One of the issues that remains a perpetual bugbear in Africa, is slow infrastructure spending to unlock the continent’s economic growth potential, research shows, but for Namibia, the Road Fund Administration (RFA) has succeeded in being the stop- gap where the government faces funding gaps that limit investment in the road sector.
Two-thirds of Africans lack access to power and the road access rate is 34% compared with 50% elsewhere. Yet in Namibia the challenges that remain are vast and deeply ingrained where the construction sector has been on its knees for close to year due to limited funds from central government.
In June 2017, the (State-Owned) Road Fund released N$250 million as a bridging facility to fast-track settlement of outstanding invoices from Government funded road capital projects.
“This was on the back of the N$280 million of the Road Fund surpluses utilised in December 2016 for the same purpose. So, we are talking about over half a billion,” says Penda Ithindi, Board Chairman of the RFA.
“For certain, such an injection in the economy represents short-term shocks to the Fund’s nancial position, but strategies are in place to rebuild the bu er stocks going forward.”
Closing the infrastructure quantity and quality gaps relative to the best performers in the world could increase the growth of GDP per capita by 2.6% per year, according to the World Bank.
Apart from sustaining the administrative operations of the RFA and Roads Authority (RA), a total of N$1.8 billion worth of expenditure directly funded through Road Fund resources most of which was spent on capital projects in the sector, thus contributing to domestic economic activity, infrastructure development and its upkeep. One such prime example is the funding of Section 1 of the Windhoek-Okahandja dual carriage way, from Brackwater to Dobra river.
The RFA’s contributions to the infrastructure sector of Namibia coincide with the 2015/16 Annual Report of the RFA as concretized in the audited Financial Statements that give an account of the Fund nancial position, the business operations of the RFA and strategic outcomes in line with the institutional mandate and vision.
Adds Ithindi, “Looking at the Road Fund performance during 2015/16, the results mirror our organisational strategic intent to achieve operational e ciency and strengthen the Fund’s nancial position, while giving greater impetus to developmental outcomes in the road sector.”
- RFA improved the Fund financial position to realize a surplus of some N$277 million. This is on the back of expenditure outlay of N$1.8 billion.
- The financial outcomes are in line with the business plan proposition to build reasonable fiscal buffers for the Fund as room for manoeuvre during rainy days. It is on the basis of this buffer position that the RFA was able to defray costs arising from Government funded projects during 2016 to the tune of N$280 million.
The RFA also expanded its footprint to strategic border entry and exit locations across the country and, as a result, plugged some of the tax planning opportunities in respect of collection of road user charges, thus strengthening revenue collection objectives.
As a result of a combination of measures, including increases on Road User Charges granted by the Government, the year-on-year revenue performance recorded represented an increase of no less than 17 percent during the reporting period.
In addition, the RFA is one of the few Public entities which has a proven record of leveraging its asset and cashflow base to access funding from the market to complement its revenue base and increasingly fund the needs in the road sector.
Thus Ithindi, “During the reporting period, we successfully redeemed our RFA2016 loan stock and we have further successfully took up about N$447m loan. I am also pleased that we have devoted due attention to improving the conditions of service for our staff in a holistic manner and inculcated a performance-based work culture centred on our corporate values, while enlisting effective engagement with stakeholders.”
Below Ithindi, an Economist and Senior Technical Economic Advisor to the Minister of Finance takes us through the elevation of Namibia’s road infrastructure sector, in a nutshell.
From a deficit of N$124m in FY 2014/15 to a surplus of N$277m. What has been the recipe and secret to your success as Board Chair?
First, vision and strategy matter and these find a concrete expression in the design and implementation of a credible Business Plan. Secondly and most important, there are critical success factors which underpin strategy design and operation.
Having the right people at the right time, robust internal systems and harnessing the power of technology and innovation are such critical factors. For the RFA business proposition, financial management skills is a necessary condition, ICT systems are a must and business foresight is key to strategy setting and implementation.
Another critical success factor for the RFA has been the ushering in of better conditions of service for staff, building effective teamwork, performance-based work culture and chasing operational efficiency at every opportunity. Critically, the Board of Directors, Senior Management and all staff share in this enthusiasm and collective responsibility.
Unlike in some public enterprises environment in which boards of directors and management are at dissonance and have a go at each other at the expense of developmental outcomes, we at the RFA do not avail ourselves to such posturing, which is not only anathema to organisational growth, but also subtracts a lot from business strategy implementation.
Last, stakeholder relationship is key for RFA strategy implementation and we believe that the synergies of integrated development are best optimized through collaborative efforts.
Where is risk in RFA’s line of business?
The effective means to manage and mitigate risks is to have a forward-looking risk management plan and strategies which encompass risk mitigation. Such a framework must, of necessity, be underpinned by an effective and dynamic monitoring framework because risks are not passive, they tilt and rotate.
For the RFA, external risks arise from demand for spending beyond the Fund financial capacity. We cannot spend like there is no tomorrow. We have to plan better and prioritize our needs. Concurrent large expenditure undertakings tear budgetary frameworks apart. If I have to advise, prudent management of the Road Fund requires that spending is well kept in line with predictable means of implementation. We must not comprise the financial management of the Fund as we embark upon road sector institutional reforms.
Secondly and equally important, the RFA manages over N$2.3 billion budget. This is road users’ money and it has to be utilized prudently and for intended purposes. A seamless system of internal control has to be preserved, financial skills are core to prudent management of the Fund because we cannot afford to mismanage road users’ money and we need a sound financial system to do just that.
We have to limit cash transactions to the minimum to eliminate unethical conducts by harnessing technological advances in our banking services. Last, we need predictability in terms of the revenue flows as regards timely adjustments of the road user charges.
The cost for road projects increase by inflation or, worse still, by more than inflation. If we do not catch up on the revenue side, maintenance backlog will seriously catch up with us one day.
Are your challenges unique from that of RCC and RA in this sector?
Broadly not, but in details yes. The three institutions were created at the same time to meet clearly defined objectives and contribute to a common goal. All three institutions thrive, or better said, supposed to thrive, on prime underlying assets.
The RCC benefits from lucrative, multi-billion-dollar construction projects, RA operations are fully funded through the Road User Charges (RUCs) by the RFA. The RFA revenue base is supported by the RUCs not least to mention the fuel levy. Thus, the basis for sustainability and growth is provided for these institutions. What is needed is credible operational plans and business models, a critical mass of requisite skills and effective leadership.