For the first time in over 10 years,
the Government announced new road and bridge toll rates that came
into effect on February 1 this year, after the legislation instrument
was revised by parliament in December 2009. Also increased were
road and vehicle use fees that had remained unchanged for about
8 years. Altogether, new tolls and vehicle user fees will result
in additional annual increases of GH¢30 million and GH¢20
million respectively to the road fund, revenues that will help Government
reduce arrears, clear maintenance backlog and stabilize the condition
of the network.
Road Funds have emerged as one of the more popular forms of financing
road sector maintenance funding gaps in many countries and Ghana
has had a fair share of its benefits. However challenges remained
because tolls and fees were unchanged for ten years. Had rates been
increased gradually over the last decade to current levels, more
than $120 million would have been accrued from road tolls and $80
million from road and vehicle user fees.
Financing Road maintenance
The main sources of financing road development and maintenance
are the Road Fund, the Consolidated Fund and development partners.
Development partners like the World Bank, European Union, African
Development Bank and other bilateral agencies have over the last
decade financed about two-thirds of the total annual $350 million
cost of road infrastructure—about $200 million annually—while
the Government, under the Road Fund and the Consolidated Fund picked
up the remaining $150 million.
Revenues accrued to the Road fund are used for routine and periodic
maintenance, as well as rehabilitation works, largely executed by
Ghanaian contractors. Given the inconsistency of inflows into the
Consolidated Fund and clear evidence of diminishing donor support
since 2007, the Road Fund will assume the most sustainable financing
instrument for maintaining road infrastructure.
Since 2005, an average of $110 million was paid to the Road Fund
annually. Key constituents of the Road Fund are the Fuel Levy sources,
and the non-Fuel Levy sources. The Fuel Levy is a direct indicator
of road use and is contributed to the Fund whenever fuel is purchased
from the pump, about 5 cents for every litre consumed. Over the
few years it formed the bulk of Road Fund revenues, contributing
over $100 million or 95 percent of the total annual revenue. The
fuel levy’s dominance exposes the Road Fund to immense risks,
particularly rendering it vulnerable to the slightest dynamics in
the petroleum sector.
The non-fuel levy sources comprise Vehicle Registration Fee, Road
User Fee, Road and Bridge Tolls and International Transit Fees that
are collected by the Driver and Vehicle Licensing Authority (DVLA)
and CEPS. Altogether, they contribute the remaining 5 percent, about
$ 6million.
The efficient delivery of road infrastructure services in Ghana
is seriously constrained by the government’s inability to
generate adequate funds, especially from domestic sources. It appears
successive governments had difficulty doing this due to a combination
of factors—lack of political will, ambivalence, political
expediency, weak capacity and lack of independence of the Road Fund
Board.
Expected gains from recent road and bridge tolls increases
The Road Fund’s 2007 annual financial statement reports an
amount of GH¢1,782,059 as income from all toll roads in that
year, a rather modest amount, corroborating the wide perception
of leakages at the toll stations. Financial figures for 2009 are
expected to report twice this amount since vehicle numbers have
increased by over 20 percent and toll booth numbers doubled to 29
nationwide.
Based on traffic count data, expected revenues can be determined
for each tolled station. The Accra – Tema motorway currently
has 36,000 vehicles plying daily comprising motor bikes –
1 percent; cars - 47 percent; pick-ups and 4-wheel drives –
18 percent; light buses - 18 percent; heavy buses 3 percent; light
and medium goods trucks - 9 percent; heavy goods trucks –
4 percent.
Current projections indicate that with the recent tariff adjustment
Accra – Tema Motorway net revenues will increase from GH¢62,000
per month to GH¢600,000. The Road Fund should reap about GH¢7
million from the motorway this year, up from the previously projected
GH¢0.75 million - a ten-fold increase. This analysis takes
into consideration, operator’s enhanced GH¢100,000 recurrent
expenditure, paid up front, and 10 percent operational losses, from
exemptions, etc.
The Tolls Act exempts vehicles bearing official identification
marks of the following institutions from paying road tolls: the
armed forces, police, fire service, prisons, diplomatic missions
on reciprocal basis, government and mission hospitals and the Ghana
Red Cross Society.
Similar revenue increases are expected from the high trafficed
roads, eg. Accra -Cape Coast (Mallam - Kasoa) and Nsawam –
Kumasi roads, approximately GH¢6 million each. Traffic growth
however varies significantly across the country, with Average Daily
Traffic starting high on the Motorway and Nsawam roads, in excess
of 30,000 each, to low figures in the northern and western regions;
eg. Bamboi – 450. The remaining 26 tolled stations will generate
in excess of GH¢9 million per annum.
Subsequently, if the reported leakages in revenue collections from
toll stations are blocked, the recent toll hikes should altogether
increase Road Fund receipts to GH¢30 million, from last year’s
projected average of GH¢3 million.
Ghana’s rates versus international trends
Ghana’s toll rates before February 1, 2010 were out of touch
with economic reality, and far lower than what pertained in neighbouring
countries. While Togo charged 400 CFA (US$1 or 100 cents) for crossing
the bridge over River Mono on the border with Benin, Ghana charged
5 pesewas (3.5 cents) on similar bridges. The bridge over River
Tano at the Ghana – Cote d’Ivoire border town of Elubo,
whose construction was financed by Ghana is not tolled. No wonder
the bridge is weak and in an imminent state of failure. The previous
rates were too low, equivalent to 15 percent of their original US
dollar value or less than 10 percent of the cedi value.
Worldwide, toll rates vary greatly, not only in absolute terms
but also in relation to the average income of the population. Consequently
the toll burden, even when low in per kilometre terms, is higher
for poor countries and lower for wealthier countries. A 2005 World
Bank toll study updated by this writer in 2009 to include Ghana,
compared sample toll rates as a percentage of Per Capita Income
(PCI) for select countries.
The analysis, based on an average road length of 50km, showed that
Ghana’s toll rates (2009) were about one twentieth of what
could have been, and completely out of line with global trends.
Even with current 10 times hike in the rates, tolls are still more
affordable in Ghana than India. Ghana’s ratio of toll rate
to the PCI is 1 cent per km, which is still one of the lowest in
the world, compared to other countries in the study: India - 3 cents/km;
China - 5 cents/km; Brazil – 7 cents/km; South Africa - 10
cents/km; USA - 13 cents per km; Mexico 17 cents/km and Japan -
22 cents per km.
Ghana should also consider charging different rates for various
road lengths. Currently, a fixed amount is charged for various vehicles
types for all roads, the longest being the Nsawam - Kumasi road—a
distance of over 200 km—and the shortest, the Accra-Tema motorway,
a distance of 19 km. The Accra-Tema motorway being the shortest
of Ghana’s tolled roads is therefore the most expensive per
kilometre. Fortunately however, the average income of users on the
motorway is about the highest among all toll roads and therefore
compensates for the affordability principle in tolling.
Strengthening tolling and road maintenance
Ghana’s Road Fund suffices for only half of the country’s
maintenance needs and currently is in arrears to contractors to
the tune of over GH¢ 120 million. Key measures must be taken
into consideration if the objective of sustainable road maintenance
and management is to be achieved in Ghana. The Road Fund’s
poor financial performance could be attributed to the imprudent
manner in which it was managed by successive boards. Its Board comprises
13 members from public and private sectors, with the majority from
Government institutions. The Chairman is the Minister of Roads and
Highways, and his Chief Director is the Secretary, thus effectively
hobbling the Board, and making it a de jure department of Ministry.
Structurally the reconstituted board remains unchanged and hence
its ability to advance the business needs of the institution is
far from certain.
The team that designed the current Road Fund Act, Act 536 in 1997
(whose membership included this author) anticipated that with time
the contribution of private sector would increase while Government
appointed persons decreased.
There is now therefore the need to strengthen road toll management
with clear delineation of responsibilities. Currently the Ghana
Highway Authority has oversight responsibility of toll collection
but it is important that this responsibility is transferred to a
body established by an act of parliament, namely, a National Road
Toll Authority, supported by professionals transferred from GHA
to regulate toll roads. Such measures will ensure that politicians
are taken out of the decision making process in determining the
level of rates. This is also necessary because a number of tolled
roads are now located in urban areas and under the jurisdiction
of the Department of Urban Roads.
The responsibility of the new regulatory authority shall include,
inter alia, monitoring and controlling private firms operating tolling,
collecting traffic data of toll areas, making recommendations to
parliament for review of the toll rates, analyzing the rates review
mechanism, and undertaking all technical and financial aspects of
road tolling. The new body should take over technical works while
GHA focuses on its core mandatory duty as implementation agency
of trunk roads. The Road Fund Board should focus on identifying
other sources of funds, the business needs of road financing, monitoring
CEPS and DVLA receipts, and payments to contractors.
Increased responsibilities and more expectations from the Road
Fund
Increased tolls go with a lot of responsibilities. There are 29
toll stations and 1.1 million vehicles in Ghana and the development
of a viable operational road tolling policy requires a structured
approach to ensure maximum returns. The Motorway for example must
set the best practice tolling system in Ghana with better lighting,
improved pavements, etc. With the average 1000 percent increases
in road tolls, Ghanaians expect to see visible, tangible improvements
on our roads. Expectations though justified, would not be met soon
due to the wide deficit in road financing. Nevertheless, Ghanaians
must demand accountability and the Board owes it a duty to disclose
income and expenditure statements.
With the new rates, annual receipts from road tolls and DVLA road
and vehicle user fees will exceed $34 million by 2012, up from the
current $6 million. Doubtlessly this will fill a large gap in road
fund maintenance programme.
Road authorities must also establish a consistent axle load control
scheme which will go a long way to reduce maintenance costs. Government
has recently revised the axle load limit in line with the ECOWAS
specifications but there are not enough weigh bridges, hence vehicles
still exceed allowable limits and pose risks to facilities. A typical
case is the Adomi Bridge, which may soon be closed for major rehabilitation
due largely to excessive loads.
Road authorities should also introduce electronic tolling collection
systems to encourage and facilitate the construction of more toll
roads. Electronic tolls lead to a reduction in toll collecting costs
and passenger time costs. The most viable e-toll will involve working
with the DVLA to design new digitized vehicle number plates that
can be captured by cameras. It is possible to implement this in
Ghana as it will yield other benefits, including crime prevention
and detection.
Governments the few last years have also reneged on their obligation
to increase the fuel levy by an amount of 1 cent per litre annually
until it reaches the equivalent of 9.5 cents. A rate of 6.7 cents
achieved in 2005 has diminished in value due to the depreciation
of the cedi and currently equivalent to 5 cents. The laws must also
be revised to include liquefied petroleum gas in the road tax regime
since 20 percent of commercial vehicles now run on Liquefied Petroleum
Gas.
Construction costs have risen due to rising labour, material and
fuel costs. Several consortiums have attempted to finance, build
and operate new highways but the low tariffs made such ventures
unattractive. It is important to note that all countries go to the
same market to source for contractors and construction materials
to develop infrastructure and thus under-recovery via low rates
will affect the nation’s ability to attract quality personnel
and deliver good infrastructure for the benefit of the populace.
The efficient management of the toll roads is imperative in reversing
the backlog maintenance in the Fund. It is important the Ghanaian
public is further educated to embrace the new toll rates to enable
the road authorities generate sufficient funds to improve road maintenance
on timely basis. Good roads improve vehicle riding quality, reduce
vehicle operating cost and enhance the general investment climate
of country. Research indicates that one dollar of maintenance deferred
increases to seven dollars of rehabilitation or reconstruction works.
As Ghanaians are keen to develop the nation, we must make efforts
to do what all developed countries did, that is pay for infrastructure
delivery and maintenance. Over the years, we have depended on the
benevolence of foreign countries who tax their citizens to furnish
aid for road financing and it was time to raise funds from internal
resources as aid inflows are diminishing. Ghanaians love their cars
and there is no other place to raise funds to maintain the roads
than ourselves.
Article : Charles Kwame Boakye
Institute for Infrastructure Development, Accra
cboakye@infrastructureghana.org |