2020 - Namibia - Roads Infrastructure Funding and Financing

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 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.