Toll roads is the way to go

There is an increasing involvement of the private sector in long-term funding, delivery, operation and maintenance of road assets worldwide. In Sub Saharan Africa, South Africa is a leader in adopting this evolution.
Isaac Sebakijje
Isaac Sebakijje

There is an increasing involvement of the private sector in long-term funding, delivery, operation and maintenance of road assets worldwide. In Sub Saharan Africa, South Africa is a leader in adopting this evolution.

The country continues to build toll roads as a way of enhancing its already good road network. However, this evolution requires changes in values and attitudes of government, private sector, industry bodies and the community. Opposition and resistance must be addressed.

One of the few examples of such roads in East Africa is under construction in Uganda. The multi-million 50-km Entebbe Highway is being funded and constructed by China’s Export-Import Bank under a public-private partnership for highway transportation management.

The income from the toll road will be used towards repayment of the loan and sustainable maintenance of the highway.

Privately funded roads are not a new idea. It has been implemented in many countries with great success. In East Africa, the privately funded road approach has not been fully investigated and utilised.

The companies that construct these roads are obliged to construct and maintain them at the highest possible standards based on long-term concession agreements or leases lasting decades.

Investors recoup their investment through toll collection during the life of agreement before transferring the highway roads to the government authorities. This method is referred to as Build, Operate and Transfer (BOT).

There are two main benefits for this method;

Toll collection provides an accelerated mechanism for financing construction and maintenance. This is far better than traditional tax based or costly borrowed funds.

Technological innovations are currently making it possible for an effective use of pricing and revenue control and mitigate problems of congestion. There is effective management and control system in place at the tollgates to ensure that money is collected and transferred efficiently.

Private funded roads can be constructed new or the best way is to upgrade or refurbish existing high traffic highways that may be in a state of disrepair or that may need expansion due to increased traffic.

In East Africa, these roads are constructed using huge borrowed or donor funds. Afterwards, these roads fall into such bad disrepair since there isn’t any “ongoing maintenance.”

In the meantime these roads may be so badly damaged that complete rebuilding may be the only option placing an even greater financial burden on the economy.

Therefore East Africa must include privately funded highways in the infrastructure development master plans. There simply isn’t enough money in most governments to build, expand and maintain highways at a desired standard.

From the very day a highway opens, such as Thika Highway in Kenya, the pavement begins deteriorating from the stress of the weather and the pounding of vehicles.

Cracks need filling, surfaces need to be painted, signs and lighting need to be maintained, debris removed, grass mowed and drains unclogged.  The cost for highway construction and maintenance is simply enormous.

Leaders must take a close look at private investment as a way of providing quality roads at no direct cost to their treasuries. The prospective stream of future toll revenues also allows the capital markets to be tapped for loans and equity to finance the construction of highways, bridges and tunnels.

Until now, not many investors were interested in or are eager to operate in Africa. But now, with Africa as the last economic frontier, this is changing. The main benefits are:

Increased road safety, as the death toll on African roads is too high partly because petrol tankers and other huge shipping trucks don’t belong in city streets.

Other benefits include minimizing vehicle repair and fuel costs to the driving public, support to the country’s economic and social development agendas and provision of training and employment to the local population.

All of these factors have led to the search for new ways of financing roads. International Finance Corporation stated that toll roads could have “tremendous economic impact,” as Africa’s urban population grows.

Therefore, toll road construction cannot be dismissed from the equation.

The writer is a founder of Impactafrica Trade & Investments.

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