ADVANTAGES OF TOLL GATE FEES

Today we feature an article written by a Zambian, based in South Africa and it reads:

There has been a debate in Zambia as to whether we are ready to have tollgates or not. Some corners of society argue that Zambia does not have the capacity to build such infrastructure.

Firstly, Zambians need to understand what a toll gate is, how a toll gate is built and how it operates.

Secondly, to the average Zambian, having to pay for a service that is generally perceived to be free seems to be an absurd thing.

Why should one pay for a road when they want to move from one place to another. To understand this one needs to know what a toll road is.

This is a privately or publicly built road for which a driver pays a toll (a fee) for use.

To build roads costs billions of kwacha.

Tollgates are necessary as the money raised from this will be used to maintain the roads and assist us in meeting the demands of social services.

Toll roads therefore will reduce the total net cost to the economy, ensuring greater opportunities for prosperity and growth.

ADVANTAGES OF TOLLGATES

 Procurement and dedication of funds: Toll road schemes are more costly for road users than obtaining funds through taxation or a fuel levy, but the funds can be obtained much sooner.

Toll roads enable the public sector to contract the private sector for the construction, operation and maintenance of the road for a period of 25 to 30 years.

It is in short a self-generating form of income, the Zambian Government will play a moderating role and just ensure the laws are adhered to and roads are safe.

Improved road:  The road is usually upgraded and expanded before it is tolled. This expansion provides increased capacity and thus reduced congestion.

The upgrade of a road generally also improves the safety and decreases accidents. Expansion of roads like the Great North and Great East Roads in this regard would be a good thing.

Tolls also act as a form of congestion charge. It rations the use of the road to those with the highest need to travel.

Job creation and gross domestic product (GDP): Toll roads can significantly increase Gross Domestic Product (GDP) over the lifetime of the project. A toll road project leads to direct (constructors, builders, architects) and indirect (toll road attendants, ambulance services at toll points, casual workers) job creation.

We are so much in need of job creation in Zambia as the population is ever-increasing.

Encourage the use of public transport: Government will make revenue if they are to invest in the public sector like a modern train service and bus service because people will use them to avoid unnecessary toll fees.

This is a spill-over effect of tollgates.

Other major advantages of toll roads relates to funding, road condition and job creation.

Disadvantages

The disadvantages of toll roads are mostly related to user reactions. An increased load might be imposed on the alternative routes due to traffic diversion. Public transport will not be advanced, since toll roads encourage public vehicle use.

It has been revealed that society generally reacts negatively towards toll roads in the first few years after implementation. This is because the public finds it difficult to pay for things which were originally provided for free of charge.

Tolling is experienced as a sudden real expense, while the savings in running costs, services and saved time are not immediately notable. As soon as users get used to the tolls and realise the benefits, their attitudes will improve drastically.

The advantages far out-weigh the disadvantages so it tells us something

Why do I pay taxes and now also tolls? When we pay taxes the money is used for the service which government renders to us all. Taxes are used to pay for these services, whether we make use of all of them or not.

Tolls on the other hand, will pay only a portion of road that we use in other words it is a user-fee. Toll fees are used directly on the road, which is a benefit to the motorist.

Taxes will not be used to fund a toll road and therefore this will reduce the tax obligation of the individual.

Why do we have to pay tolls on an existing road, which was paid for out of taxes?

Road performance depends on how, what and when maintenance is performed.

Roads deteriorate over time due to environmental influences such as weather, ultra-violet radiation, overloading etc.

Tolls are not levied on the value of the current asset (road), but only on the initial and future improvements, including operations and maintenance. Funds derived from taxes are used on other things.

What will the toll fees be used for?

The tolls collected on a specific road will be used to, inter alia, and repay the loans obtained to finance the building, upgrading or improvement of the road. In addition, it provides a dedicated on-going revenue stream, which enables the road to be adequately maintained and improved, independent of tax based revenues.

What do I get from using a toll road?

Toll roads are built and maintained to the highest possible standards. Therefore, you are assured of a smooth ride, saving you on the running costs of your vehicle and saving you time. Improved security ensures you a safe and pleasant journey.

Conclusion

In conclusion, Zambians should understand four realities about the transportation infrastructure situation facing us.  Firstly, the time for continuous expansion of the capacity of road networks is reaching saturation point and new ways of managing traffic and infrastructure should be implemented.

Secondly, public funds are not enough to sustain or maintain roads at the current or anticipated future levels based on the prevailing interest to expand traffic and the road network.

Thirdly, borrowing to build and operate a heavily subsidised transportation infrastructure is not sustainable.  Fourthly, the rapid expansion of fleet of cars on our roads is simply unsustainable.

Zambians should actually learn from other countries such as South Africa and Morocco which have some of the best roads world-over.

Edwin Hatembo Jr.

(The author is Zambian student doing a course in International relations in South Africa.)

For comments/other contributions call: 0955431442, 0977246099 or email: jmuyanwa@gmail.com.

Ends…

 

 

 

 

 

2014 NATIONAL BUDGET TO REMEDY CURRENT DEFICIT

THE Zambian economy is this year expected to post mixed results with some splendid macroeconomic indicators amid stunted growth.

Zambia is among Africa’s fastest growing economies and for the last few years its economic performance has continued to be positive, registering the Gross Domestic Product (GDP) growth rates of 6.8 per cent in 2011 and 7.3 per cent in 2012, for instance.

The rate of inflation has remained within the single-digit bracket and last month slid to seven per cent from 7.1 per cent the previous month, according to the Central Statistical Office (CSO) latest data.

Generally, the international economic bodies like the International Monetary Fund (IMF), the World Bank and World Economic Forum (WEF) are happy about the strides the government and the private sector are making in meeting some of the benchmarks.

Recently the WEF named Zambia as the continent’s number seven most competitive economy.

Last week on Tuesday an IMF team which visited Lusaka during September 17-24 period to conclude the 2013 Article IV Consultation discussions with Zambia praise the government for the country’s economy.

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with its member countries, usually every year.

A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the Executive Board.

The team said that the Zambian economy has continued to expand at a rapid pace with overall output growth, however, projected to reduce from 7.2 per cent in 2012 to six per cent under the current national budget

The 1.2-per cent is attributable to lower agricultural production. The yield for maize, the country’s staple food for instance, has gone down from 2.7 million tonnes recorded in the 2011/2012 farming season to 2.5 million tonnes in 2012/2013.

This reduction is partly attributed to poor rainfall distribution, especially in southern, eastern, Lusaka and central provinces and the army worms which raided some fields during the season.

In a statement, the IMF team led by John Wakeman-Linn (above) noted the continued increase in Zambia’s copper production amid the lowering prices of the commodity at the internatioal market.

The team had met with Finance Minister Alexander Chikwanda, Bank of Zambia (BoZ) Governor Michael Gondwe, and other senior government officials, as well as representatives from the private sector and civil society.

“The Zambian economy has continued to expand at a rapid pace, although experiencing pressures in some areas. Overall output growth is projected at 6 percent in 2013, with the decline from 7.2 percent
growth in 2012 largely due to lower agricultural production.

“Copper production has continued to increase strongly despite lower prices on the international market, and the economy has also benefitted from high levels of foreign direct investment and rapid
growth in non-traditional exports,” reads the statement at the end of the mission.

There is, however, need for the Zambian authorities to heed to the team’s advice on how to resolve the various challenges haunting the economy.

These major economic challenges are in fiscal area hence the need for the government and spending agencies to adhere to fiscal discipline to ensure that the rest of the budget is executed prudentially.

As noted by the IMF team, the government expenditure in the 2013 national budget will be considerably above the budget due to various factors including the cost of fuel subsidies incurred before the removal in May 2013.

Other factors are the newly-effected increased salaries for civil servants as well as the costs related to the running of and debts by the Food Reserve Agency.

“The main economic challenges are in the fiscal area. Government expenditures in 2013 will be significantly above budget, including from fuel subsidies incurred before retail prices were raised on May 1, the civil service wage increase that came into effect this month, and costs of covering the Food Reserve Agency’s operations and outstanding debt,” partly reads the statement.

The government has a shortfall in revenue on the projected figures.

On aggregate the budget deficit for 2013 is now expected to rise to about 8.5 per cent of GDP as opposed to about five per cent it usually hovers around.

To remedy the situation, the government is in the 2014 national budget expected to introduce measures to increase revenue and tighten expenditure controls.

These and several other measures are expected to help reduce the budget deficit in 2014 to about five per cent and ensure the economy remained buoyant.

“The mission very much welcomes the authorities’ plans to comprehensively address the fiscal challenges in the budget for 2014. With a combination of stepped-up revenue collection and tight expenditure control, the draft budget aims to bring the deficit to about five per cent of GDP, similar to what was originally planned for
2013.”

Ensuring that this budget is adhered to will be important for macroeconomic stability and hence that is the foundation that will support continued strong growth of the Zambian economy.

The IMF advises that, to maintain strong economic growth, it will also be important to safeguard competitiveness and build bumpers against external shocks.

For the increase in the salaries for civil servants to remain economically meaningful there should be a corresponding rise in production and productivity by the workers.

The workers, therefore, have to ensure that they earn (work for) their salaries so that they could help in maintaining or even increasing the competitiveness.

“Last year’s sharp increase in minimum wages and this year’s large pay award to civil servants are putting upward pressure on labor costs in both the private and the public sectors.

“Competitiveness may suffer if the higher wages are not matched by higher productivity. In addition, while recent progress in this area is encouraging, a further build-up of reserves from the current level of less than three months of imports is needed in light of risks stemming from a potentially deteriorating external environment,” further reads the statement.

The IMF Executive Board is expected to complete the 2013 Article IV consultation in late November or early December 2013.

On the same issue, Zambia’s Secretary to the Treasury Fredson Yamba says the Government has set out an extensive capital expenditure programme aimed at increasing investment in education, health, transport, energy, water and sanitation as well as social safety net.

These projects are an important prerequisite in achieving meaningful economic growth, poverty reduction and social justice.

According to Mr Yamba, in addition,  there would be a divergence from the over-reliance on the mining sector to the other areas of comparative advantage such as manufacturing, tourism, agriculture and agro-processing to ensure that growth was broad based and inclusive.

MR Yamba

The mining sector has remained Zambia’s economic mainstay for some time now, accounting up to about nine per cent of the GDP and hence the need to change the scenario through economic diversification.

Mr Yamba says the 2013 fiscal deficit was unavoidable as Government had to clear the backlog of arrears on fuel and maize subsidies as well as higher wage bills.

By and large, the broad medium term goals of the economic policy for Zambia now seem to be the maintaining of strong growth, lowering the budget deficit and keeping hold of low inflation rate to ensure stability in the prices of commodities locally.