‘’Second Generation Road Funds’’
Theory and Principles
A Paper Presented on the International Seminar In
By Rashid Mohammed
I. Background Information
Role of Road Infrastructure
Why Road Maintenance
Reforms in the Road Sector Development
II. Theory and Principles of 2nd Generation
Basic Characteristics of 2nd Generation RF
Practical application of the Principles
Some indicators of performance of 2nd Generation RF
III. The Impact of the Road Funds
IV. Challenges encountered
I. Back Ground Information
The Role of Road infrastructure
• Socio-economic development
• Links centers of production and market
• Promotes trade by linking land-locked countries
and costal ports
• Determines the price of goods and services.
• Provides access to employment, health and
education and other social services
Total Transport Cost entails different inter-related costs
Why Road Maintenance?
Inadequate and Untimely Maintenance of
Roads Results in
Higher vehicle operating costs;
Increased number of accidents;
Reduced reliability of Road Services;
Rising costs of Road transport (which in turn
suppress socio-economic development)
The Road Infrastructure is the most expensive
asset of any country
Each dollar spent on road maintenance saves up
to 10 USD of vehicle operating costs
Cost of rehabilitation or reconstruction is 20
times more expensive than the cost of sustained
maintenance over the life of the Road.
Maintenance has not always received the
attention it deserves.
- Inadequate provisions of financing
- Deficiencies in the management of roads
Countries tried to increase road taxes to
provide maintenance funding e.g. Gabon,
Senegal, Burundi etc
Studies undertaken in the late 1980s, indicated that lack of
maintenance was eroding road asset value in developing
countries and in particular in Sub-Sahara Africa (SSA).
The study identified that:
Lack of maintenance was not rooted in technical matters but was
political and institutional.
There was need for change and for effectiveness,
the changes needed to be rooted in firm awareness
at the highest level of government, of the importance of road
Things didn’t work out as intended because:
accounts resided with national accounts administered by
Impossible to protect revenue from diversion to other sectors
poor financial management
extensive use of resources for unauthorized expenditures etc
As a result the 1st Generation Road Funds were unsuccessful and
Reforms in the Road sub-sector
Road Sector reforms championed by the Road
Management and financing, RMF/SSATP, towards
the end of -1980’s Aimed at addressing these
As such Road Management Initiatives (RMI) as
comprehensive approach to road sectors took the
RMI capitalized ideas of managing roads like
business and enabling users to play much stronger
role in Road Maintenance
Four building blocks were identified under the RMI:
Within the premises of the RMI four building blocks; financing part
intended to directly relate road use payments to Road provision costs.
From this process, what came to be known as a ‘’ Second
Generation Road Funds’’ came into picture in many sub-saharan
The idea began to take shape in the early 1990s and the first of
such fund put into place in Zambia in 1993.
There are currently about 31 countries in SSA with road funds in
Theory and Principles of 2nd Generation RF
1. Sound legal basis – separate road fund administration, clear rules and
2. Agency which is a purchaser not a provider of road maintenance services.
3. Strong oversight – broad based private/public board.
4. Revenues incremental to the budget, coming from charges related to road use and
channeled directly to the Road Fund bank account.
5. Sound financial management systems, lean efficient administrative structure.
6. Regular technical and financial audits.
Practice extended (2)
31Road Funds in SSA are almost in place
Guided by company concepts
Road Fund Board
C1: Sound legal basis?- (I)
some road funds were not fully designed according to 2nd
generation criteria and this partially explains structural
problems that undermine their performance
Progress to date:
- Some road funds are restructured (e.g. Gabon) or had
their legislation completed (e.g. Madagascar, Niger and
- A number of RFs still need restructuring in view of the
2nd Generation RF
C1: Sound legal basis?- (II)
Some legislations did not mention that the road funds should be
responsible for the collection of funds revenues and rarely stated
that the proceeds should be channeled directly to their bank
Expenditure on other activities beyond road maintenance
interventions (e.g. road rehabilitation and upgrading) is allowed in
Requirement for regular technical and financial audits is not
always stated in the road fund legislation and cases where audits
are a requirement but not budgeted for in the road fund
C2: Strong and independent oversight board (I)?
A poor understanding of ‘’second generation road funds’’ principles among
some board members, mainly private sectors representatives.
Progress to date:
- Many RF board members are attending the RMF courses and we need to do
ARMFA serves as experience sharing framework for members to learn from
each others good practices, this effort needs to be enhanced.
C3: Agency which is a purchaser not a
provider of road maintenance services
Some road funds cumulates both oversight and executive powers
This created a conflict of interest in many cases.
Progress to date:
Many Road Funds are now reviewing their institutional arrangements
to separate the financing from the management and implementation of
road works (e.g. Malawi, Zambia and Kenya).
C4- Sound financial management systems, lean
efficient administrative structure
‘’Executive Directors not always recruited through open
competition – Hence impact on performance and autonomy of
Progress to date:
Sometimes RF Directors are replaced without opening the
position for competition!
C5: Regular technical and financial
Financial: funding arrangements are more transparent than in the
past but still some interferences
The recommendations of technical audit reports are discussed in
stakeholders workshops but sometimes their implementation are
Audit reports indicate that maintenance works are not carried out
in cost effective ways.
C4 : Revenues generated from charges
related to road use and directly
channeled to the Road Fund’s bank
Progress to date:
Collection mechanisms partially improved
in Benin and Niger and others have
recognized the importance of doing so
Fuel levy/RUC (%)
M Ke a
ad n y
am al i
R g er
b a ia
Fuel levy/Road user charges (%) (Av.= 80% of
Breakdown of Road User Charges (%)
Country Fuel Tolls Transit license Overloading Total
Chad 61 6.5 32 0 0.5 100
Benin 52 43 5 0 0 100
Namibia 75 0 5 20 0 100
Burundi 60 24 0 16 0 100
Lesotho 67 25 0 8 0 100
Mali 75 0 25 0 0 100
Rwanda 62 2 36 0 0 100
Source: RMI- Matrix, 2006
M Ke a
a g ya
R ig e
(Av. 6 and 7 cents/liter) in 2006
Level of fuel levy (in US cents/ liter)
Level of fuel levy, 2007(in $US cents/liter)
Progress to date:
Madagascar: from 4 to 8 cents/liter
Kenya from 8 to 12 cents/liter
Tanzania from 8 to 15 cents/liter
N ber of days
Average time for paying undisputed contractors bills
Na l i
Amount of maintenance work contracted out (Av.
B u nin
E t had
M K ia
a g ya
M ca r
oz M i
T a and
needs (Av. = 65% routine and 54% periodic)
Z i mb
Coverage of routine and periodic maintenance
Some Indicators of Performance of “Second Generation” Road
Funds in SSA
- 27 active road funds are in place – of which 9 established since 2000 and
7 in Francophone Africa
- 18 out of 27 are established by a law
- 12 with a board with private sector majority
- 14 road funds rely 80% or more on road user charges as revenues
- In nearly all cases, fuel levy is the principal means of raising road user
- Average fuel levy in US cents/liter is 8 and 7 for petrol and diesel
- 11road funds have their revenues channeled directly to their bank
- Only about one third of road funds may now be meeting routine
maintenance expenditure needs on a regular basis.
Source: RMI-Matrix, 2006
The impact of the Road Funds
In most cases they have contributed towards improvement of the Road
Many Rural Roads that were impassable during the rainy season are
now passable throughout the year.
Relatively a stable flow of funds have been ensured for timely
maintenances. But country progress varies widely
Reductions in travel time and costs in many countries have greatly
helped the rural economy by improving market access for agricultural
produce and generating new economic activities.
Road maintenance also contributed to an increase in the income
of rural populations.
Road Users involvement in decision-making has helped to bring
transparency in financing and Management of Road Maintenance.
performance and accountability of the implementing agencies have
Challenges for Road Funds in Africa (1)
Ensure equitable distribution of user charges: Vehicle
license fees -particular regard to heavy vehicles;
Develop a communication strategy to negotiate road tariffs-
Mobilize road users and stakeholders more effectively –
Set up systems that Ensure Road Users charge reflect the
expenditure of maintenance cost.
Diversify sources of revenue
Challenges for Road Funds in Africa (2)
Enabling Road boards to play their roles effectively and be accountable to
• Increase private sectors involvement in the Road Maintenance and
Ensuring adequate Finance–a RF is a means to an end…
Need for road management restructuring – to ensure cost reductions and
‘’value for money’’ for road users;
Bridging the gap between road financing (RFs) and management (RAs) -
Intermediate steps – Performance based contracts for road management
and maintenance – requires stable flow of fund…
ARMFA: Progress to date
The African Road Maintenance Funds Association,
ARMFA’s membership has increased.
ARMFA is recognized by major road sector organizations
and Donors (AIPCR and IRF), SSATP, ADB, EU, AGEPAR,
CDE and others
Permanent Secretariat in place, and hosted by Cameroun
Developed Its long term strategic development plan.
The Road Funds still remain major sources of finance for road
maintenance in Sub-saharan Africa
The Road Funds can, however, play their roles better if as
much as possible comply with the Guiding Principles of 2nd
Generation Road Funds.
Besides, reviewing their performances so as to continuously
improve the observed weaknesses in the context of the
countries will increase the success of the 2nd Generation Road