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Roads Infrastructure Funding and Financing for Namibia: a Case Study of the National Road Network

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Roads Infrastructure Funding and Financing for Namibia: a Case Study of the National Road Network Roads Infrastructure Funding and Financing for Namibia: A Case Study of the National Road Network Helvi Ndilimeke Petrus Dissertation presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Transport Economics in the Faculty of Economics and Management Sciences, at Stellenbosch University Supervisor: Prof. Stephan Krygsman March 2020 Stellenbosch University https://scholar.sun.ac.za DECLARATION By submitting this dissertation electronically, I, Helvi Ndilimeke Petrus, hereby declare that the entirety of the work contained therein is my own, original work; that I am the sole owner of the copyright thereof (save to the extent explicitly otherwise stated); and that I have not previously in its entirety or in part submitted it for obtaining any qualification. H.N. Petrus March 2020 Copyright © 2020 Stellenbosch University All rights reserved i Stellenbosch University https://scholar.sun.ac.za ABSTRACT Namibia established a second-generation road fund with the aim of implementing a user-pays system by ensuring that road users pay for their consumption of road services. The national road network covers approximately 48 399 km and serves a vehicle population of approximately 371 281. Somewhat implicit in these road funds is the confidence that the Road User Charge System (RUCS) will deliver sufficient funding for the road sector. This exploratory case study investigated the funding and financing of the national road network in Namibia. The national road network constituted the population from which the hypothetical road samples were drawn. Several data-collection methods were employed, including document analysis and secondary data analysis. The research employed the Highway Development and Management (HDM-4) model to estimate the external costs of road use. This research evaluated the relationship between the road-generated revenue (RGR) and its allocation towards the national road network expenditure and related these to international standards. The findings indicate that the Road Fund Administration (RFA) possesses high transparency in allocating RGR towards the preservation of the road network. This places Namibia among countries with high dedication of 80% and above towards road expenditure, together with the United States of America (USA) and Switzerland when compared to international standards. While revenue generated from road users are highly allocated to the preservation of the road network (0.96 ratio), a wide gap remains between the required funds and resources available for road expenditure. Financing for road expenditure was found to be a dilemma facing many developing countries, where revenue from road users does not cover the total road costs due to limited capacity and economics of use. Additional funding sources are therefore required to fund these deficits. The research also demonstrated the applicability of the Highway Development and Management (HDM-4) model, to determine the Marginal External Costs (MEC) of road use. The results indicate that heavy vehicles impose the highest costs in terms of infrastructure damage and environmental costs when using the network. When applying marginal costing, the results indicate that heavy vehicles contribute approximately 98% (district road), 97% (main road), and approximately 98% (trunk road) in terms of external costs when using the respective network. Overall, light vehicles contribute the most to congestion and accidents costs when using the national road network. Although the results presented the national road network to be congestion free, relatively low congestion was traced on the trunk road, thus increasing the overall cost contribution for light vehicles from 2% (district road) and 3% (main road) to approximately 19% when using the truck road network. The findings indicate that ii Stellenbosch University https://scholar.sun.ac.za motorists impose some externalities when using the road network and it would make economic sense to internalise such costs to road users. The research further assessed the implications of setting Road User Charges (RUC) at the Short-Run Marginal Costs (SRMC) of road use. The results indicate that setting RUC equal to correct prices leads to an estimated road funding deficit of N$5 062 746 on the sampled trunk road. These findings indicate that a marginal pricing approach in the Namibian context (expansive road network serving few users) might not necessarily raise the revenue required for the investment and maintenance of the network. This situation calls for an alternative approach to marginal pricing. In exploring the second-best RUC suitable to the Namibian funding circumstances, this study explored what Namibia could learn from other countries with expansive road networks such as Australia and New Zealand. The findings presented the efforts Namibia that has made in terms of policy formulation and noteworthy institutional frameworks, which have made Namibia the leading country in sub-Saharan Africa in terms of road-quality rankings. However, Namibia needs to embrace technologies towards charging vehicles per kilometre. The existing Mass Distance Charges (MDC) attempted to solve the challenges associated with charging heavy vehicles according to distance travelled; however, the current MDC is a blunt instrument that does not adjust charges according to weight, time, and location. Reforming the current system with the focus on distinguishing suitable charges for light and heavy vehicles to account for their use of the road network per vehicle per kilometre according to time and location is something that Namibia could learn from Australia and New Zealand. Collaborating efforts from both the public and private sectors could be another step toward a road financing solution. The contribution of this study revolves around adding to the existing knowledge relating to financing expansive road networks that serve a small vehicle population by assessing the RUCS with a particular focus on the user-pays principle and by estimating the MEC of road use by utilising the HDM-4 model. iii Stellenbosch University https://scholar.sun.ac.za ACKNOWLEDGEMENTS It is not by might, nor by power, but by my spirit, says the Lord of hosts (Zechariah 4:6b). Firstly, I would like to thank my heavenly Father for his immeasurable grace upon grace, for the strength and wisdom throughout my PHD endeavours. Thank you, Daddy, for choosing me, affording me the opportunity to learn, and placing me as part of hope to the transportation sector. Secondly, I deeply appreciate the unending support, guidance, and professional mentoring from my promoter, Prof. Stephan Krygsman, throughout the duration of this journey. Thank you, Prof., for the faith that you had in me as a protégée with little knowledge and tonnes of interest in the transport sector. Your patience and encouragement brought me this far. I trust this is just but a foundation of future opportunities and collaboration. Thirdly, I am indebted to the unending support from the transport sector. Special appreciation goes to the Roads Authority and the Road Fund Administration for their open doors and willingness to help with all the required data. These served as a motivation during my journey that the roads agencies are keen and in support of a better tomorrow. Mrs Sophia Tekkie and your team, thank you for being a call way and for prompt responses to all enquiries. It is my hope that the results provided in this study will form a foundation towards a promising road sector in Namibia. To “gwandje mwene”, Mrs Albertina Petrus and Mr Andreas Petrus, and my siblings, thank you so much for your prayers and immense support during my pilgrimage in Stellenbosch. To my mentor and dearest Pastor Selma and the entire Christoph family, thank you for continuous prayers, and financial and emotional support. To my family and friends, I wish I could mention each one of you, nevertheless thank you for your unconditional love. To my dearest friend, Teopolina Namandje, thank you so much for availing yourself and the time you went out of your way to knock on different doors for the necessary data I required and that you ensured that this PhD is completed timeously. Additionally, you spent your resources to support me as I presented at conference proceedings. Joanna Majoni and Marlene Mostert, thank for your prayers, and for the shoulder you provided whenever required. You have made my stay in Stellenbosch so pleasant. I would like to express my gratitude to the Ministry of Industrialization, Trade and SME Development, particularly the Department of Industrialization and SME Development under the leadership of Dr Michael Humavindu; not forgetting my colleagues at MITSMED-Erongo iv Stellenbosch University https://scholar.sun.ac.za Regional Office for keeping me sane. To the Namibia-German Centre for Logistics and DAAD, thank you for continuous support to your alumni. To my fellow PhDs under the auspices of the Graduate School of Economics and Management Science, as well as Logistics Department, thank you so much for your support and the ecstatic moments we shared on our journey. To Jeanne and Rudi, thank you so much for your professional service. Finally, many thanks to Dr Jaco Franken and the entire Graduate School of Economic and Management Science of the Stellenbosch University for the scholarship granted to undertake and complete this PhD. Indeed, the fruits of your investment you have made in my life will be reaped by mother Africa and across the globe. v Stellenbosch University https://scholar.sun.ac.za
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