Road sector reform : a tale of two countries - Part I Ghana : serendipity of foresight?

22578 Sub-Saharan Africa Transport Policy Program (SSATP): Road Management Initiative (RMI) UNECA and the World Bank Nate No. 6 Marrh 1997 Road Sector Reform: A Tale of Two Countries (Part I) Ghana: Serendipity or Foresight? T 'he reform process in Ghana dates back to the early 1970s. In the wake of a study commissioned to propose wvays to improve the construction and maintenance of roads, Decree 298 (1974) established the Ghana Highway Authority (GHA) under the Ministry of Wtorks and Housing. The GHA was given responsibilitv for the adrministration, This note, Part 1 of 3, is development, and maintenance of all public highways and related facilities in based on a dissemination Ghana. The GHA took over the trunk roads and rural feeder roads. The rest of report prepared by Sam the roads were managed b) the Cocoa Board, Volta Authority, and timber Mwamburi Mwale for a study companies. Urban roads were managed by city and municipal councils under delegation to Burkina Faso the Ministrv of Local Government. These changes reduced the number of and Ghana in June 1996. institutions responsible for roads to only five agencies under two ministries. Mr. Mwale is a policy analyst with the Policy Research Group in Nairobi. By 1981. further institutional consolidation took place. All feeder roads wvere placed under the Department of Feeder Roads (DFR) within the This series is intended to Ministrv of WVorks and Housing. In 1982, a new Ministry of Roads and share information about Highways (MRH) was formed from the previous Public WNorks Department. issues raised in various GHA and DFR were moved, and placed under the authority of the new ministry SSATP reports. The views In 1988, the responsibility for urban road maintenance wvas shifted from the and in this note, arethose local authorities (under the Ministry of Local Government) into the newly of the author, and do not created Department of Urban Roads (DUJR) in the Ministrv of Roads and necessarily reflect the opinions of the WVorld Highwavs. Thus, by the end of the 1980s, the institutional structure that exists Bank Group,UNECA, or todav wvas in place, consisting of a single ministry, the Ministrv of Roads and any of the RMI Highways, wNith three specialized agencies that manage Ghana's 22,000 km stakeholders. road network. The process of this institutional development was decidedly For more information evolutionary, determined along the wav by various political, social and about these notes, please economic demands of the time. Thus, it could be argued that the current contact Leita Jones in the World Bank. Internet: institutional structure is less the result of a planned reform process, than a )EORB relatively efficient result of fortunate circumstances. The creation of the Ministry of Roads and Highwavs elevated road sector issues to the cabinet level, thereby providing leverage for budget financing through the Ministry of Treasury. The MRH provides unified  z I Africa Transport plamling, policy formulation. Paxments are made into a implementation, and special account in the Bank of monitoring the sector. The Ghana, wvhich is administered by delineation of specialized Private contractors the Ministry of Roads and agencies, such as the GHA have proven their Highways. Disbursements must for trunk roads, the DFR for be jointlv approved bv the feeder roads, and the DUTR ability to provide the Ministry of Roads and Highways for urban roads, probablv otu and the Ministrv of finance. and make the specific desired with are distributed among the Ghana maintenance of these efficiency quality Highway Authority the networks more efficient. Department of Feeder Roads, and timeliness. and the Department of Urban Yet, this process is being Roads. Although there is no challenged by still-changing predetermined allocation, on political, economic and average GHA receives 58 percent social forces. Both the DFR of these disbursements. the DFR and DUR face likelv decentralization to local 20 percent, and the DlUR 22 percent. In spite of and metropolitan or municipal governments, this fund, the resources available for road respectively, as a result of the political reforms maintenance in Ghana remain insufficient. The of the 1990s. The 1996 Civil Service NIRH depends on other sources of funding such as (Ministrv of Roads and Highways) Instrument Treasury allocations from the consolidated fund, clearly defines the respective roles of the donor grants. and loans, in order to meet the Mlinistry, the Roads Advisory Board, the DFR deficit. and D)UR. A separate draft bill, establishing the Ghana Highways Authority, defines the current and future role of the GHA xvithin the The Contracting Process MRH, provides for the delegation of authority over roads to district assemblies, provides also All three agencies (the GHA, DFR and DUTR) for stakeholder representation through a contract up to 90 percent of the routine and special Board in the GIHA. and proposes periodic maintenance of roads to the private sector. specific measures for sustainable financing These firms provide both equipment-based and and maintenance of roads by the Road Fund. labor-based services. There was initial skepticism towvards, and criticism of. this privatization scheme, Sustainable Financing but early results are convincing the most doubting critics. Private contractors have proven their ability Ghana has one of the oldest road funds in to provide the desired output with efficiency. Africa. The Ghana Roads Fund xvas qualitv, and timeliness. The management by these established in July 1985. and was updated by agencies has ensured, with sound training and close the 19)96 Ghana Highway Authority Act. The supervision. wvork of a similar or superior quality to main objective of the road fund is to finance that formerly performed by force account. routine and periodic maintenance of roads, including assistance to the metropolitan, The Ghanaian contracting sector has at least municipal, and district assemblies in tvo hundred firms, ranging from small labor-based maintaining roads. The fund is financed firms to large, fully staffed firms capable of principally by a fuel levxy, vith a small competing with foreign competitors. Manv of these additional revenue derived from vehicle contractors, only recently incorporated, did not inspection fees and tolls from roads, bridges initially have skilled technical and managerial staff and ferries. or systems. One of the longer term objectives of  Technical Notes 1 3 the MRH and its agencies, therefore, has been the training, equipping and emplovment of local contracting firms through the development of a Having completed the private-sector capacity for road maintenance across training, eligible contractors the country, in particular local labor-based contractors. who lack sufficient equipment This effort is being pursued vigorously Nvith are enrolled in a loan- intensive training. There are also several Ghanaian purchase scheme ... The engineering consulting firms that are able to provide both technical and supervisory services to contractors are guaranteed the contracting industrv. Under the current program, ninety-three contractors have been work for 48 months, during trained in proper road maintenance techniques. which they must repay the Having completed the training, eligible contractors who lack sufficient equipment are enrolled in a loan- loan. Each contractor is purchase scheme. guaranteed a minimum of The scheme is run jointly by the Government US$ 200,000 work annually for of Ghana, the World Bank, DANIDA, and USAID. The equipment provided bv the scheme to each four years. enrollee consists of a tipper truck, three tractors, six trailers, two rollers, one towed water tanker, one water pump, one chainsaw, one set of hand tools, the lowest cost work, once the contractors attain and one pick-up vehicle. The contractor is guaranteed work for 48 months, during which they sufficient knowledge and experience in the process. must repay the loan. Each contractor is guaranteed a minimum of at least USc 200,000 of work To ese thattontractors are committed to annuallv for four vears. carrying out the job to satisfactory completion, a mobilization fee has been replaced by the The contractors are classified according to requirement that contractors pre-finance their work their assets, experience and equipment. Class A with their owzn bank, and sign a performance bond. contractors work on roads, while class B The contractor can pre-finance the mobilization in contractors wvork on roads,rwhile clasd se Bathis way, using the bank financing, after providing cvstems. Contract with conregteand .ewage sufficient collateral. The bank is able to call in both svstems. Contracts are negotiated xvith eligiblethpr-iacnadpefmnebodfte bidders, according to the engineers' estimate.the pre-financing and performance bond if the Open bdding is st mor the exnep estion th t.h contractor is failing to meet its performance and Open bddiang IS stilll more the exception than the p~etshdls h odaee ucae rule, particularly in the feeder roads program. payment schedules. The road agency purchases Contracts are, for the most part, still negotiated, and stores bulk materials that it can sell to the dueto he, nxrien mostp smll egontractor contractors at reasonable prices. To ensure that in setting reasonable and competent bids. contractors are sufficiently motivated, the financial Negotiation is also required due to the obligation bv arrangements of this process have been simplified, the MRH to provide for fortv-eight months of work and made convenient and prompt. The bank to each of the fiftv-four equipment-based advances, along with monthly certified payments. contractors in the loan-purchase scheme. are all approved at the local regional office. Pavments are made wNithin two days after having Competitive bidding wrill eventually, however, ensure -  4 L Africa Transport been approved by the regional minister and regional Act provides for a board wvhose membership will be economic planner. drawn equallv (five plus five) from the private sector and the public sector. The board's composition and Is it working? functions x%ill alloxv the road users (the primary stakeholders) to exercise ownership and The main objective of the road sector reform is to accountability in the use of the road fund. have 70 percent of the network in good condition, 20 percent in fair condition, and only 10 percent in This board will be the sole manager of the poor condition. The question then is wvhether or not fund's finances. The board's functions will include the current institutional arrangement -,ill be able to managing the road fund, review,ing its operations, meet this objective. This is a particularly intriguing monitoring financial inflows, and recommending question now, since the centralized svstem is set for user charges for approval by a committee of vet more change. ministers. The board -will also review and approve the Recent legal and toI 1** annual work programs of the institutional reforms point various road agencies. along towards a decentralization of with their financial the responsibilities of road requirements. jointly with the construction adTheRMilwas launched in 1988 by the UnitedMRanitagcesTh construction and Nations Economic Commission forAfrica (UNECA) MRH and its agencies. The maintenance, in spite of the and the World Bank, under the auspices of the board will organize periodic fact that the centralized Sub-Saharan Africa Transport Policy Program technical and financial svstem has thus far delivered (SSATP). The countriestaking part in the RMI are audits, and wvill inform the on its promises. The Cameroon, Kenya, Madagascar, Rwanda, , ' Tanzania, Uganda, Zambia, and Zimbabwe. Others pubic of revenue Inflows. devolution of both resources receiving assistance from the program include financial allocations. and the and management of road Benin, Ethiopia, Ghana, Lesotho, Malawi, status of work being done. It maintenance to local Mozambique, and Togo. RMI is administered by , . . . the World Bank's Africa Region, and is co-financed will also be charged with assemblies. while politically wlththe govemments of Denmark, France, periodically reviewing the desirable. mnav not necessarily Germany, Japan, the Netherlands, Sweden, fund's effectiveness. Switzerland, and the European Union. France, be an impr9vement on the Japanand Norwayprovideseniorstaffrmembersto current centralized system. work on the Program. The stakeholders will play three important roles in The crux of the matter the road fund. In their is that road sector reforms capacity as road users, they are, to a great extent, will be financing road operationally defined bv the political economy that maintenance through the fuel levy and other husbands them. The goal of road sector reform has instruments. Through their representatives on the been sought through a relatively efficient road fund board, they w ill help determine the centralized system wvhich is nowv likelv to be allocation of the fund's resources to road programs. decentralized before even being given the chance to These representatives wnill also exercise reach its gcal by the year 2000, as originally accountabilitv by requiring periodic technical and promised. financial audits. By these means. stakeholders will ensure that road maintenance is carried out Although the fuel levy is deposited directly economically, efficienth-. and equitablv in an open into the Bank of Ghana by the fuel companies. this and accountable fashion. Finally, the road fund has been nc guarantee of the fund's independence board will enhance the security of the funds. from political interference. To strengthen the fund's control o-er these resources, the 1996 GIA,