Transcript Accra-Kumasi Highway Dualization Preliminary Engineering

The Road to Ghana:
A Toll Road Infrastructure
PPP Case Study
Table of Contents
1.
2.
3.
4.
5.
6.
7.
Introduction
Major Projects
Our Mandate
Why Accra to Kumasi roadway
Our Challenge
Roadway Design
Project Benefits
Table of Contents
8.
9.
10.
11.
12.
13.
14.
15.
General Benefits of the Tolling Regime
Implementation Considerations
Transportation Integration
Economic Evaluation
Utilizing PPP in Infrastructure
Risk Assessment
Political and Commercial Challenges
In Closing
Introduction

Road transportation constitutes an integral part of a nation’s
development

In Africa, roads form one of the most important and valuable
public assets as it carries about 90% of its passengers and
major access to its rural communities, which forms the food
basket of every nation

It is all encompassing and pervasive and therefore affects the
social, economic, and the political life of every citizen

In Ghana, road transportation accounts for 94% of freight and
97% of all traffic movements
Good road network will enhance poverty reduction, by Nonor Daniel
Ghana Ministry of Transportation September 2006 - © Ghana Chronicle
Introduction
In the growth of countries such as India and China, we
have seen that there is a positive correlation between
investment in road transportation and growth and
poverty reduction.
In Ghana, completed and maintained roads have lead to a
20% increase in visits to hospitals,
A major lowering of the cost of traveling to market
centers, and
Efficient delivery of farm produce to urban centers
by farmers which empowers them financially and
reduces food costs
Introduction

The Ghanaian government has undertaken to ensure that
transport is used as a means to achieve the targets set
under the Growth and Poverty Reduction Strategy (GPRS
II) and to achieve the Millennium Development Goals and
the attainment of middle income status by 2015
Introduction
Social and Economic Impact

In North America, Road Transportation has had a major
social and economic impact
The United States and Canada developed the Eisenhower
Interstate Highway System in the 1950’s and Canada, the
Trans-Canada Highway, linking the Atlantic and Pacific
major undertakings that promoted prosperity with a
substantial economic benefit that has had a profound
long-term economic and social benefit which has
changed the face of the United States and Canada and
the lives of its people
Who we are
A Ghanaian corporation comprised of Global companies
headed by multi-national seasoned infrastructure and
construction industry professionals with diverse experience
in all aspects of infrastructure and construction including:
Project development,
Structural and architectural engineering design,
Financing,
Construction,
Concessions, and
Management and operations
Major Projects
Integrated commercial inter-modal urban complexes
Major Projects
The National Football League Buffalo Bills Stadium
Major Projects
Power Plants, Dams and pipeline infrastructure
Major Projects
Commercial and Residential Complexes
Major projects
Highway and Bridge Infrastructure
Major projects
DSC International - Raipur Durg Toll Expressway, India
Major projects
Universities, affordable housing, houses of worship, schools, hospitals
Our mandate
Arterial Toll Road Company Limited was selected by the
Government of Ghana
to develop, construct and finance an Arterial Highway
System and Tolling Regime linking the land-locked
African countries to the Port of Accra and to produce the
Ghanaian link of the Intercontinental Highway System
being planned for the Continent, and
develop a cost-efficient, user-friendly approach to
financing roadways and highways allowing for its
individual users, no matter their nationality, to pay the
cost of the roadways, without unduly burdening the
country’s citizens
Why the Kumasi-Accra roadway
Serves:
the most economic active area of the country and links the
two major commercial centres of Ghana – Accra and Kumasi
Provides:
primary access to the northern parts of the country as well
as an international transit route for Ghana’s landlocked
neighbours such as Bukina Faso and Niger
Its strategic location:
makes it one of the most important links in Ghana’s roadway
network as it serves the northern, central, western, and
southern parts of Ghana, and a major influence on
transportation for the almost 20 million people of Ghana
Why the Kumasi-Accra roadway
Prone to Accidents:
over-speeding and inadequate provisions for broken
down vehicles have contributed to the high rate of
accidents on this road which habours about 38% of the
“black spots” (accident prone locations) in the
country.
Traffic Flow:
the existing route of the highway passes through many
towns and commercial areas with its inherent traffic
delays contributing to a 5+ hour travel time to
transverse the 230 Km from Accra to Kumasi
Why the Kumasi-Accra roadway
Proof of Performance:
its traffic flow supports an affordable Tolling structure
allowing for reasonable tolling rates and the ability to
repay debt over a reduced timeframe while providing
to the International community Proof of Performance
to substantiate the expansion of the dualization of the
roadway system under a commercial financial
structure without direct government guarantees
Our challenge
To design, construct, finance, and operate a dualized
highway system and tolling regime that is
user-friendly, for both public & commercial use
safe
fair as to Tolling for all its users
has continuous Traffic Flow without on-road
checkpoints, Tolling stations, and Hawking
economical, and
an integral component of a unified cohesive transit
system for Ghana
Our challenge
Being the link between the two main commercial
centres and the creation of a true DEVELOPMENT
CORRIDOR, we are providing for future ’ribboning’
once completed with expected and anticipated
SUBSTANTIAL commercial and residential growth
Design of roadway
A 4-lane urban and rural roadway with town bypasses,
flyovers and amenities incorporating and renovating
an existing 2-lane roadway
Associated Facilities for the highway include:
 restaurants, food stalls, fuel stations
 Government approved & licensed community stalls
 Rest and convenience stops
 accident and Trauma Centres, with
 an integrated Bus Intercity Transit system
Landscaping is designed to
 prevent erosion, improve aesthetics, and
 create natural barriers to prevent unauthorized
access to the roadway
Project Benefits
A value-added faster safer mode of transportation bringing
the two major centers of commerce together with over 3
million consumers with a resultant
• Reduction of driving time from 5 ½ hours to 2 ¼ hours
• Bypassing towns and cities
• Fuel savings ( >10L PER 100KM)
• Commercial transportation cost savings including
drivers time and salaries
• Reduced food spoilage of transport to urban centres
• Maintenance, major repairs and insurance savings
• Most importantly, major reduction in accidents and
highway deaths
Project Benefits

Generates revenue for Ghana by providing primary
access to the northern parts of the country for goods
transportation as well as an international transit route for
Ghana’s landlocked neighbours such as Bukina Faso and
Niger to the Port at Accra

A fair and user-friendly revenue model that provides the
ability for financing and continuously maintain the
highway system and its benefits (user cost savings > toll
rates)
General Benefits of theTolling
Regime
Toll payments are based on type of and amount of usage commercial vs. residential
Tolls are paid by both foreign and local users
Governments can utilize budgetary funds for other projects
Alleviates and manages traffic congestion
Provides funding for ongoing road maintenance
Enables governments to build projects faster
Innovative and more user-friendly
Job creation
No requirement for Government appropriations
Revenue generator
The dramatic reduction in the cost of congestion to society
in terms of lost time, increased productivity and wasted
fuel.
Implementation considerations
During the process one must consider the following:
Legal and structure considerations
Financing and risk assessment
Public Awareness, Marketing and Governmental
cooperation
Environmental and social impact monitoring and
management
Harmonization of ongoing maintenance,
rehabilitation and construction projects on the
highway, and
Security and safety issues
Transportation integration
Dualization of the roadway system should take into
consideration current and future integration with other
modes of transportation
The ability to access bus and/or rail and air travel at
future integrated terminals is a goal of an integrated
roadway system
At selected Interchanges of the Roadway, Bus Terminals
will be located to allow for an effective alternative to the
absence of mass transit between communities and
between Accra and Kumasi
Consideration has been given to the needs of the Railway
and Airline sectors, and existing rail lines and airport
terminals through discussions with the proper authorities
and departments within the government
Economic evaluation
Our studies substantiated that the Accra to Kumasi roadway
was viable, practical and necessary after assessing:
 its overall project and construction costs
 road survey, design and engineering studies
 a safety audit, environmental and social impact study
 a transportation and traffic studies of the roadway
 the need for weighing stations to minimize overloading
 affordability of Toll Rates
 the stability, priority and willingness of the Government
 the current physical status of the roadway, and
 the needs of the community
Economic evaluation
In evaluating its feasibility, it was also important to review
Ghanaian fiscal, legal, economic and political stability
● Ghana’s government is a Constitutional Democracy,
supported by a Constitution that has been adhered to
stringently by its political parties
● Ghana’s Legal system is based on English common
law and customary law, and
● Ghana is well endowed with natural resources: oil
reserves, gold, timber, diamonds, bauxite, manganese,
fish, rubber, hydropower, petroleum, silver, salt and
limestone
Economic evaluation
Upon completion, the Accra to Kumasi roadway will:
provide the Ghanaian people with timely and
necessary road infrastructure, and as important
demonstrate to the international community Proof of
Performance through the successful completion of a
major dualized roadway corridor including successful
introduction of a economically viable Tolling regime
using a cost-efficient approach with minimum of risk
Utilizing Public Private Partnership
(PPP) in infrastructure development
Why should a Government utilize a PPP development structure?
Public-private partnerships (PPPs) provide flexibility and
involve the supply by the private sector of infrastructure and
services deriving from infrastructure assets which have
traditionally been supplied by the public sector.
Although initially there was a fear by the financial community
that such arrangements were initially an attempt to evade
expenditure controls and hide public budget deficits. PPPs are
now spreading worldwide. They are used in transportation
infrastructure, such as roads, bridges, tunnels, rail, air and sea
ports; utilities, such as water and electricity supply, sewage,
and waste disposal; prisons; schools; and hospitals.
Public-Private Partnerships: A Public Economics Perspective – an IMF Working Paper
Prepared by Efraim Sadka March 2006 - © 2006 International Monetary Fund
This Working Paper does not represent the views of the IMF
Utilizing Public Private Partnership
(PPP) in infrastructure development
PPPs are not normally seen as genuine partnerships as they
may not properly or efficiently share risks and liabilities (or
profits) and, can be a means to mask conventional contracting
undertaking which would normally be subject to standard
budgeting processes (undertakings carried out by
governments off budget).
However, properly formed PPPs have developed into genuine
partnerships aimed at properly pricing scarce public resources
and efficiently sharing and managing risks.
When properly designed and transparently reported, they can
play a useful role in enhancing the efficient provision of
infrastructure and services that were previously supplied
solely by the public sector.
Utilizing Public Private Partnership
(PPP) in infrastructure development
The most common forms of PPP’s are variations of designbuild-finance-operate (DBFO) projects, in which a private sector
concessionaire designs, builds, and finances a certain facility
and then operates them for government, or build-operatetransfer (BOT), in which a concessionaire finances and builds a
facility, operates it, and in both cases then transfers it to the
government at the end of the concession period.
In our case, we are designing, financing, building and operating
the Accra to Kumasi roadway over a 30-year Concession.
PPP’s play a useful role in enhancing a proper cost-benefit
analysis and reducing the likelihood of government building
“white elephants”.
Utilizing Public Private Partnership
(PPP) in infrastructure development
With a PPP the private sector is the final “adjudicator” of a
project, providing the economic viability of the project
calculated at socially appropriate prices.
This is a very important aspect of our relationship with the
Government of Ghana, where, similarly as in the case of how
funding was designated by the Millennium Fund provided by
the USA, the private sector determines how funds are utilized in
developing the necessary infrastructures.
Essentially, all funding properly ends up in the developing,
designing and building of infrastructures at much reduced
overhead and a minimum of extraneous costs.
Utilizing Public Private Partnership
(PPP) in infrastructure development
PPP’s also play an important roll in enhancing the efficiency of
resource allocation. When properly designed, in particular with
respect to sharing risks between the public and private
partners, PPPs can improve the quality of services previously
provided by the public sector without raising their costs to
society as a whole.
PPP’S SHOW THAT IT IS A FALSE DICHOTOMY TO BELIEVE THAT ONLY
THE PUBLIC SECTOR SHOULD DEVELOP, CONSTRUCT, OWN, LEASE OR
OPERATE INFRASTRUCTURE.
Risk Assessment
Ghana has one of the strongest economies in Sub-Saharan
Africa.

The areas that we concentrated on in our risk
assessment were PRODUCTION, MANAGEMENT , POLITICAL
STABILITY AND ECONOMIC GROWTH.
PRODUCTION - With production starting on new gold
deposits, record cocoa harvests and projected oil
production, economic activity has been registering
positive performance. The expansion of services and
increased spending on social programs and government
infrastructure should continue to fuel growth this year.
Easing inflationary pressures, allows the Central Bank to
relax monetary policy, and benefits the economy.
Risk Assessment
MANAGEMENT – Governmental tight management has
facilitated the consolidation of public sector finances,
promoted transparency with the institution of
Procurement laws and regulations that has enhanced the
reputation of Ghana in the international community.
POLITICAL STABILITY - Ghana's political stability has
facilitated implementation of reforms intended to develop
a business environment more hospitable to the private
sector.
ECONOMIC GROWTH - Ghana is experiencing major
economic growth with an anticipated increase in GNP of
over 13% in 2011.
Risk Assessment
 Through
a PPP, a Concessionaire can mitigate risk though
government providing fundamentals such as cash flow
guarantees, Sovereign guarantees, Political Risk Insurance, and
Currency devaluation guarantees.
 However, what is important for risk mitigation is assessing the
risk rating of the Government, its ability to retain politically
stable, the ability of the Government and the infrastructure users
to accept the Tolling regime and understand its benefits,
maintain a constant revenue stream and MOST OF ALL, the
economic and commercial viability of the project.
 In our evaluation of our project, which we consider to be the
premier toll road project in Sub-Saharan Africa, we decided to
take the path of least governmental and IMF resistance, and not
include any Governmental or Sovereign guarantees in the
Concession and undertake it as a fully commercial project.
Risk Assessment
 The
benefits of this structure are self-evident, from both a
political and control perspective; still, within our
Concession Agreement we have provided transparency
and overseer capacity to the Government of Ghana
providing the Government with direct input in all of the
aspects of the project throughout the Concession Term.
 And, as important, once it is proven that projects such as
the Accra to Kumasi roadway can be seen to be
economically viable, providing a true ‘proof of
performance’, this will open up Ghanaian infrastructure
investment to the International community without
affecting the budgetary pressures that Sovereign
Guarantees put on a country.
Political and
Commercial challenges
As is similar in many break-through projects, we meet a number of
Political and Commercial challenges:
Politically, the introduction of PPP Concession Agreements to
dualize the major arteries in Ghana privatizes major roadways
and diminishes the effect of the Ministries that are responsible
for and tenders these roadways, creating an inherent conflict of
interest which had caused us major technocratic delays and
stumbling blocks.
Other political challenges included an necessary reassessment
of the Ghanaian Highway Act, highway policing and control of
Commercial Trucking Weighing Stations to police variances of
axle weight limits.
Only ‘true’ political resolve and perseverance can help
developers and sponsors overcome these stumbling blocks.
Political and
Commercial challenges
We also had to overcome a number of commercial challenges
centering around the reality that there were no financially viable
existing major Toll Roads in West Africa with its inherent
negative financial preconceptions
Other commercial challenges to be resolved included:
Effect of any potential future political unrest, either within
Ghana or its neighbours
Currency devaluation and FOREX risk
And most importantly PPP and Concession Agreements are
new to Ghana with no previous experience for Government to
rely on, with preconditioned prejudices against the Private
Sector in doing their work
Inexperience of Government within a PPP process should
require Government to retain independent outside advisors to
facilitate the Private Sector by reducing timelines
Political and
Commercial challenges


These challenges cause major delays and timelines that
created an unreasonable time loss and risk funding in order to
obtain the necessary Government approvals; in that our
encompassed two administrations and 8 years; however, the
current Government’s political resolve and our perseverance
has allowed us to successfully complete the necessary
approval processes.
It is most important for Developers to be able to internally fund
the development phases of a project in-houseprior to receiving
the necessary approvals and obtaining Financial Close; and in
doing so, the benefits to the Developer can outweigh the risks
and provide for Africa its necessary infrastructure.
In closing
Our Ghanaian experience has shown that with PPPs,
the International business community has the ability
to help Africa and its Governments help themselves
in developing the necessary infrastructure that is so
urgently needed to improve the social, economic,
and the political life of every citizen.
Contact Information:
Howard Hurst, CEO
Arterial Toll Roads Company Limited
[email protected]