FILE COPY. Road Policy Reform in Sub-Saharan Africa: Thelma Triche. January 1996

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized - ~~Sub-Saharan Africa Transport Policy Program 6 - ~~The World Barnk and Econormic Commission for Affica X Road Policy Reform in Sub-Saharan Africa: Thelma Triche January 1996 Environmentally Sustainable Development Division Technical Department, Africa Region World Bank S T_ Ep FILE COPY

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3 Sub-Saharan Africa Transport Policy Program The World Bank and Economic Commission for Africa SSATP Working Paper Road Policy Reform in Sub-Saharan Africa Thelma Triche January 1996 Environmentally Sustainable Development Division Technical Department Africa Region The World Bank

4 This paper is based on Management and Financing of Roads, An Agenda for Reform, by Ian G. Heggie, World Bank Technical Paper No. 275, Africa Technical Series, This was supplemented by discussions with RMI staff and information supplied by Bank task managers. Anne Balcerac de Richecour collected data and prepared the tables and figures.

5 Foreword Reforming road policy and building financial and institutional capacity for the sustainable management of roads remain the central challenges for Sub-Saharan Africa transport sector. Roads carry 80 to 90 percent of Africa's freight and passenger transport. Neglect and ineffective maintenance have led to the erosion of investments made in the 1960's and 1970's for the extension and upgrading of African road networks. The RMI (Road Maintenance Initiative) was launched in 1987 by the World Bank and ECA as a partnership of key donors involved in the road sector. Its primary objectives have been to develop awareness of the critical importance of maintenance and to define the key elements of policy reform and institutional change needed to set road management on a sustainable footing. The RMI has evolved into a broad collaborative effort involving African countries as well as development agencies. Phase I, which unfolded over the period , was successful in raising awareness and developing a common vision among donors. It also identified the key elements of sound road policies. It is, however, through the travail of Phase II, which since 1992 has been directed at country level implementation, that the RMI has developed a coherent vision of the critical steps needed to "commercialize" road management by linking performances and services with financing, and by involving the users. The purpose of the present paper is to review the progress made in implementing key elements of road policy which came out of the RMI process. The paper was prepared as a background for presenting the RMI at the World Road Congress held in Montreal in September It provides a good overview of the RMI process and should be of use for road planners and policy makers. The paper should also be of interest to a broader audience of development and institutions specialists interested in the redefinition of the role of government. H. Doyen ivision Chief Environmentally Sustainable Development Division Africa Technical Department

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7 TABLE OF CONTENTS 1. INTRODUCTION AFRICA'S ROAD MAINTENANCE CRISIS THE DIAGNOSIS WHICH EMERGED FROM RMI PHASE I RMI PHASE II: DEEPENING OF COUNTRY POLICY REFORMS PROGRESS REPORT, EMERGING ISSUES CONCLUSIONS... 20

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9 Introduction EXECUTIVE SUMMARY In 1987, the United Nations Economic Commission for Africa (UNECA) and the World Bank launched the Road Maintenance Initiative (RMI) under the auspices of the Sub-Saharan African Transport Policy Program (SSATP) in an effort to identify the underlying causes of poor road maintenance policies and develop an agenda for reforming them. The program is administered by the Africa Technical Department in the World Bank and is financed by the governments of Denmark, Finland, France, Germany, Norway, Sweden, Switzerland, and the EU.I The Netherlands, Japan and UK have recently decided to join the program. This paper reports on progress in road maintenance, rehabilitation and policy reform throughout Africa and on the evolution of the RMI message during Africa 's Road Crisis Roads carry 80 to 90 percent of Africa's passenger and freight transport and provide the only form of access to most rural communities. To handle this traffic, African countries expanded their road networks considerably during the 1960s and 1970s. Total road expenditures currently account for over 1 percent of regional GDP. But too little of these funds have been allocated to routine and periodic maintenance. Moreover, scarce maintenance funds have often been used inefficiently by bureaucratic government roads departments. Nearly one third of the $150 billion invested in roads has been eroded through lack of maintenance. Restoring only those roads that are economically justified, and preventing their further deterioration will require additional annual expenditures over the next ten years of at least $1.5 billion. This would increase current road spending from 1 percent to nearly 2 percent of regional GDP. The economic costs of poor road maintenance are borne primarily by road users. When a road is allowed to deteriorate from good to poor condition, each dollar saved on road maintenance increases vehicle operating costs by $2 to $3. It is estimated that the economic losses imposed by insufficient maintenance in Africa amount to about $1.2 billion per year. About 75 percent of these costs must be paid with scarce foreign exchange. The RMI, Phase I During the 1970s and 1980s donors supported substantial road rehabilitation programs and attempted to reform road maintenance policies through dialogue and technical assistance. Although substantial progress was achieved, it was not sustained for a number of reasons. When the RMI was established in 1987 there was a growing recognition within the development community that the broader institutional environment in which public services operate is a major cause of their poor performance. The RMI took up the challenge of analyzing road agencies' links with other institutions and the rules and incentives which motivate their perfornance. During Phase I of RMI, , regional seminars were organized in six African cities to discuss the importance of road maintenance, the sources of poor road maintenance IFinland withdrew from the program in mid-1993.

10 ii policies, and possible solutions to these problems. As a result, three key areas which required special attention were identified: (i) planning, financing and budgeting, (ii) operational efficiency of road maintenance activities, and (iii) institutional reform and human resource development. The RMI, Phase II The content of the RMI message has evolved during the course of Phase II in light of several countries' experience with reform. In addition to questions of content, process issues, both as regards the RMI's own approach to stimulating reform as well as the process of reform within individual countries, have proven important. The RMI Process While the regional seminars of Phase I had raised awareness among policy makers and helped to promote the development of a consensus among donors on the need for a new approach to road rehabilitation, they resulted in little concrete action. It was decided that during Phase II RMI would support individual country initiatives in nine countries: Cameroon, Kenya, Madagascar, Tanzania, Uganda, Zambia, Zimbabwe, Nigeria and Rwanda. 2 National teams established in each country would be supported by a RMI Unit located in the Africa Technical Department of the World Bank. During the first year of Phase II a number of insights about the process of reform, in particular ownership of the reform process, emerged. Once these were taken into account, the RMI program became a real catalyst for change. These insights included: * Internalization of the reform effort: Excessive reliance on external resource persons can prevent internalization. Local consultants are often better placed to propose workable solutions. * Stakeholder participation. Road users should be invited to participate in the dialogue. * Absorptive capacity. It takes time for new ideas to be absorbed and the consequences of major policy reforms to be evaluated. * The importance of African experiences: The positive experience of a few African countries can become a powerful model for change in other countries. * The role of the donor community: The RMI plays the role of a neutral facilitator in reconciling two potentially conflicting principles: the need for policy reforms to be consistent with donor policies on one hand, and the importance of allowing Africans to take charge of the reform process on the other. The RMI Message The key lesson which has emerged from the RMI Phase II as regards the content of the RMI message is that road agencies are unlikely to operate efficiently until they face pressure to satisfy clients, that is, until their revenues depend on satisfying their clients, as they would in a competitive market. To accomplish this, road services must be commercialized, brought into the marketplace, put on a fee-for-service basis and managed like other business enterprises. This requires action in four complementary areas, known within the RMI as the four building blocks: 2Nigeria and Rwanda have been relatively inactive.

11 iii * Creating ownership and pressure for efficiency by involving road and transport users in the management of roads -- thereby gaining public support for adequate road funding, controlling potential monopoly power, and constraining road spending to what users need and can afford; * Stabilizing road financing by securing an adequate and stable flow of funds; * Clarifying responsibility by clearly establishing who is responsible for what; and * Strengthening the management of roads by introducing effective private sector management systems and procedures, and enforcing managerial accountability. The RMI has also developed specific recommendations for improving the operation and management of road agencies: * Staffing reform: Incentives for performance would be greatly enhanced if staff were paid salaries that were more competitive with those in the private sector and managers had enough autonomy to assume responsibility for outcomes. * Contract maintenance: Road agencies should contract out all periodic maintenance and most routine maintenance. * Labor-based methods: Labor-based methods of road maintenance represent a potentially effective tool for improving maintenance and creating employment, particularly in rural areas. * Privatization of plant pools: Attempts to reform publicly owned plant pools have not been successful. It is now recommended that they be liquidated and/or privatized so that road agencies and private contractors alike can lease equipment on an as-needed basis. Progress Report The RMI has played an important role in donor coordination. A Code of Conduct to guide future donor involvement in the road sector has been signed by most members of the African development community (See box 5.1). A review of World Bank/IDA-financed projects during the period showed that, in these operations, priority has been given to rehabilitation and maintenance rather than new construction, improvements in the institutional environment and financing of road maintenance, and the involvement of the private sector. A great deal of progress has been made in the management and financing of roads by African countries over the last five years. There is evidence that, on average, road conditions are now being stabilized, a positive trend vis-a-vis the recent past when conditions were deteriorating at an alarmning rate. However, while the overall picture appears to be improving, and the achievements of some countries are truly encouraging, the problem is not yet resolved. During the past five years, roads have deteriorated in more than a third of the countries surveyed. In some countries, although the condition of the main paved network has been stabilized, the condition of the main unpaved network, in particular rural roads, continues to deteriorate. Many countries now recognize the problem and are taking steps to improve the policy and institutional environment for road management. A large majority of the 34 countries surveyed for this report have initiated at least some of the reforms recommended during Phase I

12 iv of the RMI, and almost one quarter have initiated reforms in all eight recommended areas. Progress in each of the eight areas can be summarized as follows: * Contracting out maintenance. Overall, excellent progress has been made, though further efforts are needed to increase the participation of small contractors. * Funding stabilization and Institutional reform: Good progress has been recorded in these key areas, primarily through the creation of road boards and other mechanisms through which users have become involved in the management and finance of roads. * Network-based planning methods: Good progress has also been achieved in the introduction of network-based planning. Resources available for both investments and maintenance are increasingly being considered as a whole and allocated to the most economically justified use. * Labor-based methods, Reform of plant pools, and Improvements in employment conditions: Only fair progress has been made in the application of labor-based methods and the reform of plant pools. Achievements in the areas of reducing excess staff and improving the employment conditions of the core staff who remain have been very disappointing. These remain key focus areas for the near future. * Performance budgeting techniques: Very little progress has been made in increasing accountability through the setting and monitoring of quantifiable objectives. It is now believed that institutional reform must be deepened before such techniques can be successfully introduced. Key Factors of Success The RMI has made a considerable contribution to improving road maintenance in Africa. Several factors which have contributed to progress have been identified. * A key strength of the RMI, and a factor contributing to its success, has been the emphasis it places on adaptive policy reform, the practice of collecting regular feedback on its impact and reorienting activities in light of experience. This led to a reassessment of both its operational processes and the content of its recommendations. As a result, several changes have been introduced. Among the key changes, Africans have assumed leadership roles, and policy recommendations have become more oriented toward key institutional reforms. * The emphasis RMI has placed on donor coordination has proven essential to the reform of road management in Africa. As the major source of funding for the sector, donors can play a key role in promoting reform; and rewarding the achievements of the reformers, but their policies have occasionally undermined good management. The RMI has built a consensus within the African development community on the reforms needed to improve road management, and has secured the commitment of donors to promote these reforms. * The country focus adopted by the RMI during Phase II proved useful in focusing efforts on concrete problems and identifying practical solutions, and it promoted country ownership of the reform process. Another equally important factor has been the increased use of local resource persons who have a better understanding of the institutional environment and its impact on road management, and often enjoy greater credibility among decision makers.

13 v * While the country focus proved essential for moving forward with reform, it did not exclude the sharing of experiences from other countries, particularly African countries. The positive experiences of several African countries have become key catalysts for the reform effort elsewhere. The Future of RMI At its annual meeting in October, 1994, the coordinating committee of RMI decided to aim for broader dissemination of the RMI program in Sub-Saharan Africa. A particular effort will be made to involve more francophone countries. To promote wider circulation of information and experiences within Africa, RMI has established the Sub-Saharan Africa Road Information Network (SSARIN). RMI core countries, associate countries and African resource countries participate via facsimile connections. The strategy now being considered to further the goal of broader coverage would involve the development of four regional RMI centers in Africa in collaboration with existing regional organizations and the gradual downsizing of the RMI unit in the World Bank during Four regional dissemination seminars would be held in cooperation with the Economic Commission for Africa and regional organizations during 1995 and The first was held in Pretoria, South Africa, in April 1995.

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15 1. INTRODUCTION Road Policy Reform in Africa was the theme of a special session of the 1991 PIARC Conference in Marrakech. During that session, the serious deterioration of Africa's roads was detailed, and the early results of the Road Maintenance Initiative (RMI), an international effort to address this problem were presented. The RMI was launched by the United Nations Economic Commission for Africa (UNECA) and the World Bank under the auspices of the Sub-Saharan African Transport Policy Program (SSATP), in an effort to identify the underlying causes of poor road maintenance policies and develop an agenda for reforming them. The program is administered by the Africa Technical Department in the World Bank and is financed by the governments of Denmark, Finland, France, Germany, Norway, Sweden, Switzerland, and the EU. The Netherlands, Japan and UK have recently decided to join the program. Participating African countries include seven active core countries: Cameroon, Kenya, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe; and two inactive core countries: Nigeria and Rwanda. In addition C6te d'ivoire, Ghana, Malawi, Mozambique, Sierra Leone, South Africa and Togo participate as associate or resource countries. One of the program's hallmarks has been an endeavor to collect regular feedback on its impact, and reorient its activities in light of experience. The diagnosis of the problem that emerged during Phase I has evolved over time, and Phase II has produced several new insights. This paper will report on progress in road maintenance, rehabilitation and policy reform throughout Africa since 1991 and on the evolution of the RMI message during the second phase. 2. AFRICA'S ROAD MAINTENANCE CRISIS Road transport grew rapidly after World War II and is now the dominant form of transport in SSA. Roads carry 80 to 90 percent of the region's passenger and freight transport and provide the only form of access to most rural communities. To handle this traffic, African countries expanded their road networks considerably during the 1960s and 1970s. They also built roads to open up more land for development. The result was that, by the end of the 1 980s, there were nearly two million km of roads in SSA, including 610,000 km of main roads, 938,000 km of rural roads, and 143,000 km of urban roads. These roads are among the region's largest assets. Their replacement cost amounts to over $150 billion, and the annual expenditures on routine and periodic maintenance that would be required to keep them in stable long-term condition are between $1.5 and $2.0 billion. 4 The importance of roads in SSA is reflected by the fact that road spending typically absorbs 5 to 10 percent of the government's recurrent budget and 10 to 20 percent of its development budget. Total road expenditures currently account for over 1 percent of regional 3Finland withdrew from the program in mid Replacements costs are assumed to be $500,000 per km for a dual carriageway, $250,000 per km for a paved road, and $50,000 per km for a gravel road. No allowance has been made for the cost of replacing structures.

16 2 GDP. But too little of these funds are allocated to routine and periodic maintenance. Moreover, scarce maintenance funds are often used inefficiently by bureaucratic governmnent roads departments. Nearly one third of the $150 billion invested in roads has been eroded through lack of maintenance. The cost of the large backlog of deferred maintenance provides a striking summary indicator: it would take nearly $43 billion to fully restore all roads that are classified in poor condition (i.e., requiring immediate rehabilitation or reconstruction). Africa has been living off its assets. Restoring only those roads that are economically justified and preventing their further deterioration will require additional annual expenditures over the next ten years of at least $1.5 billion. This would increase current road spending from one percent to nearly 2 percent of regional GDP. The economic costs of poor road maintenance are borne primarily by road users. In rural areas, where roads often become impassable during the rainy season, poor road maintenance has a profound effect on agricultural output. When a road is allowed to deteriorate from good to poor condition, each dollar saved on road maintenance increases vehicle operating costs by $2 to $3. Far from saving money, cutting back on road maintenance raises the net cost to the economy as a whole. It is estimated that the economic losses imposed by insufficient maintenance in Africa amount to about $1.2 billion per year, or 0.85 percent of regional GDP. About 75 percent of these costs must be paid with scarce foreign exchange. In contrast, expenditures on road maintenance and rehabilitation produce economic rates of return of over 35 percent. One can only imagine the magnitude of the opportunities for trade and development which have been foregone as a result of the poor quality of Africa's roads. 3. THE DIAGNOSIS WHICH EMERGED FROM RMI PHASE I 3.1. Institutional Roots of the Problem This crisis did not develop unnoticed. Efforts to avert it began in the 1970s. During the past twenty years, the donor community has strenuously encouraged African governments to improve the operation and maintenance of roads. In an effort to overcome the maintenance backlog, it has supported substantial road rehabilitation programs and has attempted to reformn road maintenance policies through dialogue and technical assistance. Most reform efforts concentrated on strengthening the management of roads, improving user-charging policies, and increasing allocations for road maintenance. Although substantial progress was achieved, it was not sustained for a number of reasons: First, the economic crisis which gripped many African countries during the late 1 970s and 1 980s severely constrained financial resources at a time when funding requirements for maintenance were rising. In addition, these early initiatives lacked a comprehensive vision, focusing as they did on technical rather than institutional solutions. Finally, these efforts relied on large teams of expatriate experts and neither the policy content nor the capacity to implement it were internalized by Africans. When the RMI was established in 1987 there was a growing recognition within the development community that the broader institutional environment in which public services operate is a major cause of their poor performance. The experience of previous efforts had shown that the lack of adequate road maintenance in Africa was due to institutional rather than

17 3 technical. The RMI took up the challenge of analyzing road agencies' links with other institutions and the rules and incentives which motivate their performance. A better understanding of the institutional environment in which roads are planned, financed and managed became an essential ingredient in specifying agendas for reform by RMI participating countries The Diagnosis During Phase I of RMI, , regional seminars were organized in six African cities to discuss the importance of road maintenance, the sources of poor road maintenance policies, and possible solutions to these problems. All countries in SSA participated, and each sent a small delegation of civil servants and ministers. Experiences from Africa and from other parts of the world were shared and analyzed. As a result, three key areas which required special attention were identified. * Planning, financing and budgeting: The lack of adequate funds for road maintenance was traced to several factors, including: the lack of a strong link between road user fees and finding needs, non-optimal allocation of road funds, in particular, a preference for new construction over maintenance, and inefficient budget administrative procedures. It was recognized that the common practice of budgeting separately for new investments and maintenance needed to be replaced by a more integrated, or network-based approach in which the available resources would be allocated to the most economically justified uses. The need to develop reliable funding mechanisms and to ensure greater accountability in the use of funds -- through the establishment of quantifiable objectives and quality controls and the introduction of financial and technical audits -- was also acknowledged. * Operational efficiency of road maintenance activities: The limited funds available for maintenance were being used inefficiently. It was suggested that waste and low productivity could be reduced by eliminating force account and increasing the use of local contractors and labor-based methods, and by reducing the size of publicly owned equipment fleets. * Institutional reform and human resource development: It was recognized that technical assistance and training programs were useless unless accompanied by institutional reform measures to improve autonomy, accountability and staff motivation.

18 4 4. RMI PHASE II: DEEPENING OF COUNTRY POLICY REFORMS The RMI message has evolved during the course of Phase II in light of several countries' experience with reform. The diagnosis that emerged during Phase I had described the symptoms of the problem, but it had not clearly identified the underlying root causes of poor policies. The evolution of the RMI has involved not only changes in the content of the RMI message, but also a reorientation of the RMI process that is, the ways in which RMI stimulates reform. 4.1 The Evolution of the RMI Process The regional seminars of Phase I succeeded in raising awareness among policy makers of the need for better road maintenance policies. In addition, a consensus developed among donors on the need to radically rethink their approach to road rehabilitation prograns. But little concrete action resulted, and it was soon clear that regional seminars, while useful in some ways, were not the ideal setting in which to identify the root causes of poor policies or generate realistic countryspecific reform strategies. As a result, during Phase II, the RMI would work with individual countries through a program of Country Initiatives. Phase II began in late 1991 with country initiatives in nine target countries: Cameroon, Kenya, Madagascar, Tanzania, Uganda, Zambia, Zimbabwe, Nigeria and Rwanda. 5 Each country was required to constitute an inter-ministerial committee with a designated permanent secretariat under the leadership of a national coordinator. The role of these country teams was to identify and discuss policy actions for road maintenance and to contribute to the elaboration of national consensus on the definition of reforns and the ways to implement them. The national teams would be supported by a RMI Unit located in the Africa Technical Department of the World Bank. The Country Initiatives were not an immediate success, but during the first year a number of insights emerged. Many of these had to do with process, in particular ownership of the reform process. Once these were taken into account, the RMI program became a real catalyst for change Internalizing the reform effort. Solutions must be home-grown. Excessive reliance on outside resource persons during Phase I and the early stages of Phase II resulted in presentations which did not seem relevant to the African context or actively engage the participants. Local consultants with roots in the local culture are more likely to propose solutions which will work in the local context and are available for follow-up activities. Their reputation and rapport with local stakeholders may better facilitate stakeholder participation in studies and internalization of results. One of the best examples of how this works is the case of a paper on financing which was jointly authored by a senior official from the ministry of finance in Zambia. A heated debate took place within the ministry before the paper was released. S Nigeria and Rwanda have been relatively inactive.

19 Stakeholder participation One of the key discoveries was that the country dialogue must include all major stakeholders. Whereas initially, the program targeted government policy makers and road sector managers, it was only when representatives of private sector road users (trucking and other motoring associations, chambers of commerce, and farming organizations) were invited to participate that a genuine policy dialogue commenced. Thereafter, the country workshops became an effective forum for change. The breakthrough came during seminars and workshops in Zimbabwe, Zambia, and Tanzania where participants from the chamber of commerce, consultant organizations, road transport associations, and the farming community voiced their concern. Their participation changed the entire chemistry of the discussions. For the first time, the two parties to a potential market transaction were talking. Road users expressed willingness to pay for roads (over and above reasonable fiscal taxes), provided the proceeds were spent on roads and the work was done efficiently. The road agencies, on the other hand, started to see a genuine opportunity to improve their position provided they were willing, in return, to reform the way they did business. Bringing the two sides together, is not always easy. Civil servants generally distrust the private sector, and the private sector often is cynical about talking to the road agency. However, the experience of these workshops showed that, once the ice was broken, the relationship became instantly beneficial, with the private sector offering help and support, and the public sector showing a surprising willingness to listen and respond. A good example so far comes from Zambia where the National Roads Board, which is dominated by the private sector, works effectively under a committee of ministers and with public agencies to develop and implement a national road maintenance program, and where the Zambian Federation of Road Hauliers is actively involved in efforts to establish efficient axle-load controls and improve the collection of transit fees Absorptive Capacity Most stake-holders, government departments and local business associations alike, have a limited number of qualified people with the time and ability to think through major policy reforms. It is therefore important that any study, whether large or small, be carried out as a participatory exercise with a steering committee composed of stakeholder representatives, and that ample time for dialogue and consensus building be allowed. New ideas must be absorbed and the consequences of major policy reforms must be evaluated. Traditional sector studies with a tight schedule and little or no stakeholder participation are likely to over-tax the client's absorption capacity and/or miss the target and end up on the shelf. Fundamental reforms are painful, will inevitably involve some give and take and only succeed if the major players agree to compromise. The government must be willing to consider fundamental changes in the way it manages the road network, and road agencies must begin to function efficiently if user support for increased funding is to be secured. Common ground must be identified, a consensus built, and reform sustained until complete. Gradual, carefully guided change may be more easily absorbed than radical transformation or replacement of existing institutions.

20 Sharing of African Experiences Africans are eager to learn from the experiences of other African countries. Through the RMI, success in one or two countries has had a dramatic demonstration effect on others. The early example of Tanzania and Zambia in initiating the reform process very quickly became a challenge for other countries to meet. Reforms in Ghana, Malawi, Lesotho and Mozambique soon followed. A successful device for introducing new ideas and building consensus in the pilot countries, has been the guided study tour. The standard format has been for 5 to 10 selected individuals from the stakeholders to visit other countries and see how they deal with management and financing of roads. Popular resource countries have been Ghana and Sierra Leone in Africa, and New Zealand abroad. The study team is usually accompanied by one or more consultants who take notes on subjects studied and the study team's conclusions The Role of the Donor Community The importance of an internalized reform process has important implications for the role of donors and the RMI in particular. Donors must be involved since the compatibility of country road sector policies and performance with donors' policies influences the level of financing for the sector. They thus have a role to play in promoting cross-fertilization of ideas among countries, providing financial support and acting as facilitators but they cannot solve the underlying problems. Any solutions imposed by outsiders are not likely to be sustainable. The RMI plays a key role in reconciling these two potentially conflicting principles. On one hand, it brings to bear the policy orientation of the donors, but at the same time has established a relatively neutral position vis-a-vis the donors. The clear separation of its objectives from those of donor operations, the fact that its timeframe is not linked to donors' project processing cycles and the quality of RMI staff and resource persons have enabled it to engage in a constructive policy dialogue which is built on trust, openness and candor. The role of the RMI has evolved from one in which it engaged experts directly and without much local input, to one in which it assists local stakeholders to draft terms of reference for consultant assistance, ensuring that studies focus on the key issues, go beyond superficial symptoms, and draw on experience in other countries. 4.2 The Evolution of the RMI Message The key lesson which has emerged from the RMI Phase II program as regards the content of the RMI message is that many of the systemic problems associated with poor road maintenance policies (weak programming and budgeting, undue emphasis on force account work, and inefficient plant pools) are symptoms of a deeper problem. The real cause of poor performance is the weak and unsuitable institutional framework that typifies the sector in many countries. Roads are not managed as part of the market economy. There are no mechanisms through which road users can exert pressure on road agencies. There is no clear price for road services, since expenditures are usually financed from general tax revenues. In addition, the poor terms and conditions of employment in road agencies undermine incentives to perform

21 7 efficiently, as do the lack of clearly defined responsibilities, ineffective and weak management structures, and the absence of managerial accountability The Four Building Blocks Road agencies are unlikely to operate efficiently until they face pressure to satisfy clients, that is, until their revenues depend on satisfying their clients, as they would in a competitive market. To accomplish this, road services must be commercialized, brought into the marketplace, put on a fee-for-service basis and managed like other business enterprises. Since provision of roads is a public monopoly, and ownership of most roads is likely to remain in government hands, adoption of the commercialization concept requires action in four complementary areas: * Creating ownership and pressure for efficiency by involving road and transport users in the management of roads -- thereby gaining public support for adequate road funding, controlling potential monopoly power, and constraining road spending to what users need and can afford; * Stabilizing road financing by securing an adequate and stable flow of funds; * Clarifying responsibility by clearly establishing who is responsible for what; and - Strengthening the management of roads by introducing effective private sector management systems and procedures, and enforcing managerial accountability. Some of the elements of the early RMI message which have to do with managerial and administrative efficiency, such as network-based planning and performance budgeting, while important, are now seen as secondary to the institutional reforms which would commercialize the sector. Attempting to introduce such tools prior to reforming the sources of inefficiency is premature. They cannot be substituted for the profound institutional reform which is needed. The four building blocks: ownership, financing, assignment of responsibility, and introduction of sound business practices in management represent the core of the required institutional reforms. Since they are interdependent, they should be implemented concurrently. The financing problem is not likely to be solved without strong support of the road users. Road users will not be willing to pay for services unless they are managed efficiently. Resource use cannot be improved unless monopoly power is controlled, spending is limited to what is affordable, and managerial accountability is enforced. Further, managers cannot be held accountable unless they have clearly defined responsibilities Ownership Current allocations for road maintenance are erratic and well below the levels needed to maintain the road network sustainably over the long term. The first priority is to win public support for additional road funding. This is likely to happen only if road agencies operate efficiently, and spending is consistent with affordability. Involving the road users in management

22 8 helps to ensure that these conditions are met. Presently, there are at least seven functioning Road Boards managing Road Funds and/or Road Agencies; in Benin, Central African Republic (CAR), Mozambique, Sierra Leone, South Africa, Tanzania, and Zambia. All except those in CAR and Mozambique include private sector representatives Financing Budget allocations for road maintenance in Africa rarely exceed 30 percent of requirements and disbursements are often erratic due to severe fiscal constraints. Governments cannot increase these allocations under present conditions. Several African countries are now addressing this issue by introducing an explicit road tariff composed of vehicle license fees, fuel levies and transit fees. A tariff should ideally be collected independently from government sales and excise taxes and be deposited directly into an autonomous road fund to prevent the proceeds from being siphoned off and spent for other purposes. In the best examples of collection arrangements (CAR, Ghana, and Zambia), the fuel levy is collected on an agency basis and deposited directly into a road fund. The purposes of a road tariff are: * to create a clear market signal which encourages road users to demand value for money, and a to impose a hard budget constraint on the road agency by linking revenues and expenditures. The tariff is often set to cover all costs of maintaining main roads and part of the costs of maintaining urban and rural roads. The remaining costs of maintaining urban and rural roads are financed by local fees and/or taxes. Most countries with road funds have procedures for allocating funds among different road agencies. Some divide the revenues somewhat arbitrarily among the agencies responsible for main, urban and rural roads (Ghana and Mozambique). Some use formulas that are modified in relation to needs (Tanzania and Zambia -- See box 4.1), while others base them on a complex assessment of needs (South Africa).

23 9 Box 4.): Zambia National Road Board: Proceduresfor Allocating Funds among Different RoadAgencies In Zambia, the National Road Board allocates funds on the following basis: * On an annual basis, it prepares an estimate of expected revenues, based on current charges and likely increases during the year. The year in question coincides with the govemment's fiscal year. * In consultation with the Committee of Ministers, the available resources are then tentatively sub-divided into separate allocations for roads managed by the Roads Department (under the Ministry of Works & Supplies), those managed by urban district councils (under the Ministry of Local Govemment and Housing), and those managed by rural district councils also (under the Ministry of Local Government and Housing). Funds for urban roads are allocated on the basis of a block-grant formula which still has to be agreed upon by the Committee of Ministers. * The road agencies, knowing their tentative allocations from the road fund, prepare their annual maintenance programs and the approved programs, which determine the final allocations from the road fund, then define which items qualify for financing through the road fund (with the Ministry of Local Government and Housing preparing the programs on behalf of district councils). * The board, as manager of the road fund, then disburses funds to finance the approved expenditure programs. * Finally, at the end of each quarter, and also on an annual basis, the board conducts an audit to establish, among other things, that funds have been used in accordance with the above approval process. Source: Balcerac de Richecour and Heggie Responsibility A consistent organizational structure for managing different parts of the road network is needed. This requires: * clear assignment of responsibility among different government departments and different levels of government, and * clear assignment of responsibility among the individual road agencies. The division of responsibility should be based on an accurate road inventory and a functional classification of roads. Road agencies should be clearly designated and responsibility formally assigned to each. The relationship between the road agency and the parent ministry needs to be clarified. Among the responsibilities to be assigned are: operation, maintenance, improvement, and development of the road network; traffic management, including safety; and management and mitigation of the adverse environmental impacts associated with roads and road traffic Management The final building block focuses on creating a more business-like agency for management of road maintenance and operation. Once road users are involved in the management of roads, they generally press for the introduction of sound business practices to ensure that they get value for money. They would expect: Clear management objectives, such as " To provide a safe and reliable trunk road network that should facilitate socioeconomic development in the country." (Ghana)

24 10. A competent and dedicated staff which enjoys competitive terms and conditions of employment.. A commercially oriented management structure with consolidated budgets, commercial costing systems, and effective management information systems. * Commercialized procurement of required services and works; in-house service units, if any, to be under competitive pressure from private sector consultants and contractors. * Strengthened managerial accountability through monitorable targets and effective auditing arrangements including technical as well as financial audits. The RMI has sought to identify effective strategies for improving management in several key areas. Some of these are discussed in the following section. 4.3 Strategies for Improving Management Staffing Reform One important issue requiring immediate attention is the wide gap between terms and conditions of employment in the public and private sectors, and the impact that this has on staffing and staff morale. An engineer in the private sector in Cameroon normally receives a total remuneration package twice as large as his public sector counterpart (the ratio is 5 in Tanzania and nearly 9 in Zambia). As a result, several road agencies have lost most of their staff or are being managed by expatriates earning international salaries paid by international donor agencies. Once staff are adequately paid, other reforms should concentrate on giving each road agency a clear mission and effective management structures, including appropriate management information systems, good accounting systems, and more managerial autonomy so that managers can act commercially. The Ghana Highway Authority has made great progress in this direction by streamlining staffing and disciplinary procedures and introducing a road management system. It has also developed a corporate plan that forms the basis of an annual contract plan between the Authority and the government. These reforms improve market discipline, provide managers with the freedom to operate commercially, and strengthen managerial accountability. They also encourage a more objective approach to setting priorities, comparing in-house to contract work, and evaluating labor-based work methods. Finally, auditing procedures need to be improved to ensure that the public gets value for money from road spending. Both financial and technical audits should be carried out by independent auditors. Technical and financial audits are now being used on the rural access roads program in Kenya and on road maintenance programs in Burkina Faso and Senegal Contract Maintenance A great deal of maintenance, particularly routine maintenance, has typically been carried out by force account. The quality is often unreliable and costs are usually higher than those

25 11 associated with contract maintenance. In-house work exposed to private sector competition nearly always results in dramatic increases in efficiency, with costs falling by as much as 30 percent. Contract maintenance can result in improved accountability and quality and helps to develop the local construction industry. Contract maintenance has been introduced in more countries than any of the other reforms recommended during Phase I of the RMI. However, experience has shown that to produce the desirable benefits, contract maintenance must be pursued within an appropriate institutional and administrative framework. Procurement procedures must be straightforward and transparent. The legal system should have a track record for enforcing contracts fairly. The road agency must have enough qualified staff to process contracts, supervise the work, and deal with conflicts. Finally, funds must be available on a timely basis to pay contractors. In countries where these conditions do not exist, a number of initiatives have been taken to develop capacity and introduce contracting gradually, while promoting competition. These include: hands-on training for contractors, schemes to rent equipment to contractors who are just entering the market, training in contract procurement and management procedures for road agency staff, and simplification of procurement procedures. (see box 4.2) In spite of the benefits of contract maintenance, it might not always be feasible or desirable to eliminate in-house maintenance capability entirely, particularly if the private maintenance is undeveloped. A central road agency maintenance unit may, at least initially, be the only source of training for small-scale contractors who are just entering the market as well as decentralized road agency staff who must supervise contractors. In Botswana, Ghana and Zimbabwe, in-house construction units play this training role. But as a general rule road agencies should aim to contract out all periodic maintenance and most routine maintenance. If an in-house unit is retained, it should usually be limited to providing training and performing part of the routine maintenance, subject to competitive pressure Labor-based Methods Labor-based methods of road maintenance represent a potentially effective tool for improving maintenance and creating employment, particularly in rural areas. However, there are a number of barriers to more widespread use of labor-based work methods. Government procurement procedures often discourage the letting of small contracts, particularly to one-man contractors who cannot be expected to follow standard bidding procedures, and bureaucratic payment methods and delays are inconsistent with the financial capacity of very small contractors. Donor policies, with their emphasis on international competitive bidding (ICB) and preference for financing foreign exchange expenditures, compound the bias. Finally, labor-based contracts offer less scope for gratification payments to supplement the incomes of road agency staff, since they minimize the procurement and use of expensive equipment and workshop facilities. Efforts to introduce labor-based methods must overcome these institutional barriers. To date most efforts have been focused on resolving technical issues and training road agency staff and contractors in the appropriate application of labor-intensive techniques. (see box 4.2)

26 Plant Pools Inefficient government plant pools are another symptom of the lack of market discipline. Most road agencies own heavy plant and equipment worth millions of dollars, much of it procured under World Bank loans or furnished on a grant basis by bilateral donors. Utilization rates for this equipment rarely exceed 20 to 30 percent, compared with 80 to 90 percent in the private sector, and the economic losses associated with these low utilization rates are very large. The superficial reasons for such low utilization rates include poor management systems, lack of standardization, shortages of fuel and spare parts (usually due to shortages of foreign exchange to purchase them), and a shortage of trained equipment operators and mechanics (mainly due to poor terms and conditions of employment). However, the real reasons are inadequate flows of funds for maintenance, lack of cost accounting systems, and the absence of managerial accountability. There is simply very little incentive to optimize the use of equipment in the typical existing institutional framework. From the very beginning, the RMI has recommended downsizing and consolidation, and improving the management of plant pools. In light of the slow rate of reform and the obstacles to efficient management in the public sector, it is now recommended that they be liquidated and/or privatized so that road agencies and private contractors alike can lease equipment on an asneeded basis. Competition, with its efficiency impacts on allocation and pricing, should be encouraged, and is likely to develop naturally. Specialized equipment leasing companies will emerge. Large contractors may acquire their own equipment and lease it out when not using it themselves. Small contractors may form joint pools.

27 13 Box 4.2 Developing Domestic Contractors for Road Maintenance A number of initiatives have recently been taken to develop the capacity of local contractors. They have concentrated on: (i) providing preparatory training, (ii) providing hands-on training, (iii) providing access to plant and equipment. (iv) assisting road agencies to acquire the skills to supervise contracts, and (v) simplifying government procurement procedures. Preparatory training. Seminars have been organized. or are under preparation, in Burundi, Ghana. Tanzania. and Zaire to teach contractors how to manage small civil works contracts. The most comprehensive seminar program for contractors is in Tanzania. It offers training for administrative managers, engineers. site superintendents. and technicians. The owners and managers of the firms have also asked to participate in the training so that they can understand what is being taught to their staff. Hands-On training. Potential contractors have been permitted to work on small projects to gain practical contract experience. In Ghana, sections involving 5 km of road rehabilitation have been used as training works for implementing labor-based work methods (contract value around $50,000). Similarly, in Guinea Bissau, the International Labor Organization (ILO) has organized 3 km training sections for labor-based rehabilitation of feeder roads. In Uganda. contractors have been trained on 10 to 15 km road sections under contracts amounting to about $100,000. In Kenya, contractors have been progressively trained to bid for road rehabilitation works. The first time unit prices were fixed by the road agency. The second time contractors were allowed to bid on the same rates but with a plus or minus factor. Now they have to compute their unit prices themselves. Current contracts amount to about $500,000 each. In Tanzania, training works for equipment-based road rehabilitation are 30 to 70 km in length and are estimated at $1 to $2 million per contract. Availability of plant and equipment. These initiatives have focused on helping contractors get better access to plant and equipment. A plant pool has been in operation in Ghana for years and has helped to develop domestic road contractors. In Uganda, rented equipment belonging to the Ministry of Works was made available to contractors, but it was not sufficient. Contractors therefore decided to buy additional machinery and share it from a pool. Renting equipment to contractors is being considered by the ministries of works in Burundi, Guinea, Tanzania, and Zaire. The Integrated Roads Project in Tanzania is providing contractors with access to foreign currency to enable them to buy equipment and spares. Contract supervision. Most road agencies have a limited capacity to supervise contracts and several initiatives are under way to strengthen this capacity. Burundi, Guinea, Guinea-Bissau, Tanzania, and Zaire are all building or strengthening control units in the road agency in order to adequately supervise contracted road works. In each case. foreign expertise is involved in preparing sample documents for preparation, procurement, and supervision, staffing the unit during the initial years, and training civil servants in this new activity. Simplifying procurement procedures. Simplification of procurement procedures is an essential component of efforts to do more work under contract and develop the local construction industry. In Ghana, a comprehensive review of conditions of contracts for ICB and LCB has been carried out under the Road Rehabilitation and Maintenance Project. Proposals for changes have been prepared and accepted. New conditions of contracts are being implemented. If implemented earlier, some specific clauses, such as provision for compensation for delayed payments, might have prevented some contractors from going bankrupt. although there is no substitute for prompt payment. In Chad, Guinea Bissau, and Tanzania, governments have decided to reshape and simplify the regulations for procurement and contract administration to make them easier for contractors. Source: J-M Lantran. 5. PROGRESS REPORT, This section highlights the response of the donor community and the accomplishments of a number of countries in pursuing reform. It also shows that although significant progress has been made in policy and institutional reform by several countries, the impact on the condition of roads is not yet apparent; and in spite of progress, the challenge remains great. 5.1 Donor Support for Rehabilitation and Policy Reform Donors play a key role in encouraging the efficient use of financial resources they bring to bear in the development process. The countries which have embarked on serious reforms to build up their maintenance capacity should benefit from the strong support of the donor

28 14 community -- for institutional reforms as well as comprehensive rehabilitation programs. There is some evidence that this is the case. The most prominent example comes from Tanzania where 16 donors joined with the government to fund the Integrated Roads Project (IRP) with a budget of US$ 871 million after the government initiated a reforrn program in A second project (IRP II) with a price tag of US$650 million, became effective this year. Large projects are underway, about to become effective, or under preparation in many countries: Benin, Burkina Faso, Cameroon, Chad, Gabon, Ghana, Ethiopia, Malawi, Mali, Mozambique, Senegal, Sierra Leone, Tanzania, Uganda, Zambia, etc. All of these have demonstrated a strong commitment to reform. On the other hand, countries, such as Nigeria, Kenya, Sudan and Zaire, which are not committed to giving priority to maintenance are having difficulty attracting external finance for their works programs. The RMI, and indeed the SSATP as a whole, has played an important role in donor coordination. The ten bilateral, multilateral, and regional organizations which have supported the RMI program started off sharing a common concern about the need for sound road maintenance policies. As a result of their collaboration in the RMI, and in spite of occasional disagreements on strategy, this shared concern has evolved into a confirmed agreement. Following the 1991 Brussels Conference on Road Maintenance in Africa which was organized by the EEC, a Code of Conduct to guide future donor involvement in the road sector was drafted. (See box 5.1) The Code has been signed by most members of the African development community. A review of World Bank/IDA Lending Program from FY to FY is illustrative. While the number and amount of loans/credits allocated to roads projects in Sub- Saharan Africa has remained stable, an average of US$ 225 million per year corresponding to approximately $660 million in total projects costs per year, the content of projects has changed substantially. Emphasis has been placed on: * Rehabilitation rather than new construction * Reducing the maintenance backlog * Improving the maintenance process Development of the private sector (construction and consulting industries) * Focus on environmental aspects * Strengthening technical capacity * Increased financial integrity A breakdown for the distribution of funds in World Bank or IDA-financd projects is provided in table 5.1.

29 15 Box 5.1 Donor Code ofconduct for Promoting Sound Road Maintenance Policies The Donor Code of Conduct emerged from the technical conference on maintenance and rehabilitation of roads in Sub- Saharan Africa held in Brussels on November The conference resulted in a number of conclusions which were unanimously approved by participants. They included the following objectives: * To introduce an appropriate legislative and administrative framework; * To redefine the role of the private sector, increase private sector involvement, and increase decentralization of responsibilities; * To rationalize programming and budgeting procedures; * To introduce coherent taxation and cost recovery policies; * To increase efficiency by promoting contract maintenance, reducing state-owned equipment pools, and increasing labor-based work methods; * To promote development of the local construction industry; * To strengthen road sector administration and human resource development policies. The Code itself is a two-page document to which the conclusions of the Brussels conference are attached. In adopting the code, signatories agree to: 1. Apply in a rigorous and concerted manner the principles which were jointly developed and approved in the framework of the RMI, in accordance with the recommendations of the Second UN and Communications Decade (UNTACDA II). 2. Reinforce consultation and coordination between donors, development agencies, and beneficiary states through: * Exchanging general information at the central level and at the local level; * Informing and coordinating before each financing decision and holding regular meetings at the local level with the aim of: - assessing the potential of using local resources and employment-intensive methods for road rehabilitation and maintenance; - developing a joint analysis of priorities concerning road maintenance in each country and of capacities of the countries in question to organize and manage the relevant support services; - informing each other of the implementation of current road programs; - evaluating the application of the principles and recommendations of UJNTACDA II/RMI; - making an annual report to the relevant authorities of the RMI project. 3. Undertake the necessary steps, whether individually or through the inter-african regional organizations, to invite all the countries of Sub-Saharan Africa to subscribe to these principles and recommendations, and to implement them in terms of resources and legal measures. 4. Contribute actively to the preparation of a restructuring and investment program for the road sector and, whenever possible, to the adoption of Transport Sector Reform Programs.

30 16 TABLE 5. 1: Key components of WB-financed road projects (FYI 989 to FY 1994) IKey component % of total Details % of each component Civil works 800/ New construction 9 % Rehabilitation 65 % Periodic maintenance 20 % Routine maintenance 6 % Technical assistance 9 0 o Policy support 16 % Project preparation ± 54 % implementation support Institutional development 30 % Equipment 11% 5.2 Progress in Implementing Reforms The RMI originally recommended action in eight areas: Two of these, stable funding and institutional reform (including the creation of mechanisms for road user ownership and participation in management, and improved assignment of responsibilities) correspond to three of the building blocks which were identified during Phase IL: finance, owvnership and responsibility. A third area, staff motivation, including the reduction in road agency staff and improved coniditions of employment for the core staff who remain, is part of the fourth building block, management. These four building blocks are now considered the key areas in which the reform effort must initially be focused. They form the foundation of the movement to commercialize road services and subject them to market pressures: without progress in these, no lasting improvements in road management are likely to come about. Three of the other five areas recommended for action during Phase I: contracting maintenance, labor-based work methods and plant pool management, are techniques and tools of good management, The remaining two, network based planning and performnance budgeting, are techniques of good financial management, and are thus linked to two building blocks,finance and management. Overall, good progress has been made in initiating reform: for many of the reforms, the number of countries showing at least some progress in 1995 is significantly higher than it was in To assess progress, 34 countries were assigned a score of 0 to 4 for progress in implementing each of the eight reforms, with 0 indicating no progress and 4 indicating that the reformi was complete. The scores for each reform were averaged as an indicator of relative progress. The resulting scores indicate that the reform program seems to be well underway in many countries. Average scores for 1995 are considerably higher than those for 1991, but there is a great deal of variation among the eight reforms, and very few countries have completed any of them. (Annex 1, table I shows the progress of each of the 34 countries; table 2 summarizes the scores for each of the eight reforms and table 3 shows the average scores of all the countries for each of the eight reforms.)

31 Progress in the Key Reform Categories Good progress has been recorded in the key areas of stable funding and institutional reform. The average scores for these reforms were 1.85 and 1.82 respectively (see annex 1, table 3). In each case, more than three-fourths of the countries surveyed have taken action and more than 60 percent of the countries have gone beyond the initial stage (a score of 2,3 or 4). Almost half of the countries have gone beyond the initial stage in both reform areas. The number of countries which have introduced reforms in funding (seven) and institutional reform (thirteen) during the last five years is encouraging. This augers well for the future of the reform movement, assuming that countries which have initiated reforms will move to consolidate them. As mentioned in part 4, the introduction of road tariffs has played the key role in stabilizing funding for road maintenance. Institutional reform has come about through the creation of road boards in which road users can get involved in road management, thus exerting pressure for better performance, and through the better definition of responsibilities among the actors in the sector. Far less progress has been achieved in reducing excess staff and improving staff motivation and conditions of employment in road agencies. The average score for this reform, 1.26, was among the lowest. Fourteen of the countries surveyed, more than 40 percent, have not even initiated staffing reform. This is a politically sensitive subject and one which transcends the road sector. In spite of this, at least one country, Sierra Leone, has set up an autonomous agency which sets its own terms and conditions of employment. Ghana is also moving in this direction. It is not clear why other countries have not followed. Clearly more work is needed to eliminate the institutional and political barriers to progress in this area Progress with the Other Reforms Contracting maintenance seems to have been the easiest reform to implement. This reform category had the highest average score, All but six of the countries surveyed have initiated action in this area, and many have made substantial progress. In Botswana, Burkina and Senegal, all or most maintenance is now carried out by contractors. In theory, contracting out maintenance should go hand in hand with, and facilitate, staffing reform, as some of the staff who are laid off can join the contract work force. It is worth noting that the countries which have made the most progress in contracting out maintenance (a score of 3 or 4) have also made at least some progress in staff reform, though the latter lags behind. Only fair progress has been noted in the introduction of labor-based methods (average score, 1.22). Ten countries (almost one-third) of those for which data are available, have not taken action in this area, but eight new countries have used labor-based methods since The idea seems to be spreading, if only slowly. The surveyed countries have also been slow to reform equipment pools (average score, 1.10). Fifteen countries (almost half) have not taken action, though seven additional countries initiated reform in equipment pools since Good progress has been made in introducing network-based planning methods (average score, 1.85). About 65 percent of the countries have gone beyond the initial stage of reform in this area. Nine of the countries surveyed have introduced this tool since Only fair progress

32 18 has been made in performance budgeting (average score, 1.24). Thirteen countries (almost 40 percent) have not attempted to introduce this tool, though two countries, Burkina and Senegal, have completed the reformn in this area. On the whole, we are encouraged by the progress which has been registered. The gradual pace of reform reflects the complex nature of the institutional changes which must be inaugurated. Such profound reform, by its very nature, can be introduced only gradually, or it is not likely to have the broadbased support required to make it sustainable. A program of assistance to support such reforms must respect the need for gradualism, while constantly seeking catalysts to move the effort forward. 5.3 Changes in the Condition of the Road Network Overall, the condition of the main road network does not appear to have changed substantially over the period Changes in the condition of main roads in 34 countries are summarized in annex 2. The deterioration of roads in 13 of the countries is balanced by improvements in 18, and a stabilization of the condition in 3. Two points are noteworthy: First, it is not surprising that countries which scored highest on the reform measures succeeded in improving road conditions most and countries which scored lowest in reforms experienced the greatest deterioration. Secondly, if road conditions in Africa have indeed been stabilized, this is a positive trend vis-a-vis the past, when road conditions were deteriorating at an alarming rate Trends in Maintenance Expenditures and Road Conditions in SADC Countries A review of roads management in the Il member countries of the Southern Africa Development Community (SADC) was recently commissioned by the Southern Africa Transport and Communication Commission (SATCC) with the assistance of RMI and with funding provided by the Norwegian government. This study analyzes the status of road sector reforms 6 and provides recent data on maintenance expenditures and road conditions in these countries. Since this is the most recent analysis of the roads sector in Sub-Saharan Africa, it is worth summarizing some of its findings here. 7 Although the condition of the main paved network appears to have remained fairly stable over the period, , there is evidence that the main roads have been improved through rehabilitation rather than through maintenance. Moreover, the main unpaved network appears to have deteriorated further. The percentage of the main unpaved network in good condition fell from more than 40 percent in 1984 to 22 percent in Data on the length of the main paved network in the SADC countries and its condition in 1989 and 1993 are presented in annex 3, table l and figure 1. Southern Africa Transport and Communication Commission, Review of the Road Sector in the SADC Region, draft, June, The eleven countries of SADC are: Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

33 19 While the study found that the basic principles advocated by the RMI are generally accepted and supported by decision makers in the SADC countries, there is nevertheless some debate on several key issues, such as the extent to which roads can be completely commercialized, whether road users should be directly involved in managing roads, and the extent to which maintenance should be contracted out. Although the introduction of road funds has improved the funding situation, maintenance remained underfunded in the 1993/94 financial year. For the SADC region as a whole (excluding Angola and the Republic of South Africa), actual spending on maintenance amounted to less than half of the amount necessary to ensure the long-term sustainability of the network. Far more was spent on rehabilitation and new construction. Annex 3, tables 2 and 3, and figures 2 and 3 show the breakdown for individual countries. The salaries of road agency staff are low compared to those in the private sector. Data for five of the SADC countries are presented in annex 3, table 4 and figure 4. With increasing reliance on contract maintenance, there is clearly a need to improve contract management practices and strengthen the capacity to supervise contracts. It was found that in Zambia, while competition was limited initially, over time, competition increased as the government demonstrated its commitment to use of the private sector, and as the reliability of funding for contracts improved. Ten of the SADC countries have public plant pools which are operated either as parastatals or directly under a government department. The study concluded that the public plant pools have failed without exception to satisfy the needs of road agencies. There seems to be no option but to privatize them. 6. EMERGING ISSUES The four building blocks discussed in Part 4 represent a strategy to address institutional and financial barriers to good roads management. In moving forward with this strategy, the RMI has identified a number of issues which now need special attention. These include: Assuring sustained availability of road funds Several countries, such as Burkina Faso, have performed well in establishing road funds where donor support has been conditioned on the availability of local funding for maintenance. But the allocation of funds is not yet automatic. The sustainability of road funding arrangements needs to be assured so that when donor supported projects are completed, funds for maintenance will continue to be available. * Channeling road funds to decentralized levels The effort to improve road maintenance policies must not focus on maintenance alone, nor should it focus on the maintenance of only the main roads. Poor road maintenance policies are a sub-set of the wider issues of managing and financing roads as a whole. In fact, the

34 20 problems are most acute at the regional and district levels, where institutional weaknesses are greater and financing is in shorter supply. One of the challenges facing the reform effort at this point is to ensure that mechanisms are developed to channel road fund resources to the decentralized levels. Choice of strategy for reforming plant pools Efforts to improve the management of plant pools have failed by and large. Their monopoly position, combined with the poor incentives for efficiency in the public sector and the potential they offer for rent seeking by road agency staff eager to supplement their inadequate incomes, virtually ensure that they cannot be managed efficiently. In addition, as public agencies, they have difficulty collecting payments from the public road agencies, and many have a large backlog of unpaid bills. The only feasible solution appears to be to liquidate the pools and encourage the creation of private pools from which both the road agencies and private contractors could lease equipment. * Poor terms and conditions of employment for road agency staff This is a key area in which very little progress has been made to date. The most important issue is the wide gap between the terms and conditions of employment in the public and private sectors, and the impact this has on performance. Technical staff are frequently lost to the private sector, and those who remain spend much of their time daylighting to supplement their incomes. Several road agencies are managed by expatriates whose international salaries are financed by multilateral and bilateral donors. This is not sustainable. Strategies for providing competitive remuneration packages need to be developed. v Need to make wider use of small contractors and labor-based methods While progress has been made in contracting out maintenance by many countries, the use of small contractors and labor-based methods has lagged due primarily to institutional barriers. Among the major issues are procurement practices which favor larger contractors, and delays in payment which create greater burdens for individual and small contractors than for larger companies. 7.1 Summary of Progress 7. CONCLUSIONS A great deal of progress has been made in the management and financing of roads by African countries over the last five years. There is evidence that, on average, road conditions are now being stabilized, a positive trend vis-a-vis the recent past when conditions were deteriorating at an alarming rate. However, while the overall picture appears to be improving, and the achievements of some countries are truly encouraging, the problem is not yet resolved. During

35 21 the past five years, roads have deteriorated in more than a third of the countries surveyed. In some countries, although the condition of the main paved network has been stabilized, the condition of the main unpaved network, in particular rural roads, continues to deteriorate. Data for the SADC countries shows that, although funding for maintenance has increased, it is still far below the required levels. Many countries now recognize the problem and are taking steps to improve the policy and institutional environment for road management. A large majority of the 34 countries surveyed have initiated at least some of the reforms recommended during Phase I of the RMI, and almost one quarter have initiated reform in all eight recommended areas. Progress in each of the eight areas can be summarized as follows: * Contracting out maintenance. Overall, excellent progress has been made, though further efforts are needed to increase the participation of small contractors. * Funding stabilization and Institutional reform. Good progress has been recorded in these key areas, primarily through the creation of road boards and other mechanisms through which users have become involved in the management and financing of roads. * Network-based planning methods. Good progress has also been achieved in the introduction of network-based planning. Resources available for both investments and maintenance are increasingly being considered as a whole and allocated to the most economically justified use. * Labor-based methods, Reform of plant pools, and Improvements in employment conditions. Only fair progress has been made in the application of labor-based methods and the reform of plant pools. Achievements in the areas of reducing excess staff and improving the employment conditions of the core staff who remain have been very disappointing. These three remain key focus areas for the near future. * Performance budgeting techniques. Very little progress has been made in increasing accountability through the setting and monitoring of quantifiable objectives. It is now believed that institutional reform must be deepened before such techniques can be successfully introduced. 7.2 Key Factors which have Contributed to Progress While the RMI cannot be credited with all the progress which has been made, it has certainly made a considerable contribution. Several factors which have contributed to progress have been identified. * A key strength of the RMI, and a factor contributing to its success, has been the emphasis it places on adaptive policy reform, the practice of collecting regular feedback on its impact and reorienting activities in light of experience. This led to a reassessment of both its operational processes and the content of its recommendations. As a result, several changes have been

36 22 introduced. Africans have assumed leadership roles, and policy recommendations have become more oriented toward key institutional reforrns. * The emphasis RMI has placed on donor coordination has proven essential to the reform of road management in Africa. As the major source of funding for the sector, donors play a key role in promoting reform and rewarding the achievements of the reformers, but their policies have occasionally undermined good management. The RMI has built a consensus within the African development community on the reforms needed to improve road management, and has secured the commitment of donors to promote these reforms. * The country focus adopted by the RMI during Phase II proved useful in focusing efforts on concrete problems and identifying practical solutions, and it promoted country ownership of the reform process. Another equally important factor has been the increased use of local resource persons who have a better understanding of the institutional environment and its impact on road management, and often enjoy greater credibility among decision makers. * While the country focus proved essential for moving forward with reform, it did not exclude the sharing of experiences from other countries, particularly African countries. The positive experiences of several African countries have become key catalysts for the reform effort elsewhere. 7.3 The Future of RMI At its annual meeting in October, 1994, the coordinating committee of RMI decided to aim for broader dissemination of the RMI program in Sub-Saharan Africa. A particular effort will be made to involve more francophone countries. To promote wider circulation of information and experiences within Africa, RMI has established the Sub-Saharan Africa Road Information Network (SSARIN). RMI core countries, associate countries and African resource countries participate via facsimile connections. The strategy now being considered to further the goal of broader coverage would involve the development of regional RMI centers in Africa and the gradual downsizing of the RMI unit in the World Bank during * Regional centers would be established in collaboration with existing regional organizations such as the Southern Africa Transport and Communication Commission (SATCC), the Economic Community of Western African States (ECOWAS), Common Market for Eastern and Southern Africa (COMESA), and the Customs and Economic Union of Central Africa (UDEAC). * Support for country initiatives would continue to be provided to the seven active countries and support would be extended to interested associate countries as increased capacity permits. Four regional dissemination seminars would be held in cooperation with the Economic Commission for Africa and regional organizations during 1995 and The first (for the SATCC countries) was held in Pretoria, South Africa, in April 1995.

37 ANNEX 1 Table 1: Status of Road Sector Policy Reform Key: 0 = no progress; 4 = reforms complete. Stable Funding Institutional Reform Staff Motivation Contracted Labor Based Work Reformed Plant Network Based Performance Maintenance Pools Planning Budgeting Country Angola Benin n.a. n.a Botswana Burkina Burundi Cameroon C.A.R Chad Comoros Congo Cote d'lvoire I Equat. Guinea Ethiopia Gabon Ghana n.a. n.a Guinea n.a. n.a. I I 1 2 Kenya Lesotho Madagascar Malawi Mali n.a. n.a Mauritania Mauritius Mozambique Nigeria Rwanda I Senegal Sierra Leone Tanzania n.a Togo Uganda Zaire I Zambia Zimbabwe I I

38 24 ANNEX 1 Table 2: Number of Countries in Each Progress Category Progress Stable Funding Institutional Staff Motivation Contracted Labor Based Work Reformed Plant Pools Network Based Performance Category* Reform Maintenance Planning Budgeting I Is n.a Totalno of countries * A score of 0= no progress; 1= reform initiated, 2 = some progress beyond initiation; 3 = substantial progress; 4 = reforn complete Table 3: Average Score of all Countries for each Reform on a scale of 0-4 Stable Funding Institutional Staff Motivation Contracted Labor Based Work Reformed Plant Pools Network Based Performance Reform Maintenance Planning Budgeting

39 25 ANNEX 2: CHANGE IN CONDITION OF MAIN ROADS Marked Some Stable Some Marked RMI Country Deterioration Deterioration Improvement Improvement Country Angola - No Benin No Botswana No Burkina 0No Burundi No Cameroon Yes C.A.R.. No Chad 777 No Comoros o Congo, - No Cote d'ivoire No Equat. Guinea No Ethiopia Associate Gabon ANo Ghana Associate Guinea No Kenya - 3_'*i Yes Lesotho Associate Madagascar 3_'g. >l... t> '._'.''_ Yes Malawi ;Associate Mali 21!i2igEffi No Mauritania INo Mauritius X Mozambique Associate Nigeria _..Withdrew Rwanda Withdrew Senegal No Sierra Leone N Tanzania.- A Yes Togo -- Associate. Uganda Yes Zaire - No Zambia Yes Zimbabwe Yes Number of countries

40 26 ANNEX 3: ROAD MAINTENANCE IN SADC COUNTRIES TABLE 1: Condition of Main Paved Roads in SADC Countries Total Road Main Paved Network Network Total km Total km In Good and Fair Condition in 1989 in 1993 in 1989 in 1993 in 1989 in 1993 Angola n.a. n.a. Lesotho 5,425 5, ,005 82% 100% Namibia 41,301 41,301 4,904 4,904 95% 95% Botswana 30,096 20,455 2,831 3,663 98% 92% South Africa 21,780 72,021 n.a. 60,000 n.a. 91% Swaziland 2,913 3, % 80% Zambia 40,388 38,897 6,369 5,047 70% 80% Malawi 12,561 12,104 2,520 2,568 94% 76% Tanzania 64,007 88,307 3,349 3,800 78% 75% Zimbabwe 105,365 91,078 8,261 8,261 97% 70% Mozambique 32,042 47,232 4,600 5,519 68% 31% Source: Review of The Road Sector in the SADC Region, SATCC, 1995 FIGURE 5.1: Changes in % of Main Roads in Good and Fair Condition, in SADC Countries, 1989 and % 95% 85% 75% Min 1989 *in % 55% 45% 35% 25% Cu 0 co ~ N CV. cm Cu co 0 :5 CuC 0 1 E m co O < C D S E i X s : E E en N co 0

41 27 ANNEX 3: TABLE 2: Maintenance Expenditures in US$ Current Maintenance Required Adequacy of Maintenance Expenditures Maint. Expenditures* Expenditures _ South Africa A A Swaziland C A Lesotho E A Namibia n.a n.a B Botswana D B Tanzania E D Zimbabwe E E Mozambique n.a n.a E Zambia E E Malawi E E Angola n.a n.a 70.0 n.a n.a Source: Review of The Road Sector in the SADC Region, SATCC, 1995 * Expenditures as a percentage of required maintenance expenditures in 1993: A = 100% or more, B = 85-99%, C = 60-84%; D = 45-59%; E < 45%

42 28 ANNEX 3: FIGURE 2: Maintenance Expenditure by SADC Countries as Percentage of Requirement in % 400% 350% 300% 250% _ l % _ : * % 150% 0% 'a 0 Cm cu CU Cl) C iq ~~CU.0 co._ C m C) C Ci c.0 En E i < -j z *6 co E o,, m N N 5

43 29 Table 3: Total Road Expenditures (Maintenance + New Investments) in USS millions In US$ GNP Current Cutirrent Total Maint. as % Investments millions New A'ftiintencnce Maint.+ of total as % of Investment Expenditures Investment expenditures GNP s Zambia % 0.8% Tanzania % 3.5% Malawi '% 0.3% Swaziland % 2.5% Botswana % 1.3% Zimbabwe % 0.5% South Africa % 0.2% Namibia % 1.5% Lesotho % 0.6% Angola 7200 n.a. n.a. n.a. n.a. n.a. Mozambique 1034 n.a. 4.0 n.a. n.a. n.a. Source: Review of The Road Sector in the SADC Region, SATCC, 1995 ANNEX 3: FIGURE 3: Maintenance Expenditures Compared to New Investments in SADC Countries, in %MM 90% 80% 70% 60% 50% 40% 30% j 20% 10%- 0% 3..2 E cu co E N = *.0 E co z 0 C,,