Nine point­ers for pol­icy mak­ers to re­think road in­fras­truc­ture in Zam­bia.

Zambian Business Times - - FRONT PAGE -

This As­sess­ment has come up with a num­ber of find­ings and con­clu­sions that, taken to­gether, raise fun­da­men­tal is­sues re­gard­ing how best the coun­try can pro­ceed with max­imis­ing the ben­e­fits from road in­fras­truc­ture de­vel­op­ment, on the one hand, and, on the other, min­imis­ing the po­ten­tial dan­gers that come with in­ad­e­quate de­sign and plan­ning for in­vest­ments in this im­por­tant sec­tor of the econ­omy. Look­ing closely at re­source al­loca­tive pat­terns within the road in­fras­truc­ture sec­tor; re­view­ing the in­sti­tu­tional, reg­u­la­tory and leg­isla­tive en­vi­ron­ment within which road in­vest­ment de­ci­sions are made and im­ple­mented; ex­am­in­ing the pol­icy en­vi­ron­ment that fa­cil­i­tates in­ter­ven­tions in the sec­tor; and crit­i­cally as­sess­ing the ac­tual per­for­mance on the ground thus far par­tic­u­larly with re­spect to in­tra-sec­tor pri­ori­tisa-

This As­sess­ment has come up with a num­ber of find­ings and con­clu­sions that, taken to­gether, raise fun­da­men­tal is­sues re­gard­ing how best the coun­try can pro­ceed with max­imis­ing the ben­e­fits from road in­fras­truc­ture de­vel­op­ment, on the one hand, and, on the other, min­imis­ing the po­ten­tial dan­gers that come with in­ad­e­quate de­sign and plan­ning for in­vest­ments in this im­por­tant sec­tor of the econ­omy. Look­ing closely at re­source al­loca­tive pat­terns within the road in­fras­truc­ture sec­tor; re­view­ing the in­sti­tu­tional, reg­u­la­tory and leg­isla­tive en­vi­ron­ment within which road in­vest­ment de­ci­sions are made and im­ple­mented; ex­am­in­ing the pol­icy en­vi­ron­ment that fa­cil­i­tates in­ter­ven­tions in the sec­tor; and crit­i­cally as­sess­ing the ac­tual per­for­mance on the ground thus far par­tic­u­larly with re­spect to in­tra-sec­tor pri­ori­ti­sa­tion vis-à-vis the dif­fer­ent roles played by var­i­ous ac­tors-cum-stake­hold­ers, a num­ber of mes­sages have emerged and sev­eral rec­om­men­da­tions ten­dered.

Be­low are the nine Core Mes­sages that could help pol­icy mak­ers as they take a re-look at how best to pro­ceed to­wards mak­ing the road in­fras­truc­ture sec­tor more pro-growth and re­spon­sive to the de­vel­op­men­tal needs of Zam­bia. Spend­ing on Zam­bian roads has over the years re­mained sig­nif­i­cant but pos­i­tive progress has been sub­dued due to in­vest­ment pri­or­i­ti­za­tion chal­lenges.

While it is clear that large in­vest­ments in the roads in­fras­truc­ture sec­tor are de­sir­able for eco­nomic growth and so­cial trans­for­ma­tion and, thus, ought to be given pri­or­ity, more at­ten­tion is still re­quired to en­sure that these re­sources, sourced mainly from ex­ter­nal bor­row­ing, are not un­duly act­ing as a drain on the lim­ited pub­lic fi­nances. The debt threat is real and its ef­fects on the larger econ­omy should not be un­der­played, hence the need to pru­den­tially ap­ply re­sources in the sec­tor. Yields on Zam­bia’s Eurobonds have risen sig­nif­i­cantly, which has wors­ened the pain for hold­ers. With losses of 11 per­cent this year (2018), the coun­try’s dol­lar se­cu­ri­ties are the worst-per­form­ing in the Emerg­ing Mar­kets US$ Sov­er­eign Bond In­dex that in­cludes more than 70 coun­tries. As prospects for con­clud­ing a US$1.3 bil­lion bailout deal with the IMF re­main unas­sured, the on-go­ing ques­tion­ing of the true size of Zam­bia’s ex­ter­nal debt stock has not helped much in calm­ing the mar­ket in spite of as­sur­ances from the Gov­ern­ment re­gard­ing the cor­rect­ness of what it has of­fi­cially re­port, cur­rently at US$8.7 bil­lion. In the light of this, in­vest­ments in roads in­fras­truc­ture should not be han­dled in a man­ner that be­gins to se­ri­ously ex­ac­er­bate the coun­try’s high risk of debt dis­tress. Rather, road in­fras­truc­ture de­vel­op­ment pri­or­i­ti­za­tion in the sec­tor should re­flect a clear de­sire to­wards pos­i­tive re­turns on in­vest­ments. Yet the road in­fras­truc­ture sec­tor’s char­ac­ter­is­tic un­der- achiev­ing of its own set tar­gets has brought lit­tle hope to­wards mak­ing the sec­tor con­trib­ute more pro­gres­sively to­wards na­tional de­vel­op­men­tal goals. Hav­ing an eye on re­duc­ing the com­par­a­tively high road con­struc­tion costs must be part of the so­lu­tion to mak­ing the roads sec­tor con­trib­ute more pos­i­tively to the coun­try’s de­vel­op­ment Zam­bia is a high-cost coun­try in the area of road con­struc­tion relative to re­gional com­para­tor coun­tries. The high con­struc­tion costs are caused by, in­ter alia, the oner­ous pro­cure­ment pro­cesses and the fact the Gov­ern­ment has quite of­ten floated bids for road in­fras­truc­ture pro­jects with­out prior de­signs and plans that should pro­vide in­dica­tive es­ti­ma­tion of cost. Given the ev­i­dent non-avail­abil­ity in a num­ber of cases of de­tailed en­gi­neer­ing road de­signs (which should in­clude pave­ment and geo­met­ric de­signs, en­vi­ron­men­tal man­age­ment, draw­ings and es­ti­mated con­struc­tion costs) be­fore ten­der­ing and con­struc­tion, op­por­tu­ni­ties for cost es­ca­la­tion have re­mained per­va­sive. Yet, con­trary to this re­quire­ment, many road pro­jects in Zam­bia are pro­cured and com­menced with­out de­tailed de­signs. This has re­sulted in bid­ders gen­er­ally de­ter­min­ing the cost in­de­pen­dently of Gov­ern­ment, a state of af­fairs that has trig­gered sig­nif­i­cant cost es­ca­la­tion, which, in turn, has opened op­por­tu­ni­ties for ar­bi­trari­ness and cor­rup­tion in price de­ter­mi­na­tion. Fur­ther­more, guid­ance from the At­tor­ney Gen­eral pro­vides that all price vari­a­tions should not ex­ceed 25 per­cent of the con­trac­tual price. Yet the au­dit of RDA that cov­ered the 2012-2015 pe­riod re­ported that ex­ces­sive vari­a­tions on some con­tracts have ranged from 50 per­cent to 400 per­cent. In ad­di­tion to this, Zam­bia cur­rently lacks ad­e­quate trans­ac­tion ad­vi­sory ser­vices, a state of af­fairs that could par­tially ex­plains the higher cost­ing of road con­struc­tion in the coun­try than the re­gional av­er­age. In the light of these con­sid­er­a­tions, the cur­rent ap­proach to procur­ing road works in Zam­bia re­mains highly in­ef­fi­cient and is clearly con­tribut­ing to the coun­try’s mount­ing and un­sus­tain­able debt bur­den. Yet in­vest­ments in roads should help min­i­mize the debt dis­tress in­stead of ex­ac­er­bat­ing it. The sit­u­a­tion is wors­ened by the fact that, be­cause roads with lower eco­nomic re­turns are also be­ing con­structed, the po­ten­tial for good re­turns from such in­vest­ment is se­ri­ously cur­tailed. Go­ing for­ward, Gov­ern­ment should work to­wards stream­lin­ing its road works pro­cure­ment sys­tem by re­duc­ing on pro­cesses that re­sult in cost es­ca­la­tion. The Fo­cus on road con­struc­tion at the ex­pense of main­te­nance and re­ha­bil­i­ta­tion has re­mained prob­lem­atic over the years and Zam­bian road users have con­tin­ued to bear the cost of poor road main­te­nance The un­der­fund­ing of main­te­nance ac­tiv­i­ties has re­mained a char­ac­ter­is­tic as­pect of roads de­vel­op­ment in Zam­bia. While it may seem po­lit­i­cally pop­u­lar in the short term to al­lo­cate more re­sources to road con­struc­tion and, in the process, ne­glect road main­te­nance, the ad­verse ef­fects of this have been trou­bling and have tended to de­rail the larger Gov­ern­ment goal that aims to pro­mote sus­tain­able eco­nomic de­vel­op­ment through ef­fi­cient road and cost-ef­fec­tive in­vest­ments. It is note­wor­thy that, for ev­ery dol­lar that is ‘saved’ by not un­der­tak­ing road main­te­nance, $3 is be­ing spent by road users in in­creased Ve­hi­cle Op­er­at­ing Costs ( VOCs) re­sult­ing from the poor state of the roads that con­tinue to cause fre­quent ve­hi­cles break­downs and ex­pen­sive re­pairs. Con­se­quently, it is road users that have con­tin­ued to shoul­der the worst ad­verse ef­fects of poor road main­te­nance in the form of in­creased VOCs. It is also a tru­ism that the longer that road main­te­nance is de­layed, the costlier it be­comes to re­store the road to good con­di­tion. The Road De­vel­op­ment Agency (RDA) has, for ex­am­ple, re­ported that the re­pair costs can rise to six times main­te­nance costs af­ter three years of ne­glect and to eigh­teen times af­ter five years of ne­glect. In the light of these chal­lenges, pre­ven­tive road main­te­nance and road re­ha­bil­i­ta­tion should be top pri­or­ity in in­vest­ment de­ci­sions.

Poorly main­tained roads are sim­ply bad for the larger econ­omy

Poor road main­te­nance in Zam­bia has led to in­creased ve­hi­cle op­er­at­ing costs; longer travel-times; driver and pas­sen­ger dis­com­fort and wors­en­ing road traf­fic ac­ci­dents for or­di­nary Zam­bians, which, col­lec­tively, have slowed down the coun­try’s eco­nomic de­vel­op­ment. Un­der these con­di­tions, to at­tribute the high traf­fic ac­ci­dent rate in Zam­bia pri­mar­ily to bad driv­ing and poor vis­i­bil­ity at night ( hence the burn­ing of pas­sen­ger bus trans­port at night) seems to be a “blame-the-vic­tim” su­per­fi­cial way of ad­dress­ing a much more com­plex sit­u­a­tion that calls for re­fo­cus on how best to di­ag­nose the cur­rent mul­ti­ple chal­lenges in road trans­port, in gen­eral, and the roads in­vest­ment pat­tern, in par­tic­u­lar.

In­sti­tu­tional re­forms on how de­ci­sions re­gard­ing in­vest­ment choices are made mat­ter and should be un­der­taken as a mat­ter of ur­gency

A peren­nial prob­lem in Zam­bia re­lates to poor in­vest­ment tar­get­ing, which rarely se­cures rea­son­able eco­nomic re­turns. While the As­sess­ment re­vealed that RDA has per­formed rea­son­ably well, the Min­istry of Hous­ing and In­fras­truc­ture De­vel­op­ment (MHID) ap­pears to com­mand an over­bear­ing in­flu­ence over the ul­ti­mate de­ci­sions re­gard­ing which road in­vest­ment is pur­sued. It has been re­vealed that although RDA usu­ally as­sesses and then sub­mits to MHID for ap­proval a list of pri­or­ity road pro­jects, po­lit­i­cal con­sid­er­a­tions that rarely con­sid­ers value for money take prece­dence in the fi­nal de­ci­sions. While it is in­evitable that the al­lo­ca­tion of the roads bud­get will be in­flu­enced by po­lit­i­cal con­sid­er­a­tions to some ex­tent, there should still be sig­nif­i­cant con­sid­er­a­tion of value for money and ef­fi­ciency con­sid­er­a­tions in the ap­pli­ca­tion of pub­lic re­sources.

Roads de­vel­op­ment prob­lems have been ex­ac­er­bated by weak co­or­di­na­tion among im­ple­ment­ing agen­cies

The ef­fec­tive­ness of the var­i­ous ac­tors in the roads sec­tor in meet­ing set goals has, over the years, been cur­tailed by weak co­or­di­na­tion and du­plic­ity among the main play­ers. Quite of­ten, roles and ob­jec­tives of dif­fer­ent ac­tors are not well de­fined and, at times, con­flict­ual, an as­pect that has gen­er­ally af­fected not only op­por­tu­ni­ties for more har­monised and co­or­di­nated road in­fras­truc­ture de­vel­op­ment ef­fort but also prospects for ef­fec­tive re­source mo­bi­liza­tion. Three dif­fer­ent min­istries as well as mu­nic­i­pal­i­ties (un­der lo­cal gov­ern­ment) have been re­spon­si­ble for dif­fer­ent, al­beit over­lap­ping types of in­fras­truc­ture but with lit­tle co­or­di­na­tion and har­mon­i­sa­tion of ef­fort.

Mongu - Kal­abo road in Zam­bia’s Western Prov­ince.

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