RFA financing a safe and efficient road network

March 16, 2016, 12:20pm

 

 

 

Prime Focus Editor Penda Jonas Hashoongo sits down with the Chief Executive Officer of the Road Fund Administration Ali Ipinge to discuss the milestones achieved by the State Owned Enterprise, the challenges encountered and the way forward in making the parastal a competitive entity with potential to continue contributing the growth of the economy.

Prime Focus: What is the mandate of the Road Fund Administration?

Ali Ipinge: The Road Fund Administration was established by an act (ACT 18 of 1999) of parliament. We officially came into existence in April 2000 and last year we celebrated our 15th year of existence. The primary purpose for the establishment of the fund is to manage the country’s road user charges system. That system was set up to enable the country to have a rain fence portfolio or fund to manage and maintain the road infrastructure. In essence, our core mandate and business is to ensure that there is sufficient funding to meet the objective of the act which is to maintain and preserve our national road network.

Prime Focus: There are a lot of people who still do not understand the difference in the roles of the Road Fund Administration compared to the Roads Authority, could you distinguish the two for them?

Ali Ipinge: The three institutions, adding the Road Constructor Company (RCC), were founded at the same time with different mandates. We are primarily a funding institution that first collects funds and then funds the maintenance of the road network. The Roads Authority is tasked with managing the road network by ensuring that the roads are done properly in terms of design and as per the national transportation act. They also have to manage the contracts as they do not do the physical implementation themselves. They would thus issue contracts to either the RCC or private contractors to carry out the physical work such as the construction of new roads or the maintenance of existing roads as per the specification by the government through the Ministry of Works and Transport has set. The third leg is then the Road Constructor Company, the sole purpose of which was to do the physical construction or maintenance of the road network. In essence, the RFA provides the funding to carry out these projects, the RA ensures that the roads are managed properly, while the RCC makes sure that the physical construction and maintenance of these roads is done based on the standards set by the government through the Roads Authority.

At this stage, we fund 100% of the operational costs or the Roads Authority which means we carry the entire administrative budget of the Roads Authority. We also fund 100% of the agreed budget, when it comes to the maintenance of the road network and the rehabilitation of certain roads.

Prime Focus: What are some of the milestones that the RFA has attained to date since its inception?

Ali Ipinge: I believe we have achieved quite a lot. However we are not going to rest on our laurels as a lot still needs to be done. In terms of our key milestones is that we have assisted the government to increase the national road network, which now stands at 46 300 kilometres. I would say this is a milestone and if we look at the quality of this infrastructure, we have been able to maintain what we have and keep it to the required standard and I think that because of our efforts as the Road Fund, we have been able to provide consistent funding allocation towards these projects and this culminates in the good roads that we have. That is a milestone that we can all be proud of and it is not one that can be attributed to the RFA alone but rather the RA, the contractors, RCC and the other private contractors, as well as the budgetary allocations that have enabled us to get new roads that connect all the major economic centres. It has also enabled us to the preferred entry and exit port for goods coming into the SADC region. We are able to do this because our road network is of the right quality and our neighbours are able to use our ports to either import or export their goods as a result.

In terms of the funding, we generated about N$ 500 million in the first year that went towards the meeting of our objective and 15 years later, we are talking about revenue in excess of N$2 billion per year. These are the improvements that can be seen in our collection ability.

While I don’t want to list it as a key milestone but rather as something worth noting is the fact that 95% of goods are transported by road. If our roads were not in good condition, one can imagine how difficult it would be for people to do business in Namibia and by extension how intra-regional trade would be affected. We are thus able to boast about this as an accomplishment but naturally this comes at a cost because it means more vehicles are using the roads. I think for this we need to bring in other players, particularly rail, to assist us and to ensure that there is a balance in terms of the movement of goods between rail and road as ideally we would not want to see 95% of goods being transported by road as surely 10 or 15 % of that could easily be moved on the rail network if the rail network is able to play its meaningful part in this process.

 

Prime Focus: Could you outline some of the challenges that your institution has had to avert in the execution of the aforementioned mandate?

Ali Ipinge: One issue you find in countries like Namibia is where you have institutions that operate in silos. We do not do proper joint-planning. We may do our own planning but collectively we do not share these plans jointly to ensure that we implement these plans as a sector or as a group. The issue of joint-planning is important and it’s an area that we need to improve on and ensure that we do not implement projects that perhaps do not add value to our road users. This calls for engagements between key stakeholders such as the RA, the RCC, the Ministry of Finance and also the contractors. We can look at whether there are new alternatives as far as construction methods for example or the designs of the roads to ensure safety for the road-users and minimize accidents on our roads. These are things I believe we need to do more of as a sector. While we have been building new roads, we also need to find a balance between new projects and the preservation of new roads because there is no sense in building a 300 kilometre road today and then in a few years you are not able to maintain it. These are some of the challenges we need to navigate through.

The other challenge is that the cost of construction and maintenance of the road network continues to increase and at times it outpaces the general inflation. At times we are required from our side to match this with revenue that is not increasing to catch up with the inflation. We have thus adopted a strategy to look at tariff adjustment on an annual basis to keep up with the construction price inflation. This is a strategy that we have received approval for from the Ministry of Finance to implement this. The road users might see this as an additional cost that they have to bear but it is a cost that will add value to them in the future by continuing to enjoy driving on good roads.

The other challenge has to do with the funding requests that come not only from the Roads Authority, but also the other authorities that we do provide funding to as sometimes the amount they need is much higher than what we collect and we need to make sure that we increase our revenue base to catch up with the optimum funding and our plan for the next 4-5 years is to reach a target of 90% funding as we are currently hovering at around 60-70% optimal funding. I need to add a caveat here and say that no country in the world provides 100% optimal funding for its road infrastructure. It’s almost impossible. We need to make sure as a country that we do not stray too far behind with what is needed and you can often see this with the deterioration of the road for both gravel and tar.

The softer challenge pertains to the systems that the roads authority uses to manage the road network. Mapping the road network for example requires state-of-the-art systems which allow you to know what is happening on a given section of the road. Local Authorities for example may not be able to provide you with information about their roads or the conditions of these roads. Therefore we have to assist them to come up with those systems because we have been mandated to assist them with their road networks. We also need robust systems to ensure that there is no revenue leakage in our collections.

Slow implementation of projects is also something that we are working through and this might be from the projects run by the Roads Authority of from the Local Authorities that we provide support to. At time there are projects that they are not able to complete on time and of course this impacts on our mandate. We may have more money due to the job not having been completed but that is not our intention to build up huge reserves at the expense of a road that needs to be rehabilitated or that needs to be maintained. This is a balance that needs to be kept.

With regards to human capital, we obviously have a deficit of skills and engineering is one of the areas where we are experiencing these challenges. We don’t have enough engineers to run some of our key road projects. We have a situation where there are good seasoned engineers that are nearing retirement or have retired and then there are newer entrants at the bottom. This leaves a gap in the middle. Some of the reasons we have slow implementation of projects for example is because we do not have enough qualified engineers to run these projects for us. There is a definite need for us to train more engineers to ensure that, as a country, we can sustain these projects on our own without the need to import these skills from outside the country. My vision is that within a period of 5-10 years we shouldn’t be giving contracts to companies from outside to build our roads. The practice now is that most of the constructors building the new roads are external and this needs to change. This, however, starts with us supporting SME contractors to make sure that they can carry out a project of 10 kilometres for example and when they are able to execute that on time and on budget then you can trust them to do a 20 kilometre stretch of road and eventually they will be able to take on a 200 kilometre stretch of road. This is what we need to do as a country.

Prime Focus: Does the Road Fund Administration receive enough financial assistance to carry out its mandate from its stakeholders? And if not, what measures has it put in place that it has sufficient funds for its operations?

Ali Ipinge: In terms of financial assistance, we do not receive any revenue from the government to carry out our mandate. We generate our own revenue. We are not reliant on government subsidy to fund our operations. In terms of support, I believe we do get the right support from our line ministry which is the Ministry of Finance in terms of the much needed direction and governance. They also support our key initiatives such as the strategy to adjust our tariffs on an annual basis for example.

Similarly, we do get good support from the Ministry of Works and Transport, particularly their policy and planning point of view and this is something we need to continue. As far as the Ministry of State Owned Enterprises (MoSOE) we want abide by the Public Enterprise act and we like some of the principals that the Minister of SOEs has introduced including proper performance management, monitoring and evaluation and general information sharing on best practices. We hope it will add value to what we do as a sector and I think all SOEs are please with the new layer of support that comes with the Ministry of State Owned Enterprises.

Prime Focus: How pivotal is the Road Fund Administration in the facilitation of commerce in Namibia, particularly taking into account that Namibia acts as a docking station for some of the Southern African Development Community countries that are landlocked?

Ali Ipinge: If we look at our strategic plan, it is aligned with the fourth national development plan (NDP4) as well as vision 2030 and we are looking forward to the fifth national development plan (NDP5) which is coming in the next year or so and if there are elements in the NDP5 that we are not aligned to, we may need to change or align or strategy to do that. At the moment we fall under the pillar of logistics and government has made it clear that we want Namibia to be a logistical hub and in order for this to happen we need to have the correct roads, rail and air infrastructure to support that strategy. As far as the road sector is concerned, all our projects are geared towards the NDP4. We need to make sure that all the corridors are properly managed to ensure that for instance goods can move from Gauteng to Walvis Bay with ease.

Our neighbouring countries are able to transport their goods on our road networks because we have good roads with the exception of certain parts that need to be rehabilitated. On a revenue collection point of view we are also seeing good collections from our border offices.

Prime Focus: How does the establishment of a new ministry specifically for State-Owned Enterprises aid the effectiveness of organizations such as the Road Fund Administration?

Ali Ipinge: This is about uniformity, particularly when it comes to governance. There should be no difference between NamPower and the RFA when it comes to governance. Those standards and benchmarks need to be set and the Ministry of SOEs is best suited to play this role. When it comes to the appointment of boards as well for SOEs there is a need to have the same requirements in terms of expertise and skills to become a director of an SOE for example. These standards should be maintained so that we can create capacity at this level to enable the board to provide strategic leadership. What we have seen is that there are some directors of certain SOEs that are competing with management and they focus their attention on operational matters, which they shouldn’t. It depends really on the calibre of people that are appointed to these boards and that’s where the Ministry of SOEs will be vital. Hopefully this will set the pace for the transformation that is needed these SOEs.

Prime Focus: Toll routes have been a contentious issue in neighbouring South Africa, could you explain their importance in the context of Namibia and if or when consumers will expect to pay directly for the usage of roads?

Ali Ipinge: The principle which was adopted upon the inception of the RFA was the Road Users Charges System (RUCS) and this set the pace of how we charge road users to ensure that we have enough funds to sustain our road network.

The RUCS has five components and these include what we call shadow tolls. These shadow tolls include the fuel levy. This means that every time a person fills up at a service station, they contribute towards the funds given to the road fund. The other is the vehicle registration as well as other financial transactions that take place at Natis, whether it’s the renewal of a driver’s license or testing of vehicles. The third is the cross border charges that we charge to all vehicles coming into the country with foreign number plates; these vehicles have to get a permit in order for them to use our roads. The fourth is the mass distance charge which is a charge levied to vehicles that are in excess of 3.5 tonnes. They need to pay because their mass means that they damage the roads much faster than let’s say sedans and this charge is levied per kilometre they travel. This applies to both domestic and foreign vehicles falling under this tonnage. The fifth one is the abnormal vehicle charge and this for those humongous vehicles that often require normal road users to get off the road and let them pass due to their abnormal size.

Our act does allow us to do have a tolling system in the same manner that it is done in South Africa, however, it is not practical for us to have this because the principal around tolling is that you want to give a road user an alternative. Therefore, if you say that you have refurbished a certain section of the road for example and this has set you back a lot of money and you now want to recoup this money, then you also have to give the road user an alternative route to use to get to the same destination even though it may take them longer to get there. In this country, the design of our roads does not give the road users options. However, with projects such as the Okahandja/Windhoek road, which is being upgraded to a dual carriageway may then give us an option to put up a toll structure but as a principal we would first need to provide the road users with an alternative so that people who do not want to pay a toll can still get to their destination even without the use of a tolling system.

Prime Focus: With the year heading to a close, what are some of the Corporate Social Responsibility (CSR) activities that the RFA has undertaken to ensure that it has given back to the community in which it operates?

Ali Ipinge: I want to be controversial and say that 90% of our revenue is geared towards helping the people because if you build a road to a school then you have already made a difference to the lives of the individuals in those communities. That shows some of the contributions we make to the community which is not always said.

Prime Focus: What are your personal philosophies on leadership and how have these enabled you to transform the operations of the RFA since taking charge of the institution in 2014?

Ali Ipinge: As a leader, you are not running that institution by yourself. You have to lead the team of individuals and set good examples and we depend on others because we need a good tone. If you set the right standards and you let them to set the same standards towards the people below them, naturally with the right monitoring, and if this is done correctly then the results will show.

You need to bring everybody on board and ensure that everybody is on the journey with you because if you don’t you may run into some problems.

Prime Focus: Where would you like to see the RFA in five (5) years’ time?

Ali Ipinge: I would like to lead a legacy where we have taken something that was already working well and made it greater. At times we need to do the basics to do the great and I would like to pick up a newspaper in 5 years and see the RFA being ranked as one of the top places to work for.

I hope that with some innovation and road design, we can alleviate and improve on the bad statistics in terms of road safety.

Prime Focus: Are there any other comments you would like to make with regards to the Road Fund Administration and its future prospects?

Ali Ipinge: We are opening up new representation points to enhance our revenue collection abilities. The latest one is the Swartkop border post and this is the border post going into Oranjemund and we recently opened up an office there. We opened up three new offices last year, with the Walvis Bay cross-border charges office we are already seeing some revenue from there.

The other project that we are going to drive full-steam from this point is the automation of our mass distance charging system as it currently relies on the declaration of road users that they have travelled here and there and we have seen that we may be leaving some bread on the table as not all citizens are good citizens, therefore we are going to automate this system and hopefully by the end of the year we will run a pilot project where we will no longer rely on the self-assessment of the road user. This will enable us to improve even 2 or 3% of our annual revenue.