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VIII
LIST OF TABLES
Table 1: Project Title Definition ... 24
Table 2: Global Outlook Human and Vehicular Demographics (2010-2012) ... 27
Table 3: Road Sector Financing Matrix ... 40
Table 4:Examples of Research Methodologies ... 54
Table 5: Sample of Likert Scale ... 62
Table 6: Year-end Foreign Exchange Mid-Rates in Analysis ... 67
Table 7: Zambia's Road Network ... 69
Table 8: Trends in Road Fund and Maintenance Gap in Zambia ... 70
Table 9: Optimized Budget Run Using HDM IV: TMD Alternative Funding Requirement
(2012-2016)... 70
Table 10: Optimized TMD Kilometres of Roads Maintained (2012 2016)... 71
Table 11: PFR/Urban Funding Requirements (2012 2016) ... 71
Table 12: Combined Outputs (Km) for CRN (2012 2016) ... 71
Table 13: Updated PFR/Urban Funding Requirements (2012 2016) ... 72
Table 14: Upgrading to Bituminous Standard: Analysis of Projected Needs versus Budget . 72
Table 15: Planned versus Projected: Financial Needs and SNDP/MTEF Budget ... 73
Table 16: Computations for Maintenance and Total Road Expenditures ... 73
Table 17: Budget Expenditure as per AWPs (2012 2014) ... 74
Table 18: Zambia's Road Expenditure vs. Gross National Product ... 74
Table 19: Annual Work Plan Proportional Expenditure (2006 2014) ... 74
Table 20: Self-administered Adapted Asset Management Policy Framework ... 76
Table 21: Likert Scales used in the Analysis ... 77
Table 22: Summary of Survey Results ... 78
Table 23: Estimate of 2012 Upgrading Kilometers ... 100
Table 24: Annual Budget Analysis (2006 2014) ... 101
Table 25: Status of Resource Mobilization ... 102
Table 26: Comparative Analysis of Unit Rates ... 103
Table 27: Trends in Diesel Pump Prices ... 104
Table 28: Trends in Zambia's Inflation Rate ... 104
Table 29: Foreign Exchange Rates ... 104
Table 30: Rates Analysis on some Selected Link Zambia 8000 Projects ... 105
Table 31: Rates Analysis on Routine Maintenance Contracts under
Lusaka City Council (2013) ... 106
Table 32: Comparative TMDs and Urban Unit Rates for Seals and Asphalt
on Running Contracts ... 107
Table 33: Unit Rates Development for Urban Roads on Running Contracts ... 107
Table 34: Unit Rates Development for TMDs on Running Contracts ... 108
Table 35: Rates Analysis on Periodic Maintenance Unpaved Roads (2013) ... 109
Table 36: Rates Analysis on Rehabilitation Unpaved Roads (2013) ... 110
Table 37: Rates Analysis of Upgrading Projects (2012 2013) ... 111
Table 38: Worksheet: Current Unit Costs for Asphalt and Surfacing Seals on TMD Roads 112
Table 39: Worksheet: Current Unit Costs for Asphalt and Surfacing Seals on Urban Roads113
Table 40: Worksheet: Current Unit Costs for Asphalt and Surfacing Seals on
TMD Link Zambia 8000 Roads ... 113
IX
Table 41: Raw Data: Category 1 and 2 Questions ... 116
Table 42: Raw Data: Category 3 and 4 Questions ... 117
Table 43: Analysis of Category 1 Questions ... 117
Table 44: Analysis of Category 2 Questions ... 118
Table 45: Analysis of Category 3 Questions ... 119
Table 46: Analysis of Category 4 Questions ... 119
Table 47: Weighted Mean for Category 1 and 2 Questions ... 120
Table 48: Weighted Mean for Category 3 and 4 Questions ... 120
LIST OF TEXT BOXES
Text Box 1: Case Study on Asset Management Challenge in North Dakota ... 38
Text Box 2: Adapted Asset Management Policy Framework ... 39
Text Box 3: Case Study on Challenges of Delayed Payments in Ghana ... 48
Text Box 4: Cover Note Accompanying Questionnaire ... 114
Text Box 5: Sample of Questionnaire used to collect Primary Data ... 115
LIST OF FIGURES
Figure 1: Pavement Performance Curve over Time ... 34
Figure 2: Balancing Maintenance and Capital Investments ... 46
Figure 3: The Conceptual Constructs Model ... 52
Figure 4: The Influence of Philosophical Assumptions on Research Process & Tasks ... 55
Figure 5: A Holistic (Cyclical) Approach to Research Tasks, driven by the CCM ... 56
Figure 6: Zambia's Road Network Condition, 2012 ... 69
Figure 7: Annual Work Plan Budget Trends (2006 2014) ... 75
Figure 8: Condition of Trunk Road T5 Chingola to Solwezi. ... 100
X
ABBREVIATIONS AND ACRONYMS
AC
Asphalt
Concrete
AWP
Annual
Work
Plan
BOT
Build Operate and Transfer
CPI
Consumer Price Index
CRN
Core
Road
Network
CSO
Central
Statistics
Office
DBST
Double
Surface
Treatment
DBSD
Double
Surface
Dressing
EU
European
Union
GDP
Gross
Domestic
Product
GRZ
Government Republic of Zambia
HMS
Highway
Management
System
IRI
International
Roughness
Index
MLGH
Ministry of Local Government and Housing
MoF
Ministry
of
Finance
MTCWS
Ministry of Transport, Communication, Works and Supply
MTEF
Medium Term Expenditure Framework
NAR
Needs
Assessment
Report
NRFA
National Road Fund Agency
NTRC
National
Toll
Road
Company
ORUCs
Other Road-User Charges
PBRCs
Performance Based Road Contracts
PFI
Private
Finance
Initiative
PFR
Primary
Feeder
Road
PM
Periodic
Maintenance
PPP
Public
Private
Partnership
PMS
Pavement
Management
System
RDA
Road
Development
Agency
RMI
Road
Maintenance
Initiative
RMS
Road
Management
System
RoadSIP I
Road Sector Investment Plan Phase 1
RoadSIP II
Road Sector Investment Plan Phase 2
RRM
Routine
Road
Maintenance
RRU
Rural
Road
Unit
RTSA
Road Transport and Safety Agency
SNDP
Sixth
National
Development
Plan
SPV
Special
Purpose
Vehicle
TAZARA
Tanzania-Zambia
Railway
Authority
TMD
Trunk, Main, and District Roads
US$
United
States
Dollar
Veh/day
Vehicles per Day
WB
World
Bank
WEI
Wider
Economic
Benefits
ZIPAR
Zambia Institute for Policy Analysis and Research
XI
ZMK
Zambian
Kwacha
(old
currency)
ZMW
Zambian
Kwacha
(rebased
currency)
ZNS
Zambia
National
Service
XII
XIII
TABLE OF CONTENTS
PREFACE ... V
DEDICATION ... VI
ACKNOWLEDGEMENT ... VII
LIST OF TABLES ... VIII
LIST OF TEXT BOXES ... IX
LIST OF FIGURES ... IX
ABBREVIATIONS AND ACRONYMS ... X
EXECUTIVE SUMMARY ... XV
1.
INTRODUCTION ... 19
1.1
Introduction ... 19
1.2
Problem statement ... 20
1.3
Aims and objectives ... 21
1.4
Scope of the study ... 21
1.5
Significance of the study ... 22
2
REVIEW OF LITERATURE ... 23
2.1
Introduction ... 23
2.2
Analysis of the Study Title ... 24
2.3
The Economic Question of Road Investments ... 24
2.4
Legal and Institutional Framework ... 28
2.5
Maintenance Philosophies ... 32
2.6
Resource Mobilization ... 39
3
METHODOLOGY ... 50
3.1
Introduction ... 50
3.2
Theoretical Background ... 50
3.3
Presentation of the Methodology ... 62
3.3.1
Choice of Variables ... 63
3.3.2
Hypothesis ... 63
3.3.3
Data Collection ... 64
3.3.4
Analysis ... 65
3.3.5
Validation ... 67
XIV
4
RESULTS AND ANALYSIS ... 68
4.1
Introduction ... 68
4.2
The Process ... 68
4.3
Results from Analysis of Secondary Data... 69
4.4
Results from Analysis of Primary Data... 76
4.5
Analysis ... 79
5
CONCLUSION ... 92
5.1
Introduction ... 92
5.2
Main Conclusions ... 92
5.3
Summary ... 93
6
RECOMMENDATIONS ... 96
6.1
Introduction ... 96
6.2
Recommendations ... 96
7
BIBLIOGRAPHY ... 98
8
APPENDICES ... 100
Appendix A: Data and Analysis for Secondary Data ... 100
Appendix B: Data and Analysis for Primary Data ... 114
XV
EXECUTIVE SUMMARY
There are obviously many reasons why the road asset in Zambia has been deteriorating
over the past five decades. Much effort to restore the road asset to its original value and
keep it maintained in a good and safe condition was initiated in mid 1990s with the launch
of the Road Sector Investment Plan Phase I, which was immediately followed by the
launch of a Phase II to run from 2003 to 2013. It is my appreciation that many diagnostic
studies into road financing strategies which could have led to inefficient road asset
management in Zambia have been undertaken, but it is also my conviction that the matter
requires persistent search for sustainable solutions; hence the addition of my voice.
I have analyzed many resources and conducted my own research in arriving at the
observations, conclusions and recommendations made in this book. To permit the easy
use of this book as a reference text, I have systematically arranged the material to include
literature review, methodological presentation, and surveys, as well as presentation of
results and analysis. Conclusions and recommendations have also been included.
Resource mobilization for road construction and maintenance, and subsequent allocation
to respective road programs can often be problematic for an emerging country like
Zambia. It has the potential to lead to inefficiencies in road asset management as has
evidently been demonstrated in the declining road asset value over time. The political, as
well as the economic, landscape plays a vital role in resource mobilization and allocation
strategies as much as the institutional and the legal framework do.
The failure to clear the backlog of maintenance which normally results, largely, from
deferment of scheduled maintenance due to insufficient annual budgetary allocation to the
road sector maintenance programs has led to the significant deterioration in road network
condition, in spite of the relatively low volume of traffic on Zambian roads. The huge
government emphasis that road transport infrastructure is the engine of Zambia's
economic development and growth, often fails to convince the citizens in reality.
Exorbitant road construction costs have posed additional challenges to the fiscus, thereby
constraining both the quantity and quality of road infrastructure that could be constructed
and maintained at any given time. Recent policy drives have been categorical in their
preference of new road construction aimed at linking Zambia, over road maintenance,
which plays a pivotal role in road asset management.
The scenario described above creates a perception that policy pronouncements are at
variance to policy documents which promote sustainable economic development through
efficient road investments, thereby raising fears of typical market failure in the nation's
road sector. This could be seen as being paradoxical in that the actual financing
strategies are skewed towards road construction, a recipe of comfort for the next election
challenge due to increased visibility on the ground, rather than to maintenance, as an
astute and effective way of managing the road asset.
The difficult of establishing congruence between government pronouncements and actual
road business strategies in the implementing agencies has, over the years, posed
challenges to the fiscal policy implementation. Consequently, this has often led to serious
XVI
budget overruns due, firstly, to unplanned expenditure and, secondly, variations due to
scope increase resulting from project implementation without having prior designs.
Persistent budget deficits leading to ever constrained annual budgets have, in most
cases, entirely closed the window for undertaking scheduled preventive and restorative
road maintenance works. This has led to high operating inefficiencies of existing roads
due to the high level of pavement degradation, with the eventual effect of higher vehicle
operating costs, longer travel-times, driver and passenger discomfort, and ultimately,
higher agency pavement replacement costs. The damage caused to the economy is
apparent in all this.
This study undertaken in arriving at this book had aimed to carry out an analysis of road
financing strategies in Zambia, taking a special look into the past decade, with the view to
ascertaining the extent to which roads budgets have been employed to fund new
construction and maintenance. The aim was to establish that there is a mismatch in
allocation of resources for roads in terms of needs and policy, in which new road
construction is highly favored in preference to maintenance. It was hoped that if the
mismatch existed, it would espouse some paradoxes which existed between the road
asset management policies and actual strategies.
The research draws attention to the fact that over 76% of unpaved Primary Feeder Roads
and 70% of unpaved Urban roads of Zambia's road network, which constitutes over 80%
of the Core Road Network is in poor condition, while only 68% of the paved Trunk, Main,
and District road network could be said to be in good condition. Further investigations
revealed that the country has been spending an average of 0.71% of its Gross Domestic
Product (GDP) on road maintenance programs from 2006 to 2012, with a corresponding
expenditure averaging 2.49% of the GDP on its total roads programs.
These indices have placed the country above the comfort zone of 0.5-1% of GDP and 1-
2% of GDP recommended by Heggie (2004) for sustainable road maintenance and total
road expenditures, respectively. However, it was established that the maintenance index
had fallen drastically to 0.40% and 0.44% for the years 2013 and 2014, respectively, while
the total road expenditure remained high at 3.71% and 3.51% for 2013 and 2014,
respectively.
In real terms, the total budget needs for new construction had risen by about 643% for the
period 2012 2016, the Medium-Term Expenditure Framework (MTEF) as enshrined in
the Sixth National Development Plan (SNDP). This was due to the recently launched Link
Zambia 8000 Project whose implementation was tied to the SNDP. The study showed that
concurrent implementation of the Link Zambia 8000 and other scheduled routine and
periodic maintenance projects would demand an approximated US$9.914 billion for the
period 2012 2016, taking into account the increase in construction unit costs, against
the projected total realigned SNDP budget of USD3.459 billion. In estimating the total
expenditure for the period 2012 to 2014, both years included, the study established that
about US$2.79 billion had been spent. This would, therefore, imply a gross deviation if the
program objectives of the SNDP were to be attained by 2016.
The escalating construction costs pose a huge challenge to the efficient utilization of
available road finances. The quantum jump of about 16% and 22% in the unit costs for
XVII
Trunk, Main, and District Roads and Urban Roads, respectively from 2011 to 2013 reflects
declining economic fortunes which hinge on impairing effective road asset management.
The increase of 16% was congruent with a rise in diesel pump price of 15% for the same
period.
A key conclusion was that the deplorable road network conditions in the face of such a
huge funding gap demands for an optimized Core Road Network, one which is much
smaller than the 40,454km currently under the care of the Road Development Agency.
Such an assertion was heavily promoted by the respondents during the survey, and is
supported by the fact that not all the required resources could be made available to meet
the needs of existing Core Road Network. For how else could such a heavy pour of
resources into the road network fail to yield an improved road condition in accordance
with road asset management? The study's determination of the low embrace of techno-
economic and detailed engineering designs in road construction as reflected in an
average expenditure of 5.2% of the Annual Work Plans in the period 2006-2014 probably
speaks volumes about why the quality of newly constructed roads and their associated
short life cycles has been a subject of public discourse.
Other conclusions of the study included the following:
1. Legal and Institutional Framework:
Zambia has a functional legal and institutional framework in place necessary for
effective and efficient road asset management. However, some inadequacies do
exist therein due to absence of a predefined balance between maintenance and
construction.
2. Financial Support to the Road Sector:
The nation has been offering sufficient support to the road sector, when measured
in relation to the country's Gross Domestic Product (GDP) for the period 2006-
2012. The year 2013 and 2014, and perhaps beyond, reflected a major policy shift
to upgrading at the expense of maintenance; thereby contravening good road asset
management principles. This incongruence led to inefficiencies in the nation's road
asset management.
3. Construction Unit Costs:
The sharp rise in construction costs lead to the increased projected needs budget
from USD$4.437 billion to US$9.914 billion from 2012 to 2016.
4. Private Finance Initiative:
Private finance initiative had a role to play in the Zambian road sector, and this was
supported by the legislative arrangements in place such as the PPP Act No. 14 of
2009, but that for some reason, SI No. 73 of 2013 for Road Tolling still empowered
the Road Development Agency (RDA) to collect road tolls without the involvement
of private participation.
5. Use of Scientific Tools:
Highway Management System was in place at the RDA but the expenditure
framework was not directed at the optimized maintenance interventions, thereby
leading to the danger of wasted resources due to over-application of resources on
roads which needed less maintenance, or the erosion of the asset due to under-
budgeting on roads which required more resources for the appropriate
maintenance.
XVIII
In order to safeguard an efficient road network through asset management, the following
recommendations were made:
1. The nation must ensure that an optimized road network, which can be sustainably
maintained in accordance with the principles of road asset management, is
established. This optimized road network should be bankable and assigned to the
Road Development Agency along with the requisite resources in order to prevent
further erosion of the asset value. Asset preservation in form of preventive, rather
than reactive maintenance, should take centre stage in the revised transport policy
document, in which the balance between maintenance and capital road
expenditures must also be clearly stated.
2. Highway Management System (HMS), or Pavement Management Systems (PMS),
supported by the Highway Development and Management Model (HDM-IV) should
be enforceable and be used to arrive at the Annual Work Plans.
3. A detailed high-level investigation should be launched to establish why construction
unit costs, have been sky-rocketing. Focus areas should include the manner in
which contracts are awarded, possibility of fronting in the bidding process due to
Citizen Empowerment Policies, and collusion among foreign state-owned
contracting firms. The durability of recently constructed or rehabilitated roads could
also be used an indicator of the governance levels in contract administration
processes.
4. For the North-South Trade Corridor, which carries most of the freight in the nation,
it is recommended that the government considers investing in alternative modes of
transport, such as railway, in a bid to leverage the distress caused on the road
network by heavy truckloads. This move would ensure prolonged highway
lifecycles and work to promote the nation's competiveness in regional trade. With
road tolling now in place, a policy to allocate a percentage of the tolling revenues to
the development of alternative modes of transport could be considered.
It is the author's belief that the summary provided here covers the essential material and
that it was not intended in any way to be a replacement for the research work to which the
reader, who has sufficient time, is now invited.
19
1. INTRODUCTION
1.1 Introduction
The relative importance of road transport in the Zambian economy has increased over the
decades, to some level where road transport constituted about 71% of freight in 2008
1
,
although the figure quoted in the Transport Policy document was about 80%
2
in 2002.
There might be fluctuations in the figure quoted for each year but, with the apparent
deterioration of existing railway transport infrastructure, an even higher estimate could be
posted to date. The gazetted road network is about 67,000km
3
compared with the railway
network which is estimated at 2,400km (1,200km for Zambia Railways and 1,000km for
TAZARA
4
). The huge disparity in network coverage is also reflected in budgetary
allocation for the two transportation sub-sectors where, for instance, the Sixth National
Development 2013-2016 allocations reflect the total budget of ZMW16.869 billion for
roads and ZMW1.709 billion for railways.
Indisputably, the flexibility and versatility of a road transport system, due to its point-to-
point distribution of freight and people can more easily be achieved where a well-
developed road network exists. However, it must be stated without hesitation that an
efficient road transport system is important for economic development, as transport costs
constitute a significant part of the cost structure of the goods that a country produces or
imports. If transport costs become unnecessarily high, then the country's products lose
their competitive advantage in comparison with goods from other countries. Needless to
mention, there is a cost that comes with any road transport system. Road transport costs
include not only the cost of constructing and maintaining the road network, but also
vehicle operating costs, which increase as roads deteriorate due to increased vehicle
maintenance costs, and the costs associated with increased time-in-transit. Costing and
cost recovery of road infrastructure has been a subject of many debates world-over and a
host of solutions and models have been developed over the years in response to this
challenge.
Raising the required finances for road construction and maintenance, and subsequent
allocation to respective road programs can be a huge challenge for an emerging country
like Zambia. This can lead to inefficiencies in road asset management as is evidently
demonstrated in the declining road asset value over time. Political and economic
landscape, institutional, and legal framework all play a vital role in resource mobilization
and allocation strategies. The challenge of constrained resources should serve as a
cardinal guide in striking the crucial balance required between funds allocated to road
development and those allocated to road maintenance.
1
Raballand, Gaël et al. (2008). The Impact of Regional Liberalization and Harmonization in Road Transport Services: A
Focus on Zambia and Lessons for Landlocked Countries. p. 4.
2
Republic of Zambia, Transport Policy, 2002, p.3
3
Road Development Agency, Zambia
4
TAZARA stands for Tanzania-Zambia Railway Authority
20
It is important for the fiscus to also consider the additional needs that require to be
addressed on an annual basis, such as the clearance of backlog maintenance which
results, largely, from deferment of scheduled maintenance due to insufficient annual
budgetary allocation to the road sector maintenance programs. This reflects more
significantly in the deteriorated road network condition in spite of the low volume of traffic
on Zambia's roads compared to other bigger economies.
Government's recognition of these challenges is reflected in the changing legal and
institutional framework in the country's road transport sector which has enabled the
creation of several agencies such as the National Road Fund Agency (for resource
mobilization, management, and disbursement), Road Development Agency (for planning,
care and construction of roads), Road Transport and Safety Agency (for road safety and
vehicle licensing), and National Council for Construction (for contractor regulation,
training, and capacity building).
The challenges, however, persist in spite of all these road sector reforms. This,
essentially, served as the greatest motivation for my undertaking a diagnostic study into
the road transport sub-sector.
1.2 Problem statement
The condition of the existing Zambian road network has continued to deteriorate unabated
over the years. This is in spite of huge government pronouncements that road transport
infrastructure is the engine of Zambia's economic development and growth, and hence
the vast sums of money which the government has been pouring into the road sector. The
exorbitant road construction costs have posed additional challenges to the fiscus, thereby
constraining both the quantity and quality of road infrastructure that could be constructed
and maintained at any given time. Recent budgetary allocations appear to be inclined
towards new road construction aimed at linking Zambia, more than to road maintenance
which plays a pivotal role in road asset management.
This scenario, in itself, creates a perception that policy pronouncements are at variance to
policy documents which promote sustainable economic development through efficient
road investments, thereby raising fears of typical market failure scenario. This could be
seen as being paradoxical in that the actual financing strategies are skewed towards road
construction, a preference of political office holders for their increased visibility on the
ground, rather than as a prudent way of managing the limited road maintenance funds.
The problem is exacerbated by the fact that the substantial portion of resources utilized in
road construction comes from concessional and commercial loans which the future
generations have an inbred mandate to pay back. Worse still, the existing road
infrastructure has created a huge backlog of maintenance due to deferred maintenance
resulting from annual budget deficits.
Over the years, it has been difficult to establish congruence between government
pronouncements and the actual road business strategies in the implementing agencies.
The difficult in harmonizing the two parts has often lead to the belief that every political
21
pronouncement becomes government policy and, as such, implementing agencies should
immediately begin to procure contracts to implement politically pronounced road projects.
Consequently, this has often led to serious budget overruns due, firstly, to unplanned
expenditure and, secondly, variations due to scope increase resulting from project
implementation without having prior designs.
The net effect of this is that maintenance of existing roads has tended to suffer at the
expense of new construction due to availability of deferment options on the maintenance
of existing roads. However, persistent budget deficits leading to ever constrained annual
budgets have, in most cases, entirely closed the window for undertaking scheduled
preventive and restorative road maintenance works. This has led to high operating
inefficiencies of existing roads due to the high level of pavement degradation, with the
eventual effect of higher vehicle operating costs, longer travel-times, driver and passenger
discomfort, and ultimately higher agency pavement replacement costs. In the end, the
economy has continued suffering due to the ever-widening maintenance funding gap.
1.3 Aims and objectives
In this study, I had aimed to carry out an analysis of road financing strategies in Zambia,
taking a special look into the past ten years, with the view to ascertaining the extent to
which roads budgets have been employed to fund new construction and maintenance. I
also aimed to establish that there was a mismatch in allocation of resources for roads in
terms of needs and policy, in which new road construction was highly favored in
preference to maintenance. This mismatch, if it existed, I hoped, would espouse some
paradoxes which existed between the policies and actual government maintenance
strategies. I further aimed to establish the sustainability of existing road financing
paradigms in Zambia and their consequential effects on the national economy as whole.
Finally, I was hoping I could attempt at providing answers on the way forward for Zambia's
road sector.
1.4 Scope of the study
Broadly speaking, the study was limited to the past ten years of the Zambian transport
sector development, a period which had seen phenomenal policy and institutional reforms
in the transport sector, coupled by the unprecedented investments in the road transport
sector in particular. Emphasis was placed on road sector financing and performance
taking into account resource mobilization, allocation, and disbursements to demonstrate
the paradoxes that could have led to declining road asset value. More specifically, a
comparison of budgetary allocations between new construction and maintenance projects
was made to reveal the real thrust of road sector strategies in comparison with policy
guidelines. A detailed analysis was conducted on the projected road sector needs and
unit rates in order to make congruent comparisons with projected resources.
An appreciation of literature review has been presented in Chapter 2, while research
methodology is presented in Chapter 3. The data collected was analyzed and findings
22
presented in Chapter 4. The conclusions have been presented in Chapter 5, while the
recommendations have been presented in Chapter 6.
1.5 Significance of the study
The significance of this study is that it would help put into context the practical challenges
that the Road Development Agency and the National Road Fund Agency face annually in
their quest to effective and efficient road asset management and financing in Zambia, as
the analysis was based on tangible, rather than hypothetical information. Primarily, the
outcome of this study was meant to help road sector agencies and policy makers to
devise strategies which would remain congruent with the transport policy drive for
sustainable road construction and maintenance.
Further, it was hoped that the results would greatly assist future researchers who may not
have direct access to the data sources which the author had during the research. The
lessons learnt would be significant in helping the author to contribute to future transport
policy reviews and realignments as the nation seeks to find sustainable solutions to road
asset financing and management in an evolving economic set-up. The beauty of it was
that the author already shared an internal environment with major policy makers and
project implementers, and thus adding to the obvious personal benefit and development in
the road transport sector.
Clearly, the primary focus of this study was to help increase the knowledge about road
financing strategies and road asset management practices in Zambia in order to help
solve future problems in the road sector around the globe.
23
2 REVIEW OF LITERATURE
2.1 Introduction
In this section, the author sought to gain a deeper and more holistic approach to
understanding the paradigms that shape policies and strategies regarding investments in
road transportation, as well as to reflect a bit more on comparative literature which
advocates for specific maintenance philosophies for diverse countries as a means of road
asset management. The review of literature was taken on regional and international
platforms in order to interlock with the best practices that are emerging on the global
stage. Reference materials from the modern to near-modern sources added solidity to the
review of literature. Primarily, key literature was confined to the period not order than
2006, while literature older than that was sparingly and strategically used in exceptional
circumstances to extend the debate.
Most importantly, the author had to be fully aware about the dangers of plagiarism in
scholarly works as well as in developing own concepts in book writing. The exposure of
these dangers needed to be made clear and catalogued prior to going deeper in the act of
reviewing literature. The candidate support pack for Higher National Diploma in
Management, Management Research, quotes Booth et al. (2003, p. 167) was used to
source the definition of plagiarism, in which plagiarism was defined as:
You plagiarize when, intentionally or not, you use someone else's words or ideas but fail to
credit that person. You plagiarize even when you do credit the author but use his exact
words without so indicating with quotation marks or block indentation. You also plagiarize
when you use words so close to those in your source, that if you placed your work next to
the source, you would see that you could not have written what you did without the source
at your elbow.
5
The book further cautions that the implication of plagiarism is fairly straight forward,
adding that "if it's not your work, cite whose it is." (p. 42). Furthermore, it is noted that "the
purpose of a literature review is it to provide a critical analysis of the current `knowledge
claims' regarding your chosen research topic," and that the following guidelines about
literature review (p. 40) were found to be cardinal in a research:
· Do not be uncritical or hypercritical be balanced, otherwise you will lose
credibility.
· Do not lack focus or have too many focuses if you don't have any focus, your
literature review will be too vague. If there are too many focuses then it won't
investigate any of them to a sufficient depth.
· Always link the literature review to research questions this is essential! If the
literature review doesn't link to the questions then there will be no clear logic
5
Candidate Support Pack. Higher National Diploma in Management, Management Research (DV81_36). Scottish
Qualifications Authority. January 2009. p. 42.
24
behind choices of data collection methods or conceptual framework (particularly in
quantitative data).
· Leave enough time to research and review literature not everything you read will
be relevant and some documents will contain a lot of unnecessary information.
Reading and understanding takes time, so don't try to rush this part.
· Use the correct sources take care in the sources you choose: at the least they
might not contain anything useful; at their worst they may be misleading or
inaccurate.
2.2 Analysis of the Study Title
Preliminary research topics were drafted and analyzed in order to arrive at the most
appropriate title. Table 1 below paraphrases the key words on which the author was place
his emphasis in his study.
Table 1: Project Title Definition
No.
Title component
Appropriate synonyms
Comment
1
Diagnostic
· Analytic
· Indicative
· Investigative
· Problem-solving
For more clarity, the
reader is hereby
urged to think of the
project title in view
of the selected
synonyms.
2
Study
· Learn
· reading
3
Road Financing
· road
economics
· road
investment
· road
funding
4
Paradox
· inconsistency
· absurdity
· illogicality
· incongruity
5
Inefficient
· wasteful
· incompetent
· disorganized
6
Road Asset
Management
· road asset administration
· road asset running
· road asset organization
Main source:
www.merriam-webster.com/thesaurus/
2.3 The Economic Question of Road Investments
The economic question about road investment will continue to resonate throughout this
book due to its multi-dimensional nature. For a start, we take note of Eberts' (2010)
6
observation that the interface between transportation investment and economic
development has broad ramifications that go beyond transportation's basic purpose of
6
Eberts, R (2010). Understanding the Impact of Transportation on Economic Development.
25
moving goods and people from one place to another. Whereas there is no doubt that
transportation is essential in the operation of a market economy, Eberts says much still
needs to be understood about ways in which an efficient transportation system can
improve the productivity of the economy.
The strong linkage between national economies and transportation investments continue
to be major subjects of discussion at many conferences. In paper summaries of the 18
th
International Transport Symposium held in Madrid in 2009
7
, the Joint Transport Research
Centre presents a number of view-points that emerged during the conference. For
instance, Mr. Jack Short is cited as having said that:
Investing in transport is not just a response to growing demand, but can be a force for
driving growth if it is well targeted and makes good use of scarce financial resources.
For this, improved appraisal is essential, with Cost-Benefit Analysis and Environmental
Assessment used strategically to find good solutions across a comprehensive range of
potential responses to capacity problems.
This adds clarity to the need of project appraisal prior to making any transport
investments, and only those projects which offer the greatest return to the investment
need prioritizing. During an appraisal process, the issue of costs and benefits takes centre
stage. The fundamental question of road transport investment, actually, relates to pricing
and cost recovery. Harvey and Jowsey (2007; 235-236) observe that transportation
infrastructure is a public or collective good which, though indivisible, but one in which:
It is possible to exclude `free-riders' by levying fees, charges or tolls. One reason for
not doing so is that the costs of collection are regarded as being disproportionate to the
revenue raised. A more fundamental reason is that with most indivisible goods, the use
by one extra person does not impose a sacrifice on others since there is no addition to
the cost of provision. This `non-rivalry' means that, because MC is nil, the maximum
benefits can only be enjoyed if no charge is made (MC = MR = 0), the full cost being
met by the State from taxation.
8
Indeed, taxation is only one of the pricing policies, but borrowing and user-charges are
other options which the State has at its disposal in raising transportation investment
funds. The ideal case is for long-term government borrowing to cover only spending on
capital items. But Harvey and Jowsey (2007; 240) see two major difficulties with such
schemes. The first difficult is that the criterion may be laid down that over time revenue
should cover costs in which case it then becomes impossible to produce up to the point
where price equals marginal cost; and the second is that fixed costs may be so high that
total cost can never be covered by a single price.
There are additional economic factors that actually affect the provision of road
transportation service such as issues of political economy which may have an impact on
7
Joint Transport Research Centre (2010). The Future of Interurban Passenger Transport, Bringing Citizens Closer
Together. 18
th
International Transport Symposium held in Madrid, 2009
.
8
Harvey, J. and Jowsey E. (2007). Modern Economics. 8th Edition. New York: Palgrave Macmillan, pp 235-236.
26
the form and outcomes of the road sector. Wales & Wild (2012)
9
shed more light on
market failure characteristics which may affect the road sector, and these include:
tendency towards monopoly; positive and negative externalities; information asymmetries;
and merit goods.
They contend that:
Roads have many of the characteristics of a good that lead to market failure, especially
in rural areas. Their tendency to be non-rival and non-excludable, combined with
considerable externalities, means they are unlikely to be provided to a socially optimal
level without the presence of non-toll sources of funding and returns, whether
commercially provided (e.g. owners of large mines or plantations who need easy
market access) or political (e.g. state construction and maintenance financed by
taxation of economic activity or political returns from increases in support or the ability
to more easily exercise authority). (p.7)
These characteristics, they assert, seem to justify state intervention in the road system,
although it is clear that this is not unproblematic, given the potential for rent seeking and
that roads are not a merit good in the strictest sense, as people are largely aware of the
likely benefits that would accrue from the presence of a road and greater connectivity.
However, the low traffic volumes that characterize Zambia's road network and most of her
peer countries in Sub-Saharan Africa poses huge challenges to user-pays principle, and
thereby discourage the much needed private finance initiatives. This may be coupled with
inadequate private finance initiative legislation.
The capability for the project to generate revenues, in terms of road infrastructure, is
dependent on the level of traffic volume, as well as the road-users' capability to pay the
set tariffs. In most developed countries, meeting the minimum traffic threshold can be
quite easy, but for most of Sub-Saharan African countries, traffic levels are so low that
public-private partnerships (PPPs) have remained unattractive. The Table 2 below
attempts to demonstrate the disparities that exist in vehicular population in selected
nations around the world. The low per capita traffic levels in Sub-Saharan Africa in
comparison with most of the developed world is evident in the table, and it is thus
inconceivable to assume that investments models that seem to work very well in the
developed could just be adopted and be expected to perform the same way in Sub-
Saharan Africa. The cherished economies of scale which would attract adequate private
finances in to Sub-Saharan Africa would require possible pooling of regional road
networks to come up with an attractive package to the private investor.
9
Wales, Joseph & Wild, Leni (2012). The political economy of roads, An overview and analysis of existing literature.
27
Table 2: Global Outlook Human and Vehicular Demographics (2010-2012)
No.
Name of
Country
Vehicle
Population
(million)
Human
Population
(million)
Vehicle Population
per 1000 people
1 USA
239.8
10
313.90
797*
2 China
>78
11
1,336.72
58*
3 UK
33
12
63.18
519*
4 South
Africa
10.16
13
52.00
165*
5 Zambia
<0.5
13.88
21*
6 Zimbabwe
1.2
14
12.52
7 Kenya
0.935
41.60
24*
*Source: World Bank (http://data.worldbank.org/indicator/IS.VEH.NVEH.P3)
It's apparent that traffic levels, therefore, play a critical role in economic analysis, or
project appraisal, and is thus a very delicate parameter as it hinges on the costs and
benefits attributed to a project, but which have likely wider economic impacts (WEI) often
leading to economic development of the nation. Litman (2013; 2) makes the following
observation:
Conventional transport economic evaluation tends to focus on certain impacts (travel
time, congestion delay, vehicle operation costs, and some accident costs), but
overlooks and undervalues others that are often significant (parking costs, vehicle
ownership costs, and incremental costs of induced travel). As a result of these
omissions, what analysts report as the economic impacts (or net present value, or
benefit/cost ratio) of a transport project are often a subset of total economic effects.
More comprehensive analysis considers a wider set of economic impacts.
Transportation policy and planning decisions tend to support economic development to
the degree they increase efficiency by reducing unit costs (cents per tonne-mile or
dollars per passenger-trip) and favoring higher value travel (emergency, freight,
service, business travel and high occupancy vehicles) over lower value travel. Policies
that reflect efficient market principles (suitable consumer options, cost-based pricing,
efficient prioritization, and neutral public policies) tend to support economic
development. Market distortions that under-price transport activity or unnecessarily
reduce accessibility options can result in economically inefficient travel, in which
marginal costs exceed marginal benefits.
15
It is critical to point out here that benefits resulting from cost-savings for transport users
can be considered in two ways: producer surplus methods and consumer surplus
methods, in which producer surplus methods entail that transport cost reductions lower
producers' input and output costs, thereby resulting in higher net incomes for producers;
10
http://en.m.wikipedia.org/wiki/Motor_vehicle. Accessed July 22, 2013.
11
http://en.m.wikipedia.org/wiki/Motor_vehicle. Accessed July 22, 2013.
12
http://www.whatcar.com/car-news/number-of-cars-on-uk-roads-increases/219239/. Accessed July 26, 2013
13
http://www.info.gov.za/aboutsa/transport.htm. Accessed July 22, 2013.
14
http://www.zinara.co.zw/index.php? Accessed July 23, 2013
15
Litman, Todd (2013). Evaluating Public Transit Benefits and Costs: Best Practices Guidebook. Victoria Transport
Policy Institute, p.2.
28
while consumer surplus methods entail that benefits result if savings accrue to the users
as a reduction in transport costs or charges. Khisty & Lall (2009; 43) define consumer
surplus as "a measure of the monetary value made available to consumers by the
existence of a facility... [which] is defined as the difference between what consumers
might be willing to pay for a service and what they actually pay."
Whatever the case might be, traders and firms are always pleased if the cost of doing
business is lowered, much more if the cost of transportation and vehicle operating costs
are lowered. The resulting effect is increased disposable income, a catalyst for higher
spending, and subsequent growth in the economy. Economics plays a vital role in
determining highway transportation investments and, at the same time, highway
transportation investments help national economic growth; the two are intertwined.
2.4 Legal and Institutional Framework
The past ten years of Zambia's road transport sector has been anchored on the Transport
Policy of 2002, Road Sector Investment Program Phase 2 (RoadSIP II) of 2002, and the
Legal and Institutional Frameworks based on three road sector agencies of 2002. These
are the Public Roads Act No. 12 of 2002 which created the Road Development Agency,
Road Traffic Act No. 11 of 2002 which created the Road Transport and Safety Agency,
and the National Road Fund Agency Act No. 13 of 2002.
In the first instance, the Transport Policy
16
, as a critical component of government's road
transport development process, defines the following strategic goals:
1.
Provide adequate financially and economically sustainable road transport
infrastructure able to facilitate domestic, regional, and international trade;
2. Improve access to jobs as a means of poverty reduction, through increased
economic activity in the road transport industry; and
3. Ensure the provision of safe, efficient, integrated and environmentally friendly road
transport system which meets the needs of road users, and which supports
regional road transport strategies, for sustainable development.
More specific goals, divided into three priority categories, are set in Section 4.2.1 of the
Transport Policy (p. 23), primarily focused on:
1. Roads which aid economic recovery and development;
2. Roads which bring environmental and social benefits; and
3. Preserving investment already made in roads through maintenance.
The Transport Policy document argues that this would satisfy the national goal of working
constantly to reduce transportation problems through planned programs and further called
for development of an institutional framework able to offer competitive terms and
16
Zambia Transport Policy, 2002; p. 19
29
conditions of employment as well as development of an appropriate organizational
structure for efficient management of the road sector (p. 23).
Further review of literature shows that the response was immediate. Three strategic road
sector institutions were born through Acts of Parliament passed in 2002 after the Roads
and Road Traffic Act, CAP 464 of the Laws of Zambia was repealed. The Road Transport
and Safety Agency (RTSA), was created through the Road Traffic Act No. 11 of 2002, and
the Road Development Agency (RDA) through the Public Roads Act No. 12 of 2002.
Similarly, the National Road Fund Agency (NRFA) was created through an Act No. 13 of
2002. The Committee of Ministers on Road Maintenance Initiative (RMI) was also created
to provide overall oversight to the road sector agencies. It is clearly intentioned and
provided for in Section 6 of all the Acts of Parliament for the road sector agencies that
they were to be run as semi-autonomous body-corporate, managed by Boards of
Directors, and capable of suing and being sued in their individual capacity.
To show the severity of its intentions, the government developed a bankable ten-year
road sector investment strategy. The Road Sector Investment Program (RoadSIP II)
Bankable Document was finalized in October 2003 in readiness for implementation from
2004 to 2013. It is evident that:
The Bankable Document presents the results and a review of the lessons learned
during ROADSIP I [1998 2003], key findings from associated studies, and concerns
raised by various stakeholders compiled by the National Task Force and a team of
Consultants, being Deloitte & Touche, E.G. Petit and Partners, Jeffares & Green (Z)
Limited, and LASCO Engineering ("the Consultants"), to identify the way forward and
formulate a financial strategy for implementing an action plan for ROADSIP II.
17
The civil works ten-year budget for RoadSIP II was approximated at USD 1,586 million
(p.17) with broadened objectives of the program, as indicated in the Bankable Document
(p.3), including, but not limited to the following:
a)
Rehabilitation/Periodic and routine maintenance of the Core Road Network
(40,113 Km) through various funding agencies.
b)
Improve road conditions for Trunk, Main, District, Primary Feeder roads,
tourist roads and selected urban roads through full and accessibility
improvements as per "need" and priorities.
c)
Institutional strengthening of the construction industry through appropriate
approaches.
d)
Create employment opportunities through appropriate road interventions.
e)
Improve Road Safety as per Road Safety Action plan.
f)
Improve Environmental Management by building capacity.
g)
Improve Rural Transport Mobility through road improvements.
h)
Improve management of Community Roads through the Road Development
Agency.
i)
Address poverty and HIV/AIDS countrywide through PRSP and National
Policy on HIV/AIDS.
17
RoadSIP II Bankable Document, 2003; p. 1
30
According to the Bankable Document, a compelling reason advanced by the study for
implementing the RoadSIP II was that: "Over a ten-year period, it is considered that the
program will become self-sustaining from internal resources to facilitate routine and
periodic maintenance." (p. 19).
Key RoadSIP II implementing ministries were identified in the RoadSIP II Bankable
Document. These are: Ministry of Works and Supply, Ministry of Transport and
Communications, and Ministry of Local Government and Housing. Meanwhile, resource
mobilization remained under the Ministry of Finance. The institutional framework placed
the Road Development Agency (RDA) under the Ministry of Works and Supply, Road
Transport and Safety Agency (RTSA) under the Ministry of Transport and
Communications, and National Road Fund Agency (NRFA) under the Ministry of Finance.
Ministerial reorganizations effected in 2011 have since seen RDA and RTSA both fall
under the reorganized Ministry of Transport, Communications, Works, and Supply
(MTCWS).
Section 11 (2) of the Public Roads Act
18
mandates the Minister, on recommendation of
the RDA, to appoint, by statutory order, a road authority in respect of all or any district
roads in any area including a local authority area. The road authority so appointed
becomes responsible for the construction, care, and maintenance of district roads with
expense incurred paid from the Road Fund. Sections 12, 13, 14, 15 and 16 of the Public
Roads Act extend the appointment of road authorities to branch roads, urban roads, rural
roads, estate roads, and park roads, respectively.
Specific functions of the Road Development Agency are stipulated in Section 4 of the
Public Roads Act No. 12 of 2002. Section 4(1) states that: "The functions of the Agency
shall be to plan, manage and coordinate the road network in the country." Pursuant to
Section 4(2) and without prejudice to the generality of Sub-section (1) the Agency shall
also:
1. Carry out routine and emergency maintenance of public roads through its
employees or independent contractors (bullet a);
2. Conduct such studies as it may consider necessary for the development,
maintenance, and improvement of the road network in Zambia (bullet b);
3. In consultation with the National Road Fund Agency, recommend to the Minister
funding for development of new roads (bullet j);
4. Enforce axle load control (bullet o);
5. Etc.
Clearly, the RDA's exposition makes it easy for the agency to perform the assigned
functions except with the function on recommendation to the Minister funding for
development of new roads which normally comes by way of political pronouncements, or
party manifestos. In this manner, it becomes difficult for the agency to make appropriate
recommendations as some choices may already have been made at levels of authority
higher than the Board of Directors of the agency.
18
Public Roads Act No. 12 of 2002, Section 11(2).
31
The Ministry of Finance mobilizes resources for road maintenance and construction, and
channels them to the National Road Fund Agency (NRFA). According to Section 4(1) of
National Road Fund Agency Act, the agency is mandated to perform the following
functions
19
:
1. administer and manage the Road Fund;
2. prepare and publish audited annual accounts of the Road Fund;
3. recommend to the Minister fuel levy and other road user charges and tariffs as
required;
4. recommend to the Minister projects for funding;
5. allocate resources-
(a) for the construction, maintenance and rehabilitation of roads based on a
percentage of the annual work program of the Road Development Agency; and
(b) for road transport, traffic and safety management based on a percentage of the
annual work program of the Road Transport and Safety Agency;
6. in consultation with the Road Development Agency, recommend funding for
development of new roads; and
7. undertake such other activities as are conducive or incidental to its functions under
this Act.
The major challenge of the NRFA is to ensure that adequate resources are available for
meeting the project financial obligations since releases by the Ministry of Finance are
made in accordance with the ministry's capabilities to mobilize resources for the whole
economy. As it stands, the Ministry of Finance retains the full responsibility for committing
the government to any form of debt, and the NRFA would not, by any means, be able to
access finance to bridge funding deficits unless legislative changes are permitted.
Nonetheless, public-private partnership (PPP) Act No. 14 of 2009 was enacted to create
an enabling environment for private finance initiatives in the national development
process. It was hoped that through this avenue, the nation would see more direct private
participation in road construction and maintenance through ventures such as Build,
Operate, and Transfer (BOT). Currently, concession type of contracts in road construction
and maintenance are still absent in the country, and the need to investigate why the
apprehension exists cannot be over-emphasized here.
The most recent legal instrument to find its place in Zambia's road sector is the Tolls Act
No. 14 of 2011. It is the first time road tolling is being implemented in Zambia and the
issuance of Statutory Instrument SI No. 73 of 2013, introducing road tolling, became
effective November 1, 2013. In spite of the Tolls Act having been passed in 2011, the
actualization of the toll collection came, of course, against the backdrop of a huge
infrastructure funding gap identified in the 2014 national budget. It should be pointed out
that the Road Development Agency is currently responsible for toll collection and no
private sector involvement has been envisaged. The collected revenue is deposited in the
government accounts held at Bank of Zambia and is intended to be channeled to NRFA
through the Ministry of Finance.
19
National Road Fund Agency Act No. 13 of 2002, Section 4(1)
32
2.5 Maintenance Philosophies
A good road maintenance philosophy is an incentive to sustainable road financing and the
well-being of the economy as a whole. Road maintenance philosophies should be
designed to reflect good road asset management principles and practices. This section
takes a critical look at road maintenance philosophies and practices at a national,
regional, and international stage. The stress placed on practices in Sub-Saharan Africa is
crucial in correlating perspectives with the Zambian case.
Gwilliam et al. (2008; 4)
20
bemoans the lack of requisite expenditure on appropriate
maintenance strategies in Sub-Saharan African Countries, noting that while road sector
reforms focused on maintenance, there was evidence of a persistent capital bias in
spending. He observed that investment accounts for two-thirds of the total spending,
leaving only a third for maintenance, which, based on practices elsewhere in the world, he
argued, was contrary to the requirement that the balance between investment and
maintenance be fifty-fifty. His belief was, however, that high capital expenditure might be
justified in some cases by large backlogs in rehabilitation projects in some countries.
In the case of Zambia, the Transport Policy document is highly categorical on prioritizing
routine and periodic maintenance of the Core Road Network (CRN) rather than
investments in capital projects. The realization of the significance of road maintenance led
to the formation of the Committee of Ministers on Road Maintenance Initiative (RMI),
which was supported by the World Bank. Consequently, Road Sector Investment Program
Phase I, RoadSIP I (1997 2003) and RoadSIP II (2004 2013) were drawn up to
implement the maintenance strategies.
In spite of such categorical disposition of the transport policy, Zambia Institute for Policy
Analysis and Research (ZIPAR) has undertaken some research in Zambia's road sector
whose outcomes point to the contrary practices. They observe that:
Because Zambia is one of the largest and most sparsely populated countries in Africa, only
a small proportion of its roads carry 150 vehicles per day, let alone 300; and these are
already paved. The implication is that very few paving projects are justified on economic
grounds. The above thresholds have been largely ignored since Independence; many
roads have been paved despite having traffic levels well below 150 vehicles per day. 22 As
a result, Zambia had the highest proportion of `overengineered' roads (paved roads with
less than 300 vehicles per day) in a survey of 21 African countries (Gwilliam et al.
2008:37). In other words, Zambia has wasted considerable resources on paving roads
because the vehicle operating cost savings from paving are not sufficient to outweigh the
extra construction costs, even in the long term. The proportion of over-engineered roads
will increase further as a result of the new upgrading projects contracted since 2008.
21
20
Gwilliam, Ken et al. (2008). Africa Infrastructure Country Diagnostic, Roads in Sub-Saharan Africa. Summary of
Background Paper 14.
21
Raballand, Gaël & Whitworth, Alan (2012). The Crisis in The Zambian Road Sector. ZIPAR Working Paper No. 5. pp
12-14
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