliable payer. Contactors often add a surcharge to contract prices to cover expected late payments. Is Shirley. (1989). 31 4 APPROACH TO REFORM This chapter focuses on the way the RMI program set about identifying the causes of poor road maintenance policies and how it developed an agenda for reforming them. In other words, it is about the process of policy reform, specifically, how to promote major policy reforms when the answers are neither straight-forward nor known in advance. The chapter examines the regional approach adopted during RMI Phase I, the lessons learned from the country approach adopted during Phase II, the value of sharing experiences between participating partners and the role of the donor community in facilitating the process of policy reform. 4.1 REGIONAL APPROACH During Phase 1, the RMI held regional seminars in six main centers (Harare, Accra, Addis Ababa, Dakar, Libreville, and Antananarivo) to discuss the importance of road maintenance, the main problems contributing to poor road maintenance policies. and possible solutions to these problems. All countries in SSA participated, and each sent a small government delegation, consisting of civil servants and ministers, to participate in the seminars. A great deal of effort went into securing participation by ministries of finance. Nearly all the key resource papers were presented by non-African authors, each country delegation presented a country issues paper, all seminars were moderated by African personalities, and African specialists participated as resource persons. Each seminar concluded with discussion sessions facilitated with the aid of the Policy Action Planning (PAP) method developed by a Gernan training institute."' The PAP method was used to help participants prepare action plans for reforming road maintenance policies in their own countries. An evaluation of Phase I showed that it succeeded in raising awareness of the need for better road maintenance policies. It also helped to develop a consensus among donors of the need to radically rethink their approach to road rehabilitation programs. On the other hand, Phase I led to few, if any, concrete actions on the ground. This came as no surprise. It takes time to develop a realistic agenda for reform and even longer to build a broad-based consensus on the need for such reforms. In this context, the PAP methodology led to action plans which emphasized clear technical solutions but vague and unconvincing financial and institutional reforms. For example, they argued convincingly in favor of network-based planning and progrmming, introducing performance budgeting systems, reducing force account work, increasing the use of local contractors, increasing the use of labor-based work methods, and reducing publicly-owned equipment fleets. However, on the important issues of financing and institutional and human resource development, they simply repeated the need to deal with these issues without saving how. In many respects, they fell into the traps outlined in Boxes 4.1 and 4.2. They started dealing with systems and procedures before refonning the institutional fiamework and incentive systems. Part of the problem was attributable to the PAP methodology itself It can be a useful device for facilitating discussion and developing a consensus on action plans when there are known solutions. However, when there are no obvious solutions, it simply forces participants to 19 Cad Duisbag GCesdlschaR, Cologn Gemay. 33 agree to impractical solutions which carry no conviction or commitnent. This applied both to the financing issue and to institutional and human resource development issues. Discussions of financing sometimes led to absurd suggesticns - for example, that vehicle insurance companies should pay for road maintenance - and to consistent pressure to establish autonomous road agencies, with little idea of what that meant and what benefits it might produce. Nevertheless, experience with Phase I was sufficiently encouraging to persuade the donor community to design a second phase based on individual country initiatives. Box 4.1 Sequiencing Institutional Development Straegles Rccent case studies in Africa have shown that institutional development of govemment transport agencies needs to follow a logical hierarchy, starting with overall strategic goals and moving toward more specific reform of management systems and procedures. Unless the reforns follow a natural progression, they will conflict with each other and be ineffective. The case studies arrived at the following hierarchy of interventions: * Define the role of the organization; * Develop commitmcnt to the new role; * Develop an appropriate policy framework; * Undernake strategic reforms and restructure the relationship with government; * Strengthen leadership by improving top management; * Ensure that sufficient resources are available; * Reorganize staffing structures and improve management control; * Strengthen management systems processes, and procedures. The disappointing results of many institutional development programs are largely attributable to the fact that they deal with lower level issues before, or instead of. attending to those at the top of the list. This leads to predictable problems: * Improved systems and procedures have a negligible impac unless better organizational structures and adequate management controls are in place; * Organizational structures and controls will only be effective if sufficient resources are available; X Improved resources will have little impact unless top management is improved; * Improved management depends on strategic reform and restructuring the relationship with government; * Commnitment to change will only develop if both government and the road agency have a clear conception of the new role, which must generate more benefits than costs. The above hierarchy can only serve as a conmcptual framework since many of the issues are interrelated and mnay require simultaneous interventions at several levels. Source: P. Moeller (1993). 4.2 COUNTRY INITIATIVES The switch from a regional to an individual country approach had a dramatic effect on the process of policy reform. For the first time, the initiative started to generate a genuine policy dialogue. It turned out that the regional seminars lacked an important dimension as did the initial country dialogue. Participants were predominantly from ministries expecting to benefit from increased road spending. Their attitude was thus one of actively supporting increased road spending and creation of an autonomous road authority (which would enable them to raise their salaries), while showing little enthusiasm for the types of reform which might cause them inconvenience: contract maintenance, labor-based work methods, and reformn of government plant pools. The dialogue focused on getting more money to continue doing business-as-ual. 34 Nor was the ministry of finance much help. All sectors asked for more money, and the ministy of finance simply tumed a deaf ear, even when the issue of road financing was explored in the context of a PER, which dealt with the issues from their point of view. Genuine policy dialogue requires at least two parties: one party must want something, and the other must have something to give. Box .2 Sequencing Hmman Ramou DvelWopmueSntaes Recent case studies in SSA have pointed to the imporance of human resource development and have alo shown that reforms designed to imnprove human resources will be ineffectivc unless propery sequenced. As with institional development, the refonms should sta by setting the overall strategic framework and then progrs to lowcr objectives in an orderly fashion. The case studies suggested the following general hierachy: * Define the human resource strategy; * Improve the terns and conditions of employment and the quality of managenent; * Adjust employment to needs; * Strengthen accountability, incentives. and sanctions; * Improve mnmpower utilization and job resources; * Develop managerial and supervisory skills; * Improve personnel systems; * Improve training. Succ3sfizl reform at one level is generally dependent on the success of refonms canred out at other level. For anmpler * Without adequate terns and conditions of employment and competent mn _agme no human resoure development strategies will work; * Most transport sector organizations need to adjust current manpower levels to those required to mrn an efcient oaization; * To run an efficient organization, staff need to be well paid and motivated their motivation depends on strengthening incentives, accountability, and sanctions; * Manpower utiliztion needs to be improved to support staff motivation, but this cannot usually be done untl managerial and supervisory skills have been upgraded; * Accountability cannot be strengthened without improved manpower utilization and sufficient resources; * Improved pasonnel systems and procedures are needed to support manpower planning. mnpower utilization, and perfo-nance evaluation; * With the above refc ns in pble, training will have gnreter impact, and more atention will need to be given to the planning and programming of training. The above ordering of human resource devdopment stategies only represents a conceptua guide to action. Many of the above interventions are interrelated and may need to be implmented simultaneously. Hmn resource development strategies will only be effective if they address all of these needs in a comprensive and propedy sequenced nmnner. Source P. Moeller(1993). The real breakthroughs came unexpectedly during country seminars and workshops in Zimbabwe, Zambia, and Tanzania. The breakthrough consisted of involving the private sector in discussions on road maintenance (the private sector consisted of participants from the chamber of commerce, consultant organizations, road transport associations, and the farming community). Their participation changed the entire chemistry of the discussions. For once, therm were two sides to the dialogue. Road users expressed willingness to pay for roads (over and above all preexisting taxes), provided the proceeds were spent on roads and the work was done efficiently. The road agency, on the other hand, saw a genuine opportunity to improve its position, provided it was willing, in retur, to reform the way it did business. Bringing the two sides togher, 35 however, was not always easy. Except in Zambia and Zimbabwe, civil servants distrusted the private sector, and the private sector couldn't see the point of talking to the road agency. However, once the ice. was broken, the relationship became instantly beneficial, with the private sector offering help and support, and the public sector showing surprising willingness to listen and respond. Three other important insights emerged from the country initiatives. First, it became clear that solutions had to be home-grown. Studies on improving management and financing of roads tumed out to be more effective when prepared by African resource persons than by outsiders. Local consultants somehow have more credibility, are available for follow-up action and have a better understanding of what does and does not work in the local country context. Furthermore, since local consultants tend to be leaders of opinion in their own countries, their ideas spread quickly and soon become part of the local con-entional wisdom. On topics like financing, it was also found expedient to involve staff from the ministry of finance. This helped to make the studies more insightful and also helped to internalize the results. The best exanple was a paper on financing prepared for a seminar in Zambia. It was jointly authored by a senior official from the ministry of finance and led to a heated debate within the ministry before the paper was released. Second, it was found that several small studies were usually more effective at achieving a consensus on major policy reforms than were large, integrated studies. Most organizations in Africa, whether government departnents or local business associations, have limited capacity to think througb the potential consequences of major policy reforms. A large, comprehensive study simply over-taxes their limited technical capacity. This is why so many studies end up on the shelf. Given the limited absorptive capacity available in Africa, it is much better to divide the problem into its component parts, and then to use individual consultants to tacile each part separately over a two- to three-year time horizon. This turns the wrenching change of direction imnplied by a large, comnprehensive policy study into a series of smaller, sequential changes which can be more easily understood and absorbed by key policy makers Third, major policy reforms take time and cannot be rushed. It takes time for people to reorient their mind-set and absorb a new way of thinking. Gradualism is of the essence. Incremental change is more easily absorbed than root and branch transformation of existing institutions. It is thus better to work within existing institutions and the framework of existing laws and legislation until major changes in the institutional structure are unavoidable. This minimizes bureaucratic resistance, allows time for testing and adaptation, and provides a sounder basis for preparation of the final legislation, which then consolidates reformns that are already de facto in place. The other consequence of gradualism is that major policy reforms cannot be directly linked to donor operations. Policy reform programs can work in parallel with donor operations but cannot be tied to them since, to be successful, the reform process must move at its own pace. 43 SHANG EXPERIENCE During the course of Phase IL, the RMI found that sharing experience was one of the most successful ways of introducing new ideas and building consensus. This is particularly true in the African context Africans consider their problems unique and are unimpressed by texbook solutions or experience gained in industrialized countries. They are more interested in 36 African solutions, developed and tested in an African context. RMI Phase 11 therefore placed great emphasis on sharing experience among the nine participating target countries. Thlis was partly achieved through visits by RMI staff, who gave regular presentations on experience gained under the RMI program in other countries. This process turned out to be so successful that the sharing of experience is now in the process of being formalized through the establishment of a Sub-Saharan Africa Road Informnation Network (SSARIN). This is a fax-based network designed to facilitate exchange of information among RMI countries, associated countries that have expressed a desire to share in the RMI message, and selected resource countries outside the RMI family which have noteworthy lessons to share (see Box 4.3). The sharing of experience has also been supported through the preparation of regular newsleners and reports20 and annual meetings between RMI staff, RMI Country Coordinators, and those members of the donor community interested in roads. The annual meetings have been a particularly effective way of sharing experience and have encouraged a healthy element of competition among the nine target countries: if you can do it, so can we.21 Box 4.3 The Sub-Sakaran Africa Road Information Network (SSA RIN) During the final stages of RMI Phase 1:. it becamc clear that the sharing of experience on the various iniliatives taken to improve the management and financing of roads would benefit from being formalized. It was not cost-effective for the RMI staff to spend too much time acting as channels of communication between the different RMI countries. It would be better if these countries spoke to each other directly. For example. instead of Zambia asking the RMI Unit in Washington how Tanzania opened their Road Fund. the Zambians should be encouraged to ask the Tanza'- directly about such matters. This was the incendve which led to establishment of SSARIN. The network has three types of members: (i) RMI care countries. (ii) other resource countries, and (iii) associate countries. The RMI core countries all have some experience to share and are connected to each other by fax through the respective RMI Country Coordinators. However, there are also countries outside the RMI network which also have valuable experience to share. At the present time, they include Sierra Leone. Ghana. and Botswana. They are included in the network to ensure their experience is readily accessible to the rest of the network. Finally, there are a group of countries wishing to participate in the RMI program but cannot be accommodated due to shortage of resources. They include Malawi and Mozambique, and this group is likely to increase substantially during the course of the next few years They participate in the network to share in the experience already gained by the core and resource countries. The network is simple and unpretentious. Each participating country must have two things: a working fax connection and a formally designated Country Coordinator. The RMI Unit in the World Bank has prepared the initial network directory, which lists the contact person, fax address. alternative contact arrangements when the fax link is inoperative. and the list of noteworthy features which other countries might be interested in. The first formal meeting of Country Coordinators is due to take place in October 1994. It is expected that the mecting will elect a Secretary from amnong their number, and that SSARIN will thereafter be an African affair with its own African agenda. The other instrument used to share experience has been the guided study tour. The fonnat has been for 6 to 8 selected individuals, including both civil servants and representatives of the road transporn industry, to visit other countries to study how they deal with the 20 These include the SSATP Newsletter published twice a year (canying articles about the RMI), the RMI annual work program, reports from the Country Coordinators prepared for the annual meeting, and a recent paper, Commercial ing Africa's Roads: Transforming the Role of the Public Sector, which summarizes the initial experience gained under the RMI programnL 21 The RMI makes an annual award to its Country Coordinators for "outstanding services in the field." Awards have so far been made to Country Coordinators in Cameroon. Tanzania. and Uganda. A special award has also been made to the Executive Officer of Fedhaul, Zambia. in recognition of the outstanding contribution it made to controlling over-loading and improving collection of international transit fees. 37 management and financing of roads. Although some visits have been made to Malaysia and Korea, those to othcr African countries - mainly Ghana and Sierra Leone - have had the greatest impact. The study teams are usually accompanied by a local consultant who makes notes on subjects studied and prepares a report on the study team's conclusions. On return to their home country, the study team's report is discussed at a workshop in order to share experience with others and agree on what to do next. These reports have turned out to be surprisingly insightful and have been an important catalyst for new ideas. 4.4 ROLE OF THE DONOR COMMUNITY The development assistance strategies pursued by individual donors also have an important impact on the overall policy refonn process. They support the policy reform process when donor strategies are coordinated, but tend to undermine it when donors support contradictory policies, mainly serving their own narrow national interests. For example, the best laid plans to reform government plant pools can be completely undone when one individual donor decides to donate a large amount of new equipment. Coordination is thus at the heart of effective policy reform programs. The RNI, and indeed the whole of the SSATP, has played an important role in donor coordination. The ten bilateral, multilateral, and regional organizations supporting the RMI program started off sharing a common vision about the need for sound road maintenance policies but did not know how to establish them. The initial regional seminars and subsequent country initiatives served as a leaming experience and led to a broad measure of agreement between donors on a number of key policy issues. Regular consultations between RMI staff and donors, supplemented by regular annual meetings between RMI staff, donors, and Country Coordinators, served to reinforce this consensus. That does not mean there were no disagmements. Coordination invariably involves some give and take. Donors accept some restrictions on their development assistance strategies in return for a more effective country development program as a whole. Indeed, the RMI donors are so serious about coordination that, following the 1991 Conference on Road Maintenance in Africa held in Brussels and organized by the EEC, they invited the EEC to draft a Code of Conduct to guide future donor involvement in the road sector (see Box 4.4). The Code is now in the process of being signed by all members of the ievelopment community. Another important function of the donor community is to collectively support policy reform programs like the RMI. Such programs are always more effective when supported by a coalition of developmnent institutions, rather than by a single institution with its own traditions, outlook, and vested interests. The policy refomn programs nevertheless have to operate at ann's- length to avoid the impression of ganging up, to ensure that they can move at their own pace (rather than that of the donor processing cycle), and to ensure the independence of their staff. Independence is particularly important. Policy dialogue is built on trust and understanding. It is difficult to diagnose the real reasons for poor road maintenance policies unless people are willing to talk openly about their problems. It took the RMI about three missions, spread over at least a year, before the RMI staff were fully accepted as trusted friends, working wholly in the interests of the target countries (and often disagreeing with the donors themselves). The arm's-length relationship has encourged more openness and candor and has resulted in a more deep-seated understanding of the underlying issues affecting road maintenance. 38 Rox 4.4 Donor Code of Conductfor Promoixg Sound Road Maintenance Poticies The Donor Code of Conduct emerged from the technical conference on maintenance and rehabilitation of roads in Sub-Saharan Africa held in Brussels on 25-26 November 1991. The conference resulted in a number of conclusions which were unanimously approved by participants. They included the following objectives: * To introduce an appropriatc legislative and administrativc framework; * To redefine the role of the privatc sector, increase private sector involvement, and increase decentralization of responsibilities; * To rationalize programming and budgeting procedures; * To introduce coherent taxation and cost recovery policies; * To increase efficiency by promoting contract maintenance, reducing state-owned equipment pools, and increasing labor-based work methods; * To promote development of the local construction industry; * To strengthen road sector administration and human resource development policies. The Code itself is a two-page document which, after a preamble, declares the full consent of the signatories to: I. Apply in a rigorous and concerted manner the principles which were jointly developed and approved in the framework of the RMI, in accordance with the recommendations of the Second UN and Communicabons Decade (UNTACDA II). 2. Reinforce consultation and coordination between donors, development agencies, and benericiary states through: * Exchanging general informnation at the central level and at the local level; * Informing and coordinating before each financing decision and holding regular meetings at the local level with the aimn of: - assessing the potential of using local resources and anployment-intensive methods for road rehabilitation and maintenance; - developing ajoint analysis of priorities conceming road maintenance in each country and of capacides of the countries in question to organize and manage the relevant support services; - informing each other of the implenentation of current road programs; - evaluating the application of the principles and recommendations of UNTACDA Il/RMI; - making an annual report to the relevant authorities of the RMI projecL 3. Undertake the necessary steps, whether individually or through the inter-African regional organizations, to invite all the countries of Sub-Saharan Africa to subscribe to these principles and recommendations, and to implemet them in terms of resources and legal measures. 4. Contribute activdy to the preparation of a restructuring and investment program for the road sector and, whenever possible. to the adoption of Transport Sector Reform Programs. 39 PART II Agenda for Reform 5 BASIC BUILDING BLOCKS Part II of this study builds on previous chapters dealing with the background and underlying causes of poor road maintenance policies and moves on from there to develop an agenda for reform. It asks, what can be done to improve road maintenance policies and, more generally, to strengthen the management and financing of roads as a whole? The key concept behind the reforms is commercialization: bring roads into the market place, put them on afee- for-service basis and manage them like any other business enterprise. However, since roads are a public monopoly, and ownership of most roads will remain in government hands for some time, commercialization requires complementary reforms in four other important areas. These will be referred to as the four basic building blocks. They focus on: (i) creating onernhip by involving road users in the management of roads to win public support for more road funding, to control potential monopoly power, and to constrain road spending to what is affordable; (ii) stabilizing road financing by securing an adequate and stable flow of funds; (iii) clarifying responsibility by clearly establishing who is responsible for what; and (iv) strengthening the management of roads by providing effective systerns and procedures and strengthening managerial accountability (see Figure 5.1). FIgure 5.1 Comnercdinadon of Roads The Four Basic Buldng Bocks Ownership I ! Finandng Management Responsibility 1. Ownerhip: Involve road users (and other inteeed parties) in the management of roads to win public support for more road fimding, to strengthen market discipline, and to constrain spending to what is affordable. AND THEN 2. Fiancing Establish an adequate and stable flow of funds and secure arrangements for channeling them to each road agency. 3. Responsibility: Establish a clear organizational structure and assign responsibilities to clarify who is responsible for what 4. Managweent: Establish a more business-like road agency by introducing sound business practices and stengthening managerial accountability. 43 The four basic building blocks represent the core of the reforms. They are interdependent and should ideally be implemented together. Without all four, the reforms may only achieve part of their objective. You cannot solve the financing problem without the strong support of road users. And you cannot win the support of road users without taking steps to ensure that resources are used efficiently. And you cannot improve resource use unless you control monopoly power, constrain road spending to what is affordable, and increase managerial accountability. And you cannot hold managers accountable unless they have clearlv defined responsibilities. There is nevertheless scope for flexibility. The reforms can be introduced in different ways, i.e., the content of each building block may differ, depending on country circumstances. They can move sequentially or in parallel, and both the sequencing and the pace of reform can vary. However, at the end of the day, all four building blocks should end up in place to ensure that the agenda is sustainable and doesn't drift back to the status quo ante. The following paragraphs summarize the broad scope of each building block. Subsequent chapters describe them in more detail. 5.1 OWNERSHIP Major policy reforms in the road sector cannot usually succeed without the active support of road users and other persons with a vested intercst in sound road management. After all, these are the people who use the road network and also pay for it (whether through taxes or user charges). Given that current allocations for road maintenance are erratic and well below the levels needed to keep the road network in stable long-term condition, the first building block involves winning public support for more road funding and taking steps to ensure that road agencies do not operate as public monopolies and do not spend more on roads than the country can afford. This is an essential precondition for getting road users to willingly pay for roads on a fee-for-service basis. Most road users are unwilling to pay unless they can influence fee levels and are satisfied that the proceeds will be spent on roads, the work will be done efficiently, and managers will be relatively free from political interference. The usual mechanism for winning the support of road users is to involve them in the management of roads. 5.2 FINANCING The second building block concentrates on establishing an adequate and stable flow of funds, usually by introducing an explicit road tariff to manage demand and generate the revenues needed to support the operation and maintenance of roads. Without an adequate flow of funds, none of the reforms will be sustainable. All goverments in Africa are seriously short of fiscal revenues. Budget allocations for road maintenance rarely exceed 30 percent of requirements, and it is simply not feasible for governments to increase these allocations under present fiscal conditions. Improved revenue mobilization is essential. However, if road user charges are increased, there is no guarantee that the additional revenues will be allocated to roads. Furthermore, traditional earmarking is not a viable solution. It has adverse impacts on the management of the govermnent's overall budget and is rarely sustainable. An added concern is that the current financing mechanisms do little to strengthen market discipline, either by 44 managing demand or by improving the efficiency of the road agency. Solving the financing problem calls for a radically new approach to road financing. 53 RESPONSIBILITY The third building block concentrates on creating a consistent organizational structure for managing different parts of the road network. In other words, it focuses on establishing who is responsible for what. This requires a clear assignment of responsibility among different govemment departmnents and different levels of government and among individual road agencies. The arrangement needs to be based on an accurate road inventory, functional classification of roads, designation of appropriate road agencies, formal assignment of responsibility to each road agency, and clarification of the relationship between the road agency and the parent ministry. Responsibilities to be assigned include those for operation, maintenance, improvement, and development of the road network, for traffic management, for road accidents caused by the road agency's own negligence, and for the adverse environmental impacts associated with roads and road traffic. 5.4 MANAGEMENT The fourth building block focuses on creating a more businesslike road agency. Once road users are involved in the management of roads, they generally press for the introduction of sound business practices to ensure that their constituents get value-for-money. Road users expect clear management objectives, competitive terms and conditions of employment, consolidated budgets, commercial costing systems, and effective management information systems. Introduction of sound business practices leads to consequential changes in managerial incentives. It brings pressure to dispose of in-house plant and equipment (or use it more efficiently), to do more work under contract, to control vehicle over-loading, and to improve road safety. These issues have become systemic sources of inefficiency in the road sector because current bureaucratic managernent procedures provide little incentive to do anything about thern. The following chapters elaborate on the four basic building blocks and propose a practical agenda for dealing with them in the African context. 45 6 OWNERSHIP This chapter examines the issue of ownership, one of the most important building blocks in the agenda for reform. How can central and local governments encourage road users to take an active interest in the management of roads? This chapter tackles the topic in four stages. First, what is meant by ownership? Second, what grass roots organizations represent road users, and do they provide a sound basis for involving them in the management of roads? Third, how does one involve road users in the management of roads? Finally, how does one set about establishing a Roads Board? 6.1 CONCEPT OF OWNERSHIP The idea of ownership is to empower road users and to encourage them to take an interest in the management of roads, since their enthusiastic support is a precondition for solving the problem of road financing (whether by raising taxes and reforming the budget process or by introducing an explicit road tariff). Ministries of finance are always reluctant to raise taxes and user charges. The public invariably complains, and the chances of persuading the ministzy of finance to increase domestic revenue mobilization to finance more road maintenance is almost zero unless road users openly express willingness to provide the extra revenues. Since road users in Africa have every incentive to see more money spent on road maintenance (see Chapter 2), the issue comes down to finding ways of translating this interest into openly expressed support for a sustainable financing plan. Road users also have their own vested interests. They may be willing to pay for roads, but only if the money is spent on roads and the work is done efficiently. This is another important concept and is part of the symbiotic relaticaship which underlies market discipline. Road users pay for roads but, in return, demand value-for-money. Road user involvement can thus create surrogate market discipline to encourage the road agency to use resources efficiently and prevent it from abusing its monopoly power. However, the benefits of ownership do not stop at financing and market discipline. Once road users are convinced that the govenmment is trying to serve their needs, they will generally support a whole range of initiatives. Ownership can become the basis for a genuine partnership, with road users working with the govemment to improve road safety, control fuel smuggling (or at least find an alternative to the fuel levy for financing roads), and control overloading. Zambia offers a good example of road users working with the government to address a wide range of road sector issues. The trucking industry takes an almost paternal interest in the road network: they are Iheir roads. For exarnple, the Federation of Zambian Road Hauliers (Fedhaul) provides financial support for the RMI secretariat in Zambia and has recently put forward a proposal which would improve administration of international transit fees (see Box 6.1). Furthermore, following an axle-load survey carried out by Fedhaul, which showed substantial overloading (particularly by foreign transit vehicles), the road transport industry as a whole requested that the transport ministry allow the private sector to enforce vehicle weights and dimensions regulations. This was done by appointing individuals nominated by the road 47 transport industry as volunteer Road Traffic Commissioners and using them to help enforce road transport regulations and supervise operation of weigh-bridges. This has already significantly reduced overloading (over 400 trucks were impounded during the first month of opemtion) and has also led to recommendations for strengthening existing road transport regulations and raising penalties (see Box 6.2). RIoad user involvement can thus play an important part in improving road management. Box 61 Collecdng International Trmnl Fen Under Cextrd A recent report on harmonizing international transit fees, prepared by the PTA Secretariat and the SATCC Technical Unit, has recommended that these fees should, in the future, be paid by coupon. At present, they are paid in cash and many staff mdnning the border posts refuse to accept anything other than hard currency (i.c., travclers checks and PTA units of account are not accepted). Not only is this a security risk for drivers who must cay largc sums of hard currency, there is ample evidence of widespread evasion and leakage. Intemational vehicles stopped at weigh- bridges in Zambia are frequently found without receipts showing payment of transit fees (the driver uses part of the funds to pay off staff at the border post and then pockets the rest), and the actual collections renitted to the Ministry of Finance are wetl below their potential. In Zambia, collections fell sharply when responsibility for collecting international transit fees was transferred from British Petroleum (who collected them under contract) to the Customs Department. In Tanzania, the treasury only receives about $150,000 of the estimated S3.0 million that should be collected annually in transit fees. To deal with this problem. the Federation of Regional Road Freight Associations, which includes representatives of the transport industries in Lesotho, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe, has resolved that a couon system should be implemented in the region. To this end, the Federation of Zamnbian Road Hauliers (Fedhaul). has prepared a scheme to be piloted in Zambia, and a similar scheme is being introduced in Mozambique. The basic elements of the scheme are as follows: * In the future, all transit fees will be paid by coupon. Coupons are printed in bank note quality - with watermarks and other security devices -and collecting agencies are issued equipment to detect counterfeits. * Coupons will be issued through regional trnsmporters associations who have indicated willingness to purchase quantities in bulk and distribute them to their members * Coupons consist of three parts which are used as follows (i) stub retained by issuing authority (Fedhaul), (ii) part 11 retained by collecting agency at the border (border collection in Zambia will be carried out by one of the commercial banks which has branches at all border posts), and (iii) part m will be retained by the transporter as proof of payment and will be canceled on exit by the collecting agency as proof of payment (to ensure that vehicles which do not pay on entry do so on exit). * The payment cycle involves four main steps: (i) transporter purchases the coupons for cash, (ii) driver hands the coupons to the collecting agency at the border post, (iii) collection agency returns the coupons to Fedhaul and (iv) Fedhaul transfers the funds used to purchase the coupons into the road fund account. * Fedhaul charges a 5 percent conmission for its services, and it is expeted that the commercial bank collecting coupons at the border will do the same. The costs of printing coupons is estimated at $200,000, and this will be financed througb a commercial bank loan to be repaid from revenues over 3 years. Annual rvenues for Zanbia alone are expected to exceed SI .8 million gross, or $1.6 million net of coupon printing and administation costs. 48 Box 6.2 PrIvate Secor hi Zambi Eniforces Vehicde Weights and Dimensions Regulafons A recent 24 hour vehicle survey carried out in July 1993 by the Federation of Zanbian Road Hauliers (Fedhaul) showed that there was widespread overloading (some vehicles canrying excess loads of 40 to 50 tons), minimal enforcement and that many of the overloaded vehicles passed the weigh bridges when they werc closed. The current fine of 500 kwacha ($1.00 equivalent) was too low to act as a deterrent and the road traffic regulations were ambiguous and difficult to enfore. Following the survey. Fedhaul recommended that the legislation be amended to clarify the regulations and that a new penalty system bet introduced. The penalty system should cover incorrectly distributed loads and overloads. Their suggcstion was that, when a vehicle exceeded the Gross Vehicle Mass, or axle weight, punitive fines should be imposed, starting at SiO for the first 1.000 kg overload and rising to a maximum fine of $10,000. All Public Service Vehicles should cany written instructions from the operator detailing the amount of cargo to be loaded. If details on this document exceed legislated weight limits, the operator should be liable for the fine. If the shipper or forwarding agent has loaded cargo in excess of what is shown on the shipping document, the shipper or forwarding agent should be liabie for the fine. If the vehicle is found to be canying goods in excess of the manifested cargo and the operatores instructions, the driverof the vehicie should be liable for the fine. Folliwing the survey, the Ministry of Communications and Transport agreed to appoint voluntary road traffic commissioners, nominated by the organizations representing the road transport industry, to help enforce road transpon regulations and, in particular, to supervise operation of weighbridges. The voluntary commissioners have powers to stop traffic, impound vehicles, and make arrests. These arrangements are now in place, and over 400 trucks were impounded during the first month of operation in early 1994. However, since the new penalty structure is not yet in place, the Road Traffic Commissioners can only make vehicles off-load the excess, which must then be collected by another vehicle. This procedure has virtually eliminated the fourty to fifty tons of overload, but is not a sufficient deterrent. Fedhaul is therefore continuing to press for punitive fines. The road transport organizations have willingly taken on the task of voluntary traffic commissioners because it protects the road pavement and reduces unfair competition, particularly from foreign vehicles operating on international transit routes. 6.2 GRASS RooTS ORGANizATIONS Involving road users in management of roads cannot be done by simply involving thenr as individuals. Effective involvement requires individuals with a constituency, so that their participation creates a link between the road agency and a wider group of individuals with a vested interest in well managed roads. The individuals involved in management must act as spokespersons for larger grassroots organizations. Most countries posses a number of such organizations which operate at different levels as follows: * National, economy-wide organizadons: chambers of commerce, farrner organizations, consultant organizations, engineering societies, consumer groups, and women's organizations. * Local organizations: village associations, parent-teachers associations, and other community groups. 49 * Transport sector organizations: transport institutions, transport training institutes, and transport consultative councils. * Road sector organizations: roads associations (or federations), motoring organizations, trucking associations, taxi associations, and organizations representing bus owners and operators. Those most relevant for establishing ownership in the road sector are chambers of commerce, farmer organizations, engineering institutions, roads associations (or federations), trucking associations, organizations representing bus owners, and other motoring organizations. Local community organizations and taxi associations are also relevant at the local level. All countries have chambers of commerce, most of which are usually well organized, take a keen interest in the state of the road network, and have a great deal of influence. Their involvement is essential. The roads boards in Tanzania and Zambia, the Board of Sierra Leone Roads Authority, and the Benin Road Fund Board all include representatives from their chamnbers of commerce. The South African Road Board also includes a representative of industry and commerce. Most countries also have farmer organizations. They tend to be well organized and influential, particularly when they represent large commercial farmers. The National Roads Board in Zambia includes a representative of farming interests. Most countries have reasonably well organized engineering institutions (see Table 6.1). They usually act as leaders of opinion and are influential. Representatives from the engineering profession are members of road sector boards in Sierra Leone, South Africa, Tanzania, and Zambia. Africa also has a number of roads associations or federations. Since their members include consultants, contractors, and material suppliers, their numbers are likely to grow in line with increases in contract maintenance. They also tend to be well organized and effective. A representative from the roads association is a member of the Central Roads Board in Tanzania. C overage is more erratic when it comes to organizations representing vehicle owners and operators. There are a large number of general motoring organizations in Africa and representatives from these organizations are members of the roads boards in South Africa, Tanzania, and Zambia, and the president of the Driver's Association is a member of the Sierra Leone Roads Board. There are fewer organizations representing the road transport industry, although there is a representative of the road transport industry on the Roads Board in Zambia and on the Road Fund Board in Rwanda. Many countries either have no formal organization representing the road transport industry or have organizations which are moribund or ineffective. This is a serious weakness. It means that many countries have no formal mechanism for canrying on a dialogue with the most important road users, cannot effectively involve them in management of roads, and cannot work with them to strengthen axleweight enforcement or deal with other road sector issues. Establishing such organizations should be an important part of any agenda for strengthening the management and financing of roads. 50 Table 6.1 Orgunuaons reprenhug roed usas Ie leted SM counrlas Roads 7huc/lng Bus owners Motoring Engineering Country associationsa organizations and operators associations profeissons Benin Yes Yes No No Yes Cameroon No Yes No Yes No CAR No Yes No No No Kenya No Yes Yes Yes Yes Nigeria Yes Yes Yes Yes Yes Madagascar Yes Yes n.a n.a n.a. Rwanda No Yes Yes Yes Yes Sierra Leone No No No No Yes South Africa Yes Yes Yes Yes Yes Tanzania Yes No No Yes Yes Uganda No Yes Yes No Yes Zimbabwe Yes Yes Yes Yes Yes Zambia No Yes Yes Yes Yes n.a.: Not Applicable a Roads associations, or road federations mainly represent plant and materials suppliers and consultants. 6.3 WAYS OF INVOLVING ROAD USERS There are several ways of involving road users in the management of roads. They can either be involved in overall management, management of parts of the road network (particularly at the local government level), or in specific aspects of management. Most countries invite outsiders to join steering committees, which guide consultants working on the road sector, or to sit on advisory boards, which review deparnental research, training progams, design standards, and other technical matters. The outsiders often come from a university, although the steering committees, for important consultant studies, may include representatives from the road tansport industry and other concerned organizations. Another mechanism for involving road users, is the standard inter-ministerial steering committee (IMSC) which exists in nmny countries and is sometimes expanded to include road user reprsentatives. A number of IMSCs were established under the RMI program and, although most simply coordinated preparations for a national road maintenance symposium, those in Tanzania, Uganda, and Zimbabwe evolved into something more substantive. The IMSC in Tanzania has evolved into an important policy review body serviced by a fill-time RMI sectariat. At one stage there were plans to widen membership to include representatives of road users (and change the name to the National Steering Committee), but this was dropped after it had been decided to establish a Central Roads Board with road user representtives. In Uganda, the IMSC is chaired by the deputy prime minister and not only meets to review mattes, but also makes decisions. The IMSC in Zimbabwe, which includes a representative from the Zimbabwe Roads Federation, has evolved into a steering committee overseeing an institutional study of the road sector. The IMSC in Zambia was also meant to evolve into a geneml policy review committee. It has ffteen members, just over half representing the private sector 51 (including the University of Zambia and the Chartered Institute of Transport), but unfortunately never meets. Several countries in Africa have national road safety councils (or the equivalent) which include representatives from the private sector (see Table 6.2). The councils attempt to coordinate the activities of different organizations in the road safety field and may also advise the Transport Ministry on a wide range of matters related to road safety. Although most councils lack statutory powers, are underfunded, and do not have an effective secretariat - and hence are ineffective - others function quite well and serve as a useful body for involving the private sector in discussions on road safety. The National Road Safety Councils in Tanzania and Zambia are currently being restructured to improve their effectiveness. Table 6.2 lasLrtldons Involving Road Uss In Management of Rr ads 1I Sekcted SSA Countris Central roads Regional roads National road Inter-ministerial Country board boards safety council steering committeed Benin Yes8 No No No Cameroon No No No Yes CAR Yesa No Yes Yes Kenya No No Yes Yes madagascar No No No Yes Mozambique Yesa No No No Rwanda Yesa No No Yes Sierra Leone Yes No No No South Africa Yes No Yes No Tanzania Yes Yes Yes Yes Uganda No No Yes Yes Ghanab No No Yes No Nigeria No No Yes No Za-nbiaC Yes No Yes Yes ZimbabweC No No Yes Yes a. Oversees management of the road fund. b. The Board was suspended by the military govermnent and is expected to be rcinsutted shordy. c. These inter-ministerial steering committees include private sector members. d. Only those in Tanzania, Uganda, and Zimbabwe meet regularly. At the local level (i.e, in urban and rural district councils), governments are not very good at involving road users in the management of roads. The usual mechanism for doing so is through working committees which operate at the local government level. All urban and rural district councils have committees which deal with finance, planning and development, housing, and the other functions delegateu to their level of government. Some also have roads and road transport committees which deal with roads, street cleaning, street lights, drainage, public transport, and traffic management. These committees often include nonelected members (e.g., the police) but rarely include representatives of road users or of the local community, other than those who happen to be elected members. However, representatives of such oranizations are sometimes invited to attend and participate in the business of the, committee. It is clearly 52 desirable to encourage the establishment of roads and road transport committees and the participation of road users in such committees, whether on a formal or informal basis. At the national and regional level, road users are generally involved in the management of roads through road management boards. These are fairly common in Africa and there are at least eight functioning boards in Benin, CAR, Mozambique, Rwanda, Sierra Leone, South Africa, Tanzania, and Zambia. The Board of the Ghana Highway Authority, originally established in 1974 but suspended by the military government in 1981, is also about to be reinstated.22 Tanzania also has Regional Roads Boards which operate at the regional level. The Boards in Benin, Rwanda, Sierra Leone, South Africa, Tanzania, and Zambia include private sector representatives (two, one, three, three, four, and seven respectively), while that in Mozambique is currently exploring ways of including private sector representatives. Ghana intends to have three private sector representatives when the Board is reinstated. The South African Road Board is the oldest. It was originally established in 1935 and has had its membership (and functions) changed twice since then. It started off with six members, four representing the provinces and two appointed by the Minister of Interior. Although the Board was meant to function autonomously in the national interest, it quiccly lapsed into gridlock because the provinces expected their representatives to promote provincial interests. In 1948 the Board was therefore replaced by one composed exclusively of civil servants. Ihis worked better, although it led to a large freeway program (which critics claimed was excessive) and to the accumulation of a lame surplus in the Road Fund (which cordibuted to its eventual closure). Finally, the present Board was established in 1988 with a much broader membership, which includes representatives of local government, the engineering profession, road users, and industry and commerce. 6.4 SETrING UP A ROADS BOARD Several issues arise once it has been decided to establish a roads board. They c- ocem the board's legal basis, its composition (including the choice of chairman), procedures for appointing board members, the role of the board, and board procedures. Each issue is examined below. There are two ways of establishing a roads board. It can either be established under existing legislation (provided the legislation provides for appointment of a board) or under new [egislation. The Central and Regional Roads Boards in Tanzania and the National Roads Board in Zambia were set up under existing legislation. The basic road legislation in most former British colonies permits establishment of roads boards to be established by notice from the minister. The basic legislation differs in each country and permits establishment of executive boards in Zambia, but only advisory boards in Tanzania.23 Both Ghana and Sierra Leone could probably have established their boards under existing legislation, but wished to make a number 12 They are not all called boards. Some we referred to as adminisutrtive councils or pervisory commite a With appropriate membarship, an advisory board can be influential and highly effective 53 of changes to the basic road act at the same time and chose to pass new legislation. The other boards listed to in Table 6.2 were set up under new legislation. New legislation offers the best long-tern solution, but does have disadvantages in the short-term. First, it requires parliamentary approval, and ministers are often reluctant to spend parliamentary time getting new legislation approved. Second, it involves fonnalizing a number of operating procedures without the benefit of hindsight. This has created major problems in Mozambique where the original wording of the decree makes it difficult to add private sector representatives, except as unpaid advisors. It is often better to get the board established under existing legislation, develop a set of operating procedures, and then formalize the procedures through legislation. Box 6.3 summarizes the membership and characteristics of the boards in South Africa, Sierra Leone, Tanzania, and Zambia.2' The composition of the board has a major impact on its effectiveness. There are three important elements: (i) choice of chairperson; (ii) membership of the board; and (iii) degree of flexibility in membership. It is not a good idea to have a chairman who is also head of the road agency (as in South Africa and Mozambique). When the director of roads is chairman, the board tends to be viewed as a lobby group arguing on behalf of the road agency, rather than as an impartial body acting on behalf of road users and the public as a whole. The chairman should ideally be a person of standing who can be expected to deal impartially with the business of the board. The boards in Sierra Leone, Tanzania, and Zambia all have strong, independent chairpersons and the Ghana Highway Authority intends to have a chairperson from the private sector when it reinstates its Board. Membership is also important A board composed wholly of civil servants tends to avoid difficult issues, concentrates on day-to-day administration of a given set of rules, and spends too little time on important policy matters. It is better to have a board representing a wide range of interests. The board generally needs to have a core of public sector representatives (from the ministries of finance, works or transport, and local government), but they should be complemented by other members representing road users, farming interests, industry and commerce, and the engineering profession. Sierra Leone probably has the neatest board structure. One-third of the board represents government, one-third road users (chamber of commerce, road transport industry, and the engineering profession), and the remainder are nominated by the minister (hence providing flexibility). The current chairperson is the retired headmistress of a major secondary school. Zambia has the most unusual anrangement Seven of the eleven board members represent road users and other private sector interests, and the board chooses its own chairperson. It is worth noting that all boards have attempted to avoid having consultants and contractors as members, fearing that they might seek to use the board to pursue their own professional interests. This is an important point, since boards can easily become a lobby for their own special interests, rather than for those of road users. 24 The boards in Finland and New Zealand have a similar membership. In Finland, the director general of roads is chainnan of the board, and members include representatives from the Ministy of Trnsport, the Ministay of Envionment, municipalities, industry and commerce, road users (especially heavy vehicles) and two persons repesning the road agency staff. The Tmnsit New Zealand Authority has an independant chairma (a former local authority engineer), a deputy chairman (past president of the Institution of Professional Engineers), and six other members with experience in town planning, industy, local govemnment, road lransport (past president of the Automobile Association), farning, and accounting. 54 Box 6.3 Menmhership and Charcte,bas of Some Read Manageantea Boards South African Roadm Board (SARB): * The Board established under the 1988 Act, consists of a chairperson and seven members who are appointed by the Minister of Transport, Posts and Tclecommunications. * The director general, transport, is ex officio chairperson of the Board, and the deputy director general. transport, and the chief director, national roads, are also members of the Board. The remaining fivc members represent provincial road authorities, city councils road users, the engineering profession, and industry and commere. Thcsc members are appointcd after consultation with their respective constituencics. * Thc Board has two subcommittees. One, the Urban Transport and Planning Advisory Committee. revicws the transport plans prepared by the core cities of the metropolitan transport areas and makes recommcndations on these plans to the Board. The other, the Toll Road Committee. advises the Board on all matters pertaining to toll roads. Board of Sierra Leone Roads Authority (SLRA): * The Board consists of a chairperson, the director general and nine other members. The Board, together with the director general and deputy director general, are appointed by the prcsident * Board members include the head of the Ministry of Works, the financial secretary, representatives of the Chamber of Conmerce, local government, and road users, a professional engineer of standing; and threc other persons appointed by the president on the advicc of the minister. * The drector gencral and his deputy arc assisted by five directors who are appointed by the Board. * The director of administration acts as secretary to the Board. Tanaisa Central Roads Board (CRB): * The Board consists of a chairpeson and devcn members The chairperson and one other mernber are appointed by the minister. The director of roads is also a member and acts as secrctary of the Board. All other Board members are nominatcd by the organizafdons they represent * Board members include ftve representadves of principal secretaries (Works, Communications and Transport, Finance, Local Government, Home Affairs, and Planning Commission), four reprcsentatives of the private sector (Chamber of Commerce, Institution of Engineers, Roads Association, and Automobile Association), and onc member appointcd by the minister. * The Board elects its own vice-chairperson. * The Board has a full-time secretariat in the office of thc director of roads. Zambia National Roads Board (NRB): * The Board consists of five ex officio members reprcsenting government ministrics (Finance, Works and Supplies, Transport and Communications, Local Govermnent, and National Commission for Development Planning) and seven members representing the private sector (Chamber of Commerce, road transport industry, Automobile Association, farmers, Institutc of Enginecrs, Institutc of Transport, Copperbdt University). All Board members arc nominated by the organizaions they represent * The Board dects its own chairperson and vicc chairperson,. * The Board may have a corc staff of up to five persons to deal with finance, planning, and inspection or auditing. Finally, it is wise to allow for some flexibility in membership. This will enable the composition to evolve in line with changing mad needs and, more importantly, provides a useful vehicle for resolving conflicts over membership. The inaugural meeting of the National Roads Board in Zambia was delayed for sevemal months due to a disagreement over the organization 55 nominated to represent road users. This could have been avoided had it been possible to appoint one or more members "on the advice of the minister." The way board members are appointed also influences their effectiveness. It is not simply a question of having someone on the Board who claims to speak on behalf of road users, like having a representative from the ministry of industry, or an acquaintance of the minister, who happens to run a trucking company. Such persons cannot, and do not, speak on behalf of the road transport industry. They have no constituency, no way of communicating with road users and cannot easily mobilize their support. The same applies to people representing concerned ministries. Unless they are senior persons with regular access to the permanent secretary, they will not really represent their ministry. Genuine ownership only occurs when the people selected to represent each constituency genuinely represent their members and have formal ways of communicating with them. Tanzania has attempted to address this concern by specifying that no ministry may be represented on the Central Roads Board by anyone below the level of director and requires the private sector agencies represented on the Board to nominate their own members. Zambia also invites the organizations represented on the Board to nominate their own members, while South Africa consults these organizations before appointing board members. There is an important caveat to the above arrangements. Board members will only be effective if they spend sufficient time studying the business of the board and regularly consulting their constituents for guidance. In Zimbabwe, private sector members on several public boards have been ineffective because they did not spend enough time studying board matters. Board members should thus be paid an adequate allowance (to ensure they spend enough time preparing for board meetings) and should be required, as part of board membership, to consult their constituents before important board meetings. In Tanzania, board representatives from the Chamber of Commerce, Roads Association, Automobile Association, and Institution of Engineers, have been openly told that, as part of their function on the Board, they are expected to inform their members of the reasons for important Board decisions and of the Board's support for them. The board also needs a clear role. This is usually spelled out in the legislation, or other parliamentary instrument establishing the board. The legal documents are usually supported by other instructions elaborating the general provisions of the legislation. These instructions need to cover the relationship between the board and the parent ministry, whether the board has executive powers or is merely advisory, its sources of finance (in the case of an executive Board), and its day-to-day responsibilities. Box 6.4 summarizes the duties laid down for the Board of the Sierra Leone Roads Authority and the Tanzania Central Roads Board. Box 6.5 summarizes the duties laid down for the roads boards in South Africa and Zambia. These legislated duties are normally supplemented through annual reporting arrangements that provide a formal vehicle through which the minister can amend or extend these duties. Finally, there is the question of procedures. These are fairly standard but sfill need to be spelled out. They usually include the tenure of board members, payment of fees and expenses, secretarial arrangements, frequency of meetings, keeping of minutes (the board needs to meet at least once every three months; in Sierra Leone it meets more than once a month), accounting 56 arrangements (where relevant), submission of reports and their content, and auditing arrangements (where relevant). Reporting arrangements are particularly important since they act as a vehicle for keeping the parent ministry informed, enabling board members to report back to their constituents, and also help keep the public informed. The Sierra Leone Roads Board is required to submit an annual budget, annual statement of accounts (audited by independent auditors), and an annual report which includes information on Board policies and activities during the year. The Zambia National Roads Board has to prepare and publish the audited annual accounts of the Road Fund and also prepares quarterly and annual reports on the activities of the individual road agencies. The key factors to be borne in mind when establishing a roads board are thus as follows: * Decide whether the board is to have executive powers or act in an advisory capacity. * If it is an executive board, it will usually require new legislation. Otherwise, it can often be established under existing legislation using simpler parliamentary procedures. * Ensure that the board has an independent chairman of standing and has an adequate number of members representing road users and other persons with a vested interest in sound road managemnent. * Allow the organizations represented on the board to nominate their own members, pay adequate allowances, and require them to consult their constituents before important board meetings. * Provide the board with clear temns of reference supported by a regular way of supplementing them through annual reporting procedures. Among other things, the terms of reference should spell out the relationship between the board and the parent ministry. Ensure that the board's rules and procedures are clearly spelled out, including the frequency of meetings and the content and timing of regular reports. 57 Box 6.4 Duties Laid Downfor Road Boerds In Skr LeeOIe and Tanzania Board of Sierra Leone Roads Authority (SLRA) The Authority was established on 19 March 1992 as a body corporate having pepetual succession and a common seal which may suc and bc sued in its corporate namc and hold and dispose of real or other property in any manner whatsoever for thc purpose of carrying out the duties laid down in the acL The Board of the Authority has general control of the management, property, business, funds and of all other matters relating to the Authority. For the purposcs of discharging its functions, the Board delegates to the Director General the following powers: (i) To sign any contract for or on behalf of the Authority; (ii) To collect any monies due to the Authority such as the monies from the Road Fund and Budgetary allocations and to discharge debts owed to the Authority; (iii) To sign, accept. negotinte, endorse, and receive any negotiable instrument on behalf of the Authority; (iv) To acquire or authorize the acquisition of any movable or immovable property and to transfer and or allocate any funds of the Authority for that purposc; (v) To authorize the disposal of securities of any kind belonging to the Authority; (vi) To open and operate current deposit or credit accounts on behalf of the Authority at any bank or financial institudon; and (vii) To negotiate and obtain loans on behalf of the Authority and to determine the nature and conditions of such loans. Tanzania Central Roads Board (CRB) The Board was established on 7 Januay 1994 as a body corporate which': (a) has prpeal succession and a common seal; (b) in its corporate nane, is capable for suing and being sued; (c) is capable of purchasing and otherwise acquiring or alienating any movable or immovable property; (d) has power from time to time to exercise and perform such other powers and funictics as are conferred by the minister. The function of the Board is generally to advise the minister (of Works, Communications and Transport) on matters pertaining to management and financing of roads, operation of the Road Fund, and any other matters which the minister may fromn time to time refer to the Board. Specifically and without prejudice to the generality of the foregoing, the Board shall: (i) Advise the ministry on suitable management systems for roads; (ii) Advise the ministry on issues of staff motivations; (iii) Examine the operation of the Road Fund and advise the minisbty on suitable amngements for disbursement of adequate funds to end users; (iv) Examine existing laws governing the operation and management of the road network and advise the ministry on necessary amendments The Board shall in the performance of its functions have regard to: (i) Any gencral policies of the government notified to it by the minister, or (ii) Any general or specific direction given by the ministcr. In the performance of its functions. the Board is required to establish and maintain a system of coordination, coopemtion and consultation with other bodies, within or outside Tanzania, which have similar or related functions. 58 Box 6.5 Dutes Laid Dowa for Roads Boards In South Africa and Zambia South Afrkan Roads Board (SARB) The original National Road Board was established under the 1935 National Roads AcL The Act was amended under the 1943 Transport (Co-Ordination) Act, and the Board became the National Transport Commission (with wider responsibilities). Finally, this Act was amended under the 1938 South African Roads Board Act, which established the curent South African Roads Board. The main purpose of the SARB is. subject to the provisions of the 1943 Act (as amended in 1983), to promote and encourage the development of transport in South Africa and, where necessary, to coordinate various phases of transport in order to achieve the maximum benefit and economy of transport services to the public. The main objectives ofthe Board ame defined as follows: (i) To design, build, and maintain a national network of freeways and other roads, including toll roads; (ii) To compile a priority list of roads to be built or improved; (iii) To design and build various special roads that are in the national intercst; (iv) To set geometric standards for the construction of national and special roads; (v) To preserve the environment; (vi) To expend available funds in the most cost effective manner in the provision of a primary road network; (vii) To do or initiate research, whether in South Africa or elsewhere, in connection with the design, planning, or construction of roads; (viii) To grant bursaries or subsidies to enable persons to study or do research on any subject in connection with roads; (ix) To advise the minister, at his request, on questions relating to roads that may be raised by the govemment of any other country or territory; (x) To provide rest and service areas, in conjunction with private cnterprise, at strategic points on national roads in order to promote road safety. The Departnent of Trausport is charged with carrying out the executive and administrative work necessary to enable the SARB to carry out the duties and functions assigned to iL Zambia National Roads Board (NRB) The NRB was established through Statutory Instrument on 24 February 1994 under the Roads and Road Traffic Act The order defines the functions of the Board as follows: (i) To administer and manage the Road Fund, (ii) To prepare and publish audited annual accounts of the Road Fund; (iii) To recommend to the ministers (for Communications and Transport. Works and Supply and Local government and Housing) additional fuel levies and other road user charges as required; (iv) To recommend projects for donor funding to the minister; (v) To allocate resources for road maintenance and rchabilitation for various classes of roads as may be determined by the ministers; (vi) To recommend funding for the development of new roads; (vii) To provide guidance and technical assistance to various road agencies; (viii) To receive and consider reports from road agencies on their activities and prepare quarterly and consolidated annual reports; (vx) To prepare and award contracts, ccrtification of payments, and advise the ministers accordingly; (x) To review design standards and classification of roads and traffic sign for approval by the ministers; (xi) To prcpare and review terrns of reference and guidelines for the various road authorities and budget guidelines; (xii) To recommend to the ministers the granting of highway authorityship to any person or institution; (xiii) To plan, manage, and coordinate the road network in the country; (xiv) To review from time to time the status of road agencies and recommend appropriate action to the minists, ad make recommendations in relation to the siting of buildings on roadsides. 59 7 AN ADEQUATE AND STABLE FLOW OF FUNDS This chapter deals with pricing and cost recovery policies for roads. It develops a model which attempts to promote economic efficiency and also to generate sufficient revenues to operate and maintain the road network on a sustainable long-tenn basis.25 To do that, the model needs to influence the demand for travel - whether and how to make the joumey - as well as the supply of road services. The impact on supply is particularly important.26 The road agency should be discouraged from simply passing on to road users the costs of its own inefficiencies in the form of higher user charges. Instead, the financing mechanisms should: (i) encourage the road agency to use resources efficiently, (ii) limit the scope of the road network to what is affordable, and (iii) only construct new roads when resources are available for maintenance. In other words, the pricing and cost recovery policies should bring roads into the marketplace by defining a clear price for roads and, by linking revenues and expenditures, subjecting the road agency to a hard budget constraint to promote some form of market discipline. This chapter addresses three key questions: (i) which instruments are available for charging road users? (ii) which principles should guide pricing and cost recovery policies? and (iii) how should the resulting revenues be managed? 7.1 CHOOSING A CLEAR MARKET SIGNAL To influence demand and provide a basis for linking revenues and expenditures to create hard budget constraint, charging instruments should be: * Related to road use; * Easily recognizable; Easy to separate from indirect taxes and other service charges or fees; * Simple to administer (i.e, not subject to widespread evasion, avoidance, and In addition, the instruments should be able to distinguish among paying for. (i) the right to use the road network, (ii) traveling over the roads, (iii) occupying road space (either by parking or causing congestion), and (iv) the benefits of road access. 7.1.1 Selecting Appropriate Charging Istruments The main instruments used to chare road users include vehicle license fees, heavy vehicle license fees, levies on transport fuels and tolls and parking charges. Most of the other taxes and charges paid by road users are either general revenue taxes (see Box 3.1 for an explanation of how to separate road user charges from general tax revenues), or service fees levied in connection with the provision of specific services (eg., registration fees, driving license 25 In Africa, where viruly all govanmens are critically short of fiscal revenues, improved cost rmovery is more important than improved demmd munagement 26 This cmphasis is to countacdt ihe standard presmption made by economic theory that public sector production is efficient and that costs, including mginal costs, ae minimized (see Kranton 1990). 61 fees, etc.).27 The characteristics of the available charging instruments are compared in Table 7.1. The table suggests that the instruments best suited to Africa are vehicle license fees, heavy vehicle license fees, fuel levies, and international transit fees. Parking charges are less suitable as presently collected, because they are generally treated as yet another tax and this makes them difficult to administer (i.e., they suffer from high levels of avoidance and leakage).' However, if collected under contract, they could play an important role in helping to generate revenues and manage urban traffic. The other technically sound charging instruments, tolls, and weight- distance fees, are less suitable. Few roads in Africa carry sufficient traffic to make tolling economic, and weight-distance fees are difficult to administer (see Box 7.1 for a description of weight-distance fees). The advantage of weight-distance fees is that they encourage the use of vehicles with axle configurations which do less damage to the road pavement. They also make it easier to charge for roads when there is rampant fuel smuggling and, particularly if introduced on a regional basis, make it easier to charge international truck traffic. Weight-distance fees should therefore be considered as soon as a country has developed the capacity to administer them. The actual charging instruments used in Africa are listed in Table 7.2. The table shows that most countries use vehicle license fees (usually based on gross vehicle weights or engine capacity), a few use license fees based on axle weights (Chad) or have a heavy vehicle license fee (CAR and Zimbabwe), a surprising number use fuel levies, and a number also use international transit fees. Several countries also charge ferry and bridge tolls. These charges offer the potential for being used as a two-part road tarif The license fees can be used to charge for access to the road network, while the fuel levies can be used to charge for use of the road network. Fuel consumption is not exactly related to variable road maintenance costs, but is closely enough related for practical charging purposes (see Figure 7.1). In terms of revenues raised, fuel levies are by far the most important user charges currently used (see Figure 7.2). 7.1.2 Administrative Considermtions It is important to ensure that the above fees, fuel levies and, where applicable, bridge and road tolls are administered efficiently. This means minimizing evasion, avoidance, and leakage; avoiding inadvertent subsidies; ensuring that the fuel levy does not inadvertently tax non transort users of diesel; and minimizing fuel price distortions. 27 Service fees cover the costs of establishing title to property (to facitate law enfor rc)nt, checking vehicles for mechanical soundness and monitoring payment of license fees. As such, they are not user charges and should be set to only cover servicing costs. 231 Experience with parking charges is not encounging. During 1991 Nairobi eamed $17,500 from car parks and paking metes, but it cost $82,000 to opeme and maintain these facilities. 62 Table 7.1 AdmInisrative Characterlsllcs of Different Road User Charging Instruments Administrattve characteristics Related Separable Collection Avoidance Ease of Suitability Potential to from Easily cost or collecting for role road use general taxes recognizable (percent) evasion by contract Africa d Charging Instrument Tolls user fee yes yes excellent 10-20 moderate simple low Vehicle license fee vehicle access fee no yes good 10-12 high moderate high Heavy vehicle license fee vehicle access fee not directly yes good unknown unknown simple high Fuel levy user fee partly can be good negligible low simple high Weight-distance fee a user fee yes yes excellent 5 moderate moderate low International transit fee foreign user fee should be yes good 10 high simple high Parking charges b control access partly yes good over 50 high simple low Cordon charge c congestion charge partly yes moderate 10-15 unknown sinple moderate Area license congestion charge partly yes moderate 10-15 unknown simple moderate Electronic road pricing user or congestion can be yes good less than 10 unknown simple low charge a. A simpler form of weight-distance fee is the vehicle-km fee. It employs the same basic principles, but relates fees more simply to vehicle type and distance. b. These are difficult to administer in Africa and currently generate little revenue. c. These are only suitable when the road network lends itself to cordon pricing. d. This defines their suitability as general charging instruments. Source: Heggie, 1992 Box 7.1 WeIght-DIsrance Feesfor Diesd Vehicles New Zealand, Iceland, Norway. and Sweden all use weight-distance fees to charge diesel vehicles for usage of roads, and Canada is planning to introduce them in the near future. The basic principle is that all diesel vehicles must buy a license (in New Zealand they are issued in multiples of 1,000 km) graduatcd according to axie configuration and gross vchicle wcight. The charges are administered through sealed hub odometers or other certified distance meters. The chargc is lower for vehicles with multiple axles and increases with gross vehicle weight (see figurcs below). The charging system is best developed in Iceland and New Zealand. The weight-distance fee is administcred separately from the general tax system and all revenues collected from the sale of weight-distance licenses arc paid into a special account set aside to support spending on roads. The systems in Norway and Sweden are similar, except that revenues are not paid into a special account. In addition to the weight-distance fees. Iceland and New Zealand also levy a special fuel charge on gasoline to charge gasoline-powered vehicles. The revenues from this charge are also paid into the special account. Norway and Sweden do not levy specific charges for gasoline-powered vehicles and treat all revenues as general tax revenues. Weight-distance fees can be difficult to administer. There is considerable scope for evasion - mainly by under-buying and avoiding detection - unless the sale of licenses can be checked for consistency and linked to an active enforcmemnt program. In New Zcaland it is estimated that collection and enforcement absorbs about 5 percent of gross revenues and that evasion varies from 10 to 20 pereent The system should work satisfactorily when it is effectively administered-with fees perhaps being ollected under contract-and vigorously enforced. It should be possible to administer weight-distance fees in countries like Botswana. South Africa, and Zimbabwe. Trailers Rigid Vehicles rums (HZ S) hm ra n (HspZ s) cezsg~~~~~~~ spmd ar"J& dsril ;Ag1n k b ud (ui 2 *acid (twol bm2 n- cmigru I2 Wo 3 (/T las~~~~~~~~~~~~~~~~~~~~~~Sd !~~ ~ ~ bi bua& l , s I _ ~ ~~~ ~~~~~ grLd to sal 3e 1 1 20 D9 Mxi=wor vdtbpDtw) M _dmi~v" wegit (Im) Table 7.1 shows that (i) license fees suffer firom wide-spread evasion, (ii) international transit fees suffer from serious leakage (this is aggravated by the fact that they are usually vaid in foreign exchange), and (iii) road and bridge tolls suffer from high levels of evasion and leakage and are costly to adrninister. In some countries, half of the vehicles of hn go unlicensed and uninsured (e.g., Zambia), revenues from international trasit fees are less than half their potential (e.g., Tanzania), and the costs of administering road and bridge tolls is higher than the revenaes collected (e.g., Ghana). To minimize avoidance and evasion and impr-ove the efrectiveness of 64 road user charging instruments, govemments are attempting to improve revenue administration. There are two main options. The first is to simplify the fee structure to reduce avoidance, and mobilize most license fee revenues through a heavy vehicle license fee. Since there are fewer heavy vehicles (perhaps 20 percent of the total), and they are mostly owned by registered businesses, a heavy vehicle license fee is easier to administer. Both Tanzania and Zambia are considering this option. The second is to collect more fees under contract with the private sector. Mozambique is in the proces of subcontracting the collection of international transit fees to a commercial bank and Zambia is proposing to use a similar contractual arrangement (see Chapter 6, Box 6.1). Table 7.2 Charging instmuments Currently Used br Sub Saharan Africa Heavy International Country Licensefees vehiclefee Fuel levy transilfee Other charges Tanzania Yes No a Yes yes b Various levies and duties from motor vehicles are supposed to be paid into the road fund Benin No Yes c Yes Yes Bridge tolls, import duties, value-added tax Mozaxmbique Yes, at No Yes Yes b Bridge tolls provincial levels Nigeria Yes, at state No No Yes Bridge and road tolls levels Sierra Leone Yes d No Yes No Zambia Yes Noa Yes Yes b Ghana No No Yes No Bridge and road tolls. The fuel levy applies to all fuels CAR No Yes Yes No Bridge and ferry tolls Rwanda No No Yes No Road tolls Kenya Yes No Yes c Yes b Road tolls Uganda Yes No Yes C Yes b Road tolls Zimbabwe Yes, by local Yes No Yes b authorities Chad No Axle- Yes Yes Ferry and road tolls weight tax Note: - Data were not available a. Under consideration. b. Fees are collected under the Preferential Trade Area (PTA) agreement c. Weigh-bridge fees. d. Provisions exist for collecting license fees, but they are not allocated for spending on roads. Source: World Bank project reports 65 Figure 7-1 Relarionshp betwen Variable Road Maintenance Costs and Costs ofaou LeiW 6 - - . . - 5 - 0j Car Ufity Light Mod. Heavy Anicu- Bus ruck truck Single bbtd tuck tuck Note: Diesel fuel levy at $.O9/liWr, Soure: Annex 2 Table A2-4 iVadible Road uintenanceCosts Fue Lvy Figure 7-2 Fad Lenie Paid Into Road Funds (11 January, 1994 after the devaluation of the CFAF) mimi~ _ ___ 4. 0- SL GH CA TA KE RW MOZ BEN ZA Source: RN County Coordinators and World Bank task munager Administatve arrangements may also lead to inadvertent subsidies. Vehicles owned by the government rarely pay license fees and government and diplomatic vehicles often pay no fuel levies. These vehicles nevertheless impose measurable costs on the road network and someone, usually other road users, have to pay these costs. This creates distortions. To avoid tiis, all road 66 users should pay license fees and fuel levies, or the government should reimburse the road agency for loss of revenue caused by exemptions. A subsidy also occurs when the pump price of fuel (excluding the fuel levy) is lower than its border price (see Box 7.2 for a description of how to compute the relevant border price of fuel). When that occurs, the fuel levy does not generate additional net revenues. It simply reduces the implicit subsidy channeled to the road sector. To avoid this, the government should ensure that pump prices are higher than border prices and should ideally take full advantage of the low price elasticity of demand for fuel by imposing higher taxes on fuel than on general consumptinn goods (see Box 7.3). Of course the opposite can also happen. Pump prices may be too high because tax levels are higher than the optimum, as was thought to be the case in some West African countries before the CFAF devaluation, or because of inefficient petroleum procurement and distribution policies.29 One of the most difficult administrative issues is to ensure that non-transport users of diesel fuel do not pay the fuel levy. As much as a third of diesel fuel is used outside the transport sector for power generation and to operate heavy equipment in the construction, agriculture, and mining sectors. Few countries in Africa have managed to solve this problem. However, some countries (like Chad) already differentiate in their tax structures and apply different tax rates to automotive diesel, industrial diesel, and diesel for power generation (in Chad the rates are CFAF 127, 82, and 46 respectively). In principle, differentiation is therefore possible. Other countries operate rebate schemes or offer exemptions. CAR exempts river trnsport and power generation, Ghana exempts the fishing industry, and Mozanbique has introduced an arrangement under which 20 percent of the diesel fuel levy is set aside to compensate agriculture for having to pay the fuel levy. There are therefore a number of ways to ensure that the diesel fuel levy is effectively only paid by road users. Most countries have nevertheless decided that the administrative complexities outweigh the advantage of these options. Tne final administrative concern relates to relative fuel price distortions. Fuel levies raise fuel prices and this may encourage substitution between different transport fiuels. The biggest problem arises with kerosene. Some governments keep kerosene prices low to minimize the impact on low-income households which use it for cooking and lighting. They also keep kerosene prices low to encourage substitution of kerosene for fuelwood to reduce deforestation. Kerosene can be mixed with either gasoline or diesel fuel and, when mixed with a little engine oil, can even be used as a complete substitute for diesel fuel. A high price differential between diesel and kerosene will thus encourage substitution, and the fuel levy will then not realize its full potential. The only ways to discourage substitution are by coloring kerosene and inspecting vehicles for mixing (as is done in Zambia) or by issuing coupons to poor households for the purchase of kerosene at concessionary rates. Neither solution is entirely satisfiLctory. The best option is to avoid wide price differentials between kerosene and diesel fuel. 29 A recent survey has estimated that Sub-Saharan Africa could swvc about SI.4 billion a year at 1989/90 prices by rtionalizing the supply of peroleum products. About half the potential samgs would come from improved procurement arangements, which would cut costs and, more imporntly, reduce gratification payments. Moer 40 percent would come from improved refining practices, while fte final 10 percent would come fiom improved distribution and storage arrangements (Sce Schloss, 1993). 67 Box 7.2 The Border Ne of Transport Fucs Border prices measure the cheapest way to procure lranspon fuels. There are three main cases to be considered, countries which: (i) import refined fuel products, (ii) import aude petroleum and refinc it in a domestic rfinery (or pay a fee to have it refined in another country), or (iii) produce crude petroleum and refine it in a domestic refinry. The method of calculating border prices is the same in all three cases. For case (i), the starting point is the f.o.b. price at the originating port, whilc for cas (ii) and (iii), it is thc f.o.b. price at the most efficienl, available. originating post (usually Bshrain, Cumao, Rotterdam, or Singapore). The reason for choosing the most cfficient available originating port is to ensure that the costs of an inefficient local refinery, or inflated production costs, are not passed on to users as part of the border price, but are clearly recognized as an implicit subsidy to the refinery or local producer. Insurance and fteight costs are then added to the f.o.b. price to produce the c.i.f. price. Altematively the calcultion can start dirctly with the c.i.f. price, which is readily available for most countries from the World Bank's quarerly report on Prices of Crude Petroleum and Petroleum Products. Finally, allowance is made for occan losses, port charges, and transport costs (if any) from the port to the customs border. The sum of these costs repreents the import parity, or border price of fuel. The table shows how border prices were calculated for Botswana, a landlocked country, in January 1983. The final estimates for the border prices of premnium gasoline, diesel fuel and kerosene were $0.31, $0.29, and $0.34 per liter, respectively. Comparle figures for Nigeria, an oil producing country, were $0.32, $026, and $028 per liter in April 1983, eKcluding inland wansport costs. Boder Prices of Transport Fuels: Boswan January 1983 (US. cents per liter) Premium gasoline Diesel ifel Kerosene f.o.b. Price 21.74 21.78 23.88 Freight Chargs 1.60 1.81 1.70 Insumnec Costs 0.02 0.02 0.03 ci.f Price 23.36 23.61 25.61 Ocean LOes 0.07 0.07 0.08 Ladig and Wharfage 0.39 0.39 0.43 Coastal Strage 0.35 0.35 0.35 RailtoGaberone 7.18 4.86 7.36 [irport Parity Gaberone 31.36 29.28 33.82 Sowrce: BoLwaaw Isues and options in the Ener Sector, Report No. 4998-BT, UNDP/World Bank Energy Assessment Progam, World Bank, Washington, 1984. 7.1.3 Fuel Smugglng Fuel levies break down when there is rampant fuel smuggling. This is a major problem in parts of East and West Africa where the low price of diesel in some countries has led to massive fuel smuggling. It is estimated that during 1992 one-quarter to one-half of the fuel consumed in Cameroon and Benin was smuggled from Nigeria. This makes it virtally impossible to fiance roads through fuel levies. Indeed, it makes it virtually inpossible for governments to mobilize any revenues by taxing imported fuels (in Africa, fuel taxes account for up to one-third of the government's total tax revenues). 68 Box 7.3 SrengtIaening Revenue MobUIzatlon by Improving Taxaion of T7nsport Fuels Fuel prices in Sub-Saharan Africa arm currently well below those in other parts of the world and are also lower than thcy werc in francophone countries before the recent CFAF devaluation. Several countrics have negligible tax rates (i.c., the pump pricc is at or close to the border price), while others simply apply standard consumption tax rates to fucI. Little effort has been made, other than in francophone West Africa prior to the CFAF devaluation, to improve domestic revenue mobilization by having higher taxes on fuel than on other commodities. This contrasts starkly with practice in other parts of the world where fuel taxes arc generally significantly higher than general consumption taxes. A recent survey of selected Organization for Economic Cooperation and Development (OECD) countries has shown that gross tax rates on leaded gasoline during 1990 and 1991 were between 60 and 70 percent (75 percent in France), leading to net tax rates of IS0 to 230 percent (the gross tax rate - net tax rate/Il + net tax rate], where tax rates are measured in percent). This was three to five times higher than thc general consumption taxes in these countries. FurLhcrmorcr the available evidence on the price elasticity of dcmand for gasoline suggests that these differentials are justified from an economic efficiency point of view (i.c., the higher rates move the taxation system closer to the optimum). Since gross consumption tax rates in Africa are about 15 percent, gross petrolcum tax rates might be cxpected to be betwecn 45 and 75 percent to be economically efficient. This would result in net tax rates of 120 to 300 percent. In other words, if the base price of gasoline was 25 cents per liter, the fuel tax would be between 30 and 75 cents per litcr. This is far highcr than cxisting gasoline taxes in most Sub-Saharan African countries. Most Sub- Saharan African countries could therefore improve domestic revenue mobilization and reduce the welfare costs of taxation by raising fuel taxes and lowering other geneaml consumption taxes. T'here is no easy way around this problem. Wide disparities in price lead to large potential profits and hence to widespread bribery and corruption. Attempts to prevent smuggling cannot therefore rely on enforcement alone. Three alternatives currently being tried include: (i) making the currency nonconvertible to make the sale of smuggled fuel more difficult, (ii) introducing network-wide road tolls in lieu of the fuel levy, and (iii) promoting harmonization of fuel prices under regional trading agreements. Convertibility has been suspended in Cameroon and Benin, and Cameroon has introduced road tolls over the entire main road network (the tolls were not primarily intended to discourage smuggling). However, introduction of network-wide road tolls is a strategy of despair. Unless the system is carefully designed and administered in collaboration with the road transport industry, it will not generate much revenue and will also face public hostility. It is estimated that Cameroon loses up to 75 percent of its potential toll revenue through evasion and leakage. However, with strong support from the road transport industry, which has a vested interest in generating funds for road maintenance, a road toll system mightjust work. 7.2 PRICING AND COST RECOVERY POLICIES This section sets down the basic principles which guide pricing and cost recovery policies for roads. It focuses on ways of recovering the costs of maintaining, improving, and rehabilitating the road network and on ways of using congestion charges (where relevant) to ration scarce road space. It does not deal with the costs of other extemalities, since the government should handle these directly through regulations and corrective taxes, which may take the form of an additional environmental levy added to the price of tmnsport fuels. The pricing and cost-recovery policies discussed in this chapter have four objectives: (i) to provide the correct market signals to road users, (ii) to ensure road agencies use resources efficiently, (iii) to constrain the size and quality of the road network to what is affordable, and (iv) to 69 generate sufficient revenues to operate and maintain the core road network on a sustainable long- term basis. The policies must therefore balance several conflicting objectives. The following sections deal first with the basic principles and the practical problems encountered when trying to implement them, the way in which maintenance, new construction, and rehabilitation are financed, and how to use pricing policies to help manage urban road congestion. 7.2.1 Basic Principles To maximize net economic benefits, road user charges should be set equal to the costs of the resources consumed when using the road network. These costs are generally referred to as short-run marginal costs (SRMCs). There are two costs to be considered: (i) the damage done to the road surface by the passage of vehicles (i.e., the variable costs of operating and maintaining the road network), and (ii) the additional costs which each road user imposes on other road users and on the rest of society (i.e., the costs of road congestion and other externalities). Congestion is the classic source of external disbenefit in the road sector and is the one normally taken into account when estimating the optimal user charge.30 However, since less than half the costs of operating and maintaining the road network vary with traffic (see Table 7.3) - and roads in Africa do not experience widespread and persistent road congestion - prices set equal to SRMCs will result in large financial deficits. Furthermore, since most governments in Africa are acutely short of fiscal revenues, it is rarely possible for them to finance these deficits through general taxation. The funds are simply not available. How should these deficits be financed? The obvious target are the road users themselves, and in the case of local access roads, also those who benefit from road access. They use the roads, or benefit from them, and might be expected to pay for them. Furthermore, there is aprimafacie case for supposing that the welfare costs of raising most of the required revenues from road users are lower than the costs of mobilizing them through general tax revenues. There are also distributional arguments in favor of raising most of these revenues from road users. Road users are among the wealthiest members of society and, although the poor depend heavily on public tasport for jobsearching and gaining access to public services, it is better to assist such persons by subsidizing selected transport services or by providing other forms of income support. Therefore, unless there are reasons to the contrary, there are strong arguments in favor of financing these deficits from road users and those who benefit from road access. The idea of going for full cost recovery is also consistent with the desire to link revenues and expenditures to subject the road agency to a hard budget constraint. If some costs are financed by others, whether by way of subsidies or other transfer payments, it weakens market discipline. Pressure to keep costs under control - and only undertake expenditures for which users are willing to pay - requires a clear market signal which makes road users recognize the full costs of providing road services. The road tariff should therefore reflect the costs of operating and maintaining the road network and increased road spending should automatically raise the road tariff (although it will usually reduce VOCs). Imposition of a hard budget constraint thus requires full cost recovery from road users and, in the case of local access roads, both road users and the beneficiaries of road access. 30 Extenal disbenefits also include the road damage externality. Each vehicle damages ihe road pavement and this increase the VOCs of all subsequent vehicles which use the road. However, if the road network has a fiirly uniform age distribution, and if maintenance policies are condition-responsive. road damage cxternalities arc am when traffic growth is zcro and all road damage is caused by vehides, and is negligiblc in all other reasonablcases. (See Newbery, Hughes, Pateson, and Bamthan, 1988). 70 Tabk 7.3 Cosa ef Read Malntenaance on Different Types of Road (US cents per veh-km) Main roads LSocal access roads Payed roads Upvdroad CollectarI Minor arterial |or arterial High volumne Hligh volume Low volumne Tmffic (AADT) 3,000 1,000 300 300 S0 Pavement SNCA 5 3 2 2 Normal loading (8 ton limit), high motorization (20% brucks) Variable costs 0.28 0.53 0.65 Fixed costs 0.29 0.84 2A.0 - Total 0.57 1.37 3.05 Normal loading (8 ton limit), low motorization (70% buck) Variable costs 0.50 1.01 1.92 1.92 3.01 Fixed costs 0.32 0.92 2.68 0.91 5.48 Total 0.82 1.93 4.60 2.83 8.49 Nlotch: - Not applicable Based on data from a selection of developing countries that do not have any extremes of clilmat. US cents per veh-lan is the average cost for all vehicles. a. Modified structural number of the road pavemnent Sowuce: Paterson and Archando-Callao, 1991. This leads to three basic pricing and cost recovety policies: * Never set the road tariff lower than the variable costs of operating and maintaining the road network; * Ensure that the road tariff and the taxes and charges used to support local access roads collectively cover all road costs; * When there is significant road congestion, the road tariff should also include congestion costs, although this will only apply to a handful of seriously congested cities. 71 7.2.2 Practical Considemations There are three main practical problems. First, the variable costs of maintaining different types of roads vary significantly. Table 7.3 shows that they vary from about 0.3 US cents to 0.7 cents per veh-km on the main network, to 0.5 cents to 0.7 cents per veh-km on the urban network and to 1.9 cents to 3.0 cents per veh-km on the rural road network. Total costs likewise vary from a low of 0.6 cents per veh-km on the main network to a high of 8.5 cents per veh-km on the rural road network. Charges based strictly on costs would thus involve wide differentials between different types of roads and different road agencies. This is simply not practicable, although it is possible to maintain some differential between urban and rural areas and among different regions. A practical set of user charges will thus involve a great deal of averaging.31 Second, the variable costs of maintaining the road network also vary significantly between different types of vehicle (see Figure 7.1). Cars impose relatively small costs on the road network, while articulated trucks impose costs twelve times larger. In principle, an articulated truck should therefore pay twelve times more than a car. However, if the main charging instrument is a fuel levy it will only pay six or seven times more (an articulated truck uses about seven times as much fuel as a diesel car). The available charging instruments therefore introduce further averaging that can only be avoided by switching to weight-distance fees, which can be accurately calibrated to reflect underlying road-use costs. The final practical problem relates to the way license fees and the fuel levy are set to ensure that (i) to the extent feasible, each class of vehicle covers the variable costs it imposes on the road network, and (ii) the road tariff and the taxes and charges used to support local access roads collectively cover all road costs. The fuel levy by itself would undercharge articulated trucks and overcharge other vehicles, particularly buses. The license fee must therefore be used to compensate for this. In other words, the license fee cannot be strictly used as an access fee set to cover fixed costs. The available pricing instruments are too blunt for that. Instead, the combined license fee and fuel levy have to be set to meet the above two objectives. This then results, not in a strict two-part tariff, but in a quasi two part tariff. Clearly, there is no scope with these charging instruments for using the inverse elasticity rule (i.e., Ramsey pricing), although it would be applicable when using weight-distance fees (see Annex 2 for a description of the inverse elasticity rule). Annexes 3 and 4 provide an example illustrating how to estimate the above two-part tariff. 723 Fwnaudug Maintenance The above model suggests that: (i) the costs of operating and maintaining the interurban road network should be financed through the road tariff, (ii) in urban and rural areas, the variable costs of operating and maintaining the road network should also be financed through the road tariff, and (iii) the balance of the required expenditures in urban and rural areas should be financed from local revenues. These local revenues may come from parking charges (in large urban areas), local property taxes, head taxes, market taxes, or product taxes (in Kenya, service charges on tea and other products provide local revenues to support road maintenance). In 31 lThis is true in many sectors. In the case of electricity, the costs of generating the base load are estimated by pooling the costs of individual power stations and calculating the average variable and fuced costs for the entire group. The vaiable costs of a hydro-power station (which are virtalyl zero) are thus pooled with those of coal, oiL and gas-fired stations and also with stations of different age. 72 Zambia, the basic road legislation permits the minister to impose taxes on adjoining property owners to finance the costs of branch and estate roads. In nrral areas and urban squatter settlements, the local community sometimes conuributes materials and/or volunteer labor in lieu of such taxes. One of the key features of the above financing arrangement is that it focuses attention on the affordability of a fully-funded road maintenance program and hence on the need to define a core road network which users are willing and able to fully finance. Most African countries are now having to face this issue. Road networks were expanded too rapidly during the 1960s and 1970s, and governments are no longer able to fully maintain the entire road network. Instead, they are being forced to define a core network which they can afford to maintain. Noncore roads either receive minimal maintenance or are handed over to lower levels of government. In Tanzania, this has resulted in a decision to fully maintain all main and regional roads in good and fair condition (about two-thirds of the total) and to carry out emergency and spot maintenance on only about 20 percent of the remaining third in poor condition. CAR has defined a core network, anounting to less than 20 percent of the total, which they intend to fully maintain, while Benin has effectively handed over maintenance of most rural roads to local communities. 7.2.4 Financing New Investment New investments include road improvements (e.g., surfacing an earth track), extending the road network (e.g., constructing an agricultural penetration track), and expanding road capacity (e.g., widening a road). There are sound economic reasons for wanting to finance improvement and extens'on of the road network by applying the benefit principke of taxation: those who benefit should pay. There are also sound economic reasons for wanting to finance increased road capacity on congested roads through congestion charges. However, the bluntness of the available charging instruments makes it virtually impossible to confine charges to beneficiaries, or to administer congestion charges on the interuban and rural road networks (urban road congestion is dealt with in section 72.6). The choice of financing instruments thus comes down to charging all road users, or financing investments from general taxes channeled through the government's development budget. People have strong views on how to finance investment. Many believe the road tariff should only finance operation and maintenance and that all new investment should be financed through the development budget. Otherwise there is a danger that new construction might take precedence over maintenance or that the road agency might undertake too much investment. Major new investments in the interurban road network, furthermore, have major impacts on landuse, location of industry, and property values. This raises both strategic and political issues which should properly be dealt with by the government. There is some evidence to support this view. During the 1980s, countries like Tanzania and Zambia continued to build new roads at the expense of maintenance. On the other hand, there are also arguments in favor of financing new investment through the road tariff. Only by forcing road users to pay the full costs of using the road network- including the costs of investment -will the size of the network be constrained to what is affordable and will essential investments be carried out regardless of the state of the govenmuentfs budget. There is no simple answer. Some countries finance new investments through the development budget (including Mozamnbique, Tanzania, and Ghana), while others finance some investment through user charges (including Benin, CAR and, until recently, South Africa). It is 73 really a question of governance. In countries where new investments are frequently undertaken for political masons and where the roads board (if any) is unable to stand up to these political pressures, new investments should be financed through the development budget. Where there are strong, representative roads boards which are able to withstand political pressure, it may be better to finance new investments through the road tariff. This will ensure that they are subjected to the test of the marketplace. The board should also ensure that new investment does not displace maintenance. Slightly differmnt considerations apply in the case of urban and rural district roads. In the case of new investment, the overriding objective is to ensure that districts only undertake priority projects, rather than undertake new investments because the funds are provided as a grant channeled through the government's development budget. This argues in favor of a matching-grant system. The district has to demonstrate the priority of its investment program by paying part of the costs from its own local revenues. The local revenues can come from land- value increment taxes (i.e., betterment taxes and frontage levies) or other forms of property tax. The balance of the expenditures are then financed by the road tariff or through the government's development budget. The amount financed by the district should clearly be based on the ability to pay. 7.2.5 Financing Road Rehabilitation Most countries have large backlogs of deferred maintenance. Governments are furthermore short of fiscal revenues and are generally unable to finance much road rehabilitation to their own resources. So where will funds come from? The first thing to recognize is that Africa cannot afford to rehabilitate all roads in poor condition. The best it can hope for is to rehabilitate a core network which the country can afford to maintain on a sustainable long-term basis (see section 7.23 above). The remaining roads in poor condition will either have to receive minimal maintenance or be handed over to lower levels of government and local communities. However, even rehabilitation of the core road network will still cost an estimated $1.5 billion per year over the next ten years. There are three possible ways of financing this: (i) by reallocating existing spending from new construction, (ii) through donor-financed loans and grants, and (iii) through the road tariff. The first option offers little hope. Few African countries have large construction programs - other than those financed by donors - so there is limited scope for reallocating domestic resources from construction to rehabilitation. The second option, donor financing, is already being used, with donors currently financing about $800 million of rehabilitation per year. This money is, however, not free. True, some comes in the forn of grants and some comes in the form of concessioncry loans, but governments still have to service the loans. Somebody has to pay. In the short term, most governments are doing this from general revenues. In other words, other sectors are being taxed to finance road rehabilitation programs. This is not sustainable under present fiscal conditions, and, furthermore, donor financing will not be available indefinitely. In the longer term: (i) governments will not be able to continue servicing donor-financed road rehabilitation progrms from general tax revenues, and (ii) donor-financing will eventually cease. This only leaves one realistic long-term option: road rehabilitation programs have to be financed through the road tariff. There a-e two qualifications. First, funds for rehabilitation should be clearly designated as a temporary surcharge and, second, the costs can be spread and made more affordable by continuing to use international and domestic 74 borrowing. The decision to borrow should nevertheless be based on a careful assessment of alternative financing options and their costs. 7.2.6 Managing Urban Road Congestion Pricing and cost recovery policies can be used to manage taffic and generate additional revenues for investment. One of the basic principles of efficiency pricing is that additional road capacity on congested roads should be financed through congestion charges. Capacity should be expanded when the annual costs of road congestion are equal to the annualized costs of expanding capacity. In practice, it is difficult to do this, other than in seriously congested cities and, even then, it is not easy. The only serious attempt made so far in Africa to develop special arrangements for financing urban roads, including possible use of urban congestion charges, is in South Afiica (see Box 7.4). Box 7.4 Soend Africa's Urban Transport Fxnd Urban roads in the declared Metropolitan Transport Areas are financed through local government rates and gamnts made from an Urban Transpon Fund (UTF) administered by a subcommittee of the South African Roads Board. The original intention was to partially support the UTF with revenues collected by applying road congestion charges in urban areas. However, these charges were never introduced. Instead, money was channeled to the UTF from the road fund (in 19g6-87 S30 million was transferred), and it is currently financed entirely through a central government grant amounting to about S16 million per year. Money from the Fund is used to finance urban transport plans and infmstructure improvements, provided the latter are designed to assist public transporL The Fund finances 50 percent of the costs of studies (the remnaining costs are shared between the provincial govemment (30 percent), and the local authority, (20 percent). It finances 60 percent of infrastructure costs, with the balance being equally shared between the province and the local authority. The simplest approach is to start with parking charges, supplemented by improved traffic management to prevent parking charges from spilling over into illegal parking and other avoidance strategies. Parking charges offer a natual transition from the use of physical measures to improve road capacity to the use of congestion charges to ration scarce road space. Full-scale area-wide congestion charging is the next best option. Box 7.5 summarizes methods of charging for urban road congestion and suggests that, presently, the only feasible options for Africa are area licensing and cordon pricing. And area licensing is difficult to administer. The most attractive method is cordon pricing, but such schemes are only suitable when: (i) there are a limited number of major arterial roads entering the city, (ii) traffic using these roads is a major cause of urban road congestion, and (iii) it is possible to intercept traffic on these routes to collect the congestion toll. Only Lagos and Nairobi, together with some cities in South Africa, stand any chance of satisfying these criteria. Urban congestion charges therefore have limited applicability, but they may eventually provide a useful instument for helping to manage urban traffic and generate additional road sector revenues in large, seriously congested cities. 7.2.7 Likely User Charge Structure A sustainable road maintenance progn generally requires vehicle license fees which vary from about $75 for a car through $500 for a bus or medium truck to about $2,500 for an articulated truck Altematively, license fees can be kept at nominal levels and combined with a heavy vehicle license fee, varying fiom about $200 for a light truck, through $1,000 for a heavy truck to $2,000 for an articulated truck. These license fees need to be combined with a fuel levy of from $0.1 0 to $0.15 per liter to ensure the costs of operating and maintaining the road network 75 Box 7.5 Methods of Chargingfor Urbmn Road Congestlton There are four main ways of using pricing to reduce urban road congestion: (1) charging for parking, (2) imposing a higher license fee or fuel levy on urban road users, (3) charging a fee for entering the urban road network, or (4) charging for the use of individual streets or designated parts of thc urban road network. This box describes methods (3) and (4). Entry fec systems charge vehicles each lime they cross a cordon. Fees can be collected manually or eletronically. Manual charging schemcs eithcr use toll booths to chargc vehicles entering the restricted zone, as in Bergen, Norway, or use area licenses, as in Singapore. With area licenscs, vchicles simply display a supplemcntary prepaid license when entering and operating within the restricted zone. Therc is no need for toll booths. General road pricing, whcre vehicles arc charged cither on individual routcs or when using parts of the road network, arc only feasible with electronic charging schemes such as: Automatic Vehicle Iden:iJ1caaion (AVI). Electronic Number Plate (ENP), and Smartcard. Thc vehicles equipped with an AVI tag, an ENP. or a Smartcard are identified when they pass an electronic reader. The rcader charges either the vehicle's account (precredited or not) or the prepaid Smartcard itsclf. Oslo and Trondheim in Norway use both manual and electronic tolling systems. Users can thus choose cither to subscribe to AVI and be identified or usc the manual toll lanes and rcmain anonymous. The ENP scheme has bcen tested in Hong Kong and the Smarcsard system is currently being tested in Singapore. Electronic charging schemes do away with the need for toll plazas and reduce delays. Electronic Charging Schemes arc generally not suitable for Africa. The technology is still under development and it will bc some years before it will be available off-the-shelf The ALS requircs disciplined road users and on effective enforcement system. For these reasons it may not suit Africa at the present time. Theizfore, the best practical solutions for Africa arc the manual and mixed manual or delctronic cordon pricing schemes. But such schemes are only suitable when: (i) there ate a limited number of major arterial roads entcring the city, (ii) traffic using thcsc roads is a major cause of urban road congestion, and (iii) it is possible to erect toll booths at points which intercer' a .ignificant amount of this traffic. can be fully funded. License fees in most countries, particularly those applicable to heavy vehicles, are generally lower than this and generally need to be raised and/or supplemented by a heavy vehicle license fee. The same is not true of fuel levies (see Figure 7-2). A number of countries either have or are well on their way to having fuel levies of $0.10 per liter. The fuel levies, furthermore, should not make fuel unduly expensive. Prior to the CFAF devaluation, francophone countries frequently priced diesel at $0.70 per liter and gasoline at over $1.00 per liter. Since the devaluation, few countries price diesel at more than $0.55 per liter and gasoline at more than $0.70 per liter (see Figure 73). Africa now has some of the lowest fuel prices in the world. A $0.10 to $0.15 fuel levy would still leave fuel prices in most African countries at acceptable levels. Only in a few countries, like Uganda and Malawi, might the introduction of a high fuel levy need to be accompanied by revision of the underlying fuel tax structure to ensure that the final price of fuel was not unreasonably high. 73 MANAGING THE REVENUES The above pricing and cost recovery policies will only influence demand and strengthen market discipline if the revenues collected from road users are spent on roads and used to impose a hard budget constraint on the agencies supplying road services. Furthermore, road users are generally only willing to pay explicitly for roads "provided the money is spent on roads and the work is done efficiently."32 To that end, it is important to recognize that vehicle license fees, 32 During the Naticnal Road Maintenance setninar in Zambia, a representaive fron the road transport industry stated this for the record. The same sentiment was expressed by a representative from the private sector during 76 heavy vehicle license fees, international transit fees, and the fuel levy are not regular laes. Thoy are the road tiff and should not be confused with the general tames which road users pay. Instead, the proceeds from the road tariff should be collected and deposited into a special accout to prevent them being diverted and spent on other public programs. These special accounts are normally referred to as road funds. It is important to note that putting roads on a fee-for-service basis, introducing a road tariff and depositing the proceeds into a special account is not the same as conventional earmarking (see Box 7.6). Figure 7-3 Auel Price in Seleced African CoNunIEs 70 so __ . 40 o j30 20 10 0 n z i ^ i. X g z $AllF]| NoC-: P---r----dntcunbusr u t 1993; Picem for CFAF countbisara pot devakumion. Scums: G. Mechis. GTZ. and Word Bank. 7.3.1 Establishing a Road Fund A road fund can be established in one of two ways. It can either be opened under existing legislation or by passing new legislation to establish the road fimd as a separate legal entity. The first option is the easiest. The basic legislation in most countries gives the Ministry of Finance powers to open a special account, either through a parliamentary resolution or ministerial decree. The Minister of Finance simply tables a resolution in parliament or the minister or cabinet issues a decree stating: (i) that a special road fimd account is being opened, (ii) why it is being opened, (iii) the sourme of revenues, and (iv) how the account will be managed. The parliamentay resolution establishing the special account for financing main and regional roads in Tanzania is shown in Box 7.7. In Zambia, the road fund was established by the permanent secretary of the Ministry of Finance after parliament had passed an amendment to the Finance (Control and Management) Act The drawback of the above procedures is that they lack the full backing of the law and do not define the detailed arrangements for managing the road fund. an RMI worshop in Tanzamia, and a repfetatdvc of fth road tansport indusy fiom Zimbabwe made a similar statcmnt at a SATCC meeting in Antsba. 77 Box 7.6 Earmarking verus Commerdcluzallon Earmarking is the practice of selting aside revenues raised from certain taxes to cover specified public expnd luwes. Some economists argue that earmarking imposes undesirable rigidity on government expenditure decisions and should be discouraged. For example, it is inefficient to set aside, say, 20 percent of overall fuel tax revenues to finance national roads, since not all fuel consumption Is related to road usc. The required expenditures will generally be larger or smaller than this mount, and it may be desirable to use fuel tax revenues for other purposes. However, others argue that carmarking taxes under certain circumstances can improve allocative efficiency by acting as surrogate prices when the taxes are levied on those who benefit from the expenditures. For example, in both the US and Japan, part of the gasoline tax and other molor vehicle tax proceeds are earmarked for the road fund and the income from the fund is used to meet the costs of operating, maintaining, Improving, and extending designated parts of the road network. It is argued that such earmarking is a helpful device for approximating benefit taxation and will promote more efficient expenditurc decisions. What is being proposed in this paper is nevertheless not the above type of earmarking. Eannarking generally applies to revenues which: (i) form part of the govemments overall tax system and (ii) flow into the governments general revenue account. What is proposed here is a system of user charges which: (i) do not form part of the overtll tax system, (i.e., like the landing fees at an airport, they do not form part of the govemment's sales taxes, excise taxes, and import duties), and (ii) are kept in the accounts of the agency supplying road services. This institutional distinction has important implications for efriciency. The charges create a constituency for the agency supplying the service (ie., they create a specific market), make the agency morc accountable to its users and, by clearly linking revenues and expenditures, are used to impose a hard budget constaint on the road agency. Specifically, what is different about the proposed financing arrangements is that the road tariff: (i) Is not set within the govemmenrs overall tax framework; (ii) Is set to achieve specific objectives, like demand management and cost recovery for a particular service; (iii) Is added to pre-existing standard sales and excise taxes or, when fuel is highly taxed, pardy replaces and partly adds to pre-existing taxes; (iv) Is used to impose a hard budget constraint on the agency supplying road services. The road funds in Tanzania and Zambia should thercfore not be clssified as conentional earmwring since: i) the road tariff is set by the roads board outside the govcrmnenrs tax famework, (ii) it is set to ensure that all vehicles cover the costs they impose on the road network and collectvely cover the entire cost of operating and maintaining the road netwodl, (iii) the fuel levies are added to preexisting standard sales and excise taxes, (iv) the chrges ae related to road usage, and (v) the proceeds from the road tariffare used to impose a hard budget consraint on the agencies entitled to draw from the road fund. The second option is to establish the road fund under new legislation. This provides a much firmer basis for the arrangement, although it does have two disadvantages. First, the legislation must set down rules for marnaging the road fund before the parent ministry has gained experience on what these rules should be. Second, ministers are often reluctant to spend parliamentary time passing new legislation, and this may make it difficult to get the road fund established. It may therefore be easier to establish the road fund using a simple resolution or decree and then to translate the working rules into legislation after all the initial teething problems have been sorted out. 78 BOx 7.7 ParllammntaryRseolution usedto open a SpecdlAccountto supportmalntenance ofmain and regional roads In Tonzonia DECLARATION ON THE OPENING OF SPECIAL ROAD FUND "THE ROAD FUND" AS ANNOUNCED BY THE MINISTER OF FINANCE BECAUSE the govemment has an intention of strengthening the maintenance of core roads in the country after realizing the importance of roads in the restructuring of the country's economy; AND BECAUSE in fulfilling this objective it is necessaty that funds must be obtained for this purpose; AND BECAUSE under the present procedure of road maintenance, the internal revenue and development fund is not enough for this purpose; AND BECAUSE in accordance with Clause 17 (I) of the "Exchequer and Audit Ordinance" (Cap.439) whereby the government can open a special fund; THEREFORE, FOR THOSE SPECIAL PURPOSES, THIS PARLIAMENT IS SUGGESTING THAT (a) There should be a special fund called "The Road Fund." (b) The objectives of this fund should cover costs of rehabilitation and maintenance of major and core roads. (c) Money for this fund should come from: (i) Road tolls as charged from diesel and petrol at an amount to be decided by the Minister of Finance, effective July 1991/92. (ii) Various levies and duties from motor vehicles such as licenses, registration and taixsferring of vehicles, at an amount to be decided by the Minister of Finance effective July 1992/93. The Ministry of Works will be responsible and will monitor this Special Fund and the Ministry of Works will need to get an authority from the Planning Cormission and the Ministry of Finance before embarking upon any project. Note: Translated from the original in Swahili. 73.2 Review of Existing Road Funds There are a large number of road funds in Africa (see Tables 7.4 and 7.5). None are perfect and most have serious faults. A recent review has nevertheless identified what works and what does not work. This section focuses on some of the underlying weaknesses which cause road funds to fail, while the next section concentrates on how to avoid these pitfalls and design an effective road fund. The features which adversly affect operations include: (i) generic design problems which affect the overall operation of the road fund, and (ii) specific problems which only affect certain parts of the operation. 79 Generic design problems include: (i) Funding problems. The ministry of finance stops paying money into the road fund, holds up the release of funds (as happens in Ghana), or takes money out of the road fund and uses it for other purposes. In CAR, the government borrowed money from the road fund to pay civil service salaries, while in Mozambique, Sierra Leone, and Tanzania there have been several occasions when the ministry has withheld funds. This is generally caused by poorly designed arrangements for collecting road fund revenues, paying them into the special account, and authorizing their release. It may also be caused by a weak or nonexistent road fund board, and ambiguous legislation. (ii) It looks too much like earmarking. Anything that looks like traditional earmarking will be opposed by the ministry of finance and the International Monetary Fund (IMF). This generally happens when funds deposited into the road fund include service fees and general taxes (as in Benin and Ghana), or where the road tariff is specified as a portion of the govemment's regular fuel taxes (as in Mozambique and Chad). Depositing such funds into the road fund clearly looks like the earmarking of general tax revenues, and such funds will be under the constant threat of closure. (iii) Oil companies withhold payment. This usually happens when the government is in arrears on its own payments for fuel (as in Chad, Rwanda, and Zaire). When that happens, the oil companies stop paying the fuel levy and also withhold paymnent of government sales and excise taxes. This is a country problem, but it is also related to the influence of the road fund board. A strong board should be able to persuade the oil companies to pay up. (iv) Insufficient roadfund coverage. This happens when the road fund is set up to finance only part of the qualifying expenditures, with the balance being financed through the governments recurrent or development budget. Once road agencies are getting some money from the road fund, it often becomes even more difficult to get funds allocated through the normal budgetary process (this happens in Ghana where the road fund was originally set up to finance only 60 percent of periodic maintenance). Road funds should be set up to eventually finance all qualifying expenditures. (v) Excessive roadfund revenues. This is rare, but happens when the initial road tariff is set too high. The high tariff genertes a large surplus, encouraging other ministries to raid the fund or bring pressure to have it closed, as happened in Mali during the 1970s and has recently happened in South Africa.33 Clearly, there should be arrangements for varying the level of the road tariff. The specific problems which only affect certain operations are often related to the above generic problems but deserve special mention. They include: 33 About one-third of the pump price of fuel was earmarked for the South African Road Fund. In 1989, when the Fund was abolished, more than SO.15 per liter was earmarked. This high levy caused the Road Fund to build .up a large srplus. This led to concern t the South African Roads Board might go on a spending spree, and this eventually led to the dedicated Fund being abolished. 80 (i) Legalproblems. The road fund lacks a firm legal basis. This usually happens when the legislation is prepared too quickly or without adequate preparation and ends up being too inflexible. This affects a number of road funds. It can be avoided by establishing the road fund under existing legislation and only passing legislation after the initial teething problems have been sorted out (as in Tanzania and Zambia), or spending more time preparing the operating procedures before passing the legislation. (ii) Ineffective and inconsistent management. This may happen when there is no road fund board (as in Ghana), when there is a board but with the wrong membership (the initial board in South Africa, which primarily consisted of provincial representatives, found it difficult to get the provincial members to act in the national interest), or when it meets too infrequently (as in Rwanda). (iii) Inconsistent road tariff The tariff is inconsistent and not able to deliver a clear market signal to road users. This happens in Ghana (where vehicle inspection fees and taxes on kerosene are paid into the road fund) and in Tanzania (where the parliamentary resolution provides for car benefit, and vehicle transfer taxes to be paid to the road fund).4 The road tariff should consist only of vehicle license fees (including heavy vehicle license fees and axle-weight fees), the fuel levy, international transit fees, and bridge and ferry tolls. (iv) Inability to adjust the road tariff There is no mechanism for adjusting the road tariff other than through the normal tax-setting process combined with approval by several ministries that have nothing to do with roads (as in the case of Mozambique). This makes it difficult to adjust the tariff for inflation or to generate additional revenues. (v) Problems collecting the road tariff This happens when the revenues are collected by the customs and excise departnent and channeled through the Ministry of Finance, before being paid into the road fund. The ministry of finance almost invariably withholds some of these revenues (as in Mozanbique and Tanzania). The best solution is to have the road tariff collected under contract and deposited directly into the road fund. Among other things, this emphasizes its role as a user charge. (vi) No mechanism for objectively allocating funds. When the road fund finances roads managed by different road agencies, it needs transparent and equitable procedures for dividing the revenues between these road agencies. Sometimes, as in Ghana, it is merely a question of dividing the revenues between the agencies responsible for the main, urban, and rural roads. In others, as in Tanzania, it may involve dividing funds between more than 100 district councils. One of the persistent weaknesses of most road funds is that they have no objective prooedures for allocating funds. As a result, allocations tend to be erratic, as in Ghana, or subject to political whim. For example, in Tanzania, weak allocation procedures resulted in 75 percent of the funds allocated for urban and rural roads going only to urban areas. 34 At present, the fuel levy is the only user charge being paid to the Tanzania Road Fund. 81 Table 7.4 RevIew of Road Funds in Selected Countries in Sub Saliaran Africa: LegalandAdministrativeArrangements Country Legal basis Status Management structure Board composition Type of wvrk financed Benin Decrees; 1984, Public utility Board 6 Civil servants Routine and periodic 85 and 1992 Director and staff 2 Private sector maintenance CAR Ordinance, Public utility Board II Civil servants Routine and periodic 1981 and Director and staff maintenance decree, 1991 Mozambique Decrees, 1989 Bank account Board 7 Civil servants Routine and periodic and 1990, Director of roads Examining possibility of maintenance amended in participation from the Rehabilitation 1993 l private sector Rwanda Act, 1989 and Bank account Board 7 Civil servants Maintenance decree, 1990 Director of roads I Road haulier Sierra Leone Opened, 1989, Bank account Board Chairperson Routine, periodic, and incorporated in Director of SLRA 3 Civil servants emergency maintenance SLRA Act, 3 Private sector 1992 3 chosen by Minister of o _Works N South Africa National Road Bank account Board 3 Civil servants Routine, periodic, and Act, 1935, Director and deputy 1 Local govemment emergency maintenance amended in Director-general, Tpt I City representative Investment 1971 Director of roads 3 Private sector Studies, research and bursaries Tanzania Parliamentary Bank account Board Roads board oversees Routine and periodic resolutions, Ministry of works MOW fund maintenance 1991, 1992 Prime minister's office Chairperson Rehabilitation 8 Civil servants 4 Private sector Ghana Executive Bank account Director of roads and Board suspended by the Periodic maintenance decree, 1985 highways military govt in 1984 Chad Law, 1993 and Bank account Director of roads No board Routine and periodic decree, 1994 maintenance Source: de Richecour, 1994. Table 7. Review ofSelected Road Funds In Sub Saharan Afrkca: FlnacilArrangenmns Annual Size of fuel levy Who sets thefuel How is revenues An"angmensfor County Source offunds (dollars/liter) levy deposited | (million S) accountability Benin Fuel levy Premium gasoline, 0.008 Ministry of Through 1.8 Separate accoimts Weigh-bridge fees Diesel 0.007 Finance Ministiry of Intemal audit Bridge tolls Finance Independent audit Transit fees VAT and import duties Govt. allocation CAR Fuel levy Gasoline and diesel, 0.095 Ministry of Direct 3.0 Separate accounts Ferry tolls Finance deposit Intemal audit Weigh-bridge fees __I_ __ _ ____ _ __ _ ndependent audit Mozambique Fuel levy Premium gasoline, 0.18 Min. of Industry Through 6.3 Financial and Transit fees Regular, 0.12 and Price Customs technical control Bridge tolls Diesel, 0.04 Commission Independent audit (newly introduced) Rwanda Fuel levy Gasoline, 0.133 Ministry of Direct 8.0 Separate accounts ao Road toll fees Diesel, 0.112 Finance deposit Independent audit Sierra Leone Fuel levy Gasoline and diesel, 0.04 Ministry of Through 3.2 Separate accounts Finance Customs Internal control _______________________ __________ Independent audit South Africa Govt. allocation n.a. n.a. n.a. 152.0 Audit by auditor Miscellaneous general Tanzania Fuel levy Gasoline and diesel, 0.06 Min of Finance Through 21.5 Audit by Tanzania on advice of Customs Audit Corporation Central Roads Board Ghana Fuel levy Gasoline, 0.025 Ministry of Direct 24.0 Audit by auditor Bridge, ferry, and road Diesel, 0.02 Finance deposit general and tolls Independent audit Veh inspection fees Chad Fuel levy 16 percent of all fuel taxes Ministry of Through 3.1 Separate accounts Transit fees Finance tax Independent audit Road and ferry tolls authority Intemal control Axle-weight tax Source: de Richecour, 1994. (vii) Unsatisfactory audit procedures. Financial transactions are at least audited by the auditor general, thus helping to ensure that funds paid into the road fund are accounted for and that there is some check on whether they were disbursed to finance approved expenditures. It does not provide a check on whether the work was actually done and done according to specification. Such checks are particularly important when the work is done by force account. The above observations can now be used to define the key features which need to be considered when designing a new road fund. 73.3 Designing a Road Fund To avoid setting up a conventional, eannarked road fund, a special account should only be introduced in conjunction with an explicit road tariff. The road tariff should consist of license fees, a fuel levy, bridge and ferry tolls, and international transit fees. The proceeds from the road tariff should then be deposited into the road fund. To ensure that the road fund functions effectively, it should be designed in the following way: (i) Collecting the revenues. The proceeds from the road tariff should be collected and deposited directly into the road fund without having to pass through the accounts of the customs departnent or the Ministry of finance. The oil companies should deposit the fuel levy directly into the road fund, and both license fees and international transit fees should ideally be collected under contract Fuel levies in Ghana, CAR, Chad, Rwanda, and Zambia are collected by the oil companies and deposited directly into the road fimd. Chad is proposing to collect license fees under contract, and Mozambique and Zambia are proposing to collect international transit fees under contract. (ii) Road Fund management. The road fund should be managed by a strong board with clear terms of reference. When one road agency is responsible for managing the entire road network (as in Sieira Leone), the road fimd can be managed by the same board as the road network. Otherwise, there should be a separate road fund board. The boa;rd should have a broad-based membership and meet regularly. The boards in Sierra Leone, South Africa, Tanzania, and Zanbia all have potentially strong, representative boards capable of managing the funds effectively. (iii) Setting the road tariff There should be a formal mechanism for varying the road tariff and charges should be indexed to ensure that they keep pace with inflation. The board should either have the power to set the tariff (in the same way the railways set their tariffs) or at least to recommend tariff levels to the Ministry of finance for inclusion in the annual budget statement. Both Tanzania and Zambia propose to use the latter method, and the Ministry of finance in Tanzania has indicated that it would have great difficulty approving tariff increases without the support of the board. (iv) Allocation ofjfids. There should be a simple and consistent procedure for allocating fimds between the different agencies entitled to draw from the road fund. This is discussed in section 7.3.4. (v) Auditing arangemnts. Once road maintenance is fully-funded, the road fund will be handling $25 to $50 million per year, and it then becomes important to ensure that these 84 large sums of money are properly accounted for. The audit should make sure that revenues are collected efficiently (i.e., avoidance, evasion, and leakage are kept to a minimum), funds are only disbursed to finance approved expenditure programs, funds are actually spent on these programs, and the work is carried out according to specification. This generally requires an independent financial audit, a technical audit of all contract work, and a selective audit of work done through force account. The best arrangements are those involving an independent financial audit (as in Benin, CAR, Chad, and Sierra Leone) and a technical audit of work done under contract (as in Benin and CAR) and through force account (as in Benin). 7.3.4 Allocating Funds It is important to have allocation methods which are simple, transparent, and encourage consistency in standards between roads managed by different road agencies. There are three basic methods. They range from simple to complex and establish priorities in an increasingly complicated way. They include methods which use: (i) a simple allocation formula, (ii) an indirect assessment of needs, and (iii) a direct assessment of needs. Several countries, including Japan (see Chapter 3, Box 32), use a simple formula to allocate funds between different road agencies. Ghana has one of the simplest formula-based methods. When it started, it simply allocated 80 percent of the road fund resources to trunk roads and the remaining 20 percent to rural roads. When funds were first allocated for urban roads, the formula changed to: trunk roads, 52 percent, rural roads, 28 percent, and urban roads, 20 percent. The proportions have changed every year since then and, in principle, have attempted to equalize priorities at the margin. Mozarnbique developed an even more elaborate formula for allocating funds between urban, provincial, and rural roads (it is spelled out in a 1990 decree which has been temporarily superceded by a new allocation process established as part of a donor-financed National Roads Program). The method is similar to that used in Japan. The formula allocates the fuel levy as follows: (i) 80 percent of dte revenues from super gasoline go to cities, (ii) the remaining 20 percent go to cities with low revenues (as decided by the Ministry of Finance), (iii) 60 percent of the revenues from regular gasoline go to provinces, (iv) 20 percent of these revenues go to rural roads, and (v) the remaining 20 percent go to the general budget to support programs "on energy and minerals" (basically to compensate other sectors for having to pay the fuel levy). The indirect needs-assessment method bases allocations on an indirect measure of priority. It is done indirectly because there are eiiiher no reliable data to do so directly, or there are insufficient technically qualified staff to analyze the data. There are several methods available and all try to use information on population, land area, road length, agricultural output and per capita income to assess: (i) road sector needs, (ii) ability to finance these needs from local resources, and (iii) the need for matching grants. Tanzania is currently developing an indirect needs-based assessment method to help allocate the 20 percent of the road fund allocated for district roads to the 101 district councils entitled to draw on these funds (see Box 7.8). The direct needs-assessment method bases allocations on a direct assessment of priorities and can be more or less complicated, depending on the technical capacity of the individual road agencies. Tanzania uses this method to allocate routine maintenance funds between the twenty regions under the jurisdiction of the roads department. It uses standard unit rates for each routine maintenance activity by type of road surface. These rates are then 85 multiplied by the length of maintainable road in each region (the core network) to arrive at the total routine maintenance budget required by each region. South Africa also uses this method, but also applies it to periodic maintenance (see Box 7.9). It is planning to improve on the method by linking it to an inspection system which will enable standard unit rates to be replaced by figures based on actual road conditions. Box 7.8 ocMduresfor Allocating Funds to Disntict Councils: Tnzania In Tanzania, 20 percent of the road fund receipts are allocated to support maintenance and rehabilitation of district roads. Thae are cighty-four rural and scvcnteen urban districts outside Dar Cs Salaam (which currently receives its own road fund allocation), and the task of the Prime Minister's Office (PMO), which administers this part of the road fund, is to decide how to allocate this money to individual districts in an efficient and equitable manner. Previous attempts to allocate these funds, using general guidelines issued by the PMO. were not satisfactory. Key weaknesses were that: (i) three-quarters of the funds went to urban district councils (they simply prepared better road programs), (ii) about one-quarter of the rural districts received no funds at all, and (iii) there was no consistency in the amounts allocated to individual districts (some received a fraction of what they asked for, while others received all or more than they asked for). The PMO therefore decided to develop a formula-based allocation system for which reasonable data were available and which would be: (i) based on needs. (ii) simple, (iii) transparent, and (iv) fair. A major consideration was the lack of accurate data. This meant the system not only had to satisfy the above criteria, but also had to be robust It was therefore decided to tc s an index-based system in which districts would score between three and nine points on a scale, entitling them to receive three possible allocation levels from the road fund as follows (note that there are 101 districts entitled to draw from the road fund so that each, on average, would receive 1.0 percent of road fund revenues): a 8-9 points High allocation equal to 1.3 percent of road fund revenues; * 5-7 points Medium allocation :qual to 1.0 percent of road fund revenues; * 3-4 points Low allocation equal to 0.7 percent of road fund revenues. The formula which determines the allocation index contaiu.s three elements: Index = population density + road density + PMO rank. Population density is there to measure trip generation rates, while road density is primarily a separation parameter to differentiate between urban and rural districts. The PMO rank, which is a grading system used to decide budget subventions, grades districts according to their stage of developmet. It thus measures the level of comnmercial activity (i.e., it also measures trip generation). The index runs from one = least developed to seven = most developed. Points are allocated on the following basis: Population density: High more than 00 persons per sq km 3 points; Medium more than 27 and less than 100 persons per sq kn 2 points; Low less than 27 persons per sq Ian I point Road density: High more than 120 m persq km 3 points Medium more than 30 and less than 120 m persq hn 2 points Low less than 30 m per sq km I point PMO rank: High (active) rural, 6-7; urban, 5 3 points Medium (moderate) rural, 3-5; urban, 3-4 2 points Low (inactive) rural. 1-2; urban, 1-2 1 point The highest possible score is 9 (a commercially active district with high population and road densities), while the lowest is 3 (a conmercially inactive district with low popuation and road densities). 86 735 Dlsbursuig Fom The final task is to work out procedures for disbursing funds to individual road agencies. These procedures are important, since they can be used to strengthen financial discipline. There are three ways of structuring these procedures. The road fund can either: (i) disburse funds directly to the road agencies, (ii) settle bills periodically after certification that approved work has been completed satisfactorily, or (iii) disburse funds on a conditional basis and undertake technical and financial audits expost. The first method is the simplest, but it does little to strengthen financial discipline. Funds are simply disbursed directly to each road agency and the agencies then have to account for the way that they spend the funds within the usual government audit fianework. The financial audit of the road fund simply checks to ensure funds-in match funds-out. The road agencies are not accountable to the road fund, but to their parent ministry, which is expected to ensure that the money has been spent on roads and the work has been done according to specification. In Ghana, road fund revenues are split at the source and paid directly into the accounts of the Ghana Highway Authority, the Departnent of Feeder Roads, and the Departnent of Urban Roads. Each agency then has to prove to the Ministry of Roads and Highways that it has used the resources efficiently (Box 7.10 summarizes the way funds are disbursed for rural roads). The road fund thus plays no part in checking to ensure that road fund revenues produce value for money. The second method involves more oversight by the road fund. The road fund disburses finds on a regular basis, but it only does so after certification that the work has been completed according tD specification. This requires an approved work program, together with a system of technical and financial audits. It works best when the work is done under contra, but it can also be applied to force account work This procedure is used in Benin, CAR, and Mozambique. Mozambique has well-developed procedures for controlling work at the provincial level. A provincial inspectOr is appointed for each contact and he is responsible for supervising the contractor, administering the contract, and certifying payments (the contractor is a parastal constuction enterprise). The contractor submits monthly statements of work completed and, within fiftoeen days of presenation, ihe inspector has to certify the work for payment In Benin, similar aangements are used for force account work. However, such rigorous procedures are only effective when there are enough qualified inspectors to certify the work and they are mobile, experienced and hence sufficient authority to stand up to contactors. 87 Box 7.9 P'oedw'sforAlocalng Fmnds Between DfferentRoadAuhorales: South Africa In South Africa, the Depament of Transport advises the Ministry of Finance on the allocation of funds to Individual road authorities. It currently does so using a simplified procedure which assumes that the standards of all maintainable features within the individual road authorities are approximately the same. In the medium term, it plans to introduce an inspection system so that maintenance needs can be adjusted to take account of actual road conditions. In the longer term, this will be replaced by a maintenance management system enabling each road authority to base its maintenance requests on a series of nationally accepted maintenance standards based on objectively measured road conditions. For purposes of estimation, maintenance is divided into two main categories: (i) routine maintenance (patching and sealinu 'iacks, maintaining gravel shoulders, maintaining drainage, attend:ng to the road reserve, and maintaining road signs and markings); and (ii) periodic maintenance (maintenance of bridges, resealing, and minor road safety improvements). A matrix of unit maintenance rates - for each type of road, traffic condition, and activity group - is then applied to all the roads under the jurisdiction of each road authority to arrive at the total essential maintenance requirements ('ec table below). For this purpose, roads are classified as freeways, conventional four-lanc roads, surfaced two-lane roads (roads with ADT greater than 12,000 vpd, primary roads with ADT greater than 4,000 vpd, other roads with ADT greater than 4,000 vpd, and other roads with ADT less than 4,000 vpd), and gravel and dirt roads (roads with ADT greater than 1,200 vpd, roads with ADT greater thm 500 vpd and less than 1,200 vpd and secondary roads with ADT less than 500 vpd, and all other roads with ADT less than 500). In the case of local access roads, where no traffic figures are available and very low maintenance standards are applied, a flat figure of S70 per kn is used. Finally, :he above figures are adjusted to account for (i) enviromnental conditions, and (ii) restricted funding levels. Average maintenance costs are assumed to apply to all areas which are dry or have moderate rainfall. An adjustment is only made for areas with heavy rainfall. The environmental adjustment factors are applied to each item of maintenance and vary from zero (road safety improvements), through 25 percent increase (gravel shoulder maintenance) to 30 percent increase (blading gravel roads). The above calculations provide an estimate of essential maintenance levels (the level required to keep the road network in stable long-term condition) and these are then supplemented by estimates of the mJnimnun funding level (the level which will not compromise road safety, but where the infrastructure may start to deteriorate) and the danger finding level (the level where road safety is compromised and maintenance is confined to essential work). The minimum funding level is about 22 percent lower that the necessary level, while the danger level is about 32 percent lower. Mainteuance Unit Rates Per Carringeway km, 1992 (dolars) Sur-3 d roads Gavel Activity Frway 4-Lan Primry Other Other Actvity (AD7> (AD7> (ADT< ADD> ADT< 4.000) 4.000) 4.000) 500 SOO Routine maintenance: Routi mainenwnce: Patching and cack sealing 300 260 525 420 350 Blading 35 + 1.75 ADT Gral vshouldas 35 52 210 315 160 Drainage 123 88 Drainage 160 140 195 175 160 Road rve 877 420 Road resere 90 420 525 350 195 Signs and marings 456 350 Road signs ndmrlkcings 455 350 350 315 280 Sub-Totl 1,840 1,222 1,805 1,575 1.145 Sub-Total n. n.A a Periodic maintenanwc: Periodic mabuenance: Brdges 122 88 105 88 70 Bridges 26 18 Rrealng 6,030 2,495 2.495 2,495 2.495 Regpaveling 525 + 2.8 ADT Roadsatyiinprovements - 425 170 496 63 Sub-Total 6,152 3,008 2,705 3,079 2,628 Sub-Total na na. Grand Toald 8,384 4,492 4,957 4,987 4,016 Gmrnd Tota nA n.a Soarce: Planning Committee for Road Fmancing, 1992. 88 Box 7.1 Proceduresfor Dbbursbug Fundsfor Ruorl Reads In Ghana Io Ghana, the Department of Feeder Roads (DFR), which fonns part of the Ministry of Roads and Highways, has been designated as highway authority for a feeder road network of about 22,000 km. The network is administered through a fairly decentralized structure comprising ten regions, with ten districts per region. The planning cycle starts when district secretaries are requested to submit a road program to the regional planning officer. These programs are discussed at local meetings where DFR staff provide technical advice and help to prepare the schemes. Funds are allocated centrally and come from the road fund (25 percent is allocated to the DFR) and the central government budget. District requests arc balanced centrally and matched with the available funds. Routine maintenance funds are transferred to the regional engineers who manage the funds and report back to headquarters on progress in the field. District assenblies are advised of approved work programs and play an active role in ensuring that work is carried out effectively. Completed work is checked by headquarters on a selective basis. In the casc of rehabilhiation, periodic maintenance, and minor works, complcted work is certified by the regional engineer and regional planning officer before funds are released. Most civil works are done by small-scale contractors The DFR has about 700 staff of its own, comprising rorty engineers. 560 technicians, accountants. secrelaries and other administrative staff, and 100 casuals. About 10 percent are stationed at headquarters. The third method is designed to handle a decentralized system of road administration. Under this arrangement, the road fund allocates funds directly to each road agency - sometimes on a monthly basis - and then audits the use of the funds at the end of the fiscal year. The results of the audit report may then be used to help detennine subsequent road fund allocations. Tanzania uses this system to channel funds to urban and rural district councils. Funds are routed to districts through the regional development director who is expected to audit the work to ensurc that the funds are actually spent on roads and that the work is done efficiently. Zambia is currently implementing a simiiar system covering the entire road network. The intention is to subject completed works to a full financial and technical audit and to use the results to help decide on matching grants for the next budget period. The above arrangements can help to strengthen financial discipline. The second method imposes ex ante discipline on each road agency by only disbursing funds against evidence that works have been carried out satisfactorily. The only drawback is that it involves a great deal of field inspection. It is therefore only suitable for major road projects, and this usually means work on the main and regional road networks. The third method operates ex post and can be applied to any number of roads because the audit (particularly the technical audit) can be done on a sample basis. When the results of the audit are used to help decide on subsequent matching grants, the method can also be used to combine the devolution of responsibility with an assurance of quality. 89 8 ASSIGNING RESPONSIBILITY This chapter deals with the issue of assigning responsibility for managing different parts of the road network and managing road traffic. Managing road traffic includes responsibility for controlling vehicle weights and dimensions, providing road signs and signals, controlling vehicle safety, regulating motor vehicle emissions, managing on-street parking, and managing urban road congestion. This chapter discusses the basic principles which guide the way responsibilities are assigned, how they affect overall managernent of the road network, and how they affect responsibility for managing road traffic. 8.1 BAsiC PRINCIPLES The first task is to prepare a functional classification of the road network. That means measuring its length and condition and establishing the legal status of individual roads (i.e., whether they have been gazetted and assigned to a legally constituted road agency). This calls for an accurate road inventory, a condition survey (also recording pavement strength), and identification of the responsible road agency. Since some roads may not have been gazetted, the second task is to assign these roads to a legally constituted road agency or, in the case of community roads, to the responsible community group (e.g, village council). There may also be a need to reclassify selected roads. Traffic may have grown on some roads and their status will need to be upgraded (e.g, from regional to trunk roads), while traffic may have fallen on others which might need to be downgraded. Once the network has been classified, responsibility for managing different parts of the road network has to be assigned. The organizational strucure attempts to reconcile three conflicting objectives. First, it attempts to assign responsibility to agencies with sufficient financial and technical capacity to manage the roads placed under their jurisdiction. Second, most countries are attempting to decentralize managerial responsibility to reduce the fiscal burden on the central government and strengthen accountability. Managerial responsibilities are thus being increasingly assigned to provincial and district-level govemments, even though local governments rarely have the financial and technical capacity to effectively discharge these responsibilities. Finally, there are always areas where responsibilities overlap. Most countries attempt to deal with this by establishing a formal coordination mechanism. It is easiest to define responsibilities by starting at the bottom and working upwards. This means starting with community roads, working up through special pwpose roads (e.g., game department roads) and local government roads, and ending up with the national tunkc road network (see Box 8.1). The agencies responsible for managing roads include village-level govemments, special-purpose central government departnents or parastatal boards, rural district councils, urban district councils, and central government agencies. The local govermnent agencies generally operate under the overall jurisdiction of a central government agency, usually the ministry of local government There are also other options. For example, the agency with prime responsibility for managing rads may delegate this responsibility to other public or private sector agencies. In both Ghana and Sierra Leone, the road agency can delegate management of selected roads to "a local authority or other competent body." Alternatively, goveanment may establish a special-purpose agency to manage selected high-density roads (e.g., through an autonomous toll road agency) or invite the private sector to build and operate such 91 roads under a management contract (as in South Africa), or under a concession agreement (as is increasingly being done in Asia and Latin America). Box 8.1 Crerafor ossghig responsiblHJylo dffereuagov anen organuIXons The following criteria can be used to decide which functions ought to be: (i) assigned to any level of government acting as agents on behalf of beneficiaries, (ii) assigned to local govenments acting as agents on behalf of the central government, (iii) retaincd by the central govaenment, or (iv) dlegated to parasatals or special purpose agencies. Criteria for assigning responsibility to local commanities. Consideration could be given to assigning responsibilities to local communities for providing services which: (i) require community-level location-specific decision making because the ara served has relatively unique characeristics in terms of sevice requirmets; (ii) do not have significant consequences for priority objectives of the country as a whole; (iii) require local participation; and (iv) are not capital intensive, have few economies of scale, and do not require support from other agencies because of their ability to use simple technology. Criteria for assigning responsibility to local governments. Responsibilities can be assigned to local governments as principal agents acting on behalf of central govenments for services which: (i) have significant consequences for priority objectives of the country as a whole; (ii) require some location-specific adaptation to unique features of the environment within which operation and management need to take place; (iii) have somc economies of scale, compared with operation and management at either the local or national level; (iv) are relatively small-scale and labor intensive, but require significant levels of technical, logistical, andlor managerial support; (v) are more easily contracted-out to the private sector at local levels than would be the case at the national or regional level; or (vi) involve activities which local govenmeunts do not now havc the capacity to implement, but for which it is desired that they develop such capacity so as to serve as discredonary authorities in fitur Criteria for Retaing Authoriy at the Center. Critera for retaining authority at the central govermment level is the easiest to identify because it includes anydiing which is not assigned to local communities, local govrnment, or delegated to parastatals or special purpose agencies. Responsibilities of central govemments should nevertheless include those activities which define the overall enabling envirorment, such as: (i) responsibility for overall monetary policy, (ii) elimination or minimization of internal tariffs, (iii) coordination of external tariffs, and (iv) maintaining coordinated legal andjudicial systems protecting property and contracts. In addition, it is not prudent to assign discretionary authority to local govenments for activities which have high priority for a country as a whole, because it is unlikely that central govenunents wl-l sustain local discrction over the longer-term Crieria for delgatg responuibitay to parastatals or spcial purpose agencies. Criteria vary depending on the type of organization to which responsibility will be delegated. Criteria for delegation include {i) requirements are technical and capital, rather than labor intensive, and (ii) requirements do not need significant supporting actions by other government agencies. Critcria particular to one or another type of orgaization can also be specified. For parastatals (eg. autonomous highway authorities), the range of activities should focus on the delivery of a single, discrete service (or limited range of discrete services), and the activities should be of a commercial or quasi- commercial nature (but are considered public goods by virtue of tending toward natur monopolies). For ipecial purpose agencies (cg., game parks, cocoa marketing board), the range of activides should focus on delivery of a single. discrete, service (or limited range of discret services), and they should also be of a commcrcial or quasi- conmercial nature (as in the case of parastatals). Howeecr, the efricient and effective delivery of services should require location-specific decisionmaking because the area served has reatively unique characteristics which do not coincide with the regular administrative boundaries of the govemment Source: J. Silverman Similar principles apply when definirg responsibility for managing road taffic. Those issues which are primarily local in nature (e.g., managing urban road congestion), are normally assigned to urban district councils, while those dealing with use of the network as a whole are nonnally handled by the central government (e.g., regulating vehicle weights and dimensions). Again, the agency with prime responsibility may delegate some of these responsibilities to other 92 govemment agencies or to the private sector (e.g., axle-weight enforcement and vehicle inspection). 8.2 MANAGING THE ROAD NETWORK For purposes of defining managerial responsibility, the road network is usually divided into six functional classes. Working from the bottom up, they are: (i) community roads, (ii) special purpose roads, (iii) rural roads, (iv) urban roads, (v) regional roads, and (vi) major trunk routes. There are several ways of assigning responsibility for managing these roads. The preferred choice usually depends on the size of the country, the extent of motorization, and the structur of the central and local governments. The three management models which are most common include the single-tier, double-tier, and thre-tier systems. Each is oudined below. 82.1 Single-Tier Systems The simplest model is the single-tier road agency where one or more centrl government agency is responsible for managing the entire road network (see Figure 8.1). Community roads, which essentially consist of the unclassified road network, may either be left in the hands of viUage councils or placed under the jurisdiction of the central government This model suits small coqpact countries with a centralized system of government Both Sierra Leone and Ghana have chosen this model. F4pregi DiagaWraRi ig SingIe-ThirgaSfWiwiSl"care Roads Department > [ l l Tnklregional roads Urban roads Rural/district roads Community roads and tracks In Sierra Leone, which has a classified network of 11,669 km (including 360 kn of urban roads), management of the entire road network has been put under the jurisdiction of the Sierra Leone Roads Authority (SLRA), established in 1992. To ensure that the management of feeder roads keeps in touch with local communities, the Authority has a special Feeder Roads Department which deals exclusively with e 4,254 km feeder-roads network The Authority also has powers, as yet untestd, to delegate responsibility for managing selected parts of the road network to local government agencies or other competent bodies. It is expected that, as the 93 road network expands, management of some urban roads and parts of the rural road network will be delegated to local govemment agencies. Ghana also operates a single-tier system. However, being a much larger country (it is over three thnes the size of Sierra Leone), it has established three separate central government agencies, under the Ministry of Roads and Highways, to manage different parts of the road network. The entire 21,830 km feeder-roads network, that includes all roads that were formerly private or managed by the Cocoa Board, is managed by the Departnent of Feeder Roads (DFR). The 2,801 km urban road networks in Accra (partly), Tena, Sekondi/Takoradi, and Kumasi are managed by the separate Departmnent of Urban Roads (DUR). Finally, the 14,100 kn trunk road network, including urban roads outside the four main cities, is managed by the Ghana Highway Authority (GHA). It is worth noting that Ghana had a single highway authority in 1974 which was responsible for managing all roads in the country. However, in 1981 the govemment found it necessary to create the DFR to improve the management of rual roads. Experience with the DFR suggests that a strong, highly decentralized, feeder-roads agency working alongside the main road agency (they both belong to the same ministry) can be a highly effective way of managing rural roads. The DUR was likewise created in 1988 to strengthen the management of urban roads. The intention with the DUR is to eventually transfer responsibility for managing urban roads to municipal governments as soon as they have developed the capacity to manage them. Responsibility for maintenance has alraady been transferred to the Accra Metropolitan Assembly, and the same will eventually happen in the other thee major cities The GHA also operates a short section of toll road between Accra and Tema and is considering expanding the toll road network under concession agreements with the private sector. 8±2 Two-Ter Systms Two-tier systems make a clear distnction between the central and local governments (see Figure 8.2). They also tend to leave more roads in the hands of local communities (e.g., village councils). The model suits larger countries where it is not feasible to effectively manage an extensive road network through a system of centralized road agencies. Both Tanzania and Zambia have chosen this model. Tanzania is about four times larger than Ghana, while Zambia is three times larger. On this scale, single-tier systems tend to break down since a single road agency - generaly lodged in the ministry of works - becomes too remote from the actual users of the road network. Tanzania has an extensive network of unclassified roads. There are at least 28,000 kn of such roads which serve game parks, large commercial farming interests (tea, cotton and pyretirum), or local communities. Central and local govenments take no fornal responsibility for these roads, although some efforts are curently being made to find better ways of dealing with them?. However, whatever responsibility the government assumes for community roads tends to be dealt with as an etension of local government responsibilities. The 36,000 km network of classified district roads are managed by eighteen urban district councils (4,007 kn) 35 Tanzania has severa donor-financed pilot progams which are helping local communities to esblish priorifies and, in the case of roads and tracks, to get finance for improvement and new constructionL The fmance only covas costs of bought-out matrs, eaving the local communities to cauy ou the wor;s on a selfhelp basis, or pay for the labor themselves. 94 and eighty-four nrral district councils (31,989 km). These are clearly very small networks with an average length of only about 353 km. For purposes of administration, district councils report to the Prime Minister's Office, which is responsible for all matters pertaining to local governments. Finally, the 28,011 km main road network, comprising 10,300 km of trunk roads and 17,711 km of regional roads, is managed by the Department of Roads (and Aerodromes) which forns part of the Ministry of Works, Communications and Transport. There are several important intemational transit routes in Tanzania which are managed as part of the overall trunk road network. Figure 8.2 DIagrom ilustralIng Two-ner Organuoteoaa lSlruciure Ministry of Local Govemrnment Rds Dept 0 1 E .....> Trunk/regional roads Urban roads Ruraldistrict roads Community roads and tracks The organizational structure in Zambia is similar, although the road network is much smaller. The official unclassified network is a mere 5,714 km, although it is thought that the actual unclassified network may be between 20,000 kin and 30,000 krn. These roads are managed by the Game Department and by local village councils. The 19,600 km district road network is managed by eight urban districts (3,625 kIn) and fourty-eight rural district councils (15,980 km), which operate under the overall jurisdiction of the Ministry of Local Governnent (MLG). Again, these are very small road networks with an average length of only about 350 km. Finally, the 20,783 km main road network, which includes 3,119 km of international trunk roads, is managed by the Roads Department under the Ministry of Works. The trunk road network serving interregional transport needs is managed through nine Provincial Roads Department offices. International trunk roads, which are considered a particularly important part of the Zambian road network, are managed directly from Roads Departnent headquarters. There are two points worth noting about the above management arrangements. First, district council road networks are very small, and it is almost impossible for themn to establish a free-standing road agency with the technical capacity to mpanage these small road networks. As a result, most district road networks, particularly in rural areas, are badly managed and poorly maintained. The governments in both Tanzania and Zambia are therefore in the process of improving arrangements for channeling funds to district councils and strengthening the management of district roads. In the case of rural district roads in Zambia, the government is also providing technical assistance to district councils through a newly established Feeder Roads Section in the NLG. The technical assistance helps the rural districts prepare their road 95 programs and provides training and advice to support the implementation of approved programs. Second, the separation of responsibility for main roads from that for rural roads-the former being under Ministry of Works and the latter under the MLG-has not proved particularly effective. As a result, Tanzania is proposing to transfer overall responsibility for rural roads to the Ministry of Works, and Zambia is considering what to do with the MLG's Feeder Roads Section in the longer term. 8.2.3 Three-Tier Systems Three-tier systems add a third layer to the management structure, usually by adding provincial or state governments to the model (see Figure 8.3). The hierarchy thus follows from the central, to the provincial (state), to the local governments. These countries also tend to have large unclassified road networks which they leave in the hands of local communities. The model suits larger countries like Nigeria and Madagascar. Both countries are roughly the same size as Tanzania and Zambia. Figure &3 Diagram IIustrhng 7hree-Tier Organizatonal Strncture MLG Rds Dept -I> L Trunks/regional roads Provincial/state Government Urban roads Ruraldistrict roads Community roads and backs Nigeria has a clear three-tier structure. Responsibility for the rural road network, of 108,700 km, and the urban network, of 21,875 km, is assigned to over 600 local governnent authorities (effectively rural and urban government agencies). Because of the recent proliferation of local government authorities in Nigeria (in 1976 there were only 301), the average length of their road networks - about 218 kn - is even smaller than the district councils in Tanzania and Zambia. The second tier consists of state road networks. It comprises about 30,500 km of roads which are managed by 20 state governments. The average length, 1,525 km, is quite small, but is large enDugh to support a viable road maintenance organization. Finally, there are 28,600 kmn of main roads, including 1,150 km of tolled roads, that are managed by the Federal Highway Departnent, which forms part of the Federal Ministry of Works and Housing. However, although tolIs are collected over part of the federal highway network, these roads are not managed as toll roads. The toll revenue is simply treated as general tax revenue. 96 Madagascar also has a fairly clear three-tier structure, although it also has a network of about 15,000 km of unclassified roads and tracks which are left in the hands of local communities. The classified network starts at the first level, with about 13,000 km of rural access roads which are managed by I 10 local government departments. These networks, with an average length of less than 120 km, are even smaller than those in Nigeria. The second tier comprises the provincial road networks. It consists of about 11,000 km of roads which are managed by six provincial governments.36 Tie average length, 1,800 km, is larger than that in Nigeria and large enough to support a viable maintenance organization. Finally, there are 10,1 50 km of main roads (including 1,507 km of urban roads) which are managed by the Ministry of Public Works. The surprising thing about these examples is the small size of the first tier road networks. At this small scale, it is difficult to carry out maintenance efficiently. The same problems arise in three-tier systems when central government responsibilities are divided between the ministry of works and another ministry dealing with local govemnment. Where feasible, central government responsibility for roads should fall under one ministry. Finally, it is also surprising that Nigeria does not operate its tolled roads on an autonomous basis to strengthen performance and improve managerial accountability. 8.3 MANAGING ROAD TRAFFIC The concern here is with responsibility for those characteristics which interact with the road network and affect the management and financing of roads. The assignment of some responsibilities is fairly obvious, since they are widely recognized as an intimate part of the overall road management function. Road signs and signals fall into this category (they are, in any case, usually specified under international agreements), as do road design standards. These are clearly a central govemment responsibility and will usually be delegated to the agency responsible for managing the main road network (in Zambia, they have been delegated to the National Roads Board). The agency with prime responsibility may nevertheless delegate some of these responsibilities to lower level road agencies (e.g., for road signing in urban areas). At the other extreme, it is clear that control of parking, particularly on-stmeet parking, and management of urban road congestion should be assigned to the agencies responsible for managing the urban road networks. The two issues are closely linked, tied to the issue of urban road safety (particularly pedestrian-vehicle conflict), and are essentially local in nature. They are therefore generally dealt with most effectively at the local government level in conjunction with local level policing. Trffic regulations, particularly those dealing with the routing of heavy vehicles in cities, are also largely a local matter. They either form part of local level traffic management or, in the case of heavy vehicles, are intimately related to control of vehicle impacts and construction of local relief roads and urban by-pass schemes. Although the broad framework for these regulations should be set at the centml government level, their detailed application needs to be delegated to the agencies responsible for managing the urban road networks. 36 New legisladon is under consideration which provides for the caation of twenty-two to thirty-two new regional organizations to replace the six provincial authrities. 97 More problematic are the questions of vehicle weights and dimensions, vehicle safety, vehicle emissions, and the environmental impacts associated with new road schemes. Overweight vehicles damage the road pavement and increase road maintenance costs, while pernissible vehicle dimensions affect road design standards and hence construction and maintenance costs. All road agencies therefore have a vested interest in seeing that these regulations are well designed and consistently enforced. Axle-weight regulations are the most important, but the most difficult to enforce. The regulations are promulgated by the central government, following consultation with concemed road agencies, while enforcement is generally left to the police. Reviews of past enforcement efforts have pointed to three areas of weakness: lack of clearly assigned responsibilities, weak enforcement agencies, and resistance by the road transport industry. Part of the solution thus lies in assigning responsibility more clearly to the agency managing the main road network. The key nevertheless lies in winning the support of the road transport industry. Without their support, most initiatives will fail. That is why the recent initiative in Zambia involving the appointment of voluntary road traffic commissioners to supervise weigh-bridges warrants serious consideration (Chapter 6, Box 6.2). Tanzania is also considering using the private sector to help enforce axle-weight regulations. Regulations governing vehicle safety and vehicle emissions are usually administered in conjunction with the issuing of vehicle licenses. In some countries this is done by central government (e.g., Tanzania), while in others it is handled by local governments (e.g, Zambia and Mozambique). Administration is generally done by the transport ministry (licensing branch) or by the local tax office. Since about half of the vehicles in Africa are unlicensed and uninsured, vehicle safety and emissions regulations, where they exist, are not effective. Road agencies have a clear interest in vehicle safety since it affects the usage of the road network and has an important impact on road safety, for which most road agencies also have some responsibility. It may therefore be worthwhile to assign responsibility for regulating vehicle safety to the agencies responsible for managing the road network and, since this involves vehicle inspection, to also assign them responsibility for administering vehicle emissions regulations. However, it is only worth doing this if the agencies have the skills and resources to carry out the inspections properly. Finally, there is the important question of assigning responsibility for dealing with the environmental impact; associated with new road schemes.' Such schemes can have major environmental impacts. They may inadvertently result in damage to ecolcgically sensitive areas, destroy property, dicpiace people, or disrupt established settlement patterns, particularly in urban areas. The road agency should, at least in principle, be assigned the responsibility of ensuring that adverse environmental impacts are minimized and that remaining impacts are considered acceptable. The usual way of doing this is by ensuring that major road schemes are subjected to some form of environmental assessment process involving public consultation.m The responsibilities assigned to a road agency should thus include the need to undertake 37 Responsibility for the cnvironmental impacts associated with new road schemes is not the same as responsibility for dealing with the environmental impacts associated with road traffic. Road agencies have little control over the latter impacts, which are mainly affected by the tax structure (which influences the size of vehicles, their age, the type of fuel uscd, etc.), vehicie emission regulations and inspection procedures, and the quality of imported and locally refined fuel. These responsibilities are normally assigned to the ministries of environment. energy. and finance. 38 A study of the circumstances which might make it desirable to discuss the impacts of rnzjor road schemes in the context of a public inquiry is curendy being carried out in Tanoania. 98 environmental impact studies for major road schemes and to use them as the basis for undertaking public consultations. 8.4 THE BASIC ORGANIATIONAL MODEL The above discussion leads to the following suggestions for strengtiening organizational arrangements: (i) It is best to leave community roads under the jurisdiction of village councils and other local government bodies. (ii) Since local communities usually lack the financial and technical capacity to manage their road networks, a higher level road agency (perhaps at the regional or provincial level) should be contracted to provide them with technical advice and act as a channel for transferring fimancial resources. Local communities should be encouraged to undertake most work on a self-help basis, and outside fmancial support should be confined to meeting the costs of bought-out materials. (iii) Runl roads have special characteristics and require special attention. A single-tier systems requires a separate Feeder Roads Departnent. In two and three-tier systems management should be handed over to local government agencies at the provincial or district levels, while keeping management coordinated at the cental government level by having a single ministry responsible for roads. Central government also needs to provide funds and technical assistance. (iv) Since most rumal district councils are small and have limited technical and financial capacity, they should be encouraged to manage their road networks under contract or by combining with other rural district councils to form a larger operating unit with sufficient scale economies to make sound manaent feasible (perhaps combining them on a provincial basis). A formal arrangement should also be put in place to ensure that rural district councils have access to technical support services. (v) Roads in villages can be managed by the main road agency, while those in larger urban areas should eventually be managed by the municipality or town council. Some support may be required in the interim to help them develop the required managerial capacity. This could come from the main road agency or a special urban roads department at the central government leve. (vi) Intemational transit routes are important in some countries and often deserve special treatment. They may either be managed by a dedicated section of the main road agency or, where traffic volumes are high enough, could even be operated as toll roads. (vii) There is little point in having toll roads unless the revenues are spent on roads and the arrangement is used to improve performance and strengthen accountability. Such roads should ideally be operated on an autonomous basis, either by the main road agency, muder a management contract, or under a private sector concession agreement. 99 (viii) The main road agency should be assigned all regulatory responsibilities affecting the antire road network (eg., design standards and signs and signals), even though it may delegato some of these to other road agencies or other competent bodies. (ix) Urban road agencies should be assigned those responsibilities which have significant urban impacts (e.g., control of parking and congestion and routing of heavy vehicles). (x) The main road agency should be assigned responsibility for enforcing axle-weight regulations. This should ideally be done in conjunction (and with the cooperation of) the road tramspoft indusby. The main road agency could also carry out vehicle safety and vehicle emission inspections, provided they have the skills and resources to do them properly. (xi) All road agencies should be made rmsponsible for examining the potential enviromental inpacts of new road schemes and should be required to satsfy the public that adverse impacts have been minimized and that remaining impacts are acceptable. 100 9 INTRODUCING SOUND BUSINESS PRACTICES Public sector agencies tend to function most efficiently when they are faced with some form of competition or a competition surrogate. Competition creates market discipline, which is the primary factor that motivates managers to cut waste, improve performance, and allocate resources efficiently. Previous chapters have suggested ways of creating such discipline by introducing an explicit road tariff (to encourage users to demand value for money), linking revenues and expenditures (to create a hard budget constraint), and involving users in management of roads. Another option is to unbundle services and contract them out. These strategies strengthen market discipline and provide managers with the incentive to operate efficiently. The corollary is that managers need to work within an organization which can respond to market discipline. They need a clear and unambiguous corporate mission, competent staff, a sound management structure, appropriate management systems, and sufficient autonomy to enable them to run the agency efficiently. These topics are examined below. 9.1 DEFRNING THE MISSION The first task is to state clearly the role of the road agency: what is it supposed to be doing? It is surprising how few road agencies have any vision or mission statement to guide their operations. The Ghana Highway Authority has one of the clearest: "The vision of the Ghana Highway Authority is to ensure that Ghana has a smooth, economic, efficient. safe, and reliable trunk road network linking national, regional, and district capitals and other major towns in Ghana to themselves and to major towns in neighboring countries. The network also forms the main routes for internal distribution, defense, export, and import in harmony with other modes of transportation." From this vision statement they have derived a simple mission statement: 'To provide a safe and reliable trunk road network that should facilitate socioeconomic development in the country." Malawi has a similar mission statement: "The main objective of the Ministry of Works is to have a viable network of roads to enable the transfer of goods both within and outside the country." However, most governments currently supplement these vision statements with a statement of national policy regarding civil service reform - and the associated policy of reducing the size of the civil service - development of the local construction industry, use of local consultants, and involvement of private sector financing under concession agreements. An increasing number of governments also have policies to encourage the use of labor-based work methods, particularly in rural areas. These policies, though not necessarily included in the road agency's mission statement, still have to be taken into account because they affect the size of the road agency, number of regular staff required, and type of skills they need. Although it varies significantly between countries, road agencies are being increasingly urged, as part of overall government policy, to: * Do less construction and maintenance work in-house and more under contract with the private sector, Hand over government plant and equipment to autonomous plant pools or private sector agencies and hire it back only when requird, 101 * Encourage private sector interests to construct and operate toll roads under concession agreements or to take over, rehabilitate, and operate existing roads on a similar basis, * Do more work using labor-based work methods, and * Reduce staff numbers as part of civil service reform. There are some caveats. First, you cannot hand over work to the private sector unless private contractors already exist Most countries therefore combine contracting out with initiatives to develop the local construction and consulting industry (see Box 9.1). Second, you cannot prepare bid documents, award contracts, and supervise implementation of civil works with staff accustomed only to force account work. Nor can you easily manage all contractual work through local consultants. It may be feasible at the local level (i.e., for urban and rural district roads), where a consortium of consultants and contractors could manage the road network on an agency basis, but not at the national level. Some staff in the main road agency must know something about contracting arrangements, contract law, and arbitration procedures, even if only to be able to advise local autthorities about them. Third, labor-based work methods will only work when road agency staff are familiar with them, govemment procurement and payment methods have been adapted to favor small- scale, labor-based contractors, and small-scale conators have access to training in labor-based work methods. Finally, there are limits to how far one can go with contracting out, particularly at the national level. The main'road agency is often the only source of training in labor-based work methods and, since staff rarely join the road agency from senior positions in the construction industry, may provide the only source of training for road agency staff in road construction methods. In Botswana, Ghana, and Zimbabwe, in-house construction units are seen as important training grounds for small-scale contractors and in-house staff. These caveats have to be taken into account when translating the mission stetement into country-specific actions on the ground. In keeping with the above mission statements and overall government policies, most road agencies are evolving into whit-collar agencies which concentrae on planning, training, contract supervision, and the monitoring and control of works. This generally means they end up 'vith a mission where they: * Do most design work using consultants, * Do all periodic maintenance under contract, * Do most routine maintenance under conta, * Do all new construction and road improvements under contract The larger road agencies may also operate one or two mobile maintenance units (one for emergency works and the other for training), an in-house construction unit for training purposes, and a labor-based training program for small-scale contractors linked to on-site programs of road constuction, rehabilitation, and maintenance. 102 Box 9.1 Devdoplng Domestc Contrectorsfor Road MaIlntenance A number of initiatives have rcently been taken to devdop the capacity of local contractors. They havc concentratd on: (i) providing preparatoty training, (ii) providing hands-on training, (iii) providing access to plant and equipment, (iv) assisting road agencies to acquire the skills to supervise contracts, and (v) simplifying govemment procurement procedures Preparatory raining. Seminars have been organized, or are under preparation, in Burundi, Ghana, Tanzania, and Zaire to teach contactors how to manage small civil works contracts The most comprehensive seminar progamm for contractor is in Tanzania. It offers training for administrative managers, engineers, site superintendents, and technicians. Thc owners and managers of the firms have also asked to participate in the training so that they can understand what is being taught to their staff. Hands-On training. Potential contactors have been permitted to work on small projects to gain pracdcal contract experience. In Ghana, sections involving S km of road rehabilitation have been used as training works for implencting labor-based work methods (contract value around SSO,000). Similarly, in Guinea Bissau, the International Labor Organization (ILO) has organized 3 km training sections for labor-based rehabilitation of feeder roads. In Uganda, contractors have been trained on 10 to IS km road sections under contracts amounting to about S100,000. In Kenya, contractors have been progressively trained to bid for road rehabilitation works. hc first time unit prices were fixed by the road agency. The second time contractors were allowed to bid on the same mtes but with a plus or minus factor. Now they have to compute their unit prices themnselves. Current contracts amount to about SSWO,OO0 each. In Tanzania, training works for equipment-based mad rhabilitation are 30 to 70 krn in length and are estimated at SI to $2 million per contract. Availablity ofplaw and equqrnzwn These inidatives have focused on helping contracs get bettcr access to plant and equipment A plant pool has becn in operation in Ghana for years and has helped to develop domesdc road contractor In Uganda, rented equipment belonging to the Ministry of Works was mnade available to contractors, but it was not sufficicnt. Contractors therefore decided to buy addidonal machinery and share it from a pooL Renting equipmcnt to contractors is being considered by the ministries of works in Bunmdi. Guinea, Tanzaia, and Zairm The Integmted Roads Project in Tanzania is providing contractors with access to forcign currency to cnable them to buy equipment and spares. Contraci supervision. Most mad agencics have a limited capacity to supemse conacts and several initiatives arc under way to strengthen this capacity. Burundi, Guinca, Guinea-Bissau, Tanzania, and Zaire are all building or strengthening control units in the mad agency in order to adequately supervise contrcted road works. In each case, foreign expertise is involved in preparing sample documents for prcpaation, procrement, and supervision, staffing the unit during the initial years, and training civil servants in this new activity. SimpI5fyinprocurezent procedures. Simplification of promument procedures is an essential component of efforts to do more work under contact and devclop the local constucdon industy. In Ghana, a comprchensive review of conditions of contracts for ICB and LCB has becn carried out under the Road Rehibilitation and Maintcnance ProjecL Proposals for changes have been prepared and accepted. New conditions of contracts are being implemented. If implemented earlier. some specific clauses, such as provision for compensation for delayed payments, might havc prevented some contractors from going bankrupt, although there is no subsitute for prompt payment In Chad, Guinea Bissau, and Tanzania, governments have decided to reshape and simplify the regulations for procumment and contract administration to make them easier for contractos Source: J-M LantUu Finally, the mission statement has to be operationalized by translating it into a specific set of objectives (e.g., pot-holes on arferial roads will nornally be repaired within one week of being reported) and service standards, which define the thresholds that trigger action on these objectives (e.g., a pothole is defined as localized severe raveling extending to greater tha the fidi depth of the srfacing). 103 9.2 HuMAN RESOURCE REQUIREMENTS Once the road agency has defined its mission, it can turn its attention to the number and type of staff needed to discharge this mission. The above mission could clearly be handled by fewer staff, but they need different qualifications. The regular staff could be quite small and could be supported by lengthmnan subcontractors for most routine maintenance work, small-scale, labor-based contractors for the rehabilitation and periodic maintenance of gravel roads, and regular contractors for the patching, periodic maintenance, and rehabilitation of paved roads (see Table 9.1). For a road network of about 20,000 kin (5,000 km paved), it would require about 800 to 1,000 regular staff (fourty to fifty engineers, about 100 technicians, administrators and foremen, 500 to 600 supervisors, and about 100 laborers). It would also require about 5,000 to 6,000 lengthman subcontractors and, with road maintenance fully-funded, more than 2,000 additional staff would be involved in contract rehabilitation and maintenance work. It is significant that the Department of Feeder Roads in Ghana, which used to manage a 22,000 km road network with 2,000 staff, now does so with 700, including about fourty engineers. By these standards, virtually every road agency included in Table 3.2 is over-staffed. Tabkl 9.1 F-bndNwnberofSlaffRequredtoOperate aMedim-SkidRoadAgency Technicall Managerial adiniisraW Ch&v-andZ Labored Frmcdona professional foreman supervisor lgthn Management 5 10 Other HQ staff 15 25 - Regional offices 20 50 500 Road management system 3 10 10 Mobile maienance unitb 2 6 12 120 Labor-based taining unitc 2 5 25 - Total 47 106 547 120 a. 20,000 km road network managed through ten regional offices b. Mainly for emergency maintance and training in-house staff. c. Provides taining in labor-based construction, rhabilhation, and maintenance. The above reduction in size needs to be accompanied by a significant improvement in the terms and conditions of employment, particularly for older staff with experience and for the chief executive officer (CEO) and directors. In general, as Chapter three points out, currnt salaries for engineers and technicians now need to be increased by about two and a half times to make thern competitive with the private sector. In some countries - notably Rwanda, Uganda, Tanzania and Zambia -they need to be increased by more, as do the salaries of the CEO and directors. Allowances also need to be revised. There was a time when road agency staff enjoyed all sorts of perks which made up for lower salaries. Inflation has eroded these fringe benefits and private sector employers now offer better bonuses, housing allowances and car allowances. Salaries for laborers tend to be less out of line with the private sector, but also require adjustment. 104 At first glance, the above downsizing will create a large number of redundancies. However, restructuring and downsizing can nonnally be handled in the following way: (i) a large number of existing laborers can be converted into lengthman subcontractors, (ii) with road maintenance fully-funded, road contractors would start recruiting new staff and this would create new jobs for road agency staff, (iii) daylighting by technical staff is now so widespread that many would join their other employers on a full-time basis, and (iv) the remaining displaced staff would have to be offered a redundancy package. The Ghana and Sierra Leone Highway Authorities managed to reduce their staff from 8,400 to 4,700 and from 10,000 to 1,400, respectively through voluntary retirement and by converting staff into petty contractors. The road agency in Senegal has dramatically reduced its staff by offering redundancy packages (up to two years salary). Other countries, notably the UK, managed to reduce the number of engineers and technicians by negotiating their transfer to private sector consultants in conjunction with the transfer of agreed design and supervision work. Downsizing is not only necessary, its feasible. A smaller road agency must also address its skill-mix requirements. The agency will be smaller, more commercial, and more of a planner, facilitator, and paymaster. It will thus need more managers, more staff with financial backgrounds, and more engineers with experience in contract management, contract law, and arbitration procedures. With an increased focus on hbor-based work methods, it will also need staff who know when such techniques are suitable and must be in a position to provide training to small-scale contractors doing labor-based work. These changes require new personnel policies and revised training programs. They also call for a new look at technical assistance programs. With a clear mission and competent, well-paid staff, there should be no need for long-term expatriates in line management positions. Technical assistance can instead be refocused to meet clearly identified skill needs. 93 MANAGEMET STRUcTuRE Chapter 3 pointed out that most road agencies have management structures which date back to the time when the Ministry of Public Works spent about as much time on roads as it did on maintenance of public buildings and procurement of govenmment vehicles. That is no longer the case. Roads departments now typically account for over 70 percent of the ministry's total expenditures and are responsible for managing more assets than either the railways or national airline. The head of the roads department is nevertheless appoited at a level which corresponds to that of chief civil engineer in the railways and chief mechanical engineer in the airline. Furthermore, the organization chart of a typical central government road agency exhibits four structural weaknesses: (i) it is missing a layer of management, (ii) several important fimctions do not report to the director of roads and are shared with other departments (e.g., personnel, finance, and trining), (iii) the director of roads rarely reports directly to the permanent secretary (in contrast to the railways and airline which report directly to the PS of works or ransport), and (iv) the strucure is usually overly centalized. Some road agencies have already been restructured to create a more commercially oriented management strucure along the lines illustrated in Figure 9.1. The highway authorities in both Ghana and Siera Leone have established the post of CEO and created a new layer of line managers appointed at roughly the same level as the former director of roads. The GHA has 105 three line managers (deputy CEOs) responsible for administration, development, and maintenance, while SLRA has a deputy CEO and five directors responsible for equipment and supplies, development, administration, maintenance, and feeder roads. The CEO and his deputy in Sierra Leone are appointed by the president on the advice of the minister of works, while line managers are appointed by the board. Tanzania is proposing a similar form of restructuring involving the creation of a separate department of Public Roads (instead of the current Department of Roads and Aerodromes), headed by a commissioner and four directors responsible for development, road maintenance, feeder roads, and administration. The growing importance of financing arrangements, combined with a move toward commercial accounting systems, suggests one line manager should be responsible for accounting and finance. The above restructuring has also addressed the issues of shared services and confused reporting arrangements. Nonroad activities have been removed (e.g., responsibility for aerodromes in Tanzania), and the road agencies have been given their own support services (e.g., administration and accounting). Reporting arrangements have also been simplified and made more direct Regional engineers report directly to the CEO (in Tanzania they reported to the PS, and Madagascar has a similar arrangement), and the CEO reports through the board to the PS. Similar reforrns have also taken place with regard to urban and rual roads. In Ghana, the departments responsible for urban roads and feeder roads report directly to the Ministry of Roads and Highways in the same way as the GHA. Likewise in Zambia, where rural roads are dealt with through a feeder roads section in the Ministry of Local Govemment, the departmental head now reports directly to the PS. Fgure9. PropsedManagemSetSuctreforaLargeRoadAgency Conract plan Roads bord Secretariat | ief cmiv lnaudit Director of finance Director fDictor of Drecto Director of oni mainenance administration Accounts Planning Regional offices Road safety Public relations Cost accounts Survey and design Mechanical servicQs Occupational safety Personnel training Road fund Contvacts Stores Environrent Legal services Information systems 106 The GHA has taken the process of restructuring one stage further. It noticed that there were a large number of job grades and at grades werm not related to the size of the division or needs of the task. There was also too much layering. They therefore prepared new job descriptions based on current functional needs, designed a new organizational structure for each division based on the new job descriptions, reduced layering by grouping staff into three broad categories (senior management, middle management, and operating staff, introduced a new reward and career system, and reviewed and revised the disciplinary code. Other road agencies are beginning to do the same. The regional structure of the road agency is also important, particularly in large countries where centralized agencies remain too remote from their constituents. Several countries are attempting to address this issue by decentralizing operations to regional offices. Under such arrangements, most planning and execution is done at the regional level, while the headquarters staff coordinate regional programs, operate the management information system and provide other central support services. In the case of main roads, the headquartrs staff may also deal with trunk roads (Tanzania), or international transit corridors (Zambia). Up to 80 percent of the staff may thus be placed in regional offices. In Ghana, 90 percent of the feeder roads staff work in the regions. Tanzania has also appointed regional roads boards to decentralize the management of roads to the local level and improve coordination between trunk, regional, and district road programs. 9.4 MANAGEMENT INFORMATION SYSTEMS Managnement cannot plan, deploy, and control resources without effective management information. The road agency's parent ministry and constituents licewise need transparent information to judge whether the road agency is using resouces efficiently. The management information system consists of a set of established and documented procedures which can be used to generate and evaluate altemative ways of operating, maintaining, improving, and exending the road network. It will generally show the condition of the road network, its utilization (traffic volumes and loading), and the impact of potential futre management interventions. This infonnation can then be used to generate information on the physical and financial performance of the road network (see Box 9.2). The management information systen provides a fiamework for making decisions on a number of issues, usually handled by diffrent divisions within the road agency. They include decisions on: Routine and periodic maintenance of gravel mads, paved roads, and bridges, Rehabilitation of pavemnents and bridges, * Upgrading gravel roads to paved standard, Improving the geometric chactics, or capacity, of roads, * Setting charges for the use of roads and bridges. Each of the above activities are interdependent with regard to the road agencys budget constainL Resources have to be allocated between competing programs to optimize expenditures, and user charges must be set to generate the resources required to finance them. 107 The management information system should thus provide the basis for allocating resources in a manner which achieves best overall road conditions. The management information system will usually comprise data collection, storage and analysis, estimated traffic, predicted future road conditions, and the impact of alternative management strategies. The system need not-and should not-be too complicated. Africa is littered with the relics of failed management infonnation systems which were poorly designed and overly complicated (see Box 9.3). The key guiding principle is that the system should be affordable, suit the decisionmaking needs of the road agency, be compatible with the scarce manpower resources needed to operate it, and be capable of being incrementally upgraded when resources pernit. Most road agencies in Africa will start with a centralized, manual system with four modules: (i) traffic information (classified counts with some axle-weight data), (ii) a survey database (periodic, visual road condition survey data), (iii) road planning (upgrading and new roads), and (iv) maintenance management (using engineering judgment and standard unit costs). This roughly corresponds to the current system used by the Ministry of Works in Tanzania. It is about as simple as you can get, although some road agencies, as presently staffed, will not even be able to manage this level of sophistication. For a 20,000 km road network (5,000 km paved), the system would require about two to three traffic count teams, two road inspection teams, and at least one engineer and one technician to operate the system. Traffic counting and inspection could be done by consultants. The engineer and technician should ideally be in-house staff. The next level of sophistication is probably to computerize the systemn and make it accessible to regional engineers. The system in Zimbabwe has currently reached this stage. The survey database might then be extended (to include surface roughness and pavement strength), and the pavement nmanagement system might be strengthened by basing it on an analytical model, like HDM III. However, this takes more resources, requires continuity among the staff operating the system, and should only be attempted when there are sufficient trained staff and other resources to operate the upgraded system. Further sophistication can then follow, perhaps along the lines being pursued in Botswana, although that level of sophistication lies well in the future for most African countries (see Box 9.4). 108 RexI2 y Indwafor Memrag ReedAeIwy Peifemce (t) Fiance: * Ratio of actual to required maintennce expenditures * Ratio of new investment to total road expenditures * Routine and periodic maintennce expenditures per kn (2) Condition of network: * Condition of pament percentage length in good, fair, poor condition by road type and clss in teram of specific physical measures, such as roughness or condition ratings, or in terms of visual assessment, km backlog of rehabilitation and resurfacing. * Conditon of bridges number of bridges in terms of structurlly nd functionally sound, structurally deficiern, or fnctaonally deficient (3) Utilization and management of network: . Tmaffc flow kn of road by range of avaage annual daily traffic according to fnctonal cim nd road width * Vehicle sie and weight single and tandem axle load limits average gross vehicle weight per heavy vehicle average equivalent standard axle per heavy vehicle * Safety total accidents, fatalities accidents or fatalities per road krn, per vehicle, per vehide-km (4) Administation and productvity: * Stmng by fimction (e.g, adn nistration, planning, design, mainteanmc or consIon)s age profile, number of expatriates, and vacancies * Annual sabry ranp highest versus lowest paid * Labor intesity staffing ratios: ratio of administive to technical stadX ratio of skilled to unsilled workes, ratio of permanent to temporary staff total staff and engincers per lane-km (for all activities and sq tely for mainance) * Equipment availability and utilizaion of equipment (by major categoies and types of equipment msd hours or mileage worked) age (by major types of equipment) * Averge consrction cost per kb (two-lane road) by terain (flat, hilly, mountainous). * Percent mainteonce by contract routine periodic Sac: W.D.OQ Paersom 109 Bax 93 Problems ImplemendAg Road Monagemen t System A recent study has reviewed projects dealing with the development of Toad management systems (RMSs) to Identify why they encountered problems during Implemnentation and what might be done to overcome these problems. The following factors were identified as important contributory factors: Design problems * Inappropriate and unrealistic terms of reference. * Consultants lacking sufficient qualified staff. Client attitudes * Lack of commitment, often because the RMS had been imposed by donors as a loan condition. * Expectation of high-tech solutions when simple common sense solutions were more appropriate. * Greater than expected resistance to change. Cultural problems * Problems of introducing Western manageaent practices, including incentives, into cultures that were garontocracies where interetthnic problems existed, or where nepotism and favoritism were prevantL * Traditional behavior where excuses had to be found to avoid blaming individuals. Economic and financial problems * Weak local economies and foreign exchange shortages preventing the purchase of inputs needed to support the system. * Local funds sufficient to pay for little more than staff salaries, with the result that little road maintenance could actually be carried out Staff problems * Shortage of experienced local staff. * Operational requirements prevented local staff from being released for training. * Over-ambitious training programs with poorly prepared instuctors. * Insufficient follow-up training and updating. Hardware and software problems * Focus on procurement of new equipment, rather hn systems needed for maintenance and repair. * Deficient computer facilities and unsuitable hardware * Inadequate data * Systems too complicated to be sustainable with local staff and other resources In all the cases reviewed, the RMS was judged unsuccessful. All systems ecased to function ffctively within a short time of the consulltants departing. Failure was not due to any inherent faults in the RMS, but becausc institutional and managerial shortcomings in the road agency werc not recognized and corrected before implementation. The study concluded that, for successful operation, systems need: (i) agreement on objectives and methods of imnplementation. (ii) qualified staff who are weU mofivated and properly suervsed, and (iii) an integ taining and upgrading program. More specifically, the provision of an RMS needs to be considered within the gencral context of the road agency's institutional sructur It was thus recommended that the following factors be borxe in mind when specifying and selecting an RMS: * Obtain genuine government commitment before proceding. * Identify system users and the outputs they requirc to support informed management decisions. * Identify the policy farmework and the road agency's technical and institutional capacity to operate the RMS; if the appraisal indicates that the institutional capacity does not exist, proceed no further. * If the appraisal indicates that an RMS is needed and can be supported, agree on objectives for the systan, design it (based on an analysis of costs and benefits of each component), and prepare a procurement plan. * Identify data and models required to produce thcse outputs. * Idenaiti appropriate softwar * Identify hardware and operating systens needed to support the RMS. It typically takes five to ten years to institutionalize management systems in industrialized countries. It takes at least as long in a developing country. Sorce: R. Robinson. 110 Box 9.4 7Te Road Management Syutem (RMS) In Botwana The RMS currently under development in Botswana consists of a central database linked to subsystems covering data collection, planning. and managenienL The role of each subsystem is summanized below. (I) Central databas (CDB) contains validated summary data genrated by the other subsystems. To allow rapid export and import of data to and from the other subsystems. it uses a Fourth Generation Language database managemcnt system. The other subsystems use the same database system. (2) Pavement management subsystem (PMS) determines the type, and optimum timing and level of maintenance required. given prevailing road conditions. It provides infornation on: (i) optimum maintenance requirements. (ii) the short and long- term consequences of restricted maintenance funding, (iii) pavements with the highest priority when maintenance funds are limited, (iv) the best maintenance strategy for each road link, and (v) the impact of past Tnaintenance strategies on overall road conditions. * At the network level, the PMS identifies and ranks pavements for improvement, prepares network level budgets, produces long-range budget forecasts, assesses network level pavement conditions, and forecasts future pavemnent conditions. * At the project level, the PMS assesses causes of road deterioration, specifies aternative pavement interventions, assesses the benefits of altemative pavement interventions using life cycle costing, and selects and displays preferred solutions. The support system for the PMS includes data collection, data analysis (using HDM 111), optimization (using appropriate criteria), and preparation of an implementation program. (3) Maintenance management subsystem (MMS) is not yet operational. Its aim will be to specify. for the selected maintenance strategy: (i) performance standard.s describing the procedures to be followed, resources required (in terms of peopie, equipment, and materials), and rate of production to be achieved, (ii) budget requirements (in terms of people, equipment, and materials) to accomplish the planned maintenance program, (iii) schediae of activities within the program to ensure resources are used efficiently, and (iv) a management information reporting system to pmvide the basis for regular management reports. The MMS will eventually include a road inventory, inspection rcports assessment of maintenance needs, costs of proposed works, priorities, implementadion plans, and arrangenents for monitoring results. It will help to improve the planning and scheduling of work, establish standards (optirnum standards being set by the PMS), guide management decisions (optimum timning also being determined by the PMS), and support preparation of accurate budgets. (4) Bridge mnanagemeat subsystem (BMS) is not yet operatonal. Its aim will be to provide a rational basis for managing bridge structurs. It will eventually cover (i) the allocation of funds for constuction, replacement, rehabilitation, and maintenance, (ii) the identification of bridges requiring remedial action. (iii) the selection and prioritization of selected bridge works, (iv) the identification and prioritization of urgent remedial works, (v) the identification of the best bridge maintenance strategies, and (vi) the monitoring and evaluation of bridge conditions on an ongoing basis. (5) Taffic subsystenm (S) provides a variety of statistics on the road network, including traffic volume and loading by vehicle type by road link, total distance traveled, and growth rate by vehicle type by road link. (6) Cost accounting subsystem (CASE) is not yet operational. It aims to provide accwrate cost accounting data for purposes of: (i) establishing budgets and standard costs for road maintenance operations. (ii) tracking and accounting for actual costs of operations by activity and cost center, and (iii) monitoring performance and assessing productivity by cost center. (7) Geographic information subsystem (GIS) allows visual presentation and production of maps of the road network. The subsystemn can be configured to display and plot data for any link in the road network, such as road classification. average road condition, and traffic flows. Resource requirements are: (i) two to three full-time traffic census teams, (ii) two road inspection teams (a technician and surveyor). and (iii) two engineess. a systems analyst, and a technician to operate the RMS. Soure: M.I.Pinard. 111 9.5 FINANCIAL ACCOUNTING SYSTEMS The financial accounting system should be designed to complement and support the management information system. It should present a clear picture of the road agency's overall financial health and be capable of producing the financial data needed to plan expenditures, compare alternative strategies, monitor implementation, and account for the way funds are used. Standard government accounts, which focus almost exclusively on cash expenditures, cannot do this. A number of road agencies, notably in New Zealand and parts of Australia, are therefore restructuring their accounting systems to provide a better basis for informed management decisions. They are generally moving toward regular commercial accounting systems, including a standard income statement, balance sheet and sources and application of finds statement. Many of the benefits of commercial accounting can be achieved with simpler reforms. The most important involve: (i) preparing an income statement which matches revenues and expenditures, (ii) accounting for all the assets owned directly by the road agency (i.e., excluding the capital invested in roads), (iii) recording, in a simple and transparent fashion, the financial condition of the road network, and (iv) producing better information on costs to support the above road management systems. The SLRA produces some of the best road agency accounts in the world. To start with, they simply produced an income statement and a statement of affairs. The income statement recorded their income (income from the Road Fund, proceeds from sale of contract documents, and govemnment grants), together with the expenditures associated with the operation and maintenance of the road network. The expenditures included all expenditures on roads and excluded expenditures associated with other responsibilities handled by the Ministry of Works. The statement of affairs was a modest document which simply listed the fixed assets owned by the SLRA (vehicles, plant and equipment, and office equipment), money owed to the Authority (debtors), cash in hand, and money owed by the Authority (creditors). These reforms require little more than better book keeping arrangements. The next step involved turning the statement of affairs into a regular balance sheet and adding a cashflow statement to the financial accounts. The cash flow statement is a simplified sources and application of funds statement. Their accounts for the year ending 30 June 1993 are illustraed in Table 9.2. These financial reforms can have a major impact on managerial behavior. They provide managers with a better record of what is happening to the business; motivate them to make an effort to locate all their assets39, value them, and record their value; encourage an asset- management culture; and take a first step toward fully costing the overhead and administrative costs of operating and maintaining the road network. Financial reform is thus intimately related to managerial accountability. Without proper accounts, managers cannot be fully accountable. The next reform focuses on creating a financial statenent which accounts for the capital invested in roads, the imnpact on this of new investment, and shortfalls in regular road maintenance. It has two parts. The first provides an estimate of the total book value of the road network at the end of the fiscal year. It can either be estimated in great detail, as was done in 39 When the Ministy of Works in New Zealand was commercialized and required to prepare regular commercial accounts. it was astonished to leam how much land and other asses it owned and how much these assets were wordi. 112 Tabe 9.2 Fbnancal SatemenasfortheSle,rr.LeneReoadsAthorly, YewrEadlg39Jan41993 (millions of leones) 1. Income and Expenditure Statement Income for road repairs (fuel levy and government grants) 1,757.3 Expenditure on roads (761.5) Surplus on road repairs 995.8 Administrative expenses (122.0) Other income (sale of conract documents) 1.6 Grant income (Government of Japan grant) 283.3 Surplus of income over expenditure (after charging depreciation and 1,158.7 audit fees) Taxation Accumulated surplus 1,158.7 11. Balance Sheet Fixed assets Tangible assets (land, buildings, plant, vehicles, and fiuniture and 233.5 equipment) Intangible assets 209.4 Current assets Stocks 476.7 Debtors 6.2 Cash and bank balances 811.7 Sub-Total 1,294.6 Creditors: Amounts falling due within one year (213) Net current asset 1,2733 Total asset less current liabilities 1,716.2 Creditors: Amounts falling due after one year (526.1) Total assets 1,190.1 Reserves Capital reserve 31.5 Accumulated surplus 1,158.7 Total Reserves 1,190.1 IIL Cash flow statement Net cash inflow from operating activities (including depreciation) 707.5 Investing acitivities Payment to acquire fixed assets (242.0) Value of assets taken over on vesting day (2.0) Payment on behalf of Freetown Infras iuctr Rehabilitation project (209.4) Net cash outflow for investment activities (453.4) Net cash inflow before financing 254.1 Financing IDA advances 526.1 Assets introduced by Department of Works 31.5 Net cash inflow from financing 557.6 Incrase in cash 811.7 113 Hungary,4 or on an approximate basis. The latter method is acceptable when the results are to be used for illustrative purposes only. It is done by multiplying the length of each type of road by its estimated replacement cost, adding any required inflation adjustment to bring book values to their current replacement cost, and adding to this to any new investment completed during the year. This gives the total book value at the end of the year, valued at current replacement costs. The second part of the statement measures the erosion of capital. It is made up of four items: (i) the rehabilitation backlog at the beginning of the fiscal year (the length of road classified as being in poor condition, multiplied by the average costs of rehabilitating such roads), (ii) the amount of rehabilitation completed during the year, (iii) the shortfall in regular recurrent maintenance during the year (routine and periodic maintenance), and (iv) the additional costs of future road rehabilitation caused by shortfalls in recurrent maintenance (chapter two section 2.2, suggests that cuts in road maintenance increase the future cash costs of rehabilitation by a factor of two to three). Every four to five years, the estimated rehabilitation backlog should be replaced by a new estimate, based on a new road condition survey. The sum of these items provides an estimate of the current rehabilitation backlog. Finally, the above figures can be used to estimate the current value of the road network and the erosion of capital as a percent of current book values. A prototype road asset statement is shown in Table 9.3. Table 9.3 Prtotype Road Asset Sanent for a Road Agency (millions of dollars) December 31 Decernber 31 1990 1991 Fixed asets Total book value at beginning of yeara 2,030.00 2,035.70 Adjustment for Inflation 0 0 New works completed during the yearb 5.70 3.90 Toad book value at end ofyear 2,035.70 2,039.60 Erosion of capital: Rehabilitation backdog at beginning of yearc (670.00) (714.31) Rehabilitation completed during the year 14.95 6.94 Shortfall in recurrent maintenanced (29.63) (26.59) Additional rehabilitation costsC (29.63) (26.59) Rehabilitation backlog at end of year (714.31) (760.55) Current value of the road network 1,321.39 1,279.05 OveraU erosion of capital (percent) 35 37 a. Book values are calculated using the following replacenient costs per kin: paved, $250,000, gravel, SS0,000, and earth. $20.000. b. Invcsunent in new roads and upgrading existing roads. c. Calculated for all roads in poor condition using the following costs per km for rehabilitation: paved roads, $230,000, gravel, $36,000. d. Required maitenance expenditures based on the following values per kin: paved, $4,000, gravel, $1,000, and earth, S400. Shortfall is the difference between actual mainteance expenditures (from income and expenditure statement) and required maintenance expenditurs. e. A rough estimate based on figures given in chapter two, secion 2.2 The rehabilitation bacldog should be updated every four to five years. based on road condition asrveys. 40 ighway Departmnt, 1988. 114 Box 9.S Es:ablislding a Commercial Cost Accoewdag STystemufor Readr: Dolswaua The Roads Dcpartment (RD) in Botswana is in the process of installing a maintenance management system (MMS) as part of its ovcrall managcment information system. To be efFective, the MMS needs to utilize accurate cmst accounting data. which can be used to estimate costs, plan future work progumms, monitor implementation, and provide accurate information on overall financial performance. Although most periodic maintenance and 60 percent of routine maintenance are contracted out to the private sector, the design of all maintenance programs and the remaining 40 pcrcent of routinc maintenance continue to be done in-house, and the RD wishes to quantify the effectiveness of its in- house work and develop guidelines to increase efficiency. The cost accounting system is being designed to achieve the following goals and objectives: (i) establish comprehcnsive routinc maintenance budgets and job standard costs which can be compared to actual costs; (ii) establish performance standards by work activity and cost center to determine productivity and efficiency with which availabie rcsourees are utilized: (iii) track and account for actual direct and indirect unit costs of operations by activity, cost center (location). and road link: and (iv) monitor performance and record progress on implemntation by activity and cost center. A database is being established, with an associated computerized coding systen, to account for all anticipated inputs as follows: Cost centers and responsibility centers. Each cost item will be coded according to its locationL Work activities. Work activities will be coded based on an updated version of the current list of thirty-four work activities, to specify type of niaintenance (routine, periodic, spot, emergency) and type of road (paved, gravel, earth). Personnel. All personnel (industrial Class personnel, casual labor, and professionad staff) will be coded by compensation leveL including allowances. Plant and equipment. This is currently supplied free by the eentral transport orgaization, but will be coded by type and fcc structure (fee levels being based on recommendations induded in a reccnt road maintnane study) to avoid biasing costs in favor of equipment-based wvork. Materials and supplies. All materials and supplies used during the execution of work will be separately coded. Overbeads. These include headquarters and other indirect costs. Sourees for the above data include the work activity weekly repoi'u, for quanities of labor, plant and equipmnent. and materials. and the standard cost report, for standard costs of each item and for ovaeheads The major outputs from the Nystern will consist of weckly, monthly, quartely, and annual cost sumaries on the following topics: * Comparison of budgeted unit cost ith actual unit costs by cost and responsibility cente, * Comparison of budgeted unit costs with actual unit costs for each specific work item (labor, plant and equipment, materials and supplies. and overhcads); * Budgeted unit costs by work activity and type of road surface; * Annual plans and budgets based on actual resource rquirements and standard input costs It is cstimated that the abovc cost-accounting system could be opaated alongside the cxisting mgcment information system without any increase in staff, but would require one additional computer plus suitable software. A consultant would also be nceded for threc to four months to set up the system and trainstff Aldhougb the design of the system in Botswana is unique. many of the elements can be used as the basis for setting up similar cost accounting systems in other countries. In most cases. the road agency will need to recntit a cost-accounting dek and procure computcr hardware and software to support the system, since mrany countries do not have access to the level of resources currently available in Botswana. Sourcc: C. MclCudu. The third reform focuses on the development of a better costing system. This is usually done by setting up some form of cost accounting system, as is curreny tnder consideration in Botswana (see Box 9.5). Cost accounts show how resources are used, for what purpose, and how well they serve that purpose. In particular, they show how financial perfbrmance varies over time, between different parts of the road agency, and between work done in-house and under contact Cost accounts provide the basic raw materials needed to operate a maintenance 115 management system effectively. The maintenance management system defines the amount of work required, while the cost accounting system estimates what it will cost and whether it will be cheaper to do work in-house or under contract. The systern must nevertheless be kept simple and compatible with existing financial reporting systems and capable of being operated within existing staffing and other resource constraints. 9.6 STRENGTHENING MANAGERIAL ACCOUNTABILITY Accountability requires clear management objectives, monitorable targets, a regular reporting system, systematic auditing, and effective oversight arrangements. It also requires autonomy. Managers cannot be held accountable unless they have sufficient freedom to sign and award contracts, offer reasonable terms and conditions of employment, and operate without outside interference. The first step required to strengthen managerial accountability is thus to specify clear objectives and, based on these, to set monitorable targets. It is desirable to do this in the form of a written document to avoid later disagreements and to share it with others. It is usually done by preparing a corporate plan and using it as the basis for negotiating a performance contract with the parent ministry (see Box 9.6). The GHA prepares a three-year rolling corporate plan and uses the first year of the plan to draw up a draft performance contract The contract spells out the government's goals for the GHA, strategies for achieving them, and procedures for implementation, monitoring, and control. Monitoring is usually done in terms of the indicators outlined in Box 9.2. Bex 9.6 BasIdcPaIepIes GoveinghePeparaqo ofContractPlws The contract plan should be developed jointy by the road agency and goverment, and formally ratified by both. It is primarily an implementing documnt, not a planning document, and will usually be based on the road agency's corporate pln, or similar slatemcnt of corporate intentions. It should be in the form of a dear, written document radfying and committing both the road agency and the government to the road agencms objectives and policy choices defined in its corporate pLan It should carify the authority to mice decisions, clearly specify those areas where government review or approval is necessary, and set down the road agency's performance goals (in terms of road conditions, staff productivity, and financial trgets). The performance goals should be simple, muually consistent, and restricted to those items which define the direction of development and measure the performance of senior management. The contract plan should also include a statemcet of relted government commitment, which may include budgetary support, regulatory changes, and potential changes in labor laws and procedurce Source: L Thompson. Reporting systems are also an important tool for strengthening managerial accountability and should be produced on a regular basis using the sort of indicators included in the above performance contract. It is surprising how few road agencies produce such reports. Most simply produce ad hoc reports when preparing donor-financed road projects. The SLRA produces some of the best reports. It prepares a detailed annual budget (so do other road agencies), an annual statement of accounts audited by an independent auditor, and an annual report The annual report includes information on the proceedings and policies of the SLRA, the audited accounts, report of the auditor, and any other information requested by the parent ministry. All road agencies should be required to regularly produce such reports. Effective auditing is also an important tool for strengthening managerial accountability. Most auditing is done by the government audit office, which checks to ensure that budget 116 allocations have not been exceeded anu that funds have been handled according to govemment guidelines. This does not go far enough. Staff in the auditor general's office lack institutional independence and the audit usually falls short of the rigorous auditing needed to account for the large sums of money associated with a fully-funded road maintenance program. Some road agencies have therefore opted for an independent audit by a member of the Institute of Chartered Accountants (as is done in Sierra Leone). Other countries have gone even further and are introducing independent technical and financial audits. Kenya is doing so on the rural access roads and minor roads program (using an intemational auditing finn working in association with a local engineering consultant), Burkina Faso has started doing so on their road maintenance program (using a local engineer, supervised by an expatriate engineer, to carry out the technical audit), and Senegal is carrying out an independent technical and financial audit of their entire road maintenance program (using expatriate engineers to carry out the technical audit). Oversight arrangements can also strengthen accountability. The roads boards in Sierra Leone, South Africa, Tanzania, and Zambia (together with the board of the GHA, which is due to be reinstated) and the various roads committees which operate at the local government level make an important contribution to strengthening accountability, as do the boards and committees which oversee the road funds in Benin, CAR, Mozambique, and Rwanda. Such oversight arrangements should be encouraged and strengthened. Finally, there is the question of autonomy. For over twenty years the Wor:d Bank has been urging governments to grant more autonomy to the managers of parastatals. The objective was to reduce political interference in management decisions, develop a more commercial managerial outlook, reduce overstaffing, and strengthen accountability. The same rationale applies to road agencies. Road managers will not behave commercially until the road agency is more autonomous and managers are held accountable for their performance. This has been done in Sierra Leone and Zaire with good results and is about to be reintroduced in Ghana. Greater autonomy is nornally one of the cornerstones of a more commercial approach to management 117 PART m Finale 10 CONCLUSIONS The replacement costs of the road network in SSA is about $150 billion, and it requires annual expenditures on routine and periodic maintenance of $1.5 to $2.0 billion to keep these roads in stable, long-term condition. During the past twenty years, African countries have spent nothing like this amount, and about $43 billion, amounting to nearly a third of the capital invested in Africa's roads, has been eroded because of lack of maintenance. Restoring only those roads which are economically justified and preventing further deterioration will require annual expenditures of about $1.5 billion over the next ten years. Cutting back on maintenance is self defeating. A dollar reduction in road maintenance expenditures increases vehicle operating costs by about $2.0 to $3.0. In Tanzania. the annual economic costs of poor road maintenance have been estimated to be between $100 and $150 million. In Kenya it is estimated that the annual $40 million shortfall in road maintenance expenditures adds about $150 million per year to vehicle operating costs. That is a high price to pay for poor road maintenance policies. The main problems affecting road maintenance are institutional and financial. They relate to the institutional framework within which roads are managed, an inadequate and erratic flow of funds, poor terms and conditions of employment, lack of clearly defined responsibilities, ineffective management structures, weak management systems, and lack of managerial accountability. Roads are managed like a bureaucracy, not like a business. These are the root causes of poor road maintenance policies. Road managers are faced with a biased incentive system and that, in turn, leads to undue emphasis on force account work, ineffective use of plant and equipment, and lack of interest in labor-based work methods. Managers simply do not have the funds or the incentives to use resources efficiently, and nor are they penalized for poor performance. 10.1 GENERAL CONCLUSIONS Solving these problems requires fundamental changes in the way governments manage and finance their road networks. The key concept which has emerged from the RM1 program is commercialization: bring roads into the market place, put them on afee-for-service basis, and manage them like any other business enterprise. However, since roads are a public monopoly and their ownership is likely to remain in government hands for some time, commercialization requires complementary reforms in four other important areas. These are referred to as the four basic builuing blocks: (i) involve road users in management of roads to win public support for more road funding, to control potential monopoly power, and to constrain road spending to what is affordable, (ii) secure an adequate and stable source of funds and introduce secure arrangements for channeling these funds to the respective road agencies, (iii) establish a clear organizational structure defining who is responsible for what, both for roads and roau traffic, and (iv) strengthen the management of roads by providing effective systems and procedures and strengthening managerial accountability. These building blocks represent the core of the required reforms. They are interdependent and should ideally be implemented together. Without all four, the reforms may only achieve part of their objective. You cannot solve the financing problem without the strong 121 support of road users. And you cannot win the support of road users without taking steps to ensure that resources are used efficiently. And you cannot improve resource use unless you control monopoly power, constrain road spending to what is affordable, and increase managerial accountability. And you cannot hold managers accountable unless they have clearly defined responsibilities. The first reform focuses on winning the support of road users. They are the people who use the road network and also pay for it, whether through taxes or user charges. Major policy reforms in the road sector are unlikely to succeed without their active support. Given that current allocations for road maintenance are erratic and well below the levels needed to keep the road network in stable, long-term condition, the first building block involves winning public support for more road funding, taking steps to ensure that road agencies do not operate as public monopolies, and do not spend more on roads than the country can afford. This is an essential precondition for getting road users to willingly pay for roads on a fee-for-service basis. It is fundamental at the central govemment level, where most road maintenance funds are managed, and is also desirable at the regional, provincial, district and community levels. The preferred method of involving road users at the central, regional and provincial levels is by involving them in road management boards. At least eight countries in Africa now have roads boards which operate at the national level and, in one case, also at the regional level. The oldest are the South African Roads Board (originally established in 1935) and the Board of the Ghana Highway Authority (established in 1974, but suspended by the military government in 1981). Other boards are of more recent origin and were established during the late 1980s and early 1990s. Most of these boards have members representing organizations like the chamber of commerce, farmer's organizations, the road transport industry, and the engineering profession. The most effective have independent chairmen and allow the organizations represented on the board to nominate their own representatives. Some boards manage the road fund, while others have wider responsibilities and oversee managernent and financing as a whole. Both Ghana (until it was suspended) and Sierra Leone have semi-autonomous executive boards which have powers to hire and fire staff, sign contracts, and otherwise operate according to sound commercial principles. The second building block concentrates on establishing an adequate and stable flow of funds, usually by introducing an explicit road tariff to manage demand and generate the revenues needed to support the operation and maintenance of roads. Without an adequate flow of funds, none of the reforms will be sustainable. All govemments in Africa are seriously short of fiscal revenues. Budget allocations for road maintenance rarely exceed 30 percent of requirements, and it is simply not feasible for governments to increase these allocations under present fiscal conditions. Improved revenue mobilization is essential. However, if road user charges are increased, there is no guarantee that the additional revenues will be allocated to roads. Traditional earrnarking is not a viable solution. It has adverse impacts on the management of the governmentes overall budget and is rarely sustainable. An added concern is that current financing mechanisms do little to strengthen market discipline, either by managing demand or by improving the efficiency of the road agency. Several African countries are addressing this issue by introducing an explicit road tariff consisting of vehicle license fees (or a heavy vehicle license fee), a fuel levy, and (where 122 relevant) international transit fees. The fiuel levy is ideally specified as a discrete amount, (e.g., 30 shillings per liter) to avoid the appearance of being part of the government's general tax revenues, and is either levied in addition to all preexisting taxes or is partly additional and parly replaces existing fuel taxes. Ideally, the tariff should be set by the Ministry of Finance on the recommendation of the roads board and should be collected independently from government sales and excise taxes. In the best examples (CAR, Ghana, and Zambia), the fuel levy is collected by the oil companies and deposited directly into the road fund. This prevents the proceeds from being siphoned off and spent on other public programs. The intention is to: (i) create a clear market signal to encourage road users to demand value for money from road spending, and (ii) link revenues and expenditures to impose a hard budget constraint on the road agency, so that more road spending means a higher tariff, while a lower tariff means less road spending. The tariff is generally set to eventually cover all costs of maintaining main roads and part of the costs of maintaining urban and rural roads. The remaining costs of maintaining urban and rural roads are financed through local taxes. The local utxes may consist of land-value increment taxes (e.g., bettrment taxes or frontage fees), local property taxes, or other local taxes. Most of the countries with road funds have agreed procedures for allocating funds between different road agencies. Some use simple formulas (Ghana and Mozambique), others use formulas which are modified in relation to needs (Tanzania and Zambia), while others base them on a complex assessment of needs (South Africa). A recent review of road funds in Africa suggest that there are several factors which contribute to successful operation. They include: * Collecting the revenues. The road tariff should be collected and deposited directly into the road fimd without having to pass through the Ministry of Finance account. - Road fimd management. The fund should be managed by a board which includes road user representatives. * Setdng the tarifflevel. There should be a formal mechanism for varying the level of the road tariff. * Allocation of fnds. There should be a simple and consistent procedure for allocating fimds between the different agencies entitled to draw from the fund. * Audit arrangements. The Fund should be audited by independent auditors, and the works financed through the road fund should be subjected to a full financial and selective technical audit. The third reform focuses on establishing a consirtent organizational structure for managing different parts of the road network and dealing with road traffic. In other words, it focuses on establishing who is responsible for what. This requires two things. First, clear assignment of responsibility among different govemrnment departments and different levels of government, and second, clear assignment of responsibility to the individual road agencies. The arrangement needs to be based on an accurate road inventory, fimctional classification of roads, 123 designation of appropriate road agencies, formal assignment of responsibility to each road agency, and clarification of the relationship between each road agency and the parent ministry. Responsibilities to be assigned include those for the operation, maintenance, improvement, and development of the road network as well as those for traffic management, road accidents caused by the road agency's own negligence, and the adverse environmental impacts associated with roads and road traffic. At the community level, where roads are generally managed by village councils, higher level road agencies may provide technical advice but usually leave most of the work to be done by the local communities on a self-help basis. Financial support from the center is generally limited to meeting the costs of bought-out materials. Rural roads under the jurisdiction of the central government are generally managed by central government feeder roads departmnents. Those under the jurisdiction of local governments are generally managed by district councils. Since district councils have limited technical and financial capacity, they are usually encouraged to have their roads managed under contract or to merge with other district councils to create sufficient scale economies to enable the combined network to be managed by a larger road agency. Urban roads are usually managed by urban district councils, while the main trunk road network is generally managed by a central government road agency. International transit routes are critical for Africa and sometimes deserve special treatment. They may either be managed by a dedicated section in the main road agency, as is effectively done in Zambia, or as separate toll roads, as is done in South Africa. Responsibility for the regulation of road traffic is generally assigned to the main road agency, although it may choose to delegate some of these functions to other agencies or to the private sector. Urban road agencies are normally assigned responsibility for activities which have significant impacts in urban areas (e.g., controlling parking and routing of heavy vehicles in urban areas), while the main road agency is normally responsible for enforcing axle-weight regulations. Axle-weight enforcement should ideally be done in conjunction with the private sector, as is done in Zambia. It is often desirable to make the main road agency responsible for carrying out vehicle safety inspections and vehicle emissions tests, provided they have the capacity to do it effectively (again, these functions may be delegated to the private sector). Finally, all road agencies should be responsible for examining the potential enviromnental impacts of new road schemes and should be required to satisfy the public that adverse impacts have been minimized and rmaining impacts are acceptable. The final building block focuses on creating a more businesslike road agency. Once road users are involved in the management of roads, they generally press for the introduction of sound business practices to ensure that their constituents get value for money. They expect clear management objectives, competitive terms and conditions of employment, consolidated budgets, commercial costing systems, and effective management information systems. The most important issue requiring attention is the wide gap between the tenns and conditions of employment in the public and private sectors, and the impact that this has on staffing and staff morale. An engineer in the private sector in Cameroon normally receives a total remuneration package more than twice as large as his public sector counterpart (the ratio is five in Tanzania and nearly nine in Zambia). As a result, several road agencies have lost most of their technical staff or are being managed by expatriates who are paid intenational salaries by multilateral and bilateral donors. You cannot manage a road agency on a sustainable basis with expatriates or 124 with demoralized local staff who spend most of their time daylighting to supplement their incomes. Any serious refonn program must address these issues. Tanzania is now trying to define a competitive remuneration package for road agency staff which can be provided within existing civil service regulations. Once staff are adequately paid, other reforms should concentrate on giving each road agency a clear mission and effective management structures, including appropriate management information systems; good accounting systems; and more managerial autonomy, enabling managers to act commercially. The Ghana Highway Authority has made great progress in this direction by streamlining staffing and disciplinary procedures and introducing a road management system. It has also developed a corporate plan which forms the basis of an annual contract plan between the Authority and the govemment. These reforms improve market discipline, provide managers with the freedom to operate commercially, and strengthen managerial accountability. They also encourage a more objective approach to setting priorities, comparing in-house to contract work, and evaluating labor-based work methods. Finally, auditing procedures also need to be improved to ensure that the public gets value for money from road spending. The aim is to ensure that funds allocated for roads are spent on road works and that the work is carried out according to specification. Where possible, both financial and technical audits should be carried out by independent auditors. Technical and financial audits are now being used on the rural access roads program in Kenya and on the road maintenance programs in Burkina Faso and Senegal. The technical audit usually covers all contract work as well as work done though force account on a sample basis. 10.2 ROLE OF THE DONOR COMMUNT The donor community has a particularly important role to play in facilitating these reforms. Their assistance strategies can either support the reform process by providing well targeted aid or can undermine it by providing contradictory aid which primarily serves their own narrow national interests. Therefore, one of the most important things that the donor community can do is to rfuse to provide any assistance to the road sector without a clear govermment commitment to introduce sustainable road maintenance policies. There is no point rehabilitating roads which will be never maintained. Doing so merely reinforces the cycle of rehabilitation, lack of maintenance, and further requests for rehabilitation. To break the cycle, the donor community has to insist on a clear government commitment to reform, a time-table for implementing it, and some up-front actions demonstrating a serious intention to reform. To be effective, the donor community needs to act in a coordinated way. This requires consultation and basic agreement on the underlying rules of the game. In that regard, the SSATP as a whole and the RMI in pardcular have been highly effective instruments for building consensus among donors. However, these programs are transitory in nature and will eventually have to be replaced by a more permanent, formal arangement The rules of the gamne also need to be formalized. The Donors Code of Conduct, prepared by the EEC, provides, a sound basis for doing so as long as all key donors agree to sign it. Although the Code lacks specificity, it shows the determination and commitment of the donor community, and the general agreements set out in the Code will be bolstered by the more specific reforms set out in this report 125 REFERENCES Bahl, Roy. 1992. "The Administration of Road User Taxes in Developing Countries." World Bank Working Paper Series 986. Washington, D.C. Creightney, Cavelle. 1993. "Road User Taxation in Selected OECD Countries." SSATP Working Paper 3, World Bank, Africa Technical Department. Washington, D.C. de Richecour, Anne B. 1994. "Review of African Road Funds: What Works and Why?" SSATP Working Paper 14, World Bank, Africa Technical Department. Washington D.C. Harml, C., and A. Faiz. 1988. RoadDelerioration in Developing Countries. World Bank Policy Study. Washington, D.C. Heggie, lan G. 1991. Designing MajorPolicyReform: Lessonsform the Transport Sector. World Bank Discussion Paper 115. Washington, D.C. Heggie, Ian G., and V. Fon. 1991. "Optimal User Charges and Cost Recovery for Roads in Developing Countries." World Bank, Working Paper Series 780. Washington, D.C. Heggie, lan G. 1992 (a). "Selecting Appropriate Instruments for Charging Road Users." Infrastructure and Urban Development Department Report 95. World Bank, Washington, D.C. Heggie, Ian G. 1992 (b). "Improving Management and Charging Policies for Roads: An Agenda for Refonn." Infrastructure and Urban Development Department Report 92. World Bank, Washington, D.C. Heggie, Ian G. 1992 (c). Can Chargingfor Congestion Help Finance Improved Urban Transport Facilities: The Case of Developing Countries. OECD-CETUR: Deplacements, Public/Private Partnerships 9. Paris. Heggie, lan G. 1994. "Commercializing Africa's Roads: Transforming the role ofthe Public Sector." SSATP Working Paper 10, World Bank, Africa Technical Department. Washington, D.C. Highway Department. 1988. "Calculation of the Value of Roads in Hungary: 1981-1986." Ministry of Transport, Budapest. Hoban, Christopher, J. Riverson and A. Weckerle. 1994. "Rural Maintenance and Improvement." Report TWU I 1, World Bank, Transport, Water and Urban Development Department. Washington, D.C. Hogg, Vincent W. 1989. "Pricing ard User Charging in the Transport Sector: A Review of FY88 Transport Project Operations." Report INU-OR 1, World Bank, Infrastructure and Urban Development Department Washington, D.C. 127 Kranton, Rachel. 1990. "Pricing, Cost Recovery, and Production Efficiency in Transport." World Bank, Working Paper Series 445. Washington, D.C. Lantran, Jean-Marie. 1990. "Developing Domestic Contractors for Road Maintenance in Africa." SSATP Working Paper,, World Bank, Africa Technical Departnent. Washington, D.C. Mabogunje, Akina, L. 1992. "Sustainable Provision of Infmstructure: Issues of Governance, Empowennent, Participation and Non-Governmental Organizations." Note 12, Municipal Development Program. World Bank, Africa Technical Department. Washington D.C. Moeller, Philip. 1993. "Transport Refonn and Institutional Development Lessons from the Sub-Saharan Africa Transport Program." Infrastructure Notes, Transport OT-3. World Bank, Transport, Water and Urban Development Department. Washington, D.C. Newbery, David M., G.A. Hughes, W.D.O. Paterson and E. Bennathan. 1988. Road Transport Taxation in Developing Countries. World Bank, Discussion Paper 26. Washington, D.C. Oum, Tae H., W.G. Waters, and Jong Song Yong. 1990. "A Survey of Recent Estimates of Price Elasticity of Demand for Transport". World Bank Working Paper Series 359. Washington, D.C. Paterson, William D. 0. and R. Archando-Callao. 1991. Special HDM III analysis. Unpublished. World Bank, Washington, D.C. Pinard, Michael I., W.D.O. Paterson, and W.D. Mbvundula 1994. "Strategy for Development and Implementation of Road Management Systems in the Southern Africa Development Community Region." Transportation Research Board Annual Meeting, Washington D.C. Planning Committee for Road Financing. 1992. "Recommendations for the Allocation of Maintenance Funds to the Road Authorities." Department of Transport. Pretoria. Rausch, Eugene. 1994. Road Contractor Promotion and Employment Generation in Africa. Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ). Eschbom. Riverson, John, J. Gaviria, and S. Thriscutt 1991. Rural Roads in Sub-Saharan Africa: Lessons From World Bank Experience. World Bank Technical Paper 141. Washington, D.C. Robinson, Richard. 1988. A View of Road Maintenance Economics, Policy and Management in Developing Countries. Research Report 145. Tnsport and Road Research Laboratory. Crowthorne. Schliessler, Andreas, and A. Bull. 1993. Roads: A NewApproachfor Road Network Management and Conservation. United Nations Economic Commission for Latin America (ECLAC). Santiago. Schloss, Miguel. 1993. Does Petroleum Procurement and Trade Matter? The Case of Sub- Saharan Africa. Finance and Development. World Bank, Washington, D.C. 128 Shirley, Mary. 1989. The Reform of State-OwnedEnterprises: Lessons From World Bank Lending. World Bank Policy and Research Series 4. Washington, D.C. Southern Africa Transport and Communications Commission. 1993. "Technical Manpower Development: Problems within Road Departments in Member Countries." Study Report by Carl Bro Group. Southem Africa Transport and Communications Commission. 1993. "A Strategy for the Development and Implementation of Road Management Systems in the SADC Region." Special Working Group on Road Management Systems. World Bank. 1991. The Reform ofPublic Sector Management: Lessons From Experience. Policy and Research Series IS. World Bank, Country Economics Department. Washington, D.C. World Bank. 1991 . The Road Maintenance Initiative: Building Capacityfor Policy Reform.n Sub-Saharan Africa Transport Program. Vols l-ILI. World Bank, Economic Development Institute. Washington, D.C. World Bank. 1992. "Road Maintenance Initiative: Phase I Evaluation." SSATP Working Paper, World Bank, Africa Technical Department. Washington, D.C. 129 ANNEX 1. IMPACT OFROAD MAINTENANCE ON VEHICLE OPERA TING COSTS by W.D.O. Paterson The following example analyzes the impact of road maintenance on vehicle operating costs (VOCs). using data for Nigeria and the World Bank's Highway Design and Maintenance model, HDM Ill. The analysis was carried out for roads in both fair and poor condition, for traffic volumes of 500 and 1.000 veh/day annual average daily traffic (AADT) growing at 3 percent per year. Seventy percent of the traffic consists of trucks. The cases examined included a base case and 16 possible maintenance interventions, including: (i) patching of potholes; (ii) surface treated reconstruction with and withiout patching of potholes (i.e., flexible pavement with a crushed stone base and double surface treatment); and (iii) asphalt concrete overlays with and without patching of potholes. Five interventions were finally selected for detailed analysis. These interventions were either on or close to the "economic efficiency frontier", which represents the highest net present value (NPV) of benefits determined for each corresponding level of road agency expenditures. They consisted of: P100 Patching of potholes only. RY07 Surface treated reconstruction initiated when surface roughness reaches 7 IRI (rA/kin). with patching of potholes. RN07 Surface treated reconstruction initiated when surface roughness reaches 7 IRI (m/kmi), without patching of potholes. QY50 Asphalt-concrete overlay, initiated when surface roughness reaches 5 IRI, with patching of potholes. ON50 Asphalt-concrete overlay, initiated when surface roughness reaches 5 IR1, without patching of potholes. These five interventions were compared against a base intervention case in which no maintenance at all was done to the pavement. For this example, the deteriorated asset was still considered to be a paved road so its value was assessed relative to the cost of restoring it to full paved road qualitv and functionality after the analysis period. A null case, which effectively abandons the road to disintegrate to a gravel or earth road without full reconstruction was also analyzed, but is not presented in detail here. Modified Analysis. For this analysis. some modifications were made to the traditional HDM-1I1 anaiysis to introduce refinements which are important when evaluating cost recovery and comparing the costs and effectiveness of dissimilar strategies. These modifications are summarized below and are to be incorporated in future versions of the model. Relative Residual Value. When comparing dissimilar alternative maintenance strategies over a finite evaluation period (in this case 20 years), it is important to take account of the condition of the road pavement at the end of the analysis period because this may vary depending on whether a treatment would be made just within or beyond the analyzed period. The analysis thus included a method for estimating the residual or salvage value of the pavement at the end of the analysis period. The Relative Residual Value (RRV) was defined as the net added structural cost of upgrading the pavement from its initial as-new structural 131 capacity to the final effective structural capacity, which is the final pavemnent capacity reduced by an amount related to the final damage state. The three elements used to derive the residual value included: (i) the condition or integrity of the pavement, defined by the damage or sum of cracking and potholing areas; (ii) the effective structural capacity defined by the resultant thickness of the pavement, reduced in proportion to the final amount of damage; and (iii) the pavement value in its final state relative to its initial new state. The definition of a relative value is a general approach, which avoids the difficulty of assessing the initial construction value and utilizes costs that are consistent with the same unit costs used for the rehabilitation and reconstruction analyses. Reconstruction Cost. The cost of pavement reconstruction typically varies with the existing condition of the pavement and the target design life adopted for the new pavement. The reconstruction cost should thus be higher when the road is in very poor condition (11 m/km IRI), than when it is in fuir/poor condition (7 m/kn IRI). Typically, the costs would also include sideworks (repairing drainage etc.) which would vary with the level of routine maintenance applied and would be higher for deferred (worse condition) interventions. Reconstruction costs therefore vary widely and typically range from $90,000 to $250,000 per km for a 2-lane road. As a conservative approach, a flat unit cost of reconstruction of $93,470 per km was adopted as an adjustnent to the Nigerian data. In a more rigorous adjustment, the increases would be higher for higher damage levels (more potholing, less patching) and for higher roughness levels (more shape correction and leveling needed), but these refinements would not have affected the particular strategies analyzed here and so were not added in this exercise. AdjustingMaintenance StrategyCosts. These two sets of adjustments were applied to the HDM-II generated results for the above maintenance strategies. No changes were made to either the physical estimates (pavement condition, maintenance quantities or traffic quantities) or the vehicle operating costs. Adjusted estimates were made for the agency financial costs (undiscounted and discounted at 12 percent), and the net present value (NPV at 12 percent discount rate). In the case of the base and P100 strategies, the cost of reinstating the pavement at the end of the 20-year analysis period to its original capacity is added. Interpretation of Adjusted NPVs. The adjusted NPVs consist of the original NPV, less the discounted additional cost of reconstruction, plus the PV of the Relative Residual Value. Since the RRV of the Base or Null Strategy (routine maintenance only without patching) is negative (there being a net loss in the final badly deteriorated condition relative to the initial as-new condition), there was a need to consider the most relevant definition of a base stategy. This could be either: (a) Assume full loss of the functionality of the pavement asset, with reversion to indeterminate gravel/earth state (which would therefore exclude reconstruction at any time); or (b) Assume that the initial functionality of the asset would have to be restored, so that full reconstruction to original paved standard is required after the analysis period. It was decided to define the Base case as (b), relating values to the intended functionality of the asset which in this case is that of a paved road. Additionally, in order to demonstate the loss of value associated with complete neglect, the Null case was defined as (a) above, so the 132 Null case was typically of lower maintenance cost but also negative NPV when compared with the base case. Comparison of Maintenance Strategies based on Annualized Costs. In a normal economic life-cycle analysis, the predicted agency costs are presented as either the PV of the cost stream or as an annualized cost, utilizing the applicable discount rate. The results from the above analysis are summarized in Table A. 1 using annualized maintenance costs. This shows first that patching is more beneficial and cost-effective than not patching. The effect is strongest comparing the pothole patching (P100) with the base strategy, showing that the annualized maintenance cost including the patching is actually lower than the cost excluding the patching, and gains user benefits, because the pavement has to be restored eventually to regain functionality. The effects are also evident with the reconstruction (RY07 v. RN07), and overlay (OY50 V. ON50) strategies. For fair condition roads undertaking reconstruction at 7 IRI roughness provides significant benefits over patching only, with an incremental B/C ratio of 4 to 7.7. However, intervening with an overlay at S IRI is the most beneficial giving an additional 4.7 to 17.6 incremental B/C ratio. On poor condition roads, overlay strategies are very much more beneficial than reconstruction strategies because the reconstruction is required immediately and costs more than staging the restoration with overlays. Comparison of Maintenance Strategies based on Average Costs. When considering cost recovery of road expenditures as a basis for road user charges, the applicable maintenance cost to be determined is an undiscounted average of the overall maintenance strategy cost because the distribution of pavement ages in a road network can be assumed uniform. For example, in each year some part of the network will be requiring treatment intervention, and typically a similar length will be handled each year. The results using average maintenance cosis are shown in Table A2. These show an even stronger preference for overlay strategies over deferred reconstruction strategies for both fair and poor condition roads, both in substantially lower average costs and in higher benefit/cost ratios. These results apply when road ages are uniformly distributed throughout the network, so that roughly the same amount of maintenance is each year applied to successive segments of the network, i.e. the road network is in a state of stable equilibrium. 133 Table Al.I Impact ofAlternative Maintenance Sbategie Using Annualized Benefits and Costs (Ss) Stratey Base P100 RYO7 AN07 OY50 ONSO Road in Fair condition; traffic volume 500 vehWdayAADT: [ncreased maintenance 633 546 1,799 2,370 2,868 2,866 VOC savings 0 3,310 8,259 9,348 13,259 13,228 Benefiticost ratio - 6.1 4.6 3.9 4.6 4.6 NPV, mill @ 12 perent -6.2 27.0 62.8 67.8 99.8 99A Incremental B/C ratio - 6.1 4.0 3.3 4.7 4.7 Rank, by inc. B/C ratio 1 2 - 3 - Road in Fair condition, traffic volume 1,000 vekda'yAADT: Increased maintenance 633 606 3,011 4,677 3,399 3,520 VOC savings 0 13,371 31,976 36,141 40,418 40,947 Benefit/costratio - 22.1 10.6 7.7 11.9 11.6 NPV, mill @ 12 percent -6.2 125.2 283.7 307.9 361.0 364.8 Incremental B/C ratio - 22.1 7.7 5.6 21.8 17.6 Rank, by inc. BIC ratio 1 2 - 3 - Road in Poor condition, traffic volume 500 ve/day AADT.: Increased maintenance 633 568 9,278 9,276 5,978 5,977 VOC savings 0 2,291 31,507 31,477 27,872 27,872 Benefit/cost ratio - 4.0 3.4 3.4 4.7 4.7 NPV, mill@ 12 percent -6.2 16.8 216.3 216.0 211.1 211.1 Incremental B/C rtio - 4.0 1.1 1.1 4.7 4.7 Rank, by inc. B/C ratio 1 3 - - 2 Road in Poor condition, traffic volume, 1. 000 ehWday AADT- Increased maintenance 633 628 9,295 9,268 6,254 6,252 VOC savings 0 6,039 66,680 66,171 60,886 60,866 Benefit/cost ratio - 9.6 7.2 7.1 9.7 9.7 NPV, mill @ 12 percent -6.2 53.1 561.6 556.9 532.6 532.4 Incremental B/C ratio - 9.6 1.9 1.8 9.7 9.7 Rank, by inc. BC ratio 1 3 - 2 - 134 Table A..2 Impact ofAlternative Maintenance Strategies UsingAverage Annual Benefits and Costs (Ss) Strategy Base P100 RY07 RW07 OYSO ON50 Road in Fair condition; traffic volume 500 veh/dkyAADT: Increased maintenance 3,000 2,473 2,202 2,214 1,034 1,029 VOC savings 0 3,310 8,259 9,348 13,259 13,228 Benefit/cost ratio - 1.3 3.8 4.2 12.8 12.9 NPV, mill @ 12 percent -6.2 27 62.8 67.8 99.8 99.4 Road in Fair condition, traffic volume 1,000 veh/day AADT: Increased maintenance 3,000 2,559 3,414 5,298 1,183 1,340 VOC savings 0 13,371 31,976 36,141 40,418 40,947 Benefit/cost ratio - 5.2 9.4 6.8 34.2 30.6 NPV, mill @ 12 percent -6.2 125.2 283.7 307.9 361.0 364.8 Road in Poor condition, trafic volune 500 veh/dayAADT- Increased maintenance 3,000 2,486 6,117 6,110 4,290 4,288 VOC savings 0 2,291 31,507 31,477 27,872 27,872 Beneficost ratio - 0.9 5.2 5.2 6.5 6.5 NPV, milll2percent -6.2 16.8 216.3 216.0 211.1 211.1 Road in Poor condition, trafic volume 1,000 veA/day AADT.: Increased maintenance 3,000 2,572 6,186 6,074 4,548 4,544 VOC savings 0 6,039 66,680 66,171 60,886 60,866 Benefit/cost ratio - 2.3 10.8 10.9 13.4 13.4 NPV, mill @ 12 percent -6.2 53.1 561.6 556.9 532.6 532.4 135 ANNEX2. THEINVERSE ELASTICITYRULE This Annex presents a simple exposition of the inverse elasticity rule as it might be used to determine an optimal set of road user charges. The question is how to mobilize a given amount of revenue from each group of road users (car, bus, truck) in a way which minimizes overall loss of welfare by all user groups. Heuristically, this involves minimizing the overall loss of welfare suffered by all road users by equalizing the dead-weight loss per dollar of revenue raised from each user group. The rule will be illustrated in terms of a simple example which assumes that short-run marginal costs ef road use (SRMCs) are constant (i.e., there is no congestion), cross-price elasticities are small enough to be ignored (i.e., the travel demand for ewh user group is independent of the other user groups), and that relevant elasticities are compensated demand elasticities. The example is illustrated in Figure A2. 1. When the price of road use is raised fiom P (where it is equal to vehicle operating costs plus the SRMCs of road use) to P', the dead-weight loss per dollar of revenue raised, S, is equal to the triangular dead-weight loss area ABC divided by the additional net revenue raised, DCAE. In other words: S = -1A(AP-ANy(AP-N') = -MN/N', where AP = (P' - P), AN = (N - N'). Since the compensated own-price point elasticity of demand eA evaluated at point A is defined to be: (AN/N')I(APIP') S can be rewritten as: S -t= e%(AP/P') The overall loss of welfare is minimized by equalizing S across all user groups: S = CIA T, = e2A T2 C..&=en A 0 (1) where S represents the welfare gain associated with relaxation of the revenue constraint, 1,2 ... n represent the different user groups, and T1, T2 ... T. represem the relative mark-up of price over the final tross price, (AP1/P;'). This is the familiar inverse elasticity rule. The ratio of the relat- e mark-up of user group 1 over user group 2, TI/T2, is inversely proportional to the ratio of their respective own-price elasticities of demand, e2A/eIA. The solution is illustrated in Figure A2.2. Note that with a constant demand elasticity, the lines representing group 1, group 2, and group n are straight; otherwise they are curved. 136 a p. ~~~~~~A lAm Eilin (VDOC.. Ph, S il Edgil IDs.itii~ upm ddi ta Vimw ofW.J pub.nv pm4a Rabi 111WnibtT *8PfiP Figure A I Loss of consumer srplus when price Figure A2.2 Equalizing the dead-weight loss per dollar is rised of revenue raised The revenue generated by the above mark-ups is: R = T1PIN1' + T2P2'N2' + ... TP"NJ = APINI' + AP2N2' + . + APnNn' (2) where N', ... N', represents the volume of each type of traffic at the final traffic levels; and AP, = Pi-T,/(l - T,)], i = 1,...,n. Since the values of P, eA, and R are known, the only unknowns are the values of N' and T. These are estinmated from equations (I) and (2) using trial and eror' or a simple numerical agorithm. EApirical estimates of the price elasticity of demand for transport generally ignore income effects. When the income effect is thought to be important, the compensated demand elasticity should be used. It is equal to the ordinary demand elasticity plus the proportion of the household budget spent on transport multiplied by the income elasticity of demand for transport. When the cross-price elasticities of demand between the different user groups are significant, the relevant cross-price elasticities should be subtracted: eA = (elI - e2lA). In practice, empirical estimates of the price elasticity of demand by different road users are subject to wide margins of error (see Oum, et al, 1990). Recent estimates vary from: 0.10 to 1.1.0 for a car, 0.10 to 1.30 for a bus; to 0.70 to 1.10 for a truck. This reflects the fact that demand elasiticites depend on market conditions, which vary widely throughout the road network. It is therefore unwise to use avrage or typial demand elasticities to estimate road user charges. Instead, it is better to use uniform mark-ups (i.e., to assume 41 Choose a stang value for S and solvc equation (1) for T;. Es uate P; P,=PTJI(l - T1). Assume Nil is approximely equal to N;. Calculae the plied value of R from equation (2) and cmpare it with the actual value of R. If the impled value is less thn the aua valuc, choose a higher value for S and rpat ih calclon The values converge after about three to five iteions. Finaly, check wvher AP, is large enough to makc N3 significantly lower than Np. If so, replac N; with a new cstimate afNi' and rpat the above calculations. 137 demand elasticities are equal) and only to use differential mark-ups when accurate and consistent country-specific values are available. Finally, when roads are congested and SRMCs are not constant, the analysis has to include the supply elasticities and this adds greatly to the complexity of the analysis. 138 ANNEX 3. ESTIMA TING ROAD USER CHARGES: A WORKED EX4MPLE This annex takes a hypothetical road network and, using the pricing and cost recovery policies developed in Chapter 7, estimates the user charges required to ensure that (i) the costs of operating and maintaining the main road network are fully-fundAd, and (ii) the grants made to road agencies managing urban and ruml roads ae sufficient to ensure their maintenance programs are also fully-funded, and (iii) sufficient funds are available to finance investment in main roads, support investment in urban and rural roads, and meet debt service obligations. The hypothetical road network consists of 28,000 km of trunk roads managed by the main road agency (3,000 km are paved), 3,000 km of urban roads managed by the municipalities and 27,000 km of mral roads managed by rural district councils (see Table A3.1). Traffic volumes are modest and vary from an average of 600 vpd on paved roads, to 300 vpd on gravel roads, and 50 vpd on earth roads and gravel roads in ruml areas. The vehicle fleet consists of 200,000 vehicles (see Table A3.2). Twenty percent consist of trucks and buses and these vehicles account for nearly 27 percent of annual veh-km. Average annual distances traveled vary from about 35,000 km for light vehicles, to 50,000 kmn for most trucks and buses, to 70,000 km for articulated tricks. XTere are four main steps to the analysis: (i) Estimate the costs of operating and maintaining the entire road network on a sustainable basis. Actual expenditures may be lower than this since maintenance may be underfunded and the road agency may be accumulating a large bacilog of defew-ed maintenance. (ii) Using the above costs, prepare an outline financing table showing all costs which have to be met througb user charges. The table will include the entire costs of the tnmk road network and part of the costs associated with urban and rural district roads. (iii) Esfimate the amount of trffic expected to use the road network during the year for which costs are being estimated. (iv) Estimate the variable costs attributable to each type of traffic and then set the level of the fuel levy, together with license fees and (where relevant) heavy vehicle license fees to ensure: (a) each type of traffic covers its variable costs, and (b) all vehicles in total generate sufficient revenues to cover all the costs included in the outline financing table. The first task, item (i) above, should be carried out using either the short analysis, or the fonal anauysis described in Box A3.1. This example uses the short analysis, based on the cost matrices included in Annex 4. The results of the analysis are summarized in Table A3.I. The only parameters needed for this analysis are: (i) length of the road network, by type of road; (ii) average daily traffic volumes; and (iii) observed unit maintenance costs, which are used to adjust the cost figures set out in Annex 4. In this example, the figures from Annex 4 have been used without adjustment 139 Box A3. I MethodforEstimating RoadMaintenance Requiremants Dilatollcijon: From traffic count data, classify thc road nctwork in AADT ranges (prefirably 50, 300, 1000. 3000, etc.) and cstimatc the vehicle-km-traveled (VKT) for each vchicle class and each trafTic volume class Using a 5 percent sampic of roads in each traffic cass detcrminc thc reprcsentative pavement sirength (in pavement structural numbers) and traffic loading (Equivalent standard axles lane-yr. using average ESAs for each vehicle class). The percentage lengths in good, rair. and poor condition should also be observed. If there are relevant regional differcnecs in costs or pavement performance, the sample should be uniformly distributed across the regions The unit costs of resurfacing, rehabilitation, and reconstruction (rcseal, thin overlays, thick overlays. etc.) should be deternmincd with and without taxes, and the periodicity Of application, if any. should be noted according to region. Shon anjsis: The short method avoids direct analysis and instead makes adjustments to gcncral figures generated using the HDM III model with data from a scicction of developing countrics (see annex 4). Determine a cost factor by comparing the obscrved unit maintenance treatment costs with the values in annex 4, Table A4.1. Also utse this table to determine the applicable loading category from the loading charactcristics (ESA/lane-yr) for each tramffic volume class. Estimate the uncorrected optimal maintenance costs from annex 4. Table A4.2 for the rfelvant loading profilc and pavcment SNC. then adjust using the above unit maintenance cost factor. Multiply the adjusted cstimated maintenance cost by the road lcngth for each traffic volume category to obtain the estimated total network maintenance costs. - Maintenance requirements are equal to total network maintenance costs. - Shortfall is equal to cstimated maintenanc requirements minus the available budget. - Bracklog is the sum of estimated rehabilitation costs for all road lcngths in poor condition. FormnaLannsis: Calibrate the HDM-I1I to local conditions and prepare collected data as inputs, defining a serics of maintenance strategies sufficicnt to dcfine an optimal NPV. Only the reprcsentative values of SNC and ESA/lane-yr are used for cach traffic volume class Apply end-of-period adjustments to csure that a full lifcycle is considered by thc HDM-111. Run the analysis threc tines: (a) with full traffic as measured; (b) with no loading. but with all vehicles, by senting the load (or ESA) input to a negligible value; and (c) with no traffic (HDM requires a minimum of one vehicic per class for computational logic in this zaro trffic case). Select the optimal maintenance treatment from the (smoothed) maximum NPV in economic terms under each of the full traffic, nonload, and nontraffic run-cases. Determine the average maintenance requirements from the undiscounted, predicted maintenance costs of the optimal treatment for each road traffic class and run-case. The shortfall is determined using the full-tmffic predicted maintenance costs for the optimal treatment in each case. multiplied by the road length in each traffic class. The backlog is the product of the average optimal treatment cost (for poor condition) and road length in poor condition summed for all traffic classes Source: WD.O. Pateon. The second task is to prepare the outline financing table. This is shown in Table A3.3. In addition to routine and periodic maintenance (from Table A3.1) this table also includes: (i) the costs of policing and administration (both of which are properly attributable to road users), (ii) interest charges on projects financed through loans, (iii) grants to local authorities to support operation and maintenance of urban and rural district roads (the grants have been set to cover all variable costs which amount to between 60 and 70 percent of total urban and rual road expenditures), (iv) all investment in trunk roads and 50 percent of investment in urban and rural roads (it is assumed there is a 50 percent cost-sharing formula for the latter roads), and (v) debt service repayments. The total costs to be recovered from road users amount to $100.6 million, comprising variable costs of $55.9 million (SRMCs without congestion) and fixed costs of $24.0 million (main roads only). The balance of the fixed costs, amounting to $10.6 million, would be financed by the respective district councils (from property taxes and other local revenues). Variable costs are made up of costs which vary with traffic (variable road maintenance costs and variable road operating costs) and those which vary with traffic loading (variable periodic maintenance). The costs which vary with trffic amount to $37.7 million (including policing and administration), while those which vary with traffilc loading amount to $18.2 milion. 140 The third task is to estimate the amount of traffic using the road networc. This has been done in Table A3.2. It requires a knowledge of the vehicle fleet (i.e., number of vehicles operating over the road network), together with the average annual mileage traveled by each type of vehicle. Factors like axle- weights and fuel consumption are available from standard tables or manufacturers specifications. The final task is to estimate variable costs for each type of vehicle. This calculation is illustrated in Table A3.4. The footnotes explain how vehicle-related costs (column 1) and axle-related costs (column 2) were calculated. These are then added to give the total variable costs attributable to each type of vehicle (column 3). The fuel levy is calculated in column 4 and, in this example, has been set at $0.09 per liter. It has been assumed that there are an existing set of license fees set at nominal levels, varying from $20 per year for a car, to $100 per year for heavy single-axle trucks and buses, to $300 p.a. for an articulated truck (column 5). Clearly, without a heavy-vehicle license fee, articulated trucks would not cover variable road costs and would make no contribution to fixed costs. The table has therefore introduced a heavy vehicle license fee for the three heaviest vehicle classes and has set the charge at $375 per equivalent standard axles (ESALs) per year. This results in supplementary license fees of $218, $975, and $2,550 per year for the three heaviest types of vehicle. The combined effect of the regular license and heavy vehicle license is shown in column 7. The final matrix of charges ensures that all heavy vehicles cover their variable road costs, -.ithout involving cxtcnsive over-cliarging of light vehicles. The total revenue generated, $102.4 million, is sufficient to cover the total required revenues, $100.6 million, shown in Table A3.3. Most revenue comes from the fuel levy, $82.9 million (over 80 percent). Regular license fees contribute relatively little, $6.0 million Oust under 6 percent), while the heavy vehicle license fee -which, in this example, is only collected from 16,000 vehicles (i.e., 8 percent of the vehicle stock) - brings in $13.5 million. 141 Table A3. 1 Casts of Alaintaining the Rojad Net'rivo (in a XSxuta,iahle llivix Ruoai ni ntefnince i 'erd * iIaittIetnnaice (na alllnas oJftkdollurs) l.ength A ,14I)T I 'uriible ivxed 7*t,ifas 1 'girihblke Fi.xeLd 7T0l (Am) Main Roads Paved 3.000 600 0.90 5.1() 6.011 2.X3 3.34 6.16 Gravel 10.00( 3(0 10.74 1.401 12.14 11.26 X.23 19.49 Earth 15.000 50 8.s04 1.5) 9.5.1 0.00 Total 28,000 19.68 8.00 27.68 14.09 11.57 25.65 Urban Roads Paved 5(0 60( 0.15 0.95 1lO0 0.47 0.56 1.03 Gravcl 2,500 300 2.69 0.35 3 04 2.82 2.06 4.87 Earth - -- -( o .0 -- - 0.00 Total 3,000 2.84 1.20 4.04 3.29 2.61 5.90 Rural Roads Paved _- 0.00 Gravel 5.000 50 2.68 0.50 3.18 0.82 4.12 4.94 Eanth 22.000 50 11.79 2.21 13.99 -- 0.00 Total 27,000 14.47 2.70 17.17 0.82 4.12 4.9 Not Applicable Source: Paved roads: routinc maintenance. I dhle A4. 1 Pavcd roads: periodic maintenance. Table A4.2. for a road with a structural nunmber of threc. using the mid-point between 300 vpd and 1.000 vpd. Gravel and carth roads: periodic and routine maintcnancc. TIable A4.3 Table A3.2 Characieristics of I hc/e I Ising the Road Nerwonrk- (Individual Units) Vehicle type and Number of Mileage .4xAe-weight l:A.4L-kln 1 eh-km Fuel use payload (tons) velhicles per year (EtSALs) (mill) (mill) (I/km) Car asoline 50.000 35.000 0.0(01 0 1,750 0.08 Car diesel 70.0 0 35.000 0.0001 0 2.450 0.07 utility (0.8) 40.010 35.000 0.0080 11 1.400 0.09 Light truck (2.0) 20.0dO 50,000 0.0920 92 1.000 0.15 Medium truck (5.0) 7.000 50.000 0.5800 203 350 0.20 Heavy single-axle truck (12.0) 7.000 50.000 2.6000 910 350 0.93 Articulated truck (25.0) 2.000 70.000 6.8000 952 140 OA9 Bus 4.000 50.000 0.4900 98 200 0.36 Total 200.000 2.267 I 7,640 142 Table A3.3 Annual Expenditures on Road Subdivided into Main Casrt Components (mililons of dollars) Total annual Variable Fised Financed by expendlilw costs costs distict council Ra:urret costs Main roads POiicinga 0.70 0.21 0.49 Administratlonb 2.44 0.49 1.95 Intcrcst chargesC 2.00 0.00 2.00 Routine maintenance 27.68 19.68 8.00 Periodic maintenance 25.65 14.09 11.57 Subtotal 58.47 34.47 24.01 Urban roads Grants for maintenancd Routine 2.84 1.20 Periodic 3.29 2.61 Subtotal 6.13 6.13 3.81 (3.RI) Rural roads Gramnts for maintenanced Routine 14.47 2.70 Periodic 0.82 4.12 Subtotal 15.29 15.29 6.32 (6.82) ToAla reuaav costs 79.89 55.89 346A (ItL63) Jnestmentw Main roads 8.50 - - Debt servicerepmynent 2.83 Grants for urban roadsf 2.50 - - (2.50) Grants for nual roadsT 6.90 - - (6.90) Totaaf lnvena 20A73 - - (4) Toafiuds requid 1OA62 - Not Applicable a. An estimated 70 percent of these costs are fixd. b. Fixed costs include expenditures on buildings and 70 percent of headquarter salaries. 1 c. Interest charges on road loans. d. Maintenance grants are set to cov:r all variable road maintemnace costs. e. Although an estimated 10 percent of investment is usually inacred on behalf of heavier vehicles and 5 percent on behalf of large vehicles, no distinction has been made in the financing table. f. Grants for investments in urban and rural roads have been set at 50 percent of total investment costs. 143 Table A3.4 User Charges Required to Cover Variable and Fixed Costs of Road Use Variable costs of road use Required user charge Fuel levy Standard Heavy Total Total Vehicle Axle Total Var. @ 9c/l license veliCle license user relateda relatedb costs chargec feed licensed charget charge (cveh-k) cdESAL-krn (c/km) (cdkm) (S p.a.) (S p.a.) (c/km) (c/kin) (1) (2) (3) (4) (5) (6) (7) (8) Car gasoline 0.49 0.00 OA9 0.72 20 - 0.06 0.78 Car diesel 0.49 0.00 0.49 0.S9 20 - 0.06 0.64 Utility 0.49 0.01 0.50 0.81 25 - 0.07 0.88 Light truck- 0.49 0.07 0.57 1.35 30 - 0.06 1.41 Mcdium truck 0.49 0.47 0.96 1.80 45 218 0.53 2.33 Heavy single-axle truck 0.49 2.09 2.58 3.51 100 975 2.15 5.66 Articulated truck 0.49 5.46 5.95 4.38 300 2.550 4.07 8.45 Bus 0.49 0.39 0.89 3.21 100 - 0.20 3.41 Totel 37.69 18.20 55J9 82.92 6.02 13.45 19.46 102.38 -: Not applicable a. Values consist of total vehicle-rlated variable costs, S37.69 million. divided by total veh-krn (from Table A3.2). b. Values consist of total weight-related variable costs. $18.20 million, divided by total ESAL-km (fiom Table A3.2), multiplied by the number of ESALs for each vehicle type dividcd by veh-km for each type of vehicle. c. Values consist of the fuel levy (specified in a cell elsewhere on the spreadsheet), multiplied by rate of fuel consumption (orom Table A3.2). The column total multiplies each cell by the distance traveled by each vehicle type. d. Total are the sum of each cell multiplied by the rcspective number of vehicles. e. Values consist of the annual license fec multiplied by the respective number of vehicles (from Table A3.2) and divided by the veh-lm for each type of vehicle. 144 ANNEX 4. TABLES FOR ESTIMA TING OPTIMAL MAINTENANCE REQUIREMENTS This annex presents data for estimating optimal road maintenance requirements. The analysis was undertaken by W.D.O. Paterson and R. Archando-Callao using data from a selection of developing countries without any extremes of climate. Table A4.1 presents data on maintenance costs, and traffic loading. Table A4.2 then uses this data to estimate the average annual pavement maintenance costs (including routine maintenance) and usage costs for paved roads under optimal maintenance strategies for a variety of loading conditions. Routine maintenance costs can be estimated separately using the formnula included in the first part of Table A4.1. Table A4.3 provides similar figures for unpaved roads. They show costs of maintaining both gravel and earth roads and have been estimated for the sorts of traffic volumes likely to be encountered in Africa. 145 Table A4. I Basic Data Required to Estimate Road Use Costs Maintenance Costs: Trealmeat Unit Code Econonic Flnancial Routine maintenance S/km-yr - 1,450 + OA3 T 1,700 + 0.5 T Reseal S/km RExx 19,400 22,400 Thin overlay, 40mm S/km OSyy 47,600 56,000 Thick overlay, 80mm S/km ODyy 76,200 90,000 Reconstruction (+2 SNC) S/lkm RCyy 238,000 280,000 Unpaved blading S/km/blading - 75 80 Regravelling S/m3 - 6.00 7.00 Paeent Modified structural number (SNC) 2 3 5 8 Asphalt surfacing thickness, mm 20 40 50 10( Subgrade in situ CBR, % 8 8 8 8 T.raffic Loading: units Light Moderate Heavy High Truck Nominal axieload limit (tons) - 8.2 8.2 11 8.2 Presence of overloading - no yes yes yes Compliant axle load limit (tons) - 8.2 11 13 11 300 veh/day MESA/L-yr 0.007 0.014 0.028 0.070 ESA/Hveh (0.63) (1.25) (2.50) (1.25) 1,000 veh/day MESA/L-yr 0.026 0.053 0.104 0.250 ESA/Hveh (0.72) (1.45) (2.90) (1.45) 3,000 vehlday MESA/L-yr 0.129 0.258 0.129 0.576 ESA/Hveh (1.17) (2.35) (4.70) (2.35) 6,000 veh day MESA/L-yr 0.50 1.00 2.00 - ESA/Hveh (1.52) (?.05) (6.10) - 10,000 veh/day MESA/Lyr 0.87 1.74 3.48 - ESA/Hveh (1.59) (3.18) (6.36) - Notes: -: Not applicable xx = percentage area with surface distress; yy = intervention roughness in m/km IRI x 10; ESA = equivalent 8OkN single axle loadings; M = million; L = lane; Hveh = heavy vehicle, average for all vehicles (laden and unladen) of GVW 3.5t or more; T = annual average daily traffic volune (veh/d). 146 Table A4.2 Average Annual Maintenance Costs and Usage Costsrfor Paved Roadr under Optimal Maintenance srraCegies (Average annual costs, S/km-yi) SAC'a AADT ESAILY Optimal Variable Vehicle Loading million maint. Total No traffic Vehicles Loading c/veh-km c/ehkm clESA-km Costsfor moderte traffic loading with nonnol trock composidon (20%) 8 10,000 1.740 OD30 7658 3806 3216 636 0.106 0.088 0.018 8 6.000 1.000 OD30 6804 3155 3217 432 0.167 0.147 0.022 8 3,000 0.260 OD30 6180 2955 2647 578 0.295 0.242 0.111 5 10,000 1.740 OD30 9953 3921 3365 2667 0.165 0.092 0.077 5 6,000 1.000 OD30 8042 3270 3038 1734 0.218 0.139 0.087 5 3,000 0.260 OS35 6242 3211 2391 640 0.277 0.218 0.123 5 1,000 0.053 OD70 3524 3062 145 317 0.127 0.040 0.299 5 300 0.014 OD70 2939 2562 128 249 0.344 0.117 0.889 3 3,000 0.260 OS35 7988 3212 2648 2128 0.436 0.242 0.409 3 1,000 0.053 OD50 5004 3062 379 1563 0.532 0.104 1.475 3 300 0.014 OD70 3104 2562 206 336 0.495 0.188 1.200 2 3,000 0.260 OD35 9558 3272 3323 2963 0.574 0.303 0.570 2 1,000 0.053 OS40 5975 3122 1336 1517 0.782 0.366 1.431 2 300 0.014 OD70 3560 2622 290 648 0.857 0.265 2.314 Costsfor moderate tiaicw lodIng with high truck compontIon (70%) 8 3,000 1.000 OD30 6604 2955 2647 1002 0.333 0.242 0.050 8 1,00w 0.250 OS30 5073 2806 63 2204 0.621 0.017 0.441 8 300 0.070 P100 2795 2306 59 430 0.447 0.054 0.307 5 3,000 1.000 OD30 8944 3211 2391 3342 0.524 0.218 0.167 5 1,000 0.250 OS35 5481 3062 145 2274 0.663 0.040 0.455 5 300 0.070 OD70 3007 2562 128 317 0.406 0.117 0.226 3 3,000 1.000 OD30 10320 3212 2648 4460 0.649 0.242 0.223 3 1,000 0.250 OS35 7045 3062 379 3604 1.091 0.104 0.721 3 300 0.070 ODS0 4508 2562 206 1740 1.777 0.188 1.243 2 1,000 0.250 OS35 8848 3122 1336 4390 1.569 0.366 0.878 2 300 0.070 OD60 5039 2622 290 2127 2.207 0.265 1.519 Costsfor t c loadng with normal twck onwosition (20%) 8 6,000 1.960 OD30 7520 3155 3217 1148 0.199 0.147 0.029 5 3,000 0.500 OS35 6351 3211 2391 749 0.287 0.218 0.075 3 1,000 0.101 ODS0 5355 3062 379 1914 0.628 0.104 0.948 2 300 0.026 OD60 4263 2622 290 1351 1.499 0.265 2.598 Costfor light tuffe loAng wih normaw truck composton (29%) 8 6.000 0.500 OD30 6586 3155 3217 214 0.157 0.147 0.021 5 3,000 0.130 OD35 6207 3211 2391 605 0.274 0.218 0.233 3 1,000 0.025 OD50 4750 3062 379 1309 0.462 0.104 2.618 2 300 0.013 OD70 3380 2622 290 468 0.692 0.265 1.800 Note: Fortraffic loading, see Table A4.1 a. Modified stuctural number Source: Analysis of data in Table A4.1 using the HDM-III model 147 Table A4.3 Average AnnualMaintenance andRoad Usage Costsfor UnpavedRoads Gravel Surfaci Earth 300 vYedAY 50 veh/day 50 Ma Fa Va M F V M F V Average annual Maintenance costs (undiscountedfinancial costs) Blading (@S88&km/blading) 12 0 1074 6 0 536 6 0 536 Otherroutine (@SAam-yr) 1 140 0 1 100 0 1 100 0 Regravelling(@S7/cu.m) 0.25 823 1126 0.11 823 164 0 0 0 Total costs na 963 2200 na 923 700 na 100 536 Average user costs Cost by element (cents/veh-km) na 0.88 2.01 na 5.06 3.84 na 0.55 2.94 Total usage cost (cents/veh-hn) na na 2.89 na 8.90 na na 3.49 na = not applicable a. M = Maintenance fiequency treatments per year, F = Fixed costs (Slkmlyr); V = Variable costs ($S/an yr). Source: HDM-III analysis. 148 APPENDICES Appendix I Network Length ClassO?cation. Denly and Repla Values __________________L_______VAI CLASSIFICATION4 OF THE 7.TIWORC 3A1IG YALLIE TOW TOW Tod TO 1992 1992 1992 ThaI Main Ma Mdn Rua mm La%* Laq LIM Lkb mai Id Couy Area Population Tawi GNP Teul Nad .- Not Paed Uiawd N3w No u Pu Pur Pu Pu t, lb1 Tl_oua millica Vehkig Per Capi GNP Loco Lk Leap llh 1 LaqlLLo T _aq L 16111600 T _uE M 1 t$ S IIS Kn2 It FtW Wm2 (USSn121 (KCM) (CM) (KM) (1CM (KM) a LM) a MI) p _ v GNP M 9 M_ l ANGOLA 1247 9.73 57,030 21.710 ISS.II 7,942 7.859 4.51, 1.451 17 22g 3S2 2.7J2 2E BENIN 113 5.0 31.250 410 2,CS5 15,652 3.425 1,19S 27W 10.457 l.S0 139 3.110 S02 a SI3 BOTSWANA SS2 1.4 51,260 2.790 3.797 30,367 17.67 2,131 IS.906 I11 1.3 52 2239 374 a IJ3S SS BURKINA 274 9.5 32,.00 290 2,le 13,53S S,739 1.506 7,U3 4373 411 49 1.410 43 S so 219 BURUNDI 28 5.8 13.5C0 210 1.193 6.465 4.099 1.011 3.088 2.159 175 231 1.111 cm S 452 39 CAMEROON 475 12.2 110,900 St0 10,003 54.102 13,3D0 3.670 29330 Is.m 3.102 69 2.695 3 3 3.10 9D CAPEVERDE 4 0.4 11.1 D S50 330 1.214 1.95 679 416 119 274 2J.S IS 3 22 C.A.R. 623 3.2 23.135 410 1.,07 U.441 9.30 440 6.55D 1440D 741 39 7.7D0 1.05 19 738 23 CHAD 1.2t4 6.0 14.000 220 1,37 28,717 3,s3 3W 3,500 24.00 917 22 4,50 2.51 22 47 1 COMOROS 2 OS 4.O0 s0o l2 795 73 467 265 6o 33 Imp 1`7 3 i15 CONGO 342 2.4 46,tlD 1,030 2J02 11.S4 :t0.l0 1245 9SSS 23 SD4 34 4736 IS 5 9S tO OTE D'IVOIRE 322 12.5 235,447 6Q0 8.665 48.443 14VM6 3,976 11.3 30.J24 *W43 H 3.773 2e6 6 2o3s LSII DIMOUTI 2u 05 20,00D 3.Q49 IU77 37 720 1.6ti I 15196 1331 1 39 53 EQUAT.aUINEA 25 0.4 7.500 330 146 1.690 1,010 447 643 450 IS60 .67 2; 32 1t1 D ETlIOPIA 1.222 54.8 59.325 110 6.206 32.39 14.020 4,115 9.a58 tSD 3.319 26 so 545 5 2J34 23 GABON 268 1.2 27,.00 4,450 5.341 7.976 5300 70 4.650 2.40D 276 30 6A41 255 1 474 2o GAMBIA II 0.9 s,g0 390 367 2t49 1.310 s0o 53D L,ID 102 22 268 422 7 t93 S4 GHANA 25.5 1130.00D0 450 7.066 35.73 14,10D 5,45t S,642 2m.150 2.D 12 2.443 no 5 2A47 L GUINEA 246 6.O 24.000 S10 3.103 19.426 14,l00 I'm5 12,6U5 4.DD 926 79 3.D2 39 6 I Z2S GUINEA.OISSAU 36 1.0 5.s00 210 217 4.143 2577 415 2092 1.4 l6e Its 4s4 mg9 39 It 70 KENYA 50 25.6 337.ODD 330 8,453 154.490 63,324 8.615 s4.709 3.76 3 "'9 2.45i tog 7 SJE2 4 4.11 LESOThO 30 1.9 21.6W 590 1,090 5,425 2346 600 1.746 29[t4 1m5 I53 2.92? 251 S 2a tJ LItBERIA31 II 2.7 16,074 450 1.24 B.142 .94 557 3.55 3.615 552 73 2.L& 40 7 4S4 1i3 MADAGASCAR SP7 22.4 47.714 230 2SD9 29.147 14.640 43t40 10.l0t I3.AC SD0 Z3S4 611 t4 2.67 6 MALAWI IIS 9.2 32,23e 210 1.S96 12f561 9,963 2.S2D 7.443 L900 59 3 106 3.3 JuS 7 Lts2 3 MAU 1,240 9.0 32,0D 3 tn730 29,400 13,004 2X404 10.0)0 L5.496 gm 24 3.213 919 11 3,3 775 MAURIrANIA 1.t!26 2. 17.200 s30 1,109 5,214 2.LIO 20 Gm 5.700) 414 a 3.4 47s 7 MAURMUS 2 1.1 44.565 2,70 2.95 2X091 I3, 3.620 ItD 291 LAOG 2, 47 1 4B7 MOZAMBIQUE 802 16.6 4u.tm 60 1.04 32X,2 13D3 4,6DD 51S 146923 3,511 40 1.934 712 31 2.35 so NIGER 1,267 ILI 31.0tt 3 2.466 19,701 6.694 274%6 3.926 12.36 701 16 2.411 an a 1.6 615 NIGERIA 4.51 924 101.9 I32,572 320 32,944 19,675 59.10D 33.430 25.67 2l0.3 DJ7S 23DS I22 al 6 Is356 795 RWANDA 26 7.3 17,135 250 13.13 UX.985 s,4s 971 4.n74 G6.o SD 479 5.7X6 75 7 611 in SENEOAL 197 7.8 112600 710 6.124 25,459 10.77 3.777 6 3.738 IA44 78 L.9nt 333 2 13 37 SIERRA LEONE 72 4.4 52.23 170 726 11,659 7,0 I2 5.S23 4.24 36 3 62 267 225 16 S97 m SOMAL 3Y 635 *.3 26.7D 2t0 996 22.35 7.112 2.460 4.652 14.191 224 35 2.716 544 23 LIM 75 SNUtH AFRICA 6 1 1.221 39.5 5,030,743 2,610 3H.167 356902 6211/3 57.034 5.019 233.919 6MM 292 Lin 71 3 3.w IL497 UDAN7I 2,506 26.6 117.O9 420 11.167 22,952 5.094 2.245 5A9 11.06 3,042 9 s63 196 2 I.4 591 SWAZIAND 17 0.9 25.540 1.00 9m30 2.913 2.757 659 2,06 64 92 171 3S7 30 3 2" 3 TANZANIA 945 26.0 10DD 110 2,561 64,007 2011 3.349 24.6t2 31.919 4.0D07 30 1 2S 32 302 LI" TOG(3 57 3.9 4,225 400 1.575 5.747 2,293 IY. 713 2.23 454 30o I,AN 13S1 4 544 H2 UGANDA 236 17. 50.SD 170 2,919 3Q96U ,061 2z9oS 5.973 2210D 71 232 2.m 619 I21 97 1.12 ZAIRE 2.34 39.J 20.900 220 5,755 ISS,D9 60.9DD 230 55,1300 S7.0 7,09 66 3.901 115 is 5.J07 435 ZAMBIA 753 *.6 102.S5 290 2,SS 403U 20,733 6.6 143 L5.93 3,A5 S4 4.121 394 16 3.21 5I UIM3ABWEUI 391 10.4 415,0D SQ 5,S96 91.0A1 11434 U6 .Q73 67.757 5237 23 .7 219 IS 3.5 4.53 TOTAL 24591 5421 5105 999 _ 4941 267.736 2.69D42S 619,557| 12199 424,288 937,7961 243,92 722 3.22 58.305 47A NOTES: I/ Saceu ofpudlidnu The Wr1 Rk Adlo 1994 21 See d GNP dtu World D lpnutu Rept 1993 ad Word Tabn 193 71N GN 1967 3/ ONP In 1990 V S5.19 Km f doR Rua I P d 4112,SODKm *(du Rwm Road; at laud gi tR - alub. in lmuldiUM6 S0 lm: b--u 5 w El p mg SUa3, u r IY Main rlsh uec primary awl ulao h t~. ThTy ieyie 1.953 brn oenway sundard 01f R_im v ul. i d .6w5s 0 l i min aM 3,759 in .416. e*iniy waS 1usd, Orarmeof Trimo aw raviia a*nbw.k Appendx 2 Road Conditon by Category Elmted Pbhyea Candi of Roads, 199 Countrgy Main Paved Network Main Unpavod Network Rural Condition Conditbn Toal Main Network Len8th Lengh Laeng Good Fair Poor Lerngh Good Fair Poor LnWh (kim) (km) (km) percent (kn) percent (Jun) Angla 21,780 15.811 7.942 n.a. n.a. n.a. 7.869 n.a. n.a. n.a. 4.518 Benin 15.682 3.42S 1,195 13 S9 28 2,230 10 40 50 10,4S7 Botawan 33.264 17,867 2,831 94 4 2 15.036 45 19 36 11.000 Buridna Fao 13,538 8,739 1,506 70 12 18 7,233 16 55 29 4.378 BurnrJi 6,466 4,099 1.011 75 19 6 2.156 37 53 10 2,189 Cameroon S4.1I2 33,000 3.670 25 60 15 29.330 n.a. n.a. na. 18,000 Cap Verde 1,214 1.095 679 14 59 27 416 0 20 s0 n.a. C.A.R. 24,441 9,300 440 30 35 35 8,860 68 16 16 14,400 Chad 28,717 3,8900 300 0 10 90 3.500 0 0 100 24.000 Comnoros 795 735 467 43 53 4 268 25 38 37 n.a. Congo 11.504 10,800 1.245 50 12 38 9.555 38 27 35 200 C8ted'Ivoim 48,443 14.976 3.976 75 25 0 11,000 34 65 1 30,224 Djiboud 3,429 1.S77 857 51 38 11 720 51 38 11 1.668 EquatL Guinea 1,690 1.090 447 27 50 23 643 30 42 0 450 Ethipia 32,339 14,020 4.115 47 42 11 9.905 47 31 22 1S.000 Gabon 7,976 5.30 700 30 30 40 4.600 32 30 38 2,400 Gambia 2.492 1,310 510 22 46 32 800 32 39 29 1.080 Ghaa 38,731 14.100 5,458 28 21 51 8.642 32 36 32 21.930 Guinea 19,426 14.000 1,382 J S 0 50 12.618 0 0 100 4.500 Guinea-BissLau 4,143 2,S77 485 39 26 35 2,092 6 6 88 1.404 Kenya IS4,490 63,324 8,615 32 39 28 54,709 66 15 19 87.276 Lesbdjo 5.425 2.346 600 53 29 18 1.746 16 57 27 2.904 Liberia 8.142 3,945 5S7 85 13 2 3.388 15 75 10 3,615 Madagascar 29.147 14.640 4,540 56 27 17 10,100 27 30 43 13.000 Malawi 13.361 9.963 2,520 56 38 6 7.443 B 76 16 2.000 Mali 29.400 13.004 2,404 70 14 16 10,600 10 24 66 15.496 IMaurtaia 8.214 2,100 1,500 58 30 12 600 16 33 51 57C Maurtis 2.091 1.800 1,620 95 S 0 10 90 5 5 na. Mozanbique 32.042 13.308 4,600 19 49 32 8,708 3 17 80 16.923 Niger 19.701 6,694 2,768 67 5 23 3.926 0 10 90 12,306 Nigeriaa 189.675 59,100 33.430 34 32 34 2S.670 24 17 S9 108,70 Rwanda 12,985 5,84S 971 41 41 18 4.874 19 46 35 6.640 Senegl 15,459 10,Z77 3,777 28 32 40 6.S00 7 21 72 3,738 Siera Leone 11.699 7.085 1.262 62 9 29 5.823 8 37 55 4,254 Somalia 22,545 7.112 2,460 52 33 15 4,652 4 10 86 14.191 Soudt Africa 356.002 62,053 S7,034 na. na. 5 5,019 na. na. 20 233.949 Sudan 22.952 8,094 2,245 27 43 30 5.849 20 20 60 11,816 Swaziland 2,913 2.757 689 35 35 30 2.068 60 37 3 64 Tanzania 64,007 28,011 3,349 39 39 22 24,662 18 44 38 31.989 Togo 5,747 2.253 1.580 75 14 1 1 713 31 36 33 3,000 Uganda 30,968 8,068 2.095 10 63 27 5.973 0 73 27 22,200 Zadre ISS,509 60.900 2.800 20 40 40 58,100 44 29 27 87,000 Zambia 40.388 20.783 6,396 40 30 30 14,387 30 35 35 15930 Zinbabweb 100,071 18.434 8.261 70 27 3 10S173 50 30 20 67.357 a. Main network includes the min rads under IlO govenments. 12.500 kn of rural rads art paved b. 5.889 km of rural roads are paved 152 Appendix 3 Population, Vehicles, Accidents and Casualties in Selected Countries. Cities, and Urban Areas Toart Cawoi Total Casuates rvv*y Coury I Year IP ukn Veices hid den accidents Deaths awuries casuaeffes laccideu hIdex J. t4wmeWon. accidents, mad casuass I. sde led comrl es Beinn 1992 5,042,00D 31,250 2.212 349 1,985 349 Botwana 1991 1,319.000 81.260 8.376 333 333 0.0 Burkina Paso 1983 6,751,000 17,829 924 45 879 924 20.5 Cape Verde 1991 380.000 11.180 1.610 211 47 818 47 0.0 C.A.R. 1991 3.100,000 23.135 633 45 810 45 Caneroon 1992 12.24S.000 110,000 1.028 1.028 C6tc d'lvoire 1982 8,954,000 25s,2D6 4.600 3,936 690 9.250 9.940 2.2 14.4 Djibouti 1991 400,000 20.000 234 44 342 44 Edtiopia 1990 52,800.000 59.323 4,578 1.169 3.409 1.169 4.5 Ghana 19H4 122200.000 63,000 7.346 705 6,977 7,682 1.0 20.9 Guinea 1992 6.048.000 24.000 7.542 423 3.906 423 Kewa 1990 24.328,000 337.000 10.308 1.856 17,074 1I.86 20.0 Lesotho 1992 1.860,000 21,600 2.196 326 1.49S 326 6.9 Liberia 1981 1,909,000 18.074 97 1,676 1,773 18.3 Madqpscar 1991 12 384,000 83.8W 722 26 962 26 Malia 1973 6.043.000 19.075 117 670 787 6.7 Malawi 1991 8.800.000 31.00W 3.256 1.117 2.730 1.117 Mauritius 1991 1,099,000 44.958 2.600 163 3.716 163 Morocco 1991 2s.668.000 702.869 36.433 2.140 10,024 2.140 Nigeraa 1983 89,022.000 650.O00 37.109 10.462 28.866 39.328 1.1 3.8 Rwanda 1990 6.921,000 17.135 2,817 331 2,486 331 Seugglc 1985 6,565.000 106.023 13,960 6.051 483 7,720 8.203 0.6 17.0 Sierra Leone 1978 3.222.000 33.292 3.273 357 3.923 4.280 1.3 12.0 SoutLh Africa 1991 38.900.000 5.030.743 91,428 11.069 136.446 11.069 0.1 Swazland 1991 800.000 28.840 3.360 232 1,455 232 Tanzania 1992 25.965.000 100.000 11.862 1,367 11.406 1.367 Togo 1988 3.377.000 4,225 818 190 2.043 190 R.1 Uganda 1992 17.475.000 50.000 660 660 9.5 Zambia 1991 8,300,000 I02.500 3.283 869 4.519 869 Zimbabwe 1992 10,352.00O 415.000 1.066 2. Population en n and cauaMlfes in seetede ciies Cameroona Yaounde 1979 786.0D0 4.204 46 1.180 1.226 0.3 3.8 Cote d'lvoired Abdijan 19SL. 1.421.000 1,513 56 1.973 2.029 1.3 2.8 Edhio* Addis 1974 1.153.0D0 124 531 655 18.9 Ghana Accra 1985 885.000 2.637 146 1.760 1.906 0.7 7.7 Kenya Nairobi 1984 1.108.000 4.608 281 2.399 2.680 0.6 10.5 Kenya Mombasa 1985 419,000 710 91 479 570 0.8 16.0 Nigeria Lagos 1978 3.517.000 4,478 927 2,352 3,279 0.7 28.3 Sierra Lone Freelonv 1984 444.01W) 1S90 47 1.356 1.403 0.9 3.3 Sudan Kbartou 1984 1.761.000 2,746 246 2.100 2.346 0.9 10.5 Zimnbabwe iHarae 1984 948.000 8.133 156 2.746 2.902 0.4 S.4 3, fopdeax s and cuales in seleced urbanrt Caineroon 1980 3.744.000 9.488 151 2.860 3.011 0.3 19.9 COle d'Ivoiree 1982 4.180.000 2,315 202 2.478 2.680 1.2 13.3 Kenya 1985 2.059.000 S.955 539 4,009 4.548 0.8 8.4 M4orocco 1987 10.565.000 20.746 832 24.303 25.135 1.2 30.2 Senegale 1984 2.363.000 12.973 188 4.464 4.652 0.4 24.7 Togoc ______ 1984 686.000 83 1.490 1.573 19.0 NOTES: Blank spaces mnan data is nxt available a. Vehicle fleet 1980 b. Vehicle fleet 1979 c. Vehicle data do not include motocycles d. City popluation esimtes for 1983 e. Urban population estimate for 1983 f Data for 7 largest urban ares Source Barrett R. National. Urban and City Road Safety Comparisons. Second Road Safety Congr Addis Ababa. Octobcr 16-20 1989 153 Appendix 4 Vehicles, Accidents and Casualy Ratea In Selected Counes, Cits, and Urban Areas Vehile Accidenl Fatlities Ctude 110,000 IIOO,ODO /lOO,OW0 /lOO,ODO Country C Yea Popubtion Papuladn Populadon PopukdZon Populbtion 1. Vedhile, acddent, and auaty rates in sekded eanri. Benln 1992 5,042,000 62 I I Bolswan 1991 1,319,000 616 1,031 3 3 Burin Faso 1983 6,751,000 26 0 1 Cape Verde 1991 380.000 294 1.440 1 1 C.A.R. 1991 3,100,00 75 0 0 Cameoon 1992 12,245,O0O go I I Cdre d'lvoirm 1982 8,954,000 285 180 1 11 Djibouti 1991 400.000 500 1 1 Ethiopia 1990 52,800,00 I1 0 0 Ghna 1984 12,200,000 52 1,166 1 6 Guinea 1992 6,048,000 40 1 1 Kenya 1990 24,328,000 139 1 1 Lesoiho 1992 1,860,000 116 2 2 Liberia 1981 1,909,000 95 1 9 Madagascar 1991 12,384,000 68 0 1Jjia 1973 6.043,0D0 32 0 1 ?dMalwi 1991 S,800,000 35 1 1 Mauridus 1991 1,099,0D0 409 1 1 Morocco 1991 25.668,W0 274 1 1 Nigenab 1983 89,022,W00 73 571 1 4 Rwanda 1990 6,921,000 25 0 0 SmalpC 1985 6.565.0O0 161 1.317 1 12 Siem Leone 1978 3,222,000 103 983 1 13 South Africa 1991 38.900,0D0 1.293 182 3 3 SwasiPand. 1991 800,000 361 3 3 Tare3Tna 1992 25,965,000 39 1 1 Togo 1988 3.377.000 13 1 1 Ugand 1992 17,475.O0 29 0 0 Zambia 1991 8,300,O00 123 1 1 Zimnbabwe 1992 10,352,000 401 1 0 2. Accddent and caualty rates in selected cie Caneon& Yaaund 1979 786,000 535 6 I15 Coe td'Ivoired Abdijan 1982 1.421.000 106 4 143 E3thopia Addis 1974 1,153 000: 11 S7 Ghana Acara 1985 885 000 298 16 215 Kenya Nairobi 1984 1,108,000W.'- 416 25 242 Kenya Iotmbasa 1985 419,000 169 22 136 4igezia Lagos 1978 3S17,000 127 26 93 Siera Leooe Freetown 1984 444,000 358 11 316 Sudan KDrou 1984 1,761,000 156 14 133 Zimbabwe Barare 1984 948,000 858 16 306 3. Accident and casut y rates in selectd urban area Caneroon0 1980 3,744,00D. 253 4 OD Cort d'lvoire 1982 4.180,000 : 55 5 64 Kenya! 1985 2,059,000 . 289 26 221 Morocco 1987 10,5, 196 8 238 Seeg. 1984 26W,000 549 8 197 Tog0 I 1984 686.000 12 229 a. Vehicle fleer 1980 d. City popultion estimrs for 1983 b. Vehicle fleet 1979 e. Urban popation esumates for 1983 c. Vicle dala do notinclude motcycles f. Data for 7 lages urbn areas Sbwre: Banre R.. Nadtona, Urban and City Road Safety Comparisons. Second Road Saey Congress Addis Abdba Occober 16-20 1989 154 | {rwl t [ 1 i W [ g g b g|| | !j} 1ffirf §gy t=S5; -W{s Xf §nTt W9s i1lg g¢il tXn [°r&s Fpt gt jffi 0 9 -X1 t i§1Il rtX M1l iF{0 ff[l W10!0 i §w#§ wS'2 9i71 [S|it | jS |0 [142 r9 g$S 7r gi. gil,!§ [3'1 tIel9 {l[ES S S! fje [itSs rs, [I@ ia! §|| I 1s 3M7 ! U |6 ° 7 3 RECENT WORLD BANK TECHNICAL PAPERS (continued) No. 226 Bindlish, Evenson, and Gbetbouo, Evaluation of T&V-Based Extension in Burlina Faso No. 227 Cook, editor, Inooluntary Resettlment in Africa: Selected Papers from a Conference on Environment and Settlement bsues in Africa No. 228 Webster and Charap, The Emergence of Private Sector Manufacturing in St. Pekrsburg: A Survey of Firms No. 229 Webster, 7he Emergence of Prvate Sector Manufacturing in Hungary: A Survey of Firms No. 230 Webster and Swanson, The Emergence of Private Sector Manufacturing in the Former Czech and Slovak Federal Republic: A Survey of Firms No. 231 Eisa, Barghouti, Gillham, and Al-Saffy, Cotton Production Pmspetsfor the Decade to 2005: A Global Overview No. 232 Creightney, Transport and Economic Performance: A Surmy of Developing Countries No. 233 Frederiksen, Berkoff, and Barber, Principles and Practicesfor Dealing with Water Resources Issues No. 234 Archondo-Callao and Faiz, Estimating Vehicle Operating Costs No. 235 Claessens, Risk Management in Developing Countries No. 236 Bennett and Goldberg, Providing Enterprise Develkpment and Financial Services to Women: A Decade of Bank Experience in Asia No. 237 Webster, The Emergence of Private Sector Manufacturing in Poland: A Survey of Firms No. 238 Heath, Land Rights in CBte d'lvoire: Survey and Prospectsfor Project Inkrvention No. 239 Kirnuani and Rangeley, Inrnationa Inlnd Waters: Conceptsfor a More Active World Bank Role No. 240 Ahrned, Renewable Energy Tecdbologes A Reiww of the Status and Costs of Selected Tchnologies No. 241 Webster, Newly Privatized Russian Enterprises No. 242 Barmes, Openshaw, Smith, and van der Plas, What Makes People Cook with Improved Biomass Stoves?: A Comparative Intemational Reviet of Stove Programs No. 243 Menke and Fazzar, Improving Electric Pouw Utdity Effaincy: Issues and Recommendatons No. 244 Liebenthal, Mathur, and Wade, Solar Energy: Lessonsffrom the Pacific Island Experience No. 245 Klein, External Debt Management An Introduction No. 246 Plusquefec, Burt, and Wolter, Modern Water Control in Irigation: Concepts, Issues, and Applications No. 247 Ameur, Agricultural Extension: A Step beyond the Next Step No. 248 Malhotra, Koeni& and Sinsukprasert, A Survey of Asia's Ener Prices No. 249 Le Moigne, Easter, Ochs, and Giltner, Water Policy and Water Makrets. Selected Papers and Proceedings from the World Bank's Annual Irrigation and Drainage Seminar, Annapolis, Maryland, December 8-10, 1992 No. 250 Rangeley, Thiam, Andersen, and Lyle, International River Basin Organmizations in Sub-Saharan Africa No. 251 Sharma, Rietbergen, Heimo, and PateL A Strategy for the Forest Sector in Sub-Saharan Africa No. 252 The World Bank/FAO/UNIDO/Industry Fertilizer Working Group, World and Regional Supply and Demand Balancesfor Nitrogen, Phosphate, and Potash, 1992193-1998/99 No. 253 Jensen and Malter, A Globa' Review of Protected Agriculture No. 254 Frischtak, Goernance Capacity and Economc Reform in DeLveloping Countres No. 255 Mohan, editor, Btbliography of Publications: Technical Department, Africa Region, July 2987 to April 1994 No. 256 Carnpbell, Design and Operation of Smaliolder Irrigaton in South Asia No. 257 Malhotra, Sinsukprasert, and Eglingum, The Performance of Asia's Energy Sector No. 258 Wily De Geyndt, Managing the Quality of Health Care in Developing Countries No. 259 Chaudry, Reid, and Malah, editors, Civil Service Rgform in Latin America and the Canbbeon: Procaedings of a Conrence No. 260 Hurnphrey, Payment Systm: Principls, Practice, and Impovements No. 261 Lynch, Prvision for Children with Special Educational Needs in the Asia Region No. 262 Lee and Bobadilla, Health Staisticsfor the Americas The World Bank Headquatem European Office Tokyo Office 1818 H Street, NW. 66, avenue dldna Kokusal Building Washington, D.C. 20433, US.A. 75116 Paris, France 1-1, Marunoudil 3-chome Chiyoda-ku, Tokyo 100, Japan Telephone: (202) 477-1234 Teleplhone (1) 40.69.30.00 Facsimile. (202) 477-6391 Facsimile: (1) 40.69.30.66 Telephonew (3) 3214-5001 Telex: Mci64145 WORLDBANK Telx: 640651 Facsimile: (3) 3214-3657 Ma 248423 WORLDmANK Telex 26838 Cable Address: ITDmRAD WASHYTWONOC Cover photograph by Alain Labeau ISBN 0-8213-3143-4