How to Improve Public Spending in Roads in Zambia?

1. How to Improve Public Spending in Roads in Zambia? Gaël Raballand, graballand@worldbank.org

2. Presentation outline I – Where does stand Zambia in terms of infrastructure stock and transport services prices? II – Is it wishful to target a full network in good condition? III – A way forward? 2

3. What is important for efficient roads investments? • Road planning (including fiscal sustainability), • Works procurement (value for money), • Execution of works and supervision.

4. Some quick facts and figures on the road sector in Zambia • Network length and coverage, • Road condition, • Spending, • Economic challenges.

5. What is the road network in Zambia?

6. Road density compared to population • (in kms per thousands of inhabitants)

7. Road density compared to GDP (in kms per million USD of GDP)

8. Road condition in 2008 Road condition (in percent of the network) Source: RDA.

9. The challenges: low volumes (1/2) 4 million tonnes (international flows) is equivalent to approximately 150 trucks a day (loaded for imports) (for the whole country) 9

10. The challenges: a growing paved network with growing difficulties to maintain it… (2/2) 10

11. Red flags in contract management and procurement Control of Corruption Index and Number of Red Flags Normalized by Number of Reviewed Contracts per Country Source: Alexeeva et al. (2008).

12. Actual expenditures trends by sectors (in billion of 2009 ZMK) • A fast growing sector, • An increased share of domestic financing. 12

13. To sum up… • Relatively dense road network (compared to population and GDP levels)(at the national level), • Overall network in relatively good condition (for the paved network), • Growing network (paved) with growing difficulties to maintain it, • Increased spending in the road sector. 13

14. II – Is it wishful/possible to target a full network in good condition in Zambia? 14

15. The current size of the network is hardly financially sustainable Financial difficulties to maintain the current network length => Needs to prioritize 15 South Africa 0.6

16. How does work the link between road condition and poverty reduction? Infrastructure Services Services users 1 2 • Need of high maintenance costs (new fleet), • Roads in poor condition. • Services competition, • High traded volumes. • Need of a high share of transport costs in total production costs.

17. Maintenance costs are not the most important factor of vehicle operating costs Vehicle costs breakdown (international transport)(2007) Source: Teravanithorn and Raballand (2008)

18. International transport: low transport unit prices 18 Source: Teravanithorn and Raballand (2008)

19. International transport : improved paved road condition is not necessarilyjustifiedeconomically Internal rate of return of infrastructure rehabilitation in three African sub-regions (using HDM-4 with real fleet data)

20. The rural transport problem - Traded volumes are extremely low (a 50 kilo bag per week in the Western province, JCTR 2008) => need of production consolidation, - Affordability of transport services is a major problem (even in the case of good road condition), - In most cases, infrastructure for intermediate means of transport (motorcycle, bicycle) is sufficient whereas transport by truck is expensive for small loads.

21. The procurement problem In an environment where markets are thin and institutions face corruption and strong political interference, misprocurement, bid rigging, collusion are sometimes widespread(especially for rural roads), • Unit works are expensive and, • Quality of works is sometimes poor and with a very short life.

22. III – A way forward? 22

23. The five key principles to implement 1. Checking the fiscal sustainability of the overall commitments to the sector, accounting for the old network and its new components, 2. Checking for overoptimism in transport demand forecast, 3. Checking the realism of investments costs and associated maintenance requirements, 4. Checking the coordination with commitments made to and needs of the secondary network condition, 5. Checking the relevance of the market structure of transport services.

24. 1. Assess sustainability of the current road networks Estimate the maintenance needs of the main road network and the sustainability of the current network (currently it is difficult to go beyond maintenance of the paved network => no major rehabilitation can be done or level of service has to be reduced on some roads/parts of the network),

25. 2. Better planning and road prioritization Due to the fact that some parts of the road network may probably not be rehabilitated, define, based on objective criteria (such as traffic volumes), different classes of roads • Allocate means based on roads classification/prioritization • Increased allocation differentiation the last mile.

26. 3. Change priorities in the planning of rural roads Competition between traders/truckers is virtually impossible to achieve at the lowest level (because of limited traded volumes) • Without load consolidation and agglomeration at the local level, surplus for small farmers can not probably increase significantly (with or without massive investments in roads). • Rural roads have a political/social role but it is usually a pure subsidy and without services subsidy as well, demand may not grow in the short/medium terme despite a road in good condition

27. 4. Tackle corruption in procurement • Generate information through regular publication, audits or frequent review of unit costs, • Disclose information to communities, general public, CSOs (COST initiative), • Monitor more closely procurement processes by increasing competition, • Internal audits.

28. 5. Better monitor the execution of works • Involve communities in supervision of works, complaints mechanisms, • Disclose detailed data on contract price revisions during the execution of works (COST initiative), • Conduct post-evaluation of projects selected randomly.

29. A paved road in perfect condition does not necessarily bring affordable, motorized transport services… and is one of the most expensive public investments. Without adequate planning, procurement and works supervision, waste is certain…