1. Presenter: Helvi Petrus Promoter: Stephan Krygsman
EVALUATION OF NATIONAL ROAD FUNDING IN NAMIBIA: The curse of efficient road user charges
Presenter: Helvi Petrus
Promoter: Stephan Krygsman

2. Outline Background Road funding theoretical base Objectives
Namibia road funding system
Conclusion remarks

3. Namibia Total coverage 825 615 km
Population of 2.3 million (NSA: 2017)
Population density of about 2.6 per person
National Road Network km (RA, 2018)
Vehicle Population about (RA, 2017)
The road network in Namibia comprises (i) Proclaimed roads; municipal roads, minor roads and corridor roads; (ii) Inter-urban roads (connecting major centres); (iii) district roads(connecting farm area).

4. Background
Road infrastructure is critical for economic development, creating job and reducing poverty and inequality (Carter et al., 2017).
Insufficient budget allocation undermines road authorities’ planning and execution of road maintenance and construction.
Resulting in the deterioration of road network, leads to higher transport costs (Gwilliam & Shalizi, 1999).
Road sector can absorb as much as 5 to 10% of government operational budget and 10 to 20% of development budget (Heggie & Vickers, 1998).

5. Road Funding theoretical base
Several policies and funding schemes to address the demands for road maintenance and construction have been drafted.
Most policies seems advocate for use-pay principle as the best option to fund roads.
To promote economic efficiency and equity
Efficiency implies RUC should be set to recover costs from road users.
Equity implies that capital cost not recovered by MCP should be recovered from the road users.
Use-pay is umbrella for efficient and equitable RUCs.

6. User-pay principle
The Namibian White Paper on Transport Policy (1995) recommends the implementation of the user-pay principle.
Implicit in these policies and documents is the confidence that the User-pay principle will deliver sufficient funding.
Debate on RUC take the MC concept as a starting point.
Prices set to reflect MSC is the optimal pricing for charging road users (Steward-Ladewig & Link, 2005).
Such prices signal to the road users and the authorities appropriate prices drivers ought to pay.
Debate on RUC typically take the Marginal cost concept as a starting point.

7. Research focus
Namibia established a SGRF supported by earmarked revenue generated from RUCs.
Common challenge with SGRF, is that revenue generated from the SGRF should be sufficient to cover road expenses.
The current RUCs seems to have run into some serious problems.
RUCs has proven to generate insufficient revenue to meet the demand for the national road network expenses.

8. Objectives
To offer an overview of the Namibian road funding trajectory after the sector reform.
Evaluate the road revenue generated from the RUCs and allocation towards road expenditure.
Available secondary data were utilised for the period 2011 to 2016, obtained mainly from annual financial reports and budget documents from road agencies.

9. Namibia Road Sector Reform
Namibian government inherited a good road network at independence in 1990.
Although road taxation was in place, revenue from road taxation was in no way earmarked for road maintenance (Runji, 2003).
Government department responsible for road sector would receive annual budget allocation.
Namibia government treasures the asset at hand, thus considered to reforming road sector institutional arrangements.

10. Road sector key institutions
To manage the RUCs based on use-pay principle.
To manage the Road fund with the view to secure and allocate sufficient funding for roads.
To manage the national road network
To undertake road maintenance based on commercial principles
The RFA was established according to the principles of the SGRF: RF managed through the RFA entity, Independent board member comprising PP nominees to oversee the fund and generating revenue through the RUCs

11. Namibia road funding approach

12. Road Fund State Revenue Fund Revenue generated from RUCs.
Receipt of funds
Revenue generated from RUCs.
Road Fund
Revenue generated from the general taxes.
State Revenue Fund
Development partners (i.e loans and grants to GRN or RFA)

13. Revenue collected through RUCs
The fuel levy consisting of contributed N$ million (61%).
Vehicle registration and License & Abnormal Load N$ (29%),
CBC N$ (6%) and
MDC N$ (4%)
2.1 bill
897 mill
Road users pay charges and fees for owing and operating a vehicle on national road network and other roads. The figure illustrates the trend of revenue generated from the RUCs Between 2007 to to the total revenue,
Source: RFA (2017)

14. Real RUC revenue growth
Both VKT and the vehicle population growth are above real RUCs revenue growth.
Fuel levy has not been adjusted in line with CPI.
For 2011 Fuel levy was charged at N$ 0.99 Petrol and N$ diesel.
2015 Fuel levy was charged at N$ for both petrol and diesel.
The compensation for inflation since 2001 to 2015 FY would have been above N$ 1.65/l as opposed to N$ 1.14/l (RFA,2015)
Real RUC revenue growth compared to vehicle population and vehicle kilometre travelled (VKT). It appears that both the VKT and vehicle population growth are above the real RUCs revenue growth.
Source: Authors (based on various RA and RFA publications)

15. Revenue allocation to the approved authorities
Funding allocation of the revenue generated through RUCs. Approximately 80% of funds generated from the RUCs are allocated to the RA.
Source: RFA Financial Report (RFA, )

16. Allocation of funds to the Road Authority (RA)
During the 2015/2016 fiscal year, the road sector absorbed approximately 3% of the government operations and about 18% of its development budget (METF, 2015). The results are in agreement with Heggie and Vickers’ (1998) statement that the road sector could absorb as much as 5 to 10% of government recurrent expenses and about 10 to 20% of the development budget. The percentage share of funding provided by the government towards the development of the national road network is reasonable (18%) compared to international standards, which range between 10 to 20% of the government development budget.
Source: RA budget reports for the period 2012/2013 to 2017/2018

17. Allocation remarks
On average, 80% of the revenue generated from the RUCs has been allocated to RA.
During the 2015/2016 FY, the road sector absorbed approximately 3% of the government operations and
about 18% of its development budget (METF, 2015).
These results are in agreement with Heggie and Vickers (1998)that road sector could absorb as much as 5 to 10% of government recurrent expenses
and about 10 to 20% of the development budget.

18. National road network expenditure in 2010 prices
Resources in real amounts made available for construction (development) of new roads and maintenance of existing roads show a flat trend, which is proportional to the total budget allocated to the RA towards the national road network. In terms of administration versus the operation budget, the overall RA administration expenses decreased to 48% since 2011/2012 to 2015/2016, corresponding to 15% of the RA total expenditure (operation and administration) for the national road network budget.

19. Concluding remarks
The RFA Act (No. 18 of 1999) is clear on the user-pay principle as the economic efficiency price.
The user-pay principle appeared to be more of a popular policy statement.
very little research has been investigated, what it means in practice.
The RFA model, based on current road user charges system, has shown limited capacity
in meeting the increased demand for roads expenditure.
There is a need for the government through allocation from SRF,
to continue supporting the road sector.

20. Concluding remarks
Despite the funding shortfall for the national road network expenditure, the RFA must comply with the RFA Act.
The RFA should avoid unsubstantiated increases in the RUC rates.
A dilemma the Namibian road sector is facing is the inability of RUCs to meet the national road expenditure needs.
Namibia’s expansive road network and small vehicle population causes the inherent dilemma
spreading the costs of maintaining a large road network with few users
RUCs should be reassessed to determine whether current RUCs are in fact set at efficient prices.

21. Future research
A clear argument can still be made to recoup the costs of road infrastructure investment from those who benefit.
Alternative form of users fees, e.g toll roads to source additional income should be investigated.
Current schemes such as MDCs, may be feasible with advanced technologies and automated systems.
to secures income from those who benefit the most from road infrastructure.
There is a need to unpack the MSC pricing for Namibia
assessing the user-pay principle’s budgetary implications.

22. Thank you!