Strategies Towards Diversifying RMF Funds: Assessment of Current Resources

1. Joseph O. Haule Roads Fund Manager Tanzania Strategies Towards Diversifying RMF Funds: Assessment of Current Resources 8th ARMFA GENERAL ASSEMBLY October 12th to 16th, 2009 YAOUNDE HILTON HOTEL CAMEROON

2. Structure of Presentation • The underlying problem • Current Status of RUCs in Africa • Criteria of Good RUCs • Alternative RUCs • Conclusion and Recommendations

3. Africa Infrastructure Needs Source: Africa Infrastructure Country Diagnostic Study Annual Report 2007

4. Financing requirement for transport infrastructure in Selected Countries Source: Africa Infrastructure Country Diagnostic, 2007

5. Africa Infrastructure Needs • WB study recommends infrastructure investments in sub-Saharan Africa should exceed 5% of GDP to achieve the UN Millennium Development Goals (US $40 bn) • 4% of GDP should be added for operation and maintenance to ensure sustainability of infrastructural investment (US$ 40bn) • Compared to Brazil and India launched US$ 75bn and US$100bn respectively

6. Tanzania Transport Needs Phase 1

7. Current Status of RUCs in Africa

8. Status of RUCs IN AFRICA

9. Fuel levy/Road user charges (%) (Av.= 80% of RUC)

10. Principles of Good RUCs • Targets road users • Variable across vehicle classes • Have relationship to use of roads. • Can be adjusted to match maintenance needs.

11. Principles Continued • Simple and inexpensive to administer (e.g., not subject to widespread evasion, avoidance, and leakage). • Is enforceable • Generates sufficient revenue • Easily recognisable by road users as a road user charge;

12. Principles Continued • Distinguish between paying for the right to use the road network, actual travel on the roads, the occupying of road space (either by parking or causing congestion), and the benefits of road access.

13. Sources of revenue: • Fuel levy: Advantages: • Reliable source with significant contribution • Easy to collect

14. Fuel Levy Challenges: • Fuel smuggling • Under declaration of imports • Adulteration by mixing diesel & kerosene • Dumping of transit fuel • Limitations to increase it due to inflation and affordability • Vehicles using other sources of energy e.g. bio fuels

15. Motor Vehicle License Fees Advantages: • Is a direct payment • Is collected by a competent authority • Charged according to age, weight. Challenges: • Is not related to use but ownership • Is once of charge • Old and new vehicles not distinguished

16. Goods Vehicle License Fees & Annual License Fees Advantages • Fees paid according to weight/engine capacity of vehicle • Collected by a competent authority Challenges • Enforcement required to ensure compliance • Fees for Goods vehicles less than damage costs

17. Transit charges Advantages • Sensitive to use by vehicles • Charges collected by competent authority • Charged according to size of vehicles (no. of axles).

18. Transit Challenges Challenges • Risks in transferring collections • Estimating in Distances • Distances to small towns and villages unknown to collecting agents • Use of gadgets to measure distances on trucks are expensive

19. Foreign vehicle permit fees Advantage • Collected by a competent authority Challenges • Use of unauthorized routes to avoid paying • Fee is not related to road use

20. Overloading fees/fines Advantage • Reduces overloading and damage to roads Challenges • Collusion between transporters and operators • Offenders failing to pay • Faulty weighing scales • Congestion at weighbridges • Handling liquid cargo and sealed containers • Fines don’t go to the Roads Fund account.

21. Weight distance charges Advantages • Vehicles pay for actual road use Challenges • High Costs of administering the Fee • Tampering of gadgets • Gadgets are expensive

22. Direct Tolls Advantages • Directly related to road use Challenges • High administration costs • Evasion of toll plazas. • Theft by unfaithful staff • Contests by road users living nearby • Contest if users pay other user charges

23. Congestion pricing • Widely used outside Africa e.g. Singapore and London. • Aims to curb congestion • Shifts rush hour to other transport modes or to off peak hours

24. DETERMINATION OF RUC • Determination of maintenance needs • Compare with funding levels • Determination of funding gap • Bridging the gap • Adjusting road user charge rates • Consideration of new sources and its rates • Use of RONET model

26. Alternative RUCs and Charges

27. Alternative sources of Road Financing Traditional Sources Private Finance Road Funds Public Private Partnership Rehabilitation & Maintenance Construction, Rehabilitation & Maintenance Construction

28. Source: Proposal for Increasing Funding for Road Maintenance, 2006, Roads Fund Board

29. Table 4.2: Evaluation of other possible sources of financing

30. Charges Payable by Road Users in SADC

32. Performance Indicators

34. Proposal in 2007

36. Proposal in 2009

38. PERFORMANCE REVIEW • Share of Road Fund to Road User Charges

39. Share of Fuel Levy to Roads Fund

40. CONCLUSION & RECOMMENDATIONS • Maintenance needs be reviewed annually and compared with the levels of funding. • Ensure Management systems used by road agencies are reliable and consistent • Maintenance management systems output be compared with those from RONET.

41. CONCLUSION & RECOMMENDATIONS • Where the level of funding does not meet the Maintenance needs, a review the RUCs. • Involve stakeholders in preparation of recommendations to widen the Roads Fund base. • Consult key stakeholders who will be affected by adjustment of rates or introduction of new sources.

42. CONCLUSION & RECOMMENDATIONS • Consider diversifying sources of revenue. • Employ staff dedicated to mobilizing resources for road maintenance. • Consider the issue of affordability and inflation when reviewing RUCs. • Avoid having Overloading fines and introduce fees to be collected channelled to the Roads Fund account.

43. CONCLUSION & RECOMMENDATIONS • Donors be requested to fund maintenance on a sliding scale • Use flow meters to measure quantity of imported fuel. • Colourkersone to curb adulteration • Find ways to charge vehicles that use bio fuels, electricity etc. • Introduce Overload control to reduce costly damage to roads

44. CONCLUSION & RECOMMENDATIONS • Neighboring countries cooperate to curb the problem of smuggling fuel • Replace mechanical weighing scales with electronic ones at weighbridges • Use WIM at congested weighbridges • Deal with unfaithful operators at Weighbridges and Toll Plazas • Consideration be given to people living near toll roads

45. Thank you for your attention jhaule@raha.com www.roadsfundtz.org