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CHALLENGES & VISION OF RFA

CHALLENGES & VISION OF RFA. PURPOSE. To highlight the challenges & constraints faced by Road Fund Administration (RFA) in executing its mandate To share RFA Vision with esteemed RFA stakeholders. WHAT IS RFA?.

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CHALLENGES & VISION OF RFA

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  1. CHALLENGES & VISION OF RFA

  2. PURPOSE • To highlight the challenges & constraints faced by Road Fund Administration (RFA) in executing its mandate • To share RFA Vision with esteemed RFA stakeholders

  3. WHAT IS RFA? • White Paper on Transport Policy endorsed the principles of road user charges (RUCs) for Namibia • Road Fund Administration was created by RFA Act (Act No. 18 of 1999) • RFA operations commenced in 2000

  4. WHAT IS RFA MANDATE? • To Manage the Road User Charging (RUC) system to provide a safe and economically efficient road sector for the benefit of all road users • Road user charge(RUC) is the system that provides for an independent regulation of road funding in accordance with economic efficiency criteria & full cost recovery from road users

  5. HOW DOES THIS HAPPEN RFA: • collects the road user charges, • procures loans from financial market, • funds the maintenance, the rehabilitation & the construction of economically efficient roads

  6. PURPOSE OF RUCs • RUCs: • Promote economic efficiency & efficient utilization of resources • Avoid unfairly impact on road/rail competition • Be acceptable to affected parties • Recover fully all economically justifiable future road provision & maintenance programme • Provide for charges on foreign-based operators subject to certain principles

  7. SPECIFIC RFA MANDATE • The Act stipulates that RFA should: • determine the amount of funding for the road projects & programmes • determine the manner in which such amount shall be allocated • determine and impose the types of road user charges

  8. RUC FEES • Licence Fees – 21.12% • Cross Border Charges (CBC) – 3.24% • Fuel (Road) Levy – 63.18% • Mass Distance Charges (MDC) – 12.24% • Abnormal Load Charges (ALC) – 0.22%

  9. WHAT IS THE FUNDING PROCESS • Roads Authority (RA) submits a 5-year Business Plan based on a Medium-to-Long-term Roads Master Plan • Local Authorities also submit their ‘traffic-related maintenance’ budgets to RFA • The RFA compiles a 5-year Business Plan based on the FUNDING REQUIREMENTS (not based on available funds)

  10. LOANS • In 2003, RFA acquired N$650 mil loan from local market in consultation with the MoF • Loan acquired at 13% coupon rate - N$84.5 mil to be paid to investors annually • RFA assumed sustainable fuel levy increases to establish a sinking fund to redeem the loan by 21st November 2010 • January 2007 - sinking fund amounted to N$55 million (N$5.1 million interest)

  11. LOANS (cont’d) • RFA did not get sustainable fuel levy increases & cash flow has become precarious • RFA was forced to restructure the 10 Loan Stock in 2006 • Restructuring allows RFA to repay N$350 mil by 2010 & N$330 mil by 2016

  12. LOANS (cont’d) • RFA10 Loan Stock co-funded rehabilitation projects which GRN committed to before RA & RFA were established • The are: Okahandja- Otjiwarongo Road; Mururani - Rundu Road; & Windhoek – Aris Road (construction/rehabilitation)

  13. LICENCE FEES • RFA10 Loan Stock co-funded rehabilitation projects which GRN committed to before RA & RFA were established • These fees increased by 15% over the last 5-year Business Plan; • License fees make up about 20% of RFA revenue.

  14. CROSS BORDER CHARGES • Cross Border Charges (CBCs) are levied on all foreign-registered vehicles entering Namibia; • CBCs represent about 3% of total RFA revenue.

  15. FUEL (ROAD) LEVY • Fuel levies are collected by oil companies & paid to RFA monthly; • April 2000, RFA got 68 cents/litre (petrol) & 60 cents/litre (diesel) by MME; • June 2006, 5 cents increased fuel levy to 82 cents/litre & December 2006, 6 cents increased to 88 cents/litre

  16. FUEL (ROAD) LEVY cont’d • About 70% of RFA revenue comes from fuel levies; • However, fuel levy increases are not consistent & they are determined by MME

  17. FUNDING ALLOCATION • Due to shortfalls in funds, funding will target maintenance only in future • Loan funding requires a guarantee from MoF

  18. Current RFA Financial Position • All revenues collected are immediately paid out to RA & others • No surplus funds are kept for contingencies

  19. EXPECTED REVENUE • Between 2007 & 2011, RFA expects to collect N$4,663,615,000 from RUCs: • Fuel levy – N$2,6 bil • License Fees – N$1,2 bil • CBCs – N$249,8 mil • MDCs – N$579,3 mil • Abnormal Load Charges – N$12 mil

  20. EXPECTED REVENUE(N$’000)

  21. ASSUMPTION ON REVENUE • RFA funding will only be sufficient if: • Supply of funds equals demand • Insufficient supply is supplemented by external funding, i.e. grants, appropriation from GRN, guaranteed loans, etc • Toll roads implementation • RUCs are at cost-recovery level

  22. RFA & RA ADMIN BUDGETS • RFA Administration budget is 1.73% of total budget (N$13.9 mil of N$805 mil) • RA Administration budget is 12% of total budget (N$96.3 mil of N$805 mil)

  23. CHALLENGES • Most trunk roads are at the end of their life span & need rehabilitation • Construction of new roads will increase maintenance burden on RFA funding • Construction of roads with donor funds w/out after-care provision exerts maintenance burden on RFA funding • Poor supervision of roads construction quality will increase maintenance burden on RFA

  24. CHALLENGES (cont’d) • RFA is expected to provide adequate funds to Approved Authorities (RA & local authorities) • However, increase in RUCs is not substantial & fuel levy increase is not consistent • RFA marginally increased the RUC – 15% per annum in the last 5-year Business Plan • RFA unable to provide adequate funds given the above structural limitations

  25. REFLECTIONS • Nothing noble or noteworthy on earth was ever done without VISION. • VISION makes the unseen visible & the unknown possible. • VISION is the source of personal & corporate discipline. • Your VISION determines your destiny.

  26. RECOMMENDATIONS • RFA should be fully empowered to comply with its Act in determining cost-recovery RUCs • RA spending patterns on the road network should match the available resources • If these expectations are not feasible, GRN should appropriate funds to RFA to address the funding gap (same way as in Air Namibia’s case)

  27. RECOMMENDATIONS (cont’d) • GRN should capitalise RFA to put its funding position on solid foundation • New roads should not be built if maintenance funds are not available • All road users should commit adequate resources to the road network to achieve VISION 2030

  28. CONCLUSION RFA strives for Safety on our roads; RFA strives for Efficiency in the utilisation of scarce resources; RFA strives for Equity in the collection of road fees

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