All those with arrears have been forgiven.

It not possible to refund because we do not have a framework to do so. It would be very difficult and cumbersome. It is unfortunate that our very dedicated and compliant tax payers have been penalized. We sincerely apologize for it.

The Road Fund is part of the institutional reforms aimed at commercializing with a view of:

1. Making the road maintenance needs and expenditures more visible by involving road users in the ownership and management of roads.  This is to be achieved by having strong representation of road users in the oversight Boards of the Road Fund and the Roads Authority, and informing the general road user about development in the sub-sector.
2. Ensuring sustainable flow of resources for road maintenance by introducing road user charges and moving roads outside the budget and treating them like a business

The Road Fund will mainly finance routine and periodic maintenance because our main problem is maintaining the asset that we have.

Other eligible expenditures include:

• Road safety activities and selected projects;
• Operational expenses of the Roads Authority;
• Administrative expenses of the Fund;
• Research related to maintenance of roads; and
• Such other relevant activities as may be determined by the Board.

Improvements and new works should only be considered once the maintenance needs have been adequately covered and there is a surplus.

Studies have shown that investing $ 1 on road maintenance saves about $ 3.5 on vehicle operating costs (shock absorbers, bushes, springs, fuel consumption etc.) – road users are currently spending more than 3 times what they would be paying if the roads were in good condition.  Their burden should therefore reduce if the money they pay is directed to ensuring a good road network.

We however need to diversify our sources of revenue between the fuel levy and vehicle license fees to avoid a very high increase in the price of fuel.

In the East African Community it is only Uganda which does not have a Road Fund.  Among our neighbors it is only DRC and Sudan who also don’t have.

The other countries are already imposing road user charges as a means of raising revenues for their Road Funds.  Kenya with effect from July 2006 abolished vehicles license fees in favour of a fuel levy and raised their fuel levy from about 6 US cents to 11 US cents/litre. Tanzania’s fuel levy is about 8 US Cents/Litre.

• Fuel levy;
• International transit fees (cross-border charges)
• Weight-distance charges;
• Axle load fines;
• Bridge, and road tolls collected by the Fund; and
• Fees levied by the Fund for its services.

Other sources of funding include appropriations by Parliament, as well as Funding from Development Partners.

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Road users are already paying taxes and fees associated with road use but these are part of government taxes which are deposited into the consolidated fund and used to finance Government expenditure.

The sources identified above shall be converted to road user charges and the calculation of the amounts paid should as much as possible ensure that they compensate for the damage imposed on the roads. These revenues would be remitted directly to the Road Fund. The Minister may determine the road user charges from time on the recommendation of the Board.

1. It does not compensate for the damage on the roads. The load related cost imposed by an articulated truck is more than 10 times as much as that imposed by a small car, but only uses about 4 times as much fuel.
2. An increase in fuel prices arising from this fuel levy will constrain the Road Fund from raising additional revenue from road users because this will be the only flexible instrument at its disposal.  This is the very reason why many Road Funds in Sub-Saharan Africa are failing to raise their road tariffs - more than 90% of their revenues are from the fuel levy. 
3. The African Road Maintenance Funds Association (ARMFA) in their meeting of September 2006 recommended diversification to sources of revenues to vehicle licenses among others by 2008.
4. High price of fuel would promote smuggling and adulteration of fuel

Kenya abolished the license fees in July 2006 and the revenues have increased significantly but note that they have lost the opportunity to enforce insurance of vehicles and tracking the usage of vehicles.

Tanzania was charging a flat fee of Tshs. 20,000/= (Ushs. 30,000/=) per vehicle but in this Financial Year, 2007/08, it has increased the rates and charges according to vehicle category – motor cycles; Saloon cars; Station Wagons; pick-ups etc.  Motorcycles are proposed to pay the lowest i.e.  Tshs. 20,000/= and Heavy good vehicles >10t the highest i.e. Tshs. 350,000/= (Ushs. 525,000/=)

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This may be introduced in future.  We are soon launching a study to determine its feasibility.

Many Road Funds in Africa are now reconsidering road tolls especially on roads that are concessioned to private investors.  Ghana has a public road which is tolled with the collection contracted out.

A rebate system (refund) may be introduced especially for power generation which is visible and easy to monitor. Otherwise for others it is not recommended right now because the off-road use is relatively small; the system is open to abuse; and administrative cost is too high.

Our current allocation for road maintenance is about $ 40 million for national roads and $ 12 million for district and urban roads, which is less than 50% of the needs estimated at about $ 120 million - $ 70 million is for national roads and  $ 50 million for district and urban roads.

This is based on best international practice for clear separation of roles leading to more accountability and oversight. The Road Fund Boards normally have more day to day interaction with the Ministers of Finance than Works because it is a financing mechanism.

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The road user is the best person to determine whether a road is well maintained. The Road Fund Board may constitute representatives of organizations with interest in well-maintained roads:

1. Business community – concerned about the effect of the cost of transport in their eventual output/profit
2. Passenger transporters – use the roads most frequently and are interested in smooth rides.
3. Freight transporters – use heavy trucks which destroy the roads most
4. Farmers Association – transport costs affect their farm gate prices and they constitute the biggest population of country ably represent the rural population
5. Professional – such as engineers and accountants provide the technical backing to the Board.

Their major function should be to:

1. Set and revise the Fund's objectives;
2. Appoint the Chief Executive;
3. Monitor and evaluate the performance of the Fund;
4. Recommend adjustments in charging instruments, and;
5. Provide the interface between the road using public and relevant government ministries.
6. How shall the Board be safeguarded from political interference?

Members of the Board shall be nominated by the organizations that they represent and shall be expected to provide feed back to their constituents.

The collection of the fuel levy is simple and inexpensive to administer and shall be collected by URA.  In 2005/6 URA deployed only 7 officials to monitor the 28 registered oil companies.  The companies paid their taxes at only three points: Malaba, Busia and Port Bell. The collection of other sources of revenue will be through URA or contracted out.

The separation of the Road Agency and the Road Fund and an independent Board is expected to ensure better oversight in the utilization of funds. Regular technical and financial audits shall be carried out by the Auditor General, or an Auditor appointed by the Board in consultation with the Auditor General. The Fund is expected to operate sound financial systems

QN: Isn't it likely that the Road Fund will encourage other sectors to demand for the Creation of Funds?

It shall be noted that setting up a Road Fund does not increase resources from the budget allocated to roads.  The road users have to pay for the extra resources to finance the gap. So any sector, which feels that it has a service to sell and a market that can afford to consume its product, may commercialize and raise extra revenues through user charges.

A Discussion Paper by the World Bank, "Road Funds in Sub-Saharan Africa: A reality check, (September 2006) has the following analysis: