ANNUAL MEETING OF THE ASSOCIATION OF AFRICAN ROAD MAINTENANCE FUNDS (AARMF)

1. ANNUAL MEETING OF THE ASSOCIATION OF AFRICAN ROAD MAINTENANCE FUNDS (AARMF) ----------------------- TECHNICAL WORKSHOP YAOUNDE (CAMEROON) : 12-13/10/09 CENTRAL THEME: GOVERNANCE OF RMFs FACED WITH CHALLENGES OF DECENTRALIZATION AND REGIONAL INTEGRATION IN AFRICA2ND THEME: MEANS OF INTERVENTION BY RMFs Sub-Theme 2.4 : MANAGEMENT OF TOLL ROADS WITHIN A CONTEXT OF DECENTRALIZATION AND REGIONAL ECONOMIC INTEGRATION: EXPECTATIONS AND OBLIGATIONS By: IDOSSOU Tchona General Manager of BICI 01 P.O. Box 689 OUAGADOUGOU 01 (Burkina Faso) Tel : +226/50 34 30 43 ; 75 72 11 11 ; 78 81 38 36 E-mail : idossou@fasonet.bf

2. PREAMBLE (REMINDER)/Extracts from Workshop TDR • Main theme of the workshop: Governance of RMFs faced with challenges of decentratization and regional integration in Africa Objective/Expected Results: To provide elements for answers to the governance of RMFs in a context of decentralization and regional integration • Theme of this presentation: Management of Toll Roads within a Context of Decentralization and Regional Economic Integration: Expectations and Obligations

3. Goal: To find elements for answers – in case of tolls – to the various questions asked: * Which are the appropriate collection mechanisms? * Which is the management system used: concession or direct? * What are the expectations of the various stakeholders? * Any threats and obligations? • Results: By the end of this presentation, participants shall have been acquainted with: * the modes of management of tolls and their peculiarities thereof in respective countries; the collection mechanisms and the sharing of proceeds in the context of decentralization as well as in that of economic integration; * the expectations of the various stakeholders; the role of RMFs, the threats nd obligations entailed in the sharing of proceeds.

4. Our task in this presentation is to: • Try – together with workshop participants – to provide answers to the questions asked by all and sundry; • Help participants and others to produce the expected results.

5. THE ROLE OF ROAD MAINTENANCE IN THE ECONOMIES OF OUR COUNTRIES • A few reminders from the AARMF/AGEPAR/AICPR joint international seminar of 2 to 3 December 2009 in Ouagadougou: • The invaluable contribution of road maintenance to economies is universally acknowledged; • This contribution in financial terms, is easily calculated in most countries today; • The contribution of road maintenance to the GDP clearly stands out, even if the mechanisms thereof are not yet well understood in most of our countries; • Studies so far conducted prove that:

6. The non maintenance of road networks engenders loss of the road heritahe, increases the wear and tear of vehicles, increases the cost of road reconstruction, etc. (see Tchona IDOSSO’s presentation at the above mentioned seminar titled “How pot-holes increase the costs of running vehicles”): • data in the table below analyses a survey conducted by the Federation of Zambian Hauliers in 1992; • the vehicle concerned: a 22 wheeled double road train comprising a tractor and a trailer; • state of the road chosen: significant number of pot-holes; • the annual distance covered by such a vehicle is 70 000 km • Estimated running costs are above normal.

7. Source : Federation of Zambian Road Hauliers Ltd., February1992

8. Maintenance of the road network means protecting the road heritage, reducing vehicle running costs, enhancing a profit margin, etc. (see the table below, a summary of the presentation of Mr Soufiane MAGALI at the Ouagadougou seminar, then Director of Road Maintenance in Niger):

9. ADVANTAGES OF ROAD MAINTENANCE Overall balance sheet for a 100km road: For a 3000 km tarred road network, the profit margin would be 90 thousand millions per year, thus representing over ten times the annual maintenance budget for Niger’s road network which has 3900km of tarred roads and 6 800km of earth roads.

10. FINANCIAL NEEDS OF ROAD MAINTENANCE AND THE MISSION OF ROAD MAINTENANCE FUNDS (RMFs) • All studies conducted both in the distant and recent past have led to the following conclusion: THE FINANCIAL NEEDS OF AFRICA’S ROADS ARE IMMENSE. Here are a few figures garnered from road maintenance officials from a few countries: BURKINA FASO = MALI = ~ 40 thousand million CFA BENIN = ~ 35 thousand million CFA NIGER = CAMEROON = ~ 80 thousand million CFA TOGO = ~ 50 thousand million CFA ETC.

11. All State budgets have been and are unable to meet the financial needs of road maintenance, even through the so-called first generation RMFs • To be able to cope with this inadequacy and to remedy the inability to meet the financial needs of road maintenance, it was decided that “second generation” RMFs be set up • Let us mention here the TDR of this: “The evolution second generation Road Maintenance Funds (RMF) in Sub-Saharan Africa has been quite rapid, for the idea started taking form only in the 90s with the first fund of this model being set up in Zambia in 1993. - As for the mission of RMFs, let us still cite the same TDR:

12. “The traditional role of RMFs is to finance maintenance works on the national road networks of the countries concerned”. • The resources that may be available to RMFs for carrying out their mission are defined in the instruments governing them. The same applies to the resources that may be available to this mission and the way in which they have to be managed. These resources derive essentially from: • road usage dues (RUR) a percentage of the tax on petroleum products (TPP); • toll revenue; • overload taxes; • transit duties; • special tax labels • etc.

13. Resources that can be, and are, made available by the Road Maintenance Fund: • RUR • overload charges • transit duties • special tax labels • etc. Since they are insufficient to meet the financial needs of roadnmaintenance, it was therefore decided that revenue from toll gates be added to them. This revenue was therefore considered as RESOURCES of RMFs. - DWELLING ON TOLLS FOR A FEW MINUTES

14. The Toll System in African Countries South of the Sahara A comparative study on the toll experience in African countries south of the Sahara conducted in 2003 enabled us to realise that: • The toll system obtaining in these countries and which is managed by private operators gives rise to some sort of confusion. • Everywhere people talk of concessions, but without specifying what is being conceded. Such is the case in Mali, Burkina Faso, Côte d’Ivoire, Niger, Togo, Benin, Cameroon, etc. • The toll system in the above-mentioned countries could be anything but concessions.

15. On the other hand, the experience at the Maputo Corridor is a veritable case of toll concession. It is conceded for thirty (30) years under a Build – Operate – Transfer (BOT) agreement to TRANS AFRICAN CONCESSIONS, made up of BOUYGUES, BASIL READ et STOCKS AND STOCKS. Other roads are conceded in South Africa: - National Road n°3, which is conceded to N3 Toll Concession (Pty) Limited (N3TC) - the section on N1 (95 km) between Gauteng (North of Pretoria) and Warmbaths, and the section on N4 (290 km) running from the west of Pretoria to the BOTSWANA border. This concession is granted to BAKWENA PLATINUM CORRIDOR CONCESSIONNAIRE.

16. Which systems are there in Africa South of the Sahara? • The True Toll Concessions In Africa, cases that can be considered as true toll concessions are rare exceptions. * 1st REASON: Very light traffic * 2nd REASON: Political risk for long term investments 1ST CRITERION: > 15 000 uvp/day, YES < 5 000 uvp/day, NO 2ND CRITERION: the real economic potential of the liaison is based on business stakes rather than on considerations for regional development (see Maputo Corridor, the case of Djibouti, etc.)

17. 2. Road Leasing Road leasing – a situation wherein the “lessee” finances “major repairs”, but not the initial investment – is economically more feasible. * 1st REASON: the operator is clearly less exposed to risk. * 2nd REASON: in case of just “average” traffic (1000 to 5000 uvp/day) the pressure on the user may still be measured * 3rd REASON: the economically justified duration of the operation may be 2 to 3 times shorter, hence giving a better view of all the factors entailed.

18. 3. La simple toll collection In Africa, 95% of the toll mechanism is just systems entailing the simple collection of additional resources paid by users for road maintenance. • 1ST OPTION: Collection is by the Administration (Ministry of Finance, Public Works, inter-ministerial Commission; the breaking up of these services) • 2ND OPTION: Collection is entrusted to a private operator through a signed contract • VARIANT 2.1 : “toll concession” = a system whereby the toll gate constructs and equips toll gates at own expense. He therefore effects this minor investment.

19. * VARIANT 2.2 : “toll leasing” = a system whereby the toll gate receives the installations of the state but maintains and renews the equipment.     * VARIANT 2.3 : “toll services only” = a system whereby the toll gate owner only runs the toll gate. In the light of the amount of money invested in roads, the above nuances are simply details.

20. 4 – Which private operator should be in charge of tolls? * Let us take the case where the tollman simply collects tolls. There is no investment of any type made; nothing provided; the need for a working capital is minimal; he risks practically nothing. Rather, his balance sheet is always positive. * His mission is to train teams of tollmen, manage and control them and transfer the revenue collected each month * He, unlike for instance the ferry operator, is not running any public service * The requisite and technical know-how are minimal and are not in any way related to the road industry

21. Road tolls(simple collection) >< another solution to tax collection from road users: CRITERIA “Tolls” as a solution to revenue collection are to be compared from the stand point of shortcomings on advantages, to other classic solutions: Taxes on fuels, special taxes on labels, etc. The criteria to be taken into consideration include: a.   Financial output b.   Modulability c.   Potential for change d.   Equity e.   Possibility of fraud or evasion at all levels (users, tollmen, operators, money transfer networks...) f.  Possibility of negotiating a solution with officials of the Ministry of Finance g. Acceptability by the public

22. A look at tolls according to the various criteria a.     Financial yield It is generally less than 70%, whereas the overall yield from a tax on fuel may be over 100%! b.   Adjustability Can completely and easily be adjusted in principle; but advantage is never taken of this freedom or liberty. c.   Potential for change Varies depending on individual case d. Equity d1. The case of “autonomous” operations • In the case of “autonomous” operations, toll revenue is converted into works done on the road concerned.

23. One of the aspects of equity is satisfied if the tax schedule is well adjusted (the parson who pays his taxes benefits from the services provided. • But does the quality of service rendered improve concomitantly with the creation of a toll system? And/or with the decrease of informal tolls? • In a certain number of countries in the North, stringent measures are or were imposed through the respect of the general principles of the public service: - the obligation to maintain a free alternative itinerary (of a lower level of service)

24. - the impossibility of having access to toll revenue in order to carry out works on external itineraries. This type of concern is generally ignored by African public authorities insofar as the fear of legal recourse by users is practically inexistent. d2. Cases of misappropriation of toll • In cases where revenue is misappropriated (i.e. not allotted to the itinerary where it was collected) there is a de facto mass evening out between a small number of sections affected by toll payment (selected as being “very profitable”) and the rest of the network...

25. …this, in principle, is almost a necessity for an RMF and should not in any way be condemned: the part of the network especially the untarred part that has been slightly used is always unable to raise its own resources… • …but here, the said evening out is carried out in a “crude” and unadjustable manner. It is the geographical and functional architecture of the network as well as the choice of toll points that determine the parameters thereof in the mot arbitrary and unjustifiable manners when viewed in detail. • …for certain operations, compensatory mechanisms are provided for the interest of particularly penalised riparian populations. But such mechanisms are always indirect (endowments to local councils etc) and therefore do not compensate for the increase in local transportation costs.

26. …these rough-hewn schemes for evening out things cannot be envisaged at all in countries of the North where it is common for users to take legal action against the Administration. • …to correct this structural shortcoming of equity, the number of toll points has to be increased and should also include those that like Cameroon, are almost in deficit and are not easily brought under control. e) The potential for fraud or evasion at all levels (users, tollmen, operators, transfer channels or circuits…) • Especially on the part of operators: -  fraudulent concealment of part of revenue and decrease of statistics with or without any understanding between him and the organ in charge of controlling tolls

27. - Decreasing statistics with a view to renegotiating the terms of the contract. f) Ease of negotiating a solution with officials of the Ministry of Finance • The institutions that are the custodians of macro-economics are generally indifferent to this type of extra-budgetary deductions (which are neither fiscal nor para-fiscal); and quite often, they are simply not informed... whereas this is a substitute for incidental tax deductions likely to have an analogous effect on transport fares and, generally, on all prices.

28. Whatever the case, such indifference is an essential factor of ease for creating such mechanisms... Is this a dangerous path to follow? g) Acceptability by the public • Greater transparency, (a semblance of) simplicity, presumption of better usage • …but, on the contrary, where the itinerary in question is in a very bad state, the failure of the system calls for notice much more easily!

29. Finally… • The public as a whole, the media and the non technical decision makers are victims of great confusion on the question of tolls. • In particular, the idea of a public sector/private sector partnership (PPP) is a myth which hardly ever takes into account the economic realities of roads in Africa. • In reality, 95% of Africa’s toll operations have nothing to do with PPP. • The problem is simply that of alternative mechanisms for collecting road user taxes.

30. These mechanisms present serious structural shortcomings, and may be appropriate only in quite special situations, particularly when the other solutions are very difficult to come by. CONCLUSION ON THE QUESTION OF TOLLS • The BOT concession can be profitable for the various partners only as from a certain level of traffic: (uvp > 15 000 PER DAY). Such a PPP is feasible and viable only in some countries. • The contracting system could be tried only in certain countries. This could be compared to a road maintenance contract with an obligation to produce results (e.g. GENIS of the World Bank, DTAO of AGEPAR). • The simple collection of tolls under these various options and variants is the most suitable system for African countries south of the Sahara today, with the exception of South Africa. Moreover, this is what is currently being practised under several variants. In implementing this system, careful attention should be paid to the various criteria given in the foregoing sub chapter titled: “A look at tolls according to the various criteria”. • Finally, since there is no legal framework in place anywhere, it would be necessary to ensure that one be established.

31. REGIONAL INTEGRATION AND DECENTRALIZATION • Two contradictory but complementary concepts • Concepts treated under theme I by sub-themes 1.1 and 1.3 Examples of objective pursued by regional integration and decentralization WAEMU (regional integration) • Reinforcing the competitiveness of the economic and financial activities of member States in an open and competitive market, and in a rationalised and harmonised legal environment • Ensuring the convergence of performances and economic policies of member States through the institution of a multilateral surveillance procedure • Setting up a common market among member States based on the free movement of persons, goods, services, capital and the right to settle anywhere for people carrying out independent or paid activities, as well as on a common external tariff and trade policy. • Instituting the co-ordination of national sectoral policies through carrying out common actions and, eventually, common policies, especially in the following domains: human resources, regional development, agriculture, energy, industry, mines, transport, infrastructure and telecommunications • Harmonising, where necessary for smooth functioning of the common market, the laws of member States, and particularly the fiscal regime.

32. BENIN (Decentralisation) Law No.97-029 of 18 January to organise councils: SECTION 1: The council shall be a territorial community endowed with legal personality and financial autonomy. It shall be administered freely by an elected executive under the conditions laid down by this law. SECTION 87: The council shall initiate actions related to infrastructure and equipment development works falling under its heritage as well as actions relating to the management and maintenance thereof. The council shall have the powers to urbanise its territory. SECTION 88: For roads which do not expressly fall under other institutions and organs, the council shall be responsible for: • Constructing and maintaining roads, tracks and works of art on its territory; • Constructing and maintaining urban roads, and cleaning and ensuring drainage of agglomerations; • Putting up road signals; • Public lighting and the maintenance of the lighting network.

33. ROAD INFRASTRUCTURE SEEN FROM THE STAND POINT OF INTEGRATION AND DECENTRALISATION • At the Continental Level • Identify the NEPAD network – Look for funding in order to start feasibility studies, and thereafter the works • At the Level of Regional Councils • Identify and classify council roads • A few characteristics of regional development are defined • Funding mobilised for certain portions of roads (corridors) • Regional development works started for some • At the Decentralised Level • As far as we know: • No transfer of road infrastructure by the State • Communal road heritage has not been defined • Contribution of Tolls to the Maintenance of Continental, Regional and Council Road Infrastructure • The case of road infrastructure “under a concession” • Tolls contribute fully and solely to the maintenance of roads under a concession • The case of road infrastructure that is “not under a concession” • Community road infrastructure • Part of the toll paid contributes to their being maintained • National road infrastructure • Part of the toll paid contributes to their being maintained • Council road infrastructure • A very small part of the paid toll contributes to their being maintained