Integrated Transport Plan for Ghana Vol. 10 Finance€¦ · Ghana Civil Aviation Authority and ... This ITP 2011-15 supplants to some extent the two ... Finance Final Version . Integrated

Ministry of Finance and Economic Planning

Republic of Ghana

Integrated Transport Plan for Ghana

Volume 10: Finance Final Version

Financed by the 9th European Development Fund

Service Contract N° 9 ACP GH019

In association with

June 2010

Egis Bceom International

Page 1 Integrated Transport Plan for Ghana


EXECUTIVE SUMMARY

Volume 10 Finance reviews existing transport sector operational financial experiences and constraints, the various financing sources and approaches possible, sets out the context of the current and foreseeable economic situation, and then makes specific recommendations for funding the Integrated Transport Plan (ITP) proposals. In the process the status of individual institutions are reviewed and issues noted that would affect the effectiveness of further investments (solvency, legacy debts, financial management, etc).

Development Partner involvement ends in 2013. DP commitments to future projects are general rather than specific but there are now several feasibility studies that can be presented for their consideration. The private sector has also expressed interest in the past and could be involved in the future.

Reference is made to the need to address the on-going issue of road maintenance and funding, which is an annual recurrent issue, and which detracts from the pure investment proposals which are of a long term strategic consequence. The completion of existing investments (e.g. BOST) may be more cost effective than new investment and GoG needs to consider specifically the issue of public subsidy for passenger transport (both road and rail). These factors are part of the overall issue of the need to deal with institutional stability and viability addressed in this Volume.




Contents

Chapter 1 - Finance and Transport Sector........... ...................................... 8

Chapter 2 - Government Finance Policy Affecting Tra nsport Sector...... 9

Chapter 3 - Private Sector Involvement in the Trans port Sector ........... 11

1. Ghana Ports and Harbours Authority.....................................................12

2. Ghana Shippers Authority .....................................................................13

3. Driver and Vehicle Licensing Authority ..................................................13

4. Bus Services – STC and MMT ..............................................................13

5. Rail Services - Ghana Rail Company Ltd...............................................14

6. Ghana International Airlines ..................................................................14

7. Ghana Civil Aviation Authority and Ghana Airport Company Ltd ...........14

8. Volta Lake Transport Company Ltd .......................................................15

9. Bulk Oil Storage and Transport Company Ltd .......................................15

10. Tema Oil Refinery .................................................................................16

11. Investment in Transport Expenditure .....................................................16

Chapter 4 - Sources of Finance – A Review .......... .................................. 18

1. Constraints on Government’s Development Budget ..............................18

2. Existing Finance Sources – Examples...................................................19

3. Multilateral Institutions ...........................................................................19

4. Bi-lateral Funding - Grants.....................................................................20

5. Tied Bi-lateral Funding with Concessions ..............................................20

6. Sovereign Funds ...................................................................................20

7. Trade and Supplier Credits....................................................................20

8. International Capital Markets .................................................................20

9. Domestic Bond Market ..........................................................................21

10. Domestic and Foreign Banks.................................................................21

11. Revenue Generation .............................................................................22

12. Hypothecated Revenues .......................................................................22

13. Forward Borrowing Against Revenues...................................................23

14. Long Term User Agreements ................................................................23

15. Sale of Public Assets to Private Shareholder.........................................24

16. GoG Consolidated Fund........................................................................24

17. Constraints on, and Requirements of, Development Partner Funding ...24

18. Constraints on, and Requirements of, Private Sector Funding...............25




19. Conclusions...........................................................................................25

Chapter 5 - Development Partner Finance Availabilit y for ITP 2011-15 27

Chapter 6 - Public-Private Partnerships ............ ...................................... 31

1. Principles and Approaches....................................................................31

2. Benefits .................................................................................................31

3. Ghana and PPP Resources...................................................................32

4. Accra – Kumasi N6 - Build, Operate and Transfer .................................32

5. International Funding of Railway Projects..............................................34

Chapter 7 - Preparation of the Financial Statements .............................. 37

1. Principles...............................................................................................37

2. Inter-Ministerial Collaborative Items.......................................................38

3. Aviation .................................................................................................38

4. Maritime and Inland Waterways ............................................................40

5. Railways................................................................................................45

6. Roads and Highways.............................................................................48

Chapter 8 - Conclusion............................. ................................................. 56




List of Tables

Table 1 : Review of Development Partner Funding Status......................................................... 28

Table 2 : Inter-Ministerial Collaborative Items............................................................................. 38

Table 3 : Aviation Sub-Sector ..................................................................................................... 39

Table 4 : Maritime and Inland Water Sub-Sector – SMTDP and GPHA..................................... 40

Table 5 : Maritime and Inland Water Sub-Sector – GSA ............................................................ 41

Table 6 : Maritime and Inland Water Sub-Sector – GMU ........................................................... 42

Table 7 : Maritime and Inland Water Sub-Sector – GMA ........................................................... 43

Table 8 : Maritime and Inland Water Sub-Sector – VRA & DAS ................................................ 43

Table 9 : Maritime and Inland Water Sub-Sector – VLTC .......................................................... 44

Table 10 : Maritime and Inland Water Sub-Sector – BOST........................................................ 45

Table 11 : Rail Sub-Sector .......................................................................................................... 46

Table 12 : Roads Sub-Sector – National, Feeder and Urban Roads Expenditure ..................... 49

Table 13 : Funding Scenario 1 - Existing .................................................................................... 52

Table 14 : Funding Scenario 2 - Reasonable ............................................................................. 52

Table 15 : Funding Scenario 3 – Full .......................................................................................... 53

Table 16 : Drivers and Vehicie Licensing Authority .................................................................... 53

Table 17 : National Road Safety Council .................................................................................... 54

Table 18 : Metro Mass Transit & State Transport Co. ................................................................ 55




Acronyms and Abbreviations

AfDB African Development Bank

AFD Agence Francaise de Developpement

BADEA Arab Bank for Development in Africa

BOST Bulk Oil Storage and Transport Company

BOT Build Operate Transfer

CF Consolidated Fund

Danida Danish International Development Agency

DMNGRN Determination of Maintenance Needs of Ghana’s Road Network (report)

DFR Department of Feeder Roads

DP Development Partner

DUR Department of Urban Roads

DVLA Driver and Vehicle Licensing Authority

EAC East African Community

EATTF East African Trade and Tariff Facilitation Project

ECGD Export Credit Guarantee Department of UK

EIB European Investment Bank

EU European Union

GASCO Ghana Stevedoring Companies

GACL Ghana Airport Company Ltd

GCAA Ghana Civil Aviation Authority

GHA Ghana Highways Authority

GHC Ghana Cedi

GIA Ghana International Airlines

GoG Government of Ghana

Gp Ghana Pesewa

GPHA Ghana Ports and Harbours Authority

GRCL Ghana Rail Company Ltd

GRDA Ghana Rail Development Authority

GRF Ghana Road Fund

GSA Ghana Shipping Authority




GTZ German Society for Technical Cooperation

HDM4 Highway Development Model 4

HQ Headquarters

HIPC Highly Indebted Poor Countries

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IFC International Finance Corporation

ITP Integrated Transport Plan

JICA Japan International Co-operation Agency

KFW Kreditanstalt fur Wiederaufbau (Bank for Reconstruction)

MiDA Millennium Development Authority

MMT Metro Mass Transit

MoFEP Ministry of Finance and Economic Planning

MoRH Ministry of Roads and Highways

MoT Ministry of Transportation

MOT Maintain Operate Transfer

MPS Meridian Port Services

OECF Overseas Economic Co-operation of Japan

OPEC Organisation of Petroleum Exporting Countries

OPIC Overseas Private Investment Corporation

PFI Private Finance Initiative

PSC Passenger Service Charge

PPP Public-Private Partnership

ROT Repair Operate Transfer

SADCC Southern African Development Coordination Conference

SMTDP Sector Medium Term Development Plan

SNV Netherlands Development Organisation

SSNIT Social Security National Investment Trust

STC State Transport Corporation

TOR Tema Oil Refinery

TSDP Transport Sector Develoopment Plan

UAE United Arab Emirates

USAID United States Agency for International Development




USD United States Dollar

USTDA United States Trade Development Agency

VLTC Volta Lake Transport Company

VRA Volta River Authority




Chapter 1 - Finance and Transport Sector

Appropriate financial arrangements are required to help establish transport systems which provide efficient, cost-effective and fully integrated infrastructure and operations to best meet the needs of customers and provide economic and social development whilst being economically sustainable.

This paper reviews existing transport sector operational financial experiences and constraints, the various financing sources and approaches possible, sets out the context of the current and foreseeable economic situation, and then makes specific recommendations for funding the Integrated Transport Plan (ITP) proposals (Chapter 7).

Whilst the bulk of this paper considers financing issues which are of a long term nature (as are some of the ITP projects) the quantified tables in Chapter 7 cover the period only up to 2015. The tables include details of the original projects in the Sector Medium Term Development Plan (SMTDP) 2011-2014 (expenditure and funding, secured and unsecured), projected road maintenance needs to 2015, possible sources of funding (in three scenarios for the road sub-sector), and some new projects that were not subject to the ITP process. This ITP 2011-15 supplants to some extent the two existing investment plans for the sector: the Transport Sector Development Plan (TSDP) 2008-12 and the SMTDP 2010-14. It should be noted that some expenditure and funding data are missing for some of the GoG agencies which are now included in the ITP but not in the original SMTDP. That can be rectified when the data become available, as the different types of expenditure determine the nature of the funding to be sought. Road maintenance needs feature as a substantial expense in the road sub-sector, but the financing of much of the routine/recurrent element of this expense should be funded from the annual user charges and levies rather than through borrowing. The continued role of DPs in road maintenance appears necessary and inevitable. It is the scale of the medium to long term financing needs of the investment projects both within the GoG budget and outside in the agencies that that is an important feature of the ITP, especially the new projects identified as economically and financially viable and which have been identified as priorities under this consultancy. A combination of international concessionary long term finance for infrastructure with medium term private sector finance in one of the various forms of PPP arrangements available appears the most appropriate means of ensuring the implementation of key transport sector projects.




Chapter 2 - Government Finance Policy Affecting Transport Sector

Government finance policy affecting the transport sector is set out in Goal 4 of the NTP and TSDP 2008-2012: � Create a vibrant investment and performance-based management environment that

maximises benefits for public and private sector investors.

Finance principles are also elaborated in the NTP, quoted in full below:

“Principles for government Investment and fiscal interventions will be set out in the Transport Policy and reflected in the proposed Integrated Transport Plan.

The private sector will be encouraged to invest in transport infrastructure and services that provide commercial returns. This includes almost all freight transport operations and a number of financially viable passenger operations.

Government will continue to “Invest” in transport infrastructure and “Subsidise” transport services where they provide mainly social and environmental benefits important to users and the country as follows:

� Transport infrastructureand services that meet the vision of providing access and mobility to all users, particularly the poor and physically challenged.

� Given the limited resources of government, finances for some time will be adequate only to meet the highest-priority demands.

� “Subsidies” will be applied in a transparent manner, targeting the most vulnerable and excluded groups, using appropriate models such as

• Public service obligation; or • Subsidy concession.

Government will implement policies and practices that reduce the inefficiencies and high costs of transportation by:

� Raising adequate investment for infrastructure maintenance � Making consistent funding allocations based on policy objectives and performance

agreements � Better planning for use of least-cost inter-modal solutions � Allowing public and private sector agencies involved in the management and regulation of

the Transport system to raise and retain the cost of administration through fares or “user charges” (this includes enforcement of environmental, safety, security, and road vehicle control standards – e.g. vehicle licences, route licences, axle load control)

� Creating a vibrant and competitive private sector – by encouraging PPP, building capacity of national contractors and paying on time”




Ghanaian experience to date on private sector involvement and investment in the transport sector is mixed. Much of the transport infrastructure and many services remain within the public domain, as set out in Chapter 3, although there has been an attempt to apply and implement commercial principles and practices. There is little direct private sector involvement to date.

Public-Private Partnership (PPP) principles and approaches are set out in Chapter 6. The fundamental concept behind PPP is to mobilise private sector capital, borrowing capacity and, critically, management skills to provide public services and public enterprises economically and efficiently.

A greater use of PPP is proposed for the ITP 2011-15 where appropriate. As will be demonstrated, PPP is not very feasible in the short term (even for the Western Line rail corridor) but should be considered in the medium to long term.




Chapter 3 - Private Sector Involvement in the Transport Sector

The major involvement of the private sector in transport is through the private ownership of cars, privately owned taxis, private freight transport companies, and airlines (some with international public sector ownership).

One example is the significant collaboration between the banking sector and the Ghana Private Roads Transport Union of TUC. A USD 50 million revolving fund for the purchase of up to 1,000 buses (e.g. 15 seater Urvan type) has been established, with funding repayable over a four year period. Elsewhere, private taxis are owned by individuals and “concessioned out” to drivers who earn whatever than can over and above the “rent” that is paid daily to the owner.

The significant feature of the above private sector involvement is that the capital for investment comes from the domestic private sector and/or from banks and is self-financing. In parallel to the private sector government has invested in mass transit and public transport solutions in direct competition, often with a taxpayer subsidy or non-commercial advantages (grant financed vehicles).

Some transport investments are too large for the private sector to invest in (e.g. railways), or do not exhibit the financial returns that justify such investment. State involvement ensues, often on public policy grounds of national, long term strategy, ideology, or to achieve general economic rather than direct financial benefits. However, in government the perspective is often short term when managing these investments, as is reflected in failure to recover amortisation costs, to repair and maintain facilities, and to take objective commercial and financial decisions on costs and tariffs (c.f airplanes , public buses).

Institutional arrangements have included direct government involvement through departments within Ministries as well as separate commissions, authorities, companies, etc. Recent Ghana public policy has attempted to reverse this approach (and the defects of management), with a view to eliminating the cost to taxpayers for services benefiting only a few (through full cost recovery), and to separate the policy, regulation, management and supply functions.

Not all public transport services are suitable for full private sector treatment and this is reflected in the continued Government of Ghana (GoG) regulation and control of legally autonomous agencies (authorities, councils, etc), even though most of which are required to operate on commercial principles. This influence is effected through government nominated boards, legal provisions for “clawback” arrangements for surplus funds from devolved revenues to be remitted to the Treasury, directed short and long term investment of funds in other agencies, inter-agency transfers to facilitate cash flow problems, etc.

Many of these transactions circumvent Parliament’s oversight of budgets and investment planning. Financial monitoring and accountability, usually through private sector auditing, is not always timely, transparent or informative.




Some of these transport sector agencies continue to receive direct or indirect assistance from GoG revenues and guarantees, and direct assistance from Development Partners (DPs) in the form of grants and loans. Many feasibility studies for future expansion and investment are funded by DPs. Some agency payrolls remain part of GoG’s payroll system and are directly paid by GoG. There is national discussion in the re-introduction of one payroll “spine” for all organisations.

The state of play for transport in Ghana’s various agencies is summarised below. There are few examples of full private sector involvement (e.g. BOT or concessions). The summary suggests that there is a long way to go before there is an effective application of commercial principles in the public transport sector, and that there is a need to investigate further approaches (e.g. PPP) to eliminate government from anything but a policy and regulatory role. Government continues to play a direct role in the affairs of the agencies, to the detriment of the expressed intentions and purposes expressed in legislation and charters.

One issue that arises is the extent to which autonomous agencies should diverge from their core activities and venture into other commercial activities (e.g. GSA into telecoms, GPHA into hotels, VLTC into oil freight carriage, etc) especially when funding of their core activities is still dependent upon GoG, GoG guarantees, and grants and concessionary loans from DPs, and where surplus funds might better fund core transport needs.

1. Ghana Ports and Harbours Authority Ghana Ports and Harbours Authority (GPHA) has a record of devolving activities to the private sector and there are many fully private sector owned companies (Ghana Stevedoring Companies, GASCO) operating land based port services previously the remit of GPHA. GPHA’s main objective is to assume a “landlord” role to the port operations as well as to regulate and supervise private contractors. It continues to outsource and privatise many of its activities (engineering, cleaning, horticulture, etc) to gain economies and efficiencies.

GPHA has independently negotiated bank overdrafts and banking facilities, not all guaranteed by GoG. However it is still dependent on international DP funding of major port investments, with GoG guarantees. There is an on-going feasibility study of Tema and Takoradi Ports by Halcrow, funded by USTDA, which may result in a large expansion financed through a private-public arrangement. GPHA is also investing in non-transport activities (e.g. hotels).

Substantial privatisation has taken place. GPHA has a 30% shareholding in Meridian Port Services (MPS); private sector partners, a consortium managed by Maersk and Bollore, hold the remaining 70%. The consortium is responsible for managing the container terminal under a 20 year Build Operate Transfer (BOT) contract, in which GPHA has invested USD 65m in the first phase.

A major conflict with eight privately owned stevedoring companies (GASCO) arose after GPHA entered into the agreement with MPS whereby MPS would handle cargo from all ships carrying 50 or more containers arriving at Tema. Eventually the sector Minister stepped in and suspended the MPS contract to review the extent to which GASCO and dockworkers would lose their livelihoods.

Government influence remains significant. GPHA is involved in providing temporary loans to Ghana Rail Company Ltd (GRCL). The accounts still show large legacy debts outstanding from Ghana Airways. On occasion GPHA has provided the funds to create public sector




infrastructure to service the port (access roads in Tema).The accounts still record direct grants for investment purposes from the government’s Consolidated Fund.

2. Ghana Shippers Authority The key feature of Ghana Shippers Authority l (GSA) is its share of devolved government revenues, the surpluses of which are subject to clawback arrangements. Instead of returning funds to government or reducing charges, GSC has invested in non-transport activities (telecoms) as well as in land (with GPHA) and offices at the Boankra Inland Port. Private investors are being sought to invest in the Inland Port infrastructure and facilities.

GSA has private sector representatives on its Board of Directors but still remains firmly within the public sector. The government continues to monitor and regulate the level of shipping charges levied. GSA has provided temporary loans to GRCL and is still owed significant amounts by Ghana Airways, in liquidation.

3. Driver and Vehicle Licensing Authority The Driver and Vehicle Licensing Authority (DVLA) and GPHA are probably the best examples where the user charges principles have been most effectively applied to recover costs. However, these are monopoly positions and user charges are still subject to public policy regulation and intervention. DVLA user charges are more realistic than in the past and are designed to ensure that road users rather than taxpayers pay the cost of regulation and administration.

The DVLA is still the beneficiary of DP grant funded investment for a substantial expansion of its presence throughout Ghana to provide more accessible services. Recently it has had its payroll revert to GoG administration and payment from public funds, even though it is supposed to operate independently and on commercial principles. It is unclear to what extent DVLA will be allowed greater operational freedom in future.

4. Bus Services – STC and MMT InterCity STC (State Transport Corporation) was commercialised, was managed as a privatised entity, but eventually made subject to a debt for equity swap, resulting in STC being now 92% owned by Social Security National Investment Trust (SSNIT). Although the inter-city bus services by InterCity were granted non-competitive status on national routes, there is now direct competition from Metro Mass Transit (MMT).

The MMT Co is 45% directly owned by GoG (through the infusion of assets from the defunct OSA); funding from “private” shareholders include SSNIT, State Insurance Corporation, National Investment Bank Ltd, Agricultural Development Bank, Ghana Oil Co. Ltd, and Prudential Bank, most of which are State Owned Enterprises or government institutions.

MMT was initially intended for urban mass transit operations only. Most of its vehicles have been provided through grant aid. A small proportion was financed by a DP loan. Only the small share holding by Prudential can be deemed genuinely from the private sector. MMT is currently managed under a Technical Assistance (Netherlands) contract.




Commercial viability of both institutions has been undermined through MMT’s activities, through sub-cost tariffs regulated by the government, and public service obligations (e.g. free transport for school children) which are not funded by the government.

5. Rail Services - Ghana Rail Company Ltd Ghana rail services have been split into a commercial operation GRCL and a combined regulator and asset manager Ghana Rail Development Authority (GRDA) in which the rail assets are vested. Attempts have been made to involve private investment through a concession arrangement to run the rail services but these have foundered inter alia on the failure of the private sector to raise funds and disagreement on how to fund loss-making passenger services. There is no direct budgetary provision for government subventions to meet such losses.

Comprehensive proposals have been made to invest in a north-south rail corridor. One proposal involved a sovereign loan (China) with parallel mineral concessions and developments to justify the investment. The other proposed United Arab Emirates (UAE) and private funds with an Indian railway company managing the concession. A 3% share of revenues accruing to GoG was provided in the proposed UAE funding of the 35 year railway concession.

Neither proposal has come to fruition. A major problem is the legacy liabilities of GRCL, although these could be dealt with through an entry or bid fee when awarding the concession.

GRCL is the beneficiary of DP funding and government directed investment decisions (e.g. mass passenger transportation Accra-Tema). GRCL has also been assisted with temporary non-commercial loans from other agencies (GPHA, GSC) as it has limited bank overdraft facilities, and owes substantial amounts to SSNIT for social contributions. Several years financial accounts remain unsigned.

6. Ghana International Airlines Ghana International Airlines (GIA) is an example of public funds being pumped into a loss-making operation where the private sector appears not to have met its investment obligations (now subject to litigation). The operational losses have been covered by Ministry of Finance and Economic Planning (MoFEP) directly instead of through the MoT’s budget. As of June 2010 operations have been suspended.

The predecessor, Ghana Airways, failed inter alia through non-payment of services rendered to government departments. GoG has recently cleared many of the legacy liabilities of Ghana Airways but there still remain some debts to clear with other government organisations (GPHA, GCAA).

7. Ghana Civil Aviation Authority and Ghana Airport Company Ltd Ghana Civil Aviation Authority (GCAA) and Ghana Airport Company Ltd (GACL) are good examples of the process of separation of regulatory and operational functions into organisations operating with greater financial autonomy and involving commercial principles.




As yet there is no agreement on the sharing or valuation of assets between the two organisations. Further outsourcing of services into separate companies is in process.

GACL is still dependent upon a public tax, the Passenger Service Charge (PSC), which is determined by GoG, although it is also developing alternative sources of revenue. The PSC is used in part by GoG to provide investment funds for aviation purposes.

Investment in other (regional) airports in Ghana is still seen as a government sourced investment and it is not clear whether or not this investment will be made through the above companies, separate from GACL.

8. Volta Lake Transport Company Ltd The creation of the Volta dam and lake was subject to socio-economic conditionalities, including that of affordable tariffs on Volta Lake Transport Company (VLTC’s) ferries. VLTC was intended to operate on commercial principles. However, there was no formal arrangement to reimburse VLTC for the sub-optimal tariffs imposed. A more formal arrangement with Volta River Authority (VRA) to subsidise tariffs should have been put in place. Nor is there any arrangement to pay VLTC for free transportation of school children, the cost (loss of revenues) of which logically should fall on either MoT or Ministry of Education. VLTC has also been required, on occasion, to fund lake activities that fall outside its remit as a transport operator.

For cash flow reasons, VLTC has minimised maintenance and repairs. VLTC has also been unable to resolve over-staffing problems and the excess costs incurred. Although investment in north/south freight operations has been designed to offset these public service obligations, the revenues earned have been insufficient. Consequently VLTC has depended upon VRA to provide short terms loans and credit to avoid insolvency.

Financing arrangements to repair equipment and invest in freight operations have been agreed with Bulk Oil Storage Transport Company (BOST), with short term concessionary finance being repaid from future freight revenues; however, the volumes of freight have been less than expected (and nil recently) to the detriment of VLTC’s commercial plans.

Freight tariffs are subject to GoG regulation and are determined as a percentage of road freight charges; approval to VLTC’s tariffs is not always in a timely manner.

VLTC is 100% state owned through VRA and is subject to various ministry and regulatory oversight arrangements. It has benefited from DP funded assets and support in the past (e.g. Danida) and is currently the beneficiary of a substantial grant funding from Millennium Development Authority (MiDA) (two ferries, floating dock, etc). It has also received funds directly from GoG through Ministry budgets. VLTC is scheduled to benefit from a GoG financed USD 3m rehabilitation of the Kete Krachi ferry in 2010.

9. Bulk Oil Storage and Transport Company Ltd BOST (principally for oil products transmission) is intended to operate on commercial principles. Its principle source of income is a devolved revenue (a levy on oil products provided to Oil Marketing Companies).

BOST has utilised foreign financing from Korea, trade and suppliers’ credits through the US ExIm Bank, and domestic banks, for a pipeline venture designed to be commercially viable




and to provide an alternative to road freight via pipelines to Akosombo, by transport on oil barges on Lake Volta, and by pipeline from Buipe to Burkina Faso. All of this financing has required GoG guarantees.

It is understood that BOST has not managed well its commercial and financial relations with oil distribution companies, which owe substantial amounts for fuel supplies. The management of letters of credit with fuel suppliers has been taken over by Ecobank to ensure that funds are available to meet credit commitments. This has inhibited BOST’s arrangements with VLTC oil freight transport on Lake Volta.

There is also some confusion over its agreement with a Korean company to invest in freight barges and oil storage facilities in direct competition with VLTC, with which it has funding arrangements to enable VLTC to invest in parallel freight facilities. As both companies are publicly owned, and are in direct competition with road (and potentially rail) transportation of oil products, this issue needs to be resolved at the national level.

There is a strong argument for completing the Lake link between the pipelines, given the large investment already made. However, if there are long term factors involved affecting BOST’s financial viability (e.g. forex borrowings, overdrafts, GoG guarantees, etc) then a thorough review of all proposed investments should be made.

10. Tema Oil Refinery Tema Oil Refinery (TOR) is an example of an ostensibly commercial enterprise made subject to public policy on fuel tariffs that result in the under-recovery of costs, with the accumulated losses eventually having to be met through the issue of bonds and the establishment of a specific TOR Debt Recovery Levy on fuel sales (previously Petroleum Debt Service Surcharge). This has squeezed out the ability of GoG to implement the incremental steps in the Fuel Levy (see comments elsewhere) which was designed and intended to meet the annual cost of maintenance of national, urban and feeder roads (effectively a user charge).

More significantly, the cash flow problems of TOR nearly caused a systemic collapse of Ghana’s banking system, the consequences of which are still being felt through tight credit conditions and restricted availability of credit for the private sector (GoG pre-empts most domestic funds to meet its own funding needs).

11. Investment in Transport Expenditure The above examples set out how GoG has attempted to involve and utilise various combinations of public and private organisations in the transport sector, with different degrees of financial and accounting autonomy. The introduction of commercial principles is often with a view to eventual privatization in some instances, or to ensure that users pay the full financial and economic costs of services.

Not all of these goals have been realised. Government influence and indirect management of the various agencies remains strong, as many still rely on GoG or DPs for investment funds. Where public revenues have been devolved there remains a public interest in how the revenues are utilised, and at what level tariffs, fees and charges are established. Ghana Highways Authority (GHA), a legally separate organisation, and the autonomous Ghana Road Fund (GRF), used to channel the fuel levy and tolls towards road maintenance, are still subject to a high degree of government control over their affairs.




Much of the agency transport expenditure and many financial transactions lie outside the GoG’s budget processes and may not be consistent with sector priorities, measurable goals or clear performance targets. This is particularly so where autonomous agencies are used to subsidise or prevent the collapse or insolvency of other transport institutions, to invest in non-transport sector projects, or provide budget supplements that should have gone through Ministry supplementary budget processes. Policy still dictates the issue of contracts even when funding is uncertain or past arrears have not been paid.

The key area that inhibits effective and economic transport operations is the lack of genuinely independent and professional management in the agencies.




Chapter 4 - Sources of Finance – A Review

1. Constraints on Government’s Development Budget Ghana “faces a huge fiscal deficit in proportion to gross domestic product1 arising from a serious failure of expenditure control”. The “deficit will be brought down to 10.2 per cent of gross domestic product by the end of the year (2009) from 15 per cent last year”, “Arrears....amounted to 22 per cent of GDP”. During 2010 both inflation and domestic interest rates have reduced but are still high by international standards.

Ghana’s public finances are insufficient to meet current investment, operational and maintenance commitments let alone operational subsidies and losses. Annual GoG budgets are subject during the year to across-the-board reductions in non-payroll expenditure. A substantial element of GoG development expenditure is provided by Development Partners.

Development budgets routinely suffer from delays in the payment of counterpart funds to DP funding and on projects where GoG is fully responsible for total investment costs.

In the transport sector there is a backlog of contract payments on roads and highways, both on development contracts as well as recurrent (e.g. road maintenance). The Road Fund levy (as well as other minor revenues) was intended to cover 100% of annual recurrent maintenance costs of highways, urban and feeder roads. This has yet to be achieved, the fuel levy not being raised annually to the targeted level for socio-economic and other reasons.

The GRF is unable to meet commitments for road maintenance, even if the Fuel Levy is adjusted upwards as planned over the next few years. GoG may therefore need to seek DP funding beyond the current TSDP to provide funds to meet targeted road maintenance conditions for trunk, urban and feeder roads. This will be in addition to any new projects identified for the ITP. The GRF is not a source of investment funding.

GoG’s financial affairs have also been constrained in past years by high rates of inflation, which continued in 2009 at around 20%, and even higher rates of interest in the domestic market. Whilst international borrowing is nominally cheaper, it carries a high foreign exchange risk, with forex movements causing both interest and principal repayments to increase substantially in Cedi terms.

1 Minister of Finance 2009 Budget speech, Financial Times 23rd Nov. 2009.




2. Existing Finance Sources – Examples GoG has a comprehensive record of accessing available sources of revenue and investment funding, for its Ministries and Departments, and for those institutions constituted as self-accounting entities (Commissions, Authorities, Companies, etc).The following section elaborates on the sources and the issues arising (risks, foreign exchange issues, etc) as they affect the transport sector.

For example, Ghana Highway Authority’s accounts reveal the following sources of funding for its operations. These are:

� The Consolidated Fund (GOG) from which staff remuneration is paid through the

Controller & Accountant General's Department ; � The Ghana Road Fund; and � Loans, Credits, and Grants from Bilateral and Multi-lateral Donor Agencies such as:

• IDA - International Development Association (World Bank) • AfDB - African Development Bank • OECF - Overseas Economic Co-operation Fund of Japan • EU - European Union • KFW – Kreditanstalt fur Wiederaufbau (Bank for Reconstruction) • ECGD - Export Credit Guarantee Department of U.K. • JICA - Japan International Co-operation Agency • BADEA - Arab Bank for Development in Africa • OPEC - Organisation of Petroleum Exporting Countries • Danida – Danish Government • Saudi Fund

There are multiple other sources of mainly grant aid from other Development Partners for urban and feeder roads, marine and aviation development (MiDA, French Development Agency, SNV, etc).

3. Multilateral Institutions Many of these lenders are multilateral institutions, where the money is lent directly to GoG and then on-lent to the implementing institution. The funding is considered to be a MoFEP responsibility, rather than MoRH (in the case of GHA). GoG remains liable for repayment whether or not the beneficiary institution has to generate funds to repay GoG. In the case of GHA, GHA does not have independent sources of funding to repay GoG.

The extent of foreign exchange risk on sovereign debt is reflected in the source of funding. If the foreign lending originates with multilateral institutions, e.g. IDA, then interest rates are often at a concessionary, sub-market level, with generous grace (5 year) and repayment periods (as much as 30 years). Credits are preferable to loans from these institutions (IDA/IBRD/EIB/AfDB/BADEA/IFC, etc).

GoG determines whether or not the foreign exchange risk is handed on to the beneficiary institution. In the case of GHA, the risk falls directly on public revenues, whether or not it is formally allocated to GHA. In the case of GPHA, the risk can, and is, formally a liability of GPHA to be paid to GoG and borne through the amortisation payments.




4. Bi-lateral Funding - Grants Bi-lateral funding – country to country – has generally been replaced by multilateral and joint development partner arrangements to ensure coordination of investments and avoidance of duplication of efforts.

Much bilateral funding is in the form of direct grants or the supply of vehicles and equipment to specific projects. It may also take the form of budget support to a specific sector, sometimes pooled with funds from other DPs.

5. Tied Bi-lateral Funding with Concessions China has announced a US10 billion investment plan in Africa for 2010-12 which might involve one or more of the above approaches. Tied bilateral funding may depend upon parallel agreements on mineral or other concessions. The long term nature of such arrangements is often reflected in long term loans (20 years plus) at market (e.g. 5-8%) or concessionary interest rates and five year principal grace periods, tied to China suppliers of infrastructure and operating equipment, and Chinese construction contractors.

6. Sovereign Funds Sovereign Funds tend to focus on portfolio private sector investment (e.g. Norway’s Oil Fund) or are channelled through multilateral institutions rather than directly to governments.

7. Trade and Supplier Credits Trade and supplier credits are tied to the procurement and supply of goods and services, e.g. BOST’s purchase of pipelines. Either suppliers or foreign trade banks provide credit or credit guarantee that spread the cost of procurement over up to five years. This is a useful, if restricted form of funding, but necessarily does not match the life cycle of the purchases with the period of credit available.

8. International Capital Markets Ghana is at an early stage in accessing international capital markets. In 2007 Ghana accessed international capital markets through its Eurobond borrowing with a 10 year USD denominated bond at a commercial 8.5% interest rate. This was targeted to finance the energy, road (Accra/Kumasi and Nsawam/Kumasi highways) and rail transport sub-sectors.

In addition to the high rate of interest and short borrowing period (compared to multilateral institutional borrowings), Ghana has incurred a substantial increased Cedi liability of nearly 50% through the depreciation of the Cedi against the USD (from USD 1 = GHC 0.95 to GHC1.40). This additional cost can in theory be recovered through user charges (energy sector) but only through public revenues (transport sector). Such exchange depreciation risk also exists with multi-lateral debt expressed in foreign currencies.

With the public policy control of tariffs, charges and levies, (in the above example sub-optimal electricity tariffs, road tolls), the additional liability usually fails on the GoG rather than the beneficiaries (institutions and users).




Much of the past borrowing liabilities of GoG has been ameliorated through the Enhanced HIPC arrangement, but the responsibility for principal and interest repayments often remains with the beneficiary institution, as this is the source of Cedis that are used to finance sector targets (Education, Health) as part of the HIPC conditionality.

9. Domestic Bond Market Ghana’s domestic bond market is not significant. Private placements are possible, e.g. with SSNIT2 on a 7-10 year range, but it is understood that SSNIT will not undertake to be a lead financier. SSNIT, as a state directed pension institution, could fall foul of moral hazard issues if it lends at sub-economic rates of interest to state owned institutions. Past lending has had to be exchanged for equity holdings as a means of expunging un-repayable loans. SSNIT is also a major creditor to GRCL.

Near medium term borrowing conditions have been tested recently. In January 2010 the Central Bank successfully floated a 3 year GHC 200m bond that was increased to nearly GHC 400m at an interest rate of approximately 20%. Most of the funds originated outside Ghana from private sources and are earmarked for GoG recurrent purposes rather than being available for new investment. As a Cedi denominated source of finance domestic bond raising is preferable to forex denominated bonds.

10. Domestic and Foreign Banks Self-accounting state institutions are able to access domestic and foreign banks for short and longer term funding, based on their ability to repay from internally generated funds (GPHA, GIA, BOST, etc), but nearly always with underlying GoG guarantees on the borrowing.

Ghana has experienced near-systemic collapse of its banking sector on more than one occasion from the failure of state owned institutions failing to generate revenues to repay short term borrowing (c.f. TOR, BOST).

Short term domestic borrowing limitations are reflected in the cost of borrowing in excess of 20%3 for GoG and even more for the private sector (merchant banks quote 35% and upwards). Few, if any, public sector projects can generate rates of return able to cover this level of cost. Bank borrowing should be limited to short term operational/cash flows needs, not for investment funding.

2 SSNIT has provided short term finance (one/two years) to the GRF at sub-market interest rates for road maintenance projects. This reduces the funds available to meet future public pension fund liabilities. An announcement in 2010 stated that SSNIT is to lend GRF further funds repayable over a 6 year period.

3 GoG 90 days Treasury Bills around 25%, 180 day Bills around 28% in November 2009. This has since reduced to approximately 20% (February 2010). Rates by June 2010 had reduced to around 13%.




11. Revenue Generation Few existing transport sector operations have their own unregulated revenues. Most are subject to external regulation of one form or another (VLTC, MMT, etc). Some agencies have no independent revenues (e.g. GHA).

By contrast the GPHA is expected to generate repayments from the revenues earned or levied on its operations. Agreements to borrow are expected to be entered into on the basis that the funds borrowed are deployed on revenue generating activities (meeting various financial and economic benchmarks agreed by GoG, GPHA and the lenders).

GPHA fees and charges do, to some extent, reflect international levels in fees and charges, thus generating sufficient forex to repay the international financing costs incurred. As a national monopoly these fees and charges are subject to GoG monitoring. The main competitive pressure, however, comes from the charges levied by regional ports to which cargoes can be diverted.

Given the public nature of transport operations, revenue generation on full cost recovery principles has proved difficult to implement but remains an area where the raising of additional funds for projects should be explored.

12. Hypothecated Revenues Hypothecated revenues are raised and linked to specific spending purposes. The tariff, fee or charge – if not an outright tax - is often a user charge, to ensure that those who benefit meet the costs of providing the service. This approach attempts to take the charge setting out of the political area. In theory the funds accrue to the spending institution. In practice, in most countries, the Treasury ensures that the funds are accounted for through the Central Bank and MoFEP where they are often temporarily or permanently diverted, and setting the user charge remains an issue of policy.

The Fuel Levy is specifically designed to fund road maintenance and is channelled through the GRF. Although intended to be increased every year, as part of an overall agreement with DPs who are funding road construction, rehabilitation and maintenance, the revenues have fallen well below what is required. Some funds have been diverted to non-transport purposes.

As a user charge the levy is well below the underlying cost of road maintenance and could prove to be a significant source of revenue. It is being supplemented by road tolls, which have just been increased for the first time in over a decade. The yield of both these revenues is significant but is not a foreseeable source of investment funding in the near future4.

4 In the long run the Ghana Road Fund and the proposed National Road Authority could take on the role give to South Africa’s SANRAL, which borrows long term on the domestic market and funds BOT based toll roads. The tolls repay the capital and interest and fund the road maintenance costs. However, the level of tolls raised in South Africa is significantly higher per km than that which is feasible in Ghana, where the tolls and fuel levy do not cover even the routine maintenance costs.




13. Forward Borrowing Against Revenues. In the absence of inexpensive borrowing facilities, or ability to guarantee repayment, some institutions have resorted to borrowing against future revenues, where the lender has greater credit status or surplus funds.

VLTC has undertaken some marine investments based on agreements with the users of its services. In exchange for funds from BOST to pay for the rehabilitation of equipment, the lender agrees freight rates and quantities to be shipped, the revenues from which are used to repay the loans. The loans are short term, often less than the life of the rehabilitated equipment, but on a concessionary interest rate. As VLTC and BOST are both substantially state owned and directed, the agreement is not strictly at “arms length”. However, the mutual arrangement does ensure optimal use of a partially completed transport corridor. The viability of the revenues earned depends upon GoG approved annual agreements of marine transport tariffs of around 60% of the private sector road tariffs for fuel shipments.

GRCL attempts to keep the Western corridor repaired and maintained feature a similar arrangement, whereby future freight revenues (expressed in USD or Cedi terms) have been utilised by the mineral shippers to finance the repair and maintenance of rail track and equipment. This has been more at “arms length” than the VLTC example, although one mineral exporter is minority state owned.

This is not a solution for longer term investments in new track and equipment, and does not solve the inherent problem of GRCL not undertaking routine repair and maintenance. The sustainability of the current arrangement is undermined with the surplus revenues accruing to GRCL being siphoned off to cover loss-making passenger operations and legacy liabilities.

14. Long Term User Agreements In the case of GRCL and the railway operations, a case can be made for entering into long term revenue and tariff agreements with the principal or major users of the rail system (as is the case on the Western rail corridor). The commitment of major freight users can also be ensured if they are required to provide the capital for, in be owners of, customized wagons for their specific freight.

In the case of Ghana the Ghana Managanese and Bauxite5 Companies are almost entirely privately owned and in a better position to raise finance to invest in dedicated wagons and other equipment.

This approach ensures the viability of parallel public investments in rail track, etc but only if the asset owner repairs and maintains the facilities. This requires the ring-fencing of the finances of the dedicated rail link, and full autonomy of the asset owner from government interventions. Tariff negotiations need to be mutually agreed, and open to arbitration arrangements if not resolved amicably.

A potential user of the Eastern rail corridor is Maersk which could finance container rolling stock and take over the operations management, with infrastructure remaining with GRDA.

5 GoG owns 20% of the Bauxite Company.




15. Sale of Public Assets to Private Shareholder As a source of funds the sale of public assets is useful, and often results in the removal of annual operating losses from the national accounts. Further asset sales, this time from the transport sector, should be sought.

The sale of Ghana Telecoms to Vodafone (an international, publicly listed company) is an example of how a poor performing institution and public liability can be transformed, with the government retaining a shareholding (in this case 30%) but with no other financial obligations. The funds generated from the sale were applied to other GoG purposes.

All future expansion and funding lies with the new institution, as much as possible internally and organically (public shareholders may be called upon for further capital contributions through rights issues in the future, but this can be declined). There is currently a “re-engagement” with Vodafone to clarify asset ownership, terms and conditions of the sale, and other issues.

16. GoG Consolidated Fund GoG provides funds from its own resources to directly finance investment. These funds, obtained from taxable sources, are already stretched and fully committed. To finance the ITP strategy GoG could review existing programmes and identify lower priority investment projects (transport sector or otherwise) which could be deferred, with the CF funds switched to funding these strategic priority projects.

17. Constraints on, and Requirements of, Development Partner Funding DP funding is the major source of Ghana’s development funding. DP funding is subject to policies and strategies of DP national governments – usually in agreement with the recipient government. Funding may be restricted to specific economic sectors or sub-sectors, to new investment rather than rehabilitation or reconstruction, or to specific goals (e.g. Millennium targets). Restrictions may limit the amount available to each country or sector, to the way the funds are distributed (i.e. project specific or budget supportive), to the recovery of part or full economic cost, etc.

DP funding is coordinated through the Ghana – Joint Assistance Strategy which covers 95% of development partner assistance. DPs outside this arrangement include China.

Most DP assistance is linked to specific accountability, transparency, and good governance issues and requirements, too many to detail here but clearly impacting on the financing of projects. Millennium Development Goals, poverty reduction, gender and HIV/AIDs issues have also been introduced into the economic/financial analyses, in addition to Environmental Assessment and Impact requirements. However the economic/financial analyses are the critical determinants for projects to proceed.

None of Ghana’s DPs have specific transport sector commitments to providing funds outside the current plans (see TSDP 2008-12 and the SMTDP 2010-14) although several have expressed the intention to continue assisting Ghana in principle in the transport sector.




18. Constraints on, and Requirements of, Private Sector Funding Private sector equity involvement in projects may be part of a package of funding, but the principle financing will come from loans and similar sources. Foreign syndicated bank loans are the most likely source for large scale projects, although the duration of the loans may be well less than the life of the assets involved. Domestic banks are prepared to provide bridging loans, working capital and lines of credit in support of foreign domiciled bank syndicated loans.

The main problem with domestic bank financing lies with high domestic interest rates which limit the use of short term debt financing of local currency for project costs and working capital. Interest rate projections in the medium term indicate little amelioration of domestic interest rates6. GoG 90 and 182 day Treasury Bills paid 24% to 28% in 2009 but have reduced to around 13% recently. Bank overdraft and short term lending rates are in excess of this. Merchant bank interest rates ranged from 50% to 100% and more in 2009, have also reduced (June 2010) but still remain high.

Full economic cost recovery is required for private sector involvement, which conflicts with public policy practice that tends to direct, regulate or otherwise constrain the setting of user charges, tariffs and prices. The private sector requires political and legal certainty over the right to establish full cost recovery charges, fees, tariffs, etc without government limitation, restriction or oversight. Where commercial viability is not evident the private sector will require the assumption of risk by, and appropriate financial indemnities from, GoG.

The expropriation of assets is also an issue but this can be dealt with by the multilateral institutions. For instance, IFC offers partial risk guarantees to lenders. Their judicious use can attract private sector capital that would otherwise not be available.

19. Conclusions Ghana is already aware of the multiple approaches that can be, and have been, used to fund projects. There is less recognition and acceptance that viable economic and financial investment arrangements have been undermined by short term political and socio-economic considerations.

The ITP funding strategy should focus on readily available financial sources that offer long term credits rather than loans, with concessionary interest rates and grace periods before repayment commences. Borrowing/financing should be matched to the lives of the assets invested in.

Efforts should be made to link long term users (e.g. mining companies) of public assets with commitments in terms of tariffs, quantities, etc. linked to underlying operational and amortisation costs (e.g. ports, rail track operators). If this cannot be achieved, the next best solution is to involve multilateral institutions with concessionary, long term finance.

The GPHA Tema and Takaordi Port developments are eminently suited to a multi-sourced financial approach, given the long term infrastructure elements that need very long term financing. Elements within the ports’ development might be suitable for full PPP treatment –

6 World Bank Aide Memoire to MoFEP August 2007




see the Bonifica Feasibility Study 2010 for full details and past proposals. The USTDA MasterPlan is awaited for full details of the updated and revised proposals for the ports’ development.

The KIA MasterPlan concludes that, even on the higher growth projections, significant GoG funding of some development costs will be required, but there are elements that could be financed privately or through concessionary loans from international banks.

Generally non-revenue generating projects should be financed by credits and grants, not loans. User charges should be introduced to effect cost recovery where possible.




Chapter 5 - Development Partner Finance Availability for ITP 2011-15

The ideal funding source is DP grant based, resulting in no annual principal or interest payments chargeable to the Consolidated Fund.

DPs were approached during November 2009 with a view to identifying their strategies and plans to provide finance over and above that already agreed for the TSDP and SMTDP. A summary of the findings is set out in the following table.

The review concluded that DPs are not committed to any funding of roads beyond the existing plan (TSDP 2008-12), but that there were possibilities for the longer term DP funding of rail projects, subject to various missions to be undertaken late 2009/early 2010 (c.f. EIB, AfDB). It was noted that:

� JICA may resume lending to Ghana (lending was suspended in 2001 when Ghana

engaged in the HIPC process). Funds may not, however, be targeted to the transport sector.

� MiDA, on behalf of Millennium Challenge Corporation, suggested that there may be an interest in principle for PPP in transport if and when a second tranche of funding is discussed.

� The possibility of ITP funding through the AfDB, the European Investment Bank (EIB) and World Bank is subject to country strategy missions and visits over the past few months. These are the main potential sources of long term credit and concessionary finance for the infrastructure sector.

Although most road and rail investments have lives of 10 to 30 years, and funding duration should match such periods, it is possible that some short term credits, trade credits or concessionary loans could be available to finance the initial stages of some of the ITP 2011-15 projects.

Funding availability can be rapid if a detailed, economically and/or commercially viable feasibility study has been prepared (e.g. EIB can provide funds from the Infrastructure Fund in a few months, for up to 50% of a project’s financing requirements). EIB lends directly to both the Government and to the beneficiary institution (e.g. Volta River Authority). Loan, concessionary and direct grant funding can be made available. Minimum borrowing requirements of €25 million can be waived.

ITP borrowing may be inhibited by HIPC conditionalities and GoG’s current short term repayment problems, although China is understood to have offered up to USD 2 billion in concessionary finance to assist Ghana’s international payments imbalances. This background should not prevent GoG proposing and proceeding with economically and financially viable transport projects.




Table 1 : Review of Development Partner Funding Sta tus

DEVELOPMENT PARTNER

FUNDS FUTURE FUNDS INTEREST NOTES

DfID Does not target transport or infrastructure sector

Nothing on transport or infrastructure planned for next few years

GoJ has agreed to double current ODA between now and 2012

Target probably non-transport sector

JICA No current surplus funds; USD 87m made available for rehabilitation of National Road No.8.

GoJ may recommence new lending ODA (past ODA loan was suspended in 2001 on Ghana’s entry into HIPC).

Technical Assistance

Studies

Masterplan

Possible Loan to Road Fund?

Millennium Challenge Corporation

Nothing available in current tranche For internal discussion only, MCC might be interested if second tranche available

PPP

Infrastructure

PPP possible

National trunk road links

China USD 10bn available to 2012 Has considered financing N/S railway (feasibility study undertaken).

Has involvement in existing mineral concession in Ghana.

Probably tied to providing own contractors and suppliers, and linked to obtaining mineral concessions in Ghana.

European Union All committed –see TSDP, TSP, etc Nothing specific, still interested in transport sector. Assume grant?

Possibility EIB (see note)

See Bonifica study on railways, due March 2010.

Contact European Investment Bank visit late Nov 2009.

European Investment Bank

Interested in self-financing Ports, Rail (Western Corridor), Toll Roads projects – need to be financially viable. Quick response possible when detailed feasibility study has been prepared.

Infrastructure Fund is available, concessionary funding limited. €25m minimum investment can be varied. Maximum 50% of project to be funded

Is already involved with VRA on energy projects. Has lent money directed to GoG and to VRA. Repayments are a problem.

Danida Transport sector no longer funded. Nothing likely. One rehabilitation project 2010-12 is the exception.

AfDB Current period programme committed. New programme to be identified, not Transport sector Country Strategy Mission due




DEVELOPMENT PARTNER


quantified. Could be loan, credit or grant, or a blend.

early 2010.

Lending is sovereign, i.e. to GoG which on-lends to agencies.

Will prepare a country strategy paper.

Spain Current Euro 60m grant for commercial support committed, includes 52 feeder road steel bridges but not local installation costs. Top-up grant Euro 17m, to 2012, includes infrastructure.

Development Agency through multilateral agencies had Euro 100m for Sub-Saharan infrastructure (from which above Euro 17m came).

Under HIPC Spain will write off 60% of debt when GoG has repaid 40% of USD 44m debt into a trust fund for new development projects. Approx USD 20m may be available.

Likely projects – water treatment, rural development.

Grant money available to fund feasibility studies but as tied aid using Spanish companies.

Current funding per TSP IDA 47324-GH, to 2013. USD 225m.

Funding includes some feasibility studies for projects that could materialist post 2013 – see TSDP.

Currently assisting setting up PPP unit in MoFEP.

Nothing projected post 2013: would be IDA credit, direct to GoG, not to agencies.

Could include Ports, Aviation, Rail and Highways. Subject to feasibility studies, viability.

IFC could be involved with PPP on appropriate projects.

No liaison with Government of China.

Liaises with AfDB, EU, etc.

Looked at Goldman Sachs countrywide proposal for 10 year toll-booth project.

World Bank

International Finance Corporation – funding for infrastructure currently targeting on energy sector (including private sector) but could include transport.

Would require economically and financially viable projects with private sector involvement.

USAID See under MCC/MiDA See under MCC/MiDA




DEVELOPMENT PARTNER


India Not approached

Agence Francaise de Developpement

Bus Rapid Transit - Kumasi USD 95m with WB, GoG and Global Environmental Facility Trust Fund (GEF),

Not discussed with AFD

Soft loans and grants to 2009 – Global Budget support. Also feeder roads.

Not known. See also GAMA (Accra Rapid Transport). Danida also involved.

German Society for Technical Cooperation (GTZ)

Priority areas: agriculture, private sector promotion, good governance.

Not applicable

BADEA Commitments to Ghana USD 152m for 28 projects

Nothing known

SNV (Netherlands) Non-transport sectors Unlikely




Chapter 6 - Public-Private Partnerships

1. Principles and Approaches The concept of Public-Private Partnerships (PPP) is considered to be a means of extending state resources by harnessing private sector funding and expertise for development objectives. It brings together the social priorities of government with the managerial skills of the private sector.

The definition of PPP arrangements is fluid and can include simple contracted out-sourcing arrangements funded by the public sector (e.g. Zoomlion and waste collection); management contracts to operate a facility (e.g. Vanef STC and GPHA’s container port agreement with MPS); or a joint venture to raise private sector funding and import the latest IT skills (GCNet)7.In the GCNet example domestic banks both provided finance and took an equity share in the venture.

The provision of a government service or public enterprise is contractual and sets out which party assumes the financial, technical and operational risks of the project. The cost of using the service may be borne exclusively by the users of the service, shared between the user and taxpayer, or fall wholly on the taxpayer (e.g. under the Private Finance Initiative (PFI) approach). In the latter case the capital investment is provided by the private partner and the cost of providing the service is borne wholly or partly by the government.

Setting up the PPP can involve the transfer of assets to the PPP, or ownership is retained by the government and the PPP is responsible for the repair and maintenance, with the focus on the joint provision of services. Capital subsidies may be provided in the form of one-time grants (by the government or even a DP where multilateral financing is involved). Government may provide revenue subsidies (subventions), tax breaks or guarantees of annual revenues for a fixed period. New assets created usually revert to the public sector at the end of the contract or agreement or are provided to the project at no cost or under some form of lease or maintenance agreement (e.g. where major rail or road infrastructure is in the public domain)

2. Benefits Although PPPs may result in investors obtaining a higher rate of return on their (often leveraged) investment than the government would pay if funding came from a bond, PPPs can be beneficial. Construction costs may be lower if the private partner is given appropriate incentives to avoid cost overruns.

By providing the capital, the private sector removes the burden of direct debt on the public sector (although there is an implicit long term public liability off the balance sheet c.f. PFI). Project delivery can be quicker than that possible through government budget procedures that

7 A comprehensive report on PPP and all its variations is attached to the 2010 Bonifica Feasibility Study and should be referred to.




require year by year Parliamentary approvals and under which projects might not be built at all. Costs and revenues are ring-fenced, often with the formation of a separate company, authority or other form of agency.

Management and operation of the project is also removed from the restrictions and inherent inefficiencies of annual government budget appropriations and competing needs. The private sector is geared up to quicker responses to changing circumstances than is the public sector. Creativity is also encouraged.

Attention needs to be given to the blurring of the lines between public and private provision (especially with PFI) which may lead to a lack of public accountability (hidden by reference to “commercial confidentiality”) with regard to funding, risk exposure, and performance.

3. Ghana and PPP Resources GoG recognises the fact that enterprise level activity is best carried out by the private sector, leaving the public sector controlling the policy and regulatory framework. When both sides participate in strategy development, a good basis is set for collaboration at the implementation stage. Private sector participation in the delivery of public projects and services has, in the past, taken the form of short-term contracts for design and/or construction as well as management, but has not promoted whole life-cycle costing of projects and efficiency.

From recent experience GoG recognises the need to improve its institutional resource capacity and capability in relation to PPP arrangements. The World Bank is financing such a resource in the MOFEP where a Policy and Finance Analysis Unit has been established8. This will lay the foundations for successful PPP delivery in Ghana as well as build public sector capacity and skills in PPP investment planning, design, procurement and implementation.

Also to be addressed are the regulatory, scoping, and staged introduction of PPP. Specific PPP legislation may also be required.

In the meantime, if sufficient PPP experience is not yet available, GoG could follow the recommendations under the SADCC (Southern African Development Coordination Conference) Guidelines for Railway Concessions. The Guidelines recommend that negotiations for concessions should be through an independent and intermediate agency. There is also a USAID/Regional Centre for Southern Africa in Gaberone which could be called upon for advice and assistance in identifying sources of external intermediation.

Reference is made to two PPP examples below which have relevance to the ITP.

4. Accra – Kumasi N6 - Build, Operate and Transfer For the N6 road links consideration could be given to resurrecting the BOT concession discussions with a view to a public/private financial arrangement (this subject to the necessary legislative, regulatory, etc. issues raised elsewhere having been resolved).

8 CPSC, a Canadian consultancy, has been contracted for this process.




One of the reasons given for the failure of the original BOT discussions was GoG’s decision to proceed with construction of part of the route utilising funds from the 2007 Eurobond issue9; another reason was the turmoil in the international financial markets and the withdrawal/non-availability of private sector interest.

Whatever the reasons, development of N6 has continued and the ITP has identified N6 for priority investment consideration. The question arises whether or not BOT is appropriate at this time.

A key aspect of any BOT/ROT (Repair Operate Transfer) arrangement e.g. as proposed for the Accra-Kumasi route, is the level of toll that can be imposed to make the whole venture financially viable. Useful parameters for Ghana were presented at a workshop10 under the auspices of the then Ministry of Transportation. A road toll of US 2 cents per km was indicated for N6 with a traffic volume of 23,500 vehicles per day (vpd).

Lower levels of traffic were required for Maintain, Operate and Transfer (MOT)( 1,250/2700 vpd) and Rehabilitate, Operate and Transfer (ROT) (9,000/10,700), but MOT/ROT are not relevant for the N6 development.

The three N6 links in the ITP constitute the full Accra-Kumasi route but have variable traffic volumes. It may be possible to consider separate BOT/ROT arrangements for each link, depending on the traffic volumes. The Accra- Kukurantumi Jct link with 10,000 vpd meets less than 50% of the BOT criterium (the link requires both rehabilitation and construction); the other links are closer to 25% of the criterium. On the face of it, none of N6 is suitable for a BOT concession.

Events in Ghana have also moved on and may have pre-empted the introduction of BOT/ROT concessions on N6 or any other road in the immediate future.

� GoG through the GRF has introduced nationwide road tolls (the capital investment provided by the Road Fund, toll staff recruited through national staff arrangements, with GHA providing higher level staff). GHA collects the tolls and remits the net proceeds (after deducting staff and related costs) to GRF. The net proceeds are used by GRF to complement the road fund levy to finance road maintenance contracts.

� There is also the issue of the private sector takeover of the Tema toll booths, and its computerisation, which is being retrospectively regularised and which, it is understood, may be extended to other roads under a formal concession arrangement.

With effect from 1st February 2010, higher road tolls have been introduced throughout Ghana. The funds are intended to boost resources for road maintenance and are receivable, net of expenses, by the Ghana Road Fund. To exclude N6 under a BOT from these arrangements

9 This established a benchmark interest rate (of approximately 8% plus the foreign exchange risk) for funding the N6. This is not far removed from the real domestic interest rate (nominal interest rate less inflation) currently prevailing. Consideration could be given to GoG borrowing domestic funds (with a 10 year plus maturity) to undertake the N6 project works rather than further international funding.

10 PowerPoint presentation; Proposals for PPP in Infrastructure (Road Sub-sector), MoT; Nov 2008.




would reduce the general funding for road maintenance. In any case, even at the new toll levels it appears that insufficient funds would be generated for a BOT scenario.

5. International Funding of Railway Projects GoG has had discussions with potential concessionaires for investment in the rail system, which has included major strategic investment in a north-south rail corridor to the Burkina Faso border. These negotiations involved substantial investments and a long term (20/30 year) perspective. The economic/financial rates of return do not appear to be viable even at the conventional lower rates for rail systems (higher 12% to 15% rate are used for road systems).

Only one rail link, Tema-Kumasi, is included in the 2011-15 ITP although there is an on-going feasibility study (Bonifica) for selected rail links on the Western Corridor. Neither project addresses the institutional problems of GRCL nor the other mass passenger projects that are on-going. If any short term financing solution is to be found for the ITP rail project it may have to lie in funding directly from GoG’s CF and/or some contribution by the major freight users of each link.

Most railway investments require a long term perspective and long term financing. Examples of DP funding of part or all of railway projects in Africa (and elsewhere) has been examined. Sources of funds include EIB, AfDB, OPI (Overseas Private Investment Corporation), IFC, KfW, etc. Where these international institutions are involved there are significant conditionalities required of government, state rail institutions, and the (autonomous) management entities, particularly from the private sector.

Granting railway service autonomy provides the opportunity for enabling private sector involvement in the national railway and can lead to enhanced operational efficiency. In all instances a clear distinction is made between freight operations and public service passenger obligations; viability usually depended on the former, and the latter required some form of public sector subvention.

Examples of DP funding of part or all of railway projects in Africa have been examined and show some relevance to Ghana’s existing network and needs. The DP funding in other countries has been used to rationalise complete rail networks or separate sections of networks. Grant finance from multilateral organisations has been provided to deal with retrenchment, legacy costs, etc.

Some rail concessions were entered into in parallel with extractive mining monopoly concessions and investments, which exclusively utilise the rail link or primarily justify the investment in the rail link. Some rail links are tied to parallel port developments; others are not.

The scope and potential of a railway concession and the elements of private and public investment, domestic and international, are demonstrated in the Uganda/Kenya railway concession supported under the East African Trade and Tariff Facilitation Project (EATTF).

The EATTF covered inter alia institutional support for transport facilitation in the East African Community (EAC) and Rwanda and support to Kenya and Uganda for the joint concession of their railway systems. Project funding from IDA was USD 199 million and AfDB USD 5million, with specific amounts from IFC USD 32 million and KfW USD 32million to support the railway concession. Over the 25 year life of the project, World Bank Group engagement is leveraging over US$ 400 million of additional private financing for the railway modernization.




The IDA is financing the retrenchment of surplus staff of Kenya Railways not taken up by the concessionaire, the relocation of traders from railway lands to create a safe operating zone, a partial risk guarantee to be made available to potential lenders, and a capacity-building component for the new asset authority and safety regulator that will be created.

Sustainability has been an integral part of the transaction design. The joint concession, which is also expected to benefit other land-locked neighbouring countries through increased efficiency and lower transportation costs (up to 35% by cutting border crossing delays and dwell time at Mombasa port from 17.5 days to 10 days), has set the stage for future regional cooperation in the East African region. One major expected output from the concession is an increased market share for Kenya Railway Company from currently 16% to 30%.

Direct growth impacts e.g., quantified for the Ugandan and Kenyan State budgets are estimated to consist of (i) a reduction of USD 14 million (that will now be redeployed to other strategic objectives) in accrued arrears for Kenyan Railway Corporation, (ii) a reduction of USD 2 million per year in operating costs, (iii) direct investments of USD390 million by the concessionaire (supported by IFC and KfW) over a period of 25 years, and (iv) annual concession fees of USD 9.5 million.

In summary, where DP financing institutions are involved there are significant conditionalities required of government, state rail institutions, and the management entities.

Assuming that some form of long term (PPP) concession arrangement is envisaged for either of the existing rail corridors, the contracting parties need to agree inter alia on the following financial and cost related issues.

� Entry fee (often used to provide funds for staff redundancy schemes, pension arrangements,

etc) � Annual fee (a fixed and/or variable percentage of gross revenues, usually on freight

revenues) � Tariff rate agreement and arbitration (at market levels, adjusted for inflation, linked to Gross

Domestic Product, etc) � Marketing rights, freight exclusivity, service levels, etc � Passenger services, if any (Public Service Obligation), to be funded by government

subvention and/or separate tariffs) � Lease payments for wagons, locomotives, premises, etc (payable to the asset holding

authority or government) � Responsibility for repairs, maintenance, etc. � Pre-concession rehabilitation and improvement � Guaranteed levels of annual investment in monetary and physical terms � Sleeper production (manufacturing facilities), repair facilities, quarries, etc – ownership,

operational and managerial responsibility, etc. � Concession periods (different periods for freight and passengers) � Scope of concession (renovation, improvements, repairs, etc) � Conditionalities, staff rationalisation, retention, training, institutional strengthening, regulatory

framework, etc � Reduction of annual operating costs (targets) � Clearance of legacy liabilities � Penalty provisions and guarantees � Shareholdings, long term contracting of services (i.e. linking a mining concession and

customer to long term use of the railway).




� International accounting and auditing arrangements and standards � Government guarantees for development partner debts

This list, although not comprehensive, may have some relevance to the short term rail projects currently under consideration.




Chapter 7 - Preparation of the Financial Statements

The sub-sector financial statements comprise data from several sources:

� SMTDP (data for 2010-13) � MoT 2008 TSDP (data for 2011-13, as also found in the SMTDP) � ITP (evaluation data for 2011-2030) � Determination of Maintenance Needs of Ghana’s Road Network DMNGRN); Nov 2009 (data

year 1 to 17) � Road Fund reports � Interim Urgent Plan Feasibility Study of the Western Corridor Infrastructure Project, Bonifica,

December 2009 � DUR Development Project Brief and Strategic Plan 2010-14. � Various agency strategic plans, updated by modal strategy plans where available, and

recent feasibility studies.

The tables present the data year by year for 2011 to 2015.

1. Principles The financing principles previously proposed at the Transport Planning Group to apply to the 2011-15 ITP are set out below:

� Utilize concessionary, long term finance, matched to investment life (and grant aid where

available) � Involve the potential users in long term agreements to use the infrastructure � Determine full cost recovery user charges with provision to revise and reflect changes in

underlying costs � Ensure committed government subventions where Public Service Obligations are imposed. � Ring-fence operations from the diversion of resources to other institutions and public

services. � Use bank funding for working capital purposes only � Utilize private sector funding, ownership and independent management where feasible

At this stage there is no GoG, DP or private sector funding committed or proposed for rail or road projects in the 2011-15 ITP. Nor is there any evidence of funding being immediately available from any source. GoG may have to identify Consolidated Fund monies in the early years, by switching funds from one to project to another, and initiate discussions with DPs for short term assistance (e.g. grants). Trade/supplier credits should also be considered.

On a two year perspective some DPs may be able to provide concessionary finance (e.g. IDA). The EIB might well be able to step in on the Eastern or Western railway projects at short notice.




Longer term financing remains feasible if appropriate bankable projects are proposed that link long term, concessionary financing with the long term nature of the proposed investments.

The detailed tables following show substantial unsecured funding elements for 2011-13 under the original SMTDP as well as the need for additional funding resources for new projects from 2011 to 2015. Three scenarios are provided for the Road Sub-Sector funding with revised assumptions as to availability of funding from the CF and DPs.

2. Inter-Ministerial Collaborative Items The aggregate data for the inter-ministerial collaborative items were obtained from the SMTDP/TSDP documents. The individual projects are disseminated throughout the sub-sectors of the SMTDP and constitute too many small items to list in the following table.

There is a substantial unsecured funding element for 2011-13. Nothing is proposed beyond that date. The most likely source of funding is by DPs or from the Consolidated Fund, depending on the nature of each proposal

Table 2 : Inter-Ministerial Collaborative Items

Integration, Improvement and Cross-Cutting Measures

2011 2012 2013 2014 2015 Total 2011-15

Expenditure USDm USDm USDm USDm USDm USDm

SMTDP Existing Plans 27.9 22.7 6.4 0 0 57.0 Funding

Shown as Secured in SMTDP 0.5 0.6 0.1 0 0 1.2 DP/CF - assumed 27.4 22.1 6.3 0 0 55.8 Total Funding 27.9 22.7 6.4 0 0 57.0

3. Aviation The original data obtained from the SMTDP/TSDP documents showed a substantial unsecured funding element for 2011-13. The SMTDP data with secured funding is shown as a consolidated line item – there are too many small individual items to list.

Phase 1 data from the KIA MasterPlan high growth scenario has been used in the following table, and shifted one year to commence in 2011 (the MasterPlan commences 2010). The MasterPlan indicates that, even in this scenario, KIA cannot breakeven or be commercially viable. Minor project expenditure in the SMTDP which was shown to have secured funding could not be specifically identified and has not been included below.

It is assumed that GCAA and GACL will continue to disaggregate functions into separate companies and institutions so that commercial and non-commercial functions do not cross-subsidise each other. Key to GACL’s profitability and future funding will be the removal of regional airport costs to other institutions, which can thereby be funded transparently by GoG, DPs, etc.




Ghana International Airlines is an example of a commercialised service operating under a failed PPP arrangement, which has been in receipt of a substantial GoG subsidy for several years. Aviation sector strategy is to have a strong national carrier to support KIA and promote regional services. Nothing is known of current GoG plans in relation to this organisation.

Table 3 : Aviation Sub-Sector

Aviation Sub-Sector 2011 2012 2013 2014 2015 Total 2011-

15 Expenditure USDm USDm USDm USDm USDm USDm SMTDP - miscellaneous 8.8 4.1 1.7 0 0 14.6 KIA MasterPlan - Existing plans/replacement (3) 2.9 2.9 2.9 2.9 2.9 14.5

- Non-Commercial CIP 24.6 24.5 24.6 24.5 19.3 117.5

- Cargo & Maintenance CIP 2.2 10.3 10.3 8.0 - 30.8

Regional airports 17.0 7.0 - - - 24.0

Safety/Security (4) 12.3 9.1 8.7 - - 30.1

Encourage Prv. Sector (4) - 0.4 - - - 0.4

2nd Int. Airport FS/Land 20.5 21.0 20.5 - - 62.0 Total 88.3 79.3 68.7 35.4 22.2 293.9

Funding

Secured funding - unspecified 8.8 4.1 1.7 0 0 14.6

KIA MasterPlan

- Non-Commercial CIP loan (1)(6) 25.8 27.1 28.4 24.5 20.2 126.0

- Cargo & Maintenance loan (2)(6) 2.4 10.9 11.5 8.0 - 32.8

- Internal Funding (Depr) (3) 2.9 2.9 2.9 2.9 2.9 14.5

Development Partners - grant (4) 12.3 9.1 8.7 - - 30.1

GoG - Consolidated Fund (5) 37.5 28.4 20.5 - - 86.4

Total (6) 89.7 82.5 73.7 35.4 23.1 304.4

Ghana International Airline N/a N/a N/a N/a N/a N/a

1. Based on past ability to borrow in USD at 2% over LIBOR – say 5% 10 year commercial loan.

2. E.g. From AfDB, IBRD, etc – concessionary, 10 year plus. 3. Replacement of current assets funded from depreciation. 4. Security and safety development 5. Regional airports, land for 2nd international airport. – GoG Consolidated Fund. 6. Including rolled up interest which is not shown under investment, resulting in the

funding totals differing from the expenditure totals




4. Maritime and Inland Waterways Many of the autonomous and semi-autonomous institutions in the Maritime and Inland Waterways sub-sector fall outside the formal GoG budget but call on public funds through government guarantees, DP participation (direct and indirect), and devolved GoG revenues. Although these institutions prepare annual budgets and corporate investment plans, not all have been available in a timely fashion or, where available, could not be linked directly to the ITP presentational requirements. This situation is reflected in the limited information shown for many of the marine institutions below.

The GoG Maritime and Inland Waterways expenditure data for 2011-13 were obtained from the SMTDP/TSDP documents, all of which is shown with secured funding in Table 4. Data are awaited for GPHA, from the USTDA financed Halcrow feasibility study for Tema and Takoradi. The probable sources of funding shown are based on the nature of the expenditure to be incurred (i.e. infrastructure will require long term concessionary funding from institutions such as AfDB, EIB, etc). There are elements within the port environs that could be fully funded under concession arrangements or fully privatised.

Table 4 : Maritime and Inland Water Sub-Sector – SM TDP and GPHA

SMTDP and GHANA PORTS AND HARBOURS AUTHORITY

2011 2012 2013 2014 2015 Total 2011-15

USDm USDm USDm USDm USDm USDm

Expenditure

SMTDP - Training Needs Assessment 0.0 0.0 0.0 - - 0.1 - Takoradi - reclaim land, cocoa works

30.0 10.0 - - - 40.0

- DBOT tender for terminals 1.0 1.0 - - - 2.0 - GSA - Ship Movement misc 0.5 0.5 0.5 - - 1.4 - GSA - Port Owners ICT 0.2 0.2 0.2 - - 0.6 Total SMTDP Existing 31.7 11.7 0.7 - - 44.1

GoG 31.7 11.7 0.7 - - 44.1

Total SMTDP Funding 31.7 11.7 0.7 - - 44.1

GPHA

Investment Needs per Master Plan

N/a N/a N/a N/a N/a N/a

- Infrastructure – berths, dredging, quays

- Infrastructure – roads, rail within port, access to port

- Equipment

- Warehouses/container




SMTDP and GHANA PORTS AND HARBOURS AUTHORITY

2011 2012 2013 2014 2015 Total 2011-15

USDm USDm USDm USDm USDm USDm terminals

Other Planned Investment

Total Expenditure - GPHA N/a N/a N/a N/a N/a N/a

Funding

Internal Operations

Government Sources

- Grant

- Subsidy

Loan (Commercial)

Loan (On-lent by GoG)

Others

- International Development Bank/Fund

- Private Equity/Participation

Total Funding GPHA (1) N/a N/a N/a N/a N/a N/a

(1) Draft GPHA Strategic Corporate Plan 2010-14 – awaiting data from USTDA/ Halcrow Feasibility Study.

GSA data on Boankra Inland Port are from a 2003 feasibility study. No data have been included for other GSA investments, which are assumed to be internally funded by GSA or funded from other sources. The land purchase may have been partly funded by GPHA.

Table 5 : Maritime and Inland Water Sub-Sector – GS A

GHANA SHIPPERS AUTHORITY

2011 2012 2013 2014 2015 Total 2011-15


Expenditure (1) Phase 1 Phase 2

Boankra Inland Port

- Land (already purchased) 1.6 2.0 3.6

- Administrative Office (built) 0.2 0.2 0.4

- Infrastructure 2.7 3.4 6.1

- Cargo Depots/Workshop 3.7 4.2 7.9




- Equipment 2.9 3.3 6.2

- Contingencies 2.1 2.6 4.7

Other Planned Investment - GSA

N/a N/a N/a

Total Expenditure – GSA 13.2 15.7 28.9

GSA - Internal 1.8 2.2 4.0

Development Partners 2.7 3.4 6.1

GoG 0 0 0

Commercial Sector 8.7 10.1 18.8

Total Funding - GSA 13.2 15.7 28.9

1. Phasing nominal, Development Study of an Inland Port at Boankra Report 2003.

GMU and GMA provide institutional, regulatory and inland water safety aspects to the ITP and brief investment detaila are provided where available. GMU needs to provide justification for extension of its regionally based operations, which should be funded partly from the regional stakeholders (other regional governments).

Table 6 : Maritime and Inland Water Sub-Sector – GM U GHANA MARITIME UNIVERSITY

2011 2012 2013 2014 2015 Total

2011-15 Expenditure (1) USDm USDm USDm USDm USDm USDm Expansion of Premises Other Planned Investment Total Expenditure - GMU N/a N/a N/a N/a N/a N/a International Stakeholders Development Partners

GoG Total Funding - GMU N/a N/a N/a N/a N/a N/a

(1) Unquantified. Need to prepare a pre-feasibility study, demonstrating regional and national demand for strategic training facilities, taking into consideration other regional development proposals and ability of regional institutions to finance current as well as future demand.

The Volta Lake related investment proposals arose during discussions and were confirmed in a subsequent document outlining the costs for Volta Lake improvements generally. Some of the items are listed in Table 8 and are attributed to the Volta River Authority and/or District Administrations.




Table 7 : Maritime and Inland Water Sub-Sector – GM A

GHANA MARITIME AUTHORITY 2011 2012 2013 2014 2015 Total 2011-15

Expenditure (1) USDm USDm USDm USDm USDm USDm FS - Lake Volta Traffic Imp & Dev 1.5 - - - - 1.5 Study - Boat Construction Standards

0.1 - - - - 0.1

Study - Inland Boat Operators Training Standards

0.1 - - - - 0.1

Capacity Building - - - -

- Head Quarters 4.0 - - - - 4.0 - Staff Training 1.0 - - - - 1.0 - Boats, Equipment, 8.2 - - - - 8.2 Other Planned Investment N/a - - - - N/a Total Expenditure 14.9 - - - - 14.9

Development Partners 10.9 - - - - 10.9 GoG N/a N/a GMA - Internal 4.0 - - - - 4.0 Total Funding 14.9 - - - - 14.9

(1) Based on draft strategy paper 2010; expenditure phasing not provided, suggested funding sources assumed by consultant.

There are minor expenditure proposals scattered throughout the SMTDP. These have not been included in the maritime and inland water tables even though they affect lake safety and management issues.

Table 8 : Maritime and Inland Water Sub-Sector – VR A & DAS VOLTA RIVER AUTHORITY/ DISRICT ADMINISTRATIONS

2011 2012 2013 2014 2015 Total

2011-15 Expenditure (1) USDm USDm USDm USDm USDm USDm

Improved/New Landing Stages Lake Navigation/Trunk Clearing Total Expenditure VRA/DAs N/a N/a N/a N/a N/a N/a Total - Funding VRA/DAs – GoG/VRA


1. Based on discussions at Maritime and Inland Water Planning Meeting June 2010

Volta Lake Transport Company’s critical issue is the extent to which is should continue to pursue its commercial venture with BOST, which organisation has been affected by operational problems at TOR, and with the Oil Marketing Companies.

Given VLTC’s dependency on BOST for oil supply freight allocations (and BOST’s own plans to purchase oil barges), and VLTC’s core purpose of ferry and non-oil freight services, it may be




argued that all oil services should be concentrated under the state owned BOST. Thus, nothing is shown the ITP for VLTC investments at this time.

VLTC’s financial viability is fundamentally undermined by its excess staff rather than poor commercial judgement. If the cost of these excess staff could be removed, than a more rational appraisal of its cross-lake ferry operations could be made. This, combined with prompt regulatory approval of tariff proposals, would enable GoG/VRA to determine the extent to which a public subsidy should be provided to cover sub-economic tariff levels.

GoG subsidies would come from MoT to make up for below cost tariffs and from Ministry of Education for providing school children with free transport.

The MiDA financed ferry replacement project requires the ring-fencing of finances to ensure full life cycle cost recovery is implement for the Adawso Eyke-Amanfrom ferries.The level of public subsidy (excluding excess staff cost element) should be quite modest.

The conditions under which the GoG funded Kete Krachi ferry rehabilitation project proceeds should at least include the full operational cost recovery of ferry operations. By including depreciation, funds would be generated to ensure the future replacement of the ferry.

Nothing is included in the ITP for the replacement of the district authority owned/operated ferry at Kpondu. A private sector venture could be sought for this car/passenger route.

Table 9 : Maritime and Inland Water Sub-Sector – VL TC VOLTA LAKE TRANSPORT COMPANY

2011 2012 2013 2014 2015 Total

2011-15 Expenditure USDm USDm USDm USDm USDm USDm - Kete Krachi Ferry Rehab. 1.5 1.5 0 0 0 3.0 - Adawso Eyke-Amanfrom Ferries

3.5 3.5 0 0 0 7.0

- Akosombo Port, Dry Dock 2.7 0 0 0 0 2.7

Other VLTC (1) N/a N/a N/a N/a N/a N/a

Total Expenditure 7.7 5.0 0 0 0 12.7

MiDA/MCC 6.2 3.5 0 0 0 9.7

GoG 1.5 1.5 0 0 0 3.0

Supplier Credits (1) N/a N/a N/a N/a N/a N/a

VLTC - Internal 0 0 0 0 0 0

Total Funding 7.7 5.0 0 0 0 12.7

(1) VLTC Strategic Plan proposes the purchase of two oil barges at USD 7m each and a pusher tug for USD 9.5m but with no indicated source of funding.

Given the substantial infrastructure investment made by BOST in pipelines and storage facilities, a strong argument can be made for the completion of the N/S land/inland water oil corridor (essentially the oil barges link), which will take a substantial percentage of oil freight off national roads. A full review of BOST’s operations and finances is also required as much of the




existing and proposed funding is of a commercial medium term nature whereas the infrastructure life cycle is of a long term nature.

Table 10 : Maritime and Inland Water Sub-Sector – B OST

BULK OIL STORAGE AND TRANSPORT COMPANY

2011 2012 2013 2014 2015 Total

2011-15

Expenditure USDm USDm USDm USDm USDm USDm

Oil Barges (1)

Storage Depots (1)

Other Planned Investment

Total Expenditure N/a N/a N/a N/a N/a N/a

Suppliers Credits/ExIm Korea

Internal BOST

Total Funding N/a N/a N/a N/a N/a N/a

(1) BOST. Marginal/incremental investment to ensure completion of North-South link to ensure utilisation of heavy investment in pipelines and storage facilities.Contract and funding details not available. Ensures up to 20% of Ghana’s N/S fuel freight needs are removed from the roads.

5. Railways The Urban Mass Transit projects shown in Table 11 are understood to be on-going and to have secured funding from various sources including the Consolidated Fund.

Provisional data from the draft Bonifica Western Corridor Feasibility Study Urgent Plan have been included in the ITP. The investment allocations over 2011-15 are arbitrary as the draft report does not provide a year on year analysis. 100% funding is assumed although the probable source has yet to be determined (some investment plans show GoG providing the bulk of the funds)

Funding for the Western Corridor project is being sought from EIB and similar sources, with the Bonifica feasibility study being referred upwards through MoT and MoFEP to the Cabinet. It is expected that the final financing package will involve GoG, EIB, Mineral Extracting Companies (mineral rolling stock) and International Development Bank (infrastructure) concessionary funding.

If the passenger element in the project is proceeded with, then a parallel concessionary agreement will be required, the private sector providing rolling stock and taking operational responsibility and GoG providing an annual subsidy.




Shown as a note below11 are the annual losses that would fall on GoG from the individual freight and passenger operations. These would have to be met by subvention – provided in GoG’s MoT annual appropriations – and would be in addition to any other net GRCL losses for Headquarters (HQ) staff, other rail links, etc.

The Eastern Corridor (Tema-Kumasi) project is shown in the ITP as an economically viable freight project, subject to the assumptions in the ITP analysis. The economic viability is, for instance, determined in part by the model’s allocations of container freight between road and rail on competing routes.

For financial viability the freight tariff to be imposed will need to be competitive with road transport rates and will have to generate sufficient funds to make the freight operations at least breakeven (taking into account amortisation of investments, reasonable HQ overheads, etc). Within this ring-fenced operation, it will be required that the management of the freight operations is made more efficient, that there is no intervention in the establishment of the tariffs by government, and no diversion of cash surpluses to other parts of the rail network.

A Public-Private Partnership approach appears the most appropriate funding method, mobilising private sector capital and management. If passenger operations are included then GoG will need to provide a subsidy for any losses arising therefrom.

A short feasibility study is underway under the ITP consultancy to consider combining the two rail Corridor projects into one.

Other GRDA/GACL investment proposals (if any) are not included in the table.

Table 11 : Rail Sub-Sector

Rail Sub-Sector 2011 2012 2013 2014 2015 Total 2011-15


Expenditure

Urban Mass Transit

- Rehabilitation of rail lines 21.1 4.9 - - - 26.0

- 12 sets Diesel Multiple Units 23.0 23.0 46.0 - - 92.0

- Other civil works - - - - - -

- Rehabilitate signals, etc 4.0 4.0 1.1 - - 9.1

- Construct DMU workshops - 1.2 - - 1.2

Sub-total Urban Mass Transit 48.1 33.1 47.1 - - 128.3

Western Corridor – urgent (5)(6) 25.0 26.5 5.0 - - 56.5

- 2nd priority improvements - - 10.0 11.4 - 21.4

- 3rd priority improvements - - - 10.0 16.5 26.5

11 Annual subventions from GoG: 2011 USD 11.1m, 2012 USD 2.8m, 2013 USD 12.4m, 2014 USD 14.1m, 2015 USD 11.9m.




Rail Sub-Sector 2011 2012 2013 2014 2015 Total 2011-15


Sub-total West Corridor – Urgent 25.0 26.5 15.0 21.4 16.5 104.4

Western Corridor – upgrade - - - - 125.0 125.0

Eastern Corridor

- Encourage private sector to invest in Boankra

0.0 0.0 0.0 - - 0.1

- FS and rail line Tema/Akosombo 14.5 17.3 17.2 14.5 - 63.5

Other GRDA/GACL investment N/a N/a N/a N/a N/a N/a

Northern Corridor – FS, Design 0.5 1.5 1.0 - - 3.0

Total 88.1 78.4 80.3 35.9 141.6 424.3

Funding

Urban Mass Transit

- GoG Consolidated Fund N/a N/a N/a N/a N/a N/a

- Other Sources N/a N/a N/a N/a N/a N/a

Western Corridor

- International Dev. Bank/Fund (1)

- Mineral Companies (2)

- Pax Concession Operator (3)

- GoG (4)

Eastern Corridor

- International Dev. Bank/Fund (1)

- Freight Companies (2)

- Pax Concession Operator (3)

- GoG (4)

Northern Corridor FS – Dev. Partner

Other/Internal

Total Funding N/a N/a N/a N/a N/a N/a (1) Infrastructure (2) Freight Rolling Stock, etc (3) Passenger Rolling Stock, etc (with annual subsidy from GoG) (4) Counterpart Funding, (taxes, etc). (5) Bonifica Urgent Measures Report 2010 (6) Implementation schedule assumed.




In identifying and proposing funding arrangements for the Ghana rail links identified above, consideration should also be given to the proposed port developments (Tema, Takaordi) and to possible linkages in their funding arrangements, especially to ensure commitments to utilise the rail links if constructed (for extractive minerals, container freight, etc).

6. Roads and Highways Road mprovements and new construction for up to 2013 follow the TSDP/SMTDP projections, whether funded or not. No improvements or new construction are shown post 2013 except as determined by the ITP analysis12. In addition, no institutional, training, or road safety development expenditures are shown after 2013. Nor are any other investment proposals for GHA, DFR and DUR included in this analysis.

Data used for the road maintenance (routine, periodic, rehabilitation) in the years 2011-13 (and 2014 for DUR) reflect known or planned commitments, most of which are funded by the Ghana Road Fund or GoG. There is a substantial element of proposed expenditure in that period that is shown unfunded in the TSDP, which is assumed to reflect projects not shown in the Base Network list (for national roads) used in the ITP analysis.

Data for road maintenance from 2014 onwards (2015 for DUR) are derived from the Determination of Maintenance Needs of Ghana’s Road Network 2009 completed in November 2009 (DMNGRN)t. The report presents three scenarios. The scenarios chosen for GHA, DRF and DUR are based on the “unimproved constrained target” approach, i.e. there is no element of improvement13 to the roads, and the maintenance target is the Good 70%, Fair 20%, and Poor 10% formulation.

One way of looking at the fundamental issues of maintenance funding – which tends to overshadow the investment element of Table 12 - is presented in the DMNGRN report of 2009. The report states clearly that, to achieve the target condition scenario for maintenance without upgrading the gravel roads, the current fuel levies would need to be increased five or six times over the current level, i.e. to as much as Gp 30 to 36 per litre.

This is not to deny that funding maintenance achieves a greater return on investment that do new roads. The problem is that maintenance of the existing road network (all types) exceeds the capacity of the economy, now and in the foreseeable future, and needs to be funded from annual revenues (user charges and other recurrent revenues) rather than from borrowing.

In calculating the maintenance values in Table 12, the 2014 DMNGRN year 1 maintenance costs are used less the TSDP plan values for 2011-13 for routine and periodic maintenance (except for DUR, the data for which are shifted one year later).

The DMNGRN analysis shows a substantial expenditure peak in 2015. The DMNGRN values indicate the extent of the maintenance deficit (requiring rehabilitation) that has arisen over

12 The ITP analysis was on national roads. No analysis has been undertaken on urban or feeder roads. The inclusion of DUR projects e.g. the Kumasi Outer Ring Road USD 307m, Accra East Corridor Roads USD 316.3m, is subject to the evaluation process.

13 This is consistent with the ITP approach that calculates the cost of improvements and capacity increases only where traffic growth indicates the need. In other words, the rest of the road network should remain at the current level of investment and needs only to be maintained.




previous years that needs to be cleared before a normal pattern of routine and periodic maintenance expenditure prevails14. The DMNGRN values have been spread over several years for inclusion in the Table.

The Road Sub-Sector Table 12 comprises the identified Strategic ITP Projects, set out in a separate list in other volumes of this consultancy, the existing SMTDP/TSDP projections, and the DMNGRN projected rehabilitation/-maintenance needs from 2014/5,

The current SMTDP/TSDP ends in 2013 (2014 for Urban Roads) and shows a substantial amount of unsecured funding as part of the current programme. There are no known proposals to fund this element of the road sub-sector needs, which comprise different forms of maintenance, minor improvements, development works, traffic management and road safety and institutional development.

Several of the ITP investment projects should be eligible for long term infrastructure funding from EIB, IDB, AfDB, etc. The N6 route remains under consideration for BOT/ROT funding, according to MoRH, although the traffic volumes and new toll rates are substantially below the benchmarks announced by MoRH in 2009.

Table 12 : Roads Sub-Sector – National, Feeder and Urban Roads Expenditure

2011 2012 2013 2014 2015 Total 2011-15

USDm USDm USDm USDm USDm USDm Expenditure

Strategic ITP Projects – see list - 75.2 130.8 140.8 88.6 435.4

National Roads

- Routine Maintenance 17.1 17.1 17.2 - - 51.4

- Periodic Maintenance 47.8 45.5 45.6 - - 138.9

- Rehabilitation/Maintenance (1) - - - 239.7 90.0 329.7

- Minor Improvements 24.7 19.4 19.4 - - 63.5

- Development Works 273.2 147.9 147.9 - - 569.0

- Traffic Management & RS 4.5 4.5 4.5 - - 13.5

- Institutional Strengthening 16.3 16.1 16.1 - - 48.4

Sub-total Trunk 383.6 250.5 250.7 239.7 90.0 1,214.5

Feeder Roads

- Routine Maintenance 25.6 25.9 29.0 - - 80.5

- Periodic Maintenance 28.7 24.7 19.1 - - 72.5

14 An alternative projection of maintenance costs, using RONETS, shows much higher levels of expenditure. The aggregate GHA/DFR/DUR expenditure average USD 700m per year for the 20 year period from 2009.




2011 2012 2013 2014 2015 Total 2011-15


- Rehabilitation/Maintenance (1) - - - 133.9 150.0 283.9

- Minor Improvements 35.2 33.7 45.2 - - 114.1

- Development Works 6.5 4.6 6.9 - - 18.0

- TA, Logistics, Training 6.9 5.9 7.0 - - 19.8

Sub-total Feeder 102.9 94.8 107.2 133.9 150.0 588.8

Urban Roads

Routine Maintenance (incl walk, cycle ways)

14.8 15.4 15.4 15.4 - 60.9

Periodic Maintenance 13.1 13.1 13.1 13.1 - 52.3

Minor Rehab/Improvements 13.1 13.1 13.1 13.1 - 52.2

Rehabilitation/Maintenance (1) - - - - 400.0 400.0 -

Major RehabReconstruction 80.1 26.9 0.9 0.7 - 108.6

Development Works 28.5 26.5 34.5 36.5 - 126.0

Traffic Mgt, Admin, Institutional 14.6 12.9 11.4 10.8 - 49.7

Sub-total Urban 164.2 107.7 88.3 89.5 400.0 849.7

Other GHA, DFR & DUR investment


Total Expenditure 650.7 528.2 577.0 603.9 728.6 3,088.4

(1) Data from 2014 (2015 for Urban) not disaggregated over types of maintenance intervention. The Urban accumulated maintenance deficit of USD 1,886.8m has been spread over five years at approx USD 400m per annum, commencing 2015.

Development Partners, with grant and loan interventions, have provided substantial funding for many years. Major DP participation post 2013/4 (when the current programme ends) is required, especially on periodic maintenance and rehabilitation, but especially on the strategic projects identified for this ITP.

GoG participates through the Consolidated Fund from general taxation sources. A substantial increase in Consolidated Fund releases in 2008 was partly funded from the expensive Eurobond borrowing by GoG, which is unlikely to be repeatable in – and cannot be recommended for - subsequent years funding of the road construction programme.

Specific user charges and other recurrent revenues also finance part of the sub-sector programme (mainly the recurrent maintenance element). Reference should be made to past consultancies (e.g. Transport Sector Institutional Development and Public Finance Management reports) that have explored all possible funding sources and approaches to increasing road sector revenues through new or increased user charges. GoG appears to be implementing many of the recommendations.

Current Road Fund financing of the road sub-sector maintenance needs is being achieved by further medium term (6 year) borrowing by the Road Fund against future revenues, thus




diminishing the future ability of the Road Fund to fund the increasing level of maintenance deficit that has been projected. These reductions to future funds availability have not been brought into these broad calculations of future revenues.

Three funding scenarios have been developed for the existing SMTDP proposals, the core ITP projects identified as economically justified, and road maintenance in all its forms, viz Scenario 1 Existing, Scenario 2 Reasonable, and Scenario 3 Full Funding.

The funding Scenarios assume increases in the Fuel Levy at 50% of the existing agreement (Scenario 2), 100% increases in Fuel Levy (targeting US 9.5 cents by 2015) (Scenario 3), different assumptions of increased Consolidated Fund funding (from the “oil windfall” from 2014), and a new Development Partner programme commencing in 2014 covering mainly periodic and rehabilitation needs, again at two levels of support.

The maximum Road Fund projections (Scenario 3) assume that the Fuel Levy of Gp6 is increased regularly from 2011 onwards as follows:

2011 7.5Gp, 2012 9.0Gp, 2013 10.5; 2014 12.0Gp, 2015 14.0Gp

The Fuel Levy is applied to a rising consumption of petrol and gas oil, with a base year 1,808m litres in 2008. The Fuel Levy increases cease when reaching 14Gp, approximately US 9.5 cents. Fuel consumption is assumed to increase cumulatively at 6% per annum thereafter, the mid-point growth rate in GDP projections used in the ITP model. The issue of elasticity of demand to the increasing fuel price is subsumed in the growth rate used.

The new road tolls are estimated to generate (net of expenses) GHC 20m in 2010, rising at 6% per annum in line with fuel consumption (i.e. reflecting the growing number of vehicles on the road). Tariffs remain unchanged from the 2010 levels until the effect on revenues of the new charges introduced in February 2010 is known.

Other revenues (e.g. DVLA fees and charges) are similarly increased annually to reflect growth, with no change in the tariffs. It is not clear from the Road Fund accounts the extent to which DVLA revenues are returned to the DVLA to finance current operations.

Other road sub-sector revenue sources have been subjected to substantial increases in tariffs, fees and charges in recent years but do not constitute sufficient sources of funding to substantially bridge the current funding gap. Outsourcing of toll collection (c.f. SMTDP report 2009) was unsatisfactory and resulted in losses of revenue. A major toll booth construction programme on national roads (partly involving the private sector) is yielding increased revenues (helped by new tariffs in 2010) which cover many of the costs of collection that past low tariffs did not. For the Existing Funding Scenario 1 the projected expenditure is well in excess of what is affordable even with the current level of Development Partner participation. Recurrent funding (mainly Road Fund) covers only part of the routine maintenance, rehabilitation and upgrading costs. It is assumed that no new funding from CF or DPs will be received for the years 2011-13.

Fuel Levy remains at 2010 level of GHC 0.06 per litre. All RF revenues increase in proportion to traffic or fuel consumption growth. There is no new DP programme from 2014. It is assumed that the Consolidated Fund continues at the past rate of contribution.




Table 13 : Funding Scenario 1 - Existing

Funding – Scenario 1 2011 2012 2013 2014 2015 Total 2011-15


Road Fund 110.0 116.6 123.6 131.0 138.8 620.0

GoG 70.0 65.3 60.0 70.0 70.0 335.3

DPs 96.7 42.6 12.9 0 0 152.2

Total Funding Scenario 1 276.7 224.5 196.5 201.0 208.8 1,107.5

Funding Shortfall Scenario 1 374.0 303.7 380.5 402.9 519.8 1,980.9

The Reasonable Scenario 2 in Table 14 assumes that the Fuel Levy increases at 50% of the proposed increments, rising to 10Gp per litre by 2015. Other Road Fund revenues are assumed to increase at the same rate. Development Partners assist from 2014 onwards at the 2011 level (new programme). The CF makes increased contribution using oil revenues from 2014.

Table 14 : Funding Scenario 2 - Reasonable Funding – Scenario 2

2011 2012 2013 2014 2015 Total

2011-15 USDm USDm USDm USDm USDm USDm Road Fund 121.5 141.0 162.5 185.9 216.5 827.4

GoG - CF 70.0 65.3 60.0 100.0 100.0 395.3

DPs/Millenium 96.7 42.6 12.9 100.0 100.0 352.2


Funding Shortfall Scenario 2 362.5 279.3 341.6 218.0 312.1 1,513.5

The Full Funding Scenario 3 in Table 15 assumes implementation of full Fuel Levy as per agreement (GHC 0.14 by 2015). Development Partners double assistance above the Scenario 2 level. The CF takes up difference using oil revenues from 2014 at twice the rate used in Scenario 2.




Table 15 : Funding Scenario 3 – Full

Funding – Scenario 3 2011 2012 2013 2014 2015

Total 2011-15


Road Fund 133.0 165.5 201.3 240.9 294.2 1,034.9

GoG - CF 70.0 65.3 60.0 200.0 200.0 595.3

DPs 96.7 42.6 12.9 163.0 234.4 549.6


Funding Shortfall Scenario 3 351.0 254.8 302.8 0 0 908.6

Brief mention is made of other road sub-sector institutions for which some expenditure is included in the SMTDP but which all call upon the GoG’s and Road Fund’s resources to some extent, involve DPs through grant or loans, or to a small extent the private sector. These include DVLA, NRSC, MMT and STC.

DVLA

The DVLA financing arrangements are complex. Although constituted as an autonomous authority, part of its expenditure (e.g. payroll) is directly paid for by GoG. Other expenses are paid from a share of the fees and charges generated by activities (channelled through the Road Fund and then returned to the DVLA, although arrangements were in hand at one stage for 15% of revenues to be retained automatically by DVLA).. Investment is funded in part from DP grant aid.

No strategic expenditure proposals have been identified for DVLA beyond 2013.

Table 16 : Drivers and Vehicie Licensing Authority

2011 2012 2013 2014 2015

Total 2011-15

DVLA USDm USDm USDm USDm USDm USDm

Expenditure

Privatization of Vehicle Inspection 0.2 0.2 0.1

Automation of DVLA Activities 0.5 0.4 0

Improvement Driver Testing/Trg. 0 0.1 0

Library, Offices, Accommodation 2.4 2.5 2.0

Monitoring & Education 0.1 0.1 0

Capacity Building DVLA 1.9 1.2 1.2

Total Expenditure (2) 5.1 4.5 3.3 N/a N/a

Total Funding (2) N/a N/a N/a N/a N/a




(1) DVLA expenditure data differs within the SMTDP report (pages 54 and 64) but is shown fully funded from Road Fund in one place in the report.

Some finance comes from the Road Fund; other from a levy on insurance companies. The nature of the expenditure is more recurrent than of an investment nature.

No strategic expenditure proposals have been identified for NRSC beyond 2013.

Table 17 : National Road Safety Council

NRSC 2011 2012 2013 2014 2015

Total 2011-15


Expenditure

Campaign/Road User Education 1.7 1.9 2.7

Road Safety Research 0.2 0.2 0.3

Admin/Prog. Dev. Support 1.2 1.2 1.2

Institutional Capacity 3.1 2.8 2.0

Total Expenditure NRSC 6.2 6.1 6.2 N/a N/a

Funding

GoG 0.5 0.4 0.5

DPs 4.0 3.8 3.8

Road Fund 1.3 1.4 1.5

Insurance 0.4 0.4 0.3

Local Sponsorship 0.1 0.1 0.1

Total Funding (1) 6.2 6.1 6.2 N/a N/a

1. NRSC secured funding totals differ from SMTDP document, which shows substantial unsecured funding need. Cause of discrepancy has not been identified but approximates the values shown for DP funding by IDA and Danida.

MMT is a substantial beneficiary of grant funded buses and has a small loan financed element of current assets. Nothing is know of any future investment plans, through grant or loan or internally funded replacement.

Past MMT management deficiencies and weak financial management are being rectified by DP technical assistance. A key remedy would be the implementation of full cost recovery (including asset replacement) through fees and charges. If the sub-economic fees and charges are to continue (a regulatory issue) then MoR&H/MoFEP should ensure that MMT is provided with a subsidy to cover the cost of the free travel given to school children.




STC’s problems arise in part through the breaching of its regulated monopoly on inter-city routes that MMT now competes on through its sub-economic charges. STC is principally owned by state organisations and has only a small genuine private sector element of ownership.

Table 18 : Metro Mass Transit & State Transport Co.

MMT and STC 2011 2012 2013 2014 2015

Total 2011-15


Metro Mass Transit N/a N/a N/a N/a N/a N/a

State Transport Company N/a N/a N/a N/a N/a N/a

It should be noted that the Bus Rapid Transit project requires an operator (probably from the private sector) to provide up to 480 buses to be used on dedicated bus lanes. MMT and STC vehicles and operations could provide the core facilities around which the operator is created. No funding is shown for this element of the project, which is most likely to be sought from the private sector as part of an operations and management arrangement.




Chapter 8 - Conclusion

This volume demonstrates the wide availability of sources of finance for the various projects under consideration and identifies those that are most appropriate, even if the amounts could not be quantified. However, there are constraints, particularly on the viability, solvency and management of some of the institutions in which the projects would be vested, and these constraints need to be addressed to ensure that the projects can be successful.

GoG is also heavily indebted and in fiscal deficit, although the picture is improving. Both GoG’s current finances and Ghana’s economic condition may limit GoG’s ability to enter into further debt obligations and guarantees. Development Partners should be approached to take up those projects with a clear economic and development benefit and provide the form of finance – concessionary, long term or even grant – that will enable the projects to proceed with private sector participation.

Documents

Integrated Transport Plan for Ghana Vol. 10 Finance€¦ · Ghana Civil Aviation Authority and ... This ITP 2011-15 supplants to some extent the two ... Finance Final Version . Integrated