Promoting Private Sector Participation in Transport Infrastructure in Namibia

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By Moses Amweelo Namibia is a large country with a very small population (1.8 million people). Transport costs are high because of the vast distances and the small population. So transport is important to us, indeed very important. Before Independence it was clear that once South Africa would leave, the new country, although inheriting an extensive road network serving mainly the commercial farming areas, would also inherit inappropriate transport policies, inadequate legislation and poor institutional arrangements in the transport sector. At the time Government policies did not leave much room for private sector participation in transport infrastructure. That has now changed in South Africa, and it has and is changing in Namibia too. Following Independence intensive work was initiated in Namibia to formulate, develop and implement new policies, and also to prepare and implement new institutional arrangements. This is evidenced by the White Paper on Transport Policy, which was approved by Cabinet in 1995. It is also evidenced by the approval by Cabinet of the MWTC 2000 Project in the same year. The MWTC 2000 Project is the instrument used by the Ministry of Works, Transport and Communication to prepare and implement institutional reforms – not only in transport but also in the communications and works sectors. Now let me give you some examples with regards to this framework for the reform process of relevance to transport infrastructure. And let me start with the ports of Namibia, namely the main commercial and deep sea Port of Walvis Bay, and the smaller Port of LÃÆ’Æ‘Æ‘ÃÆ”šÃ‚¼deritz in the south of our country. The Port of Walvis Bay is very important to the welfare of Namibia. Before the reintegration of the enclave of Walvis Bay into Namibia, the port was operated by the South African parastatal known as Portnet, which forms part of the Transnet Group. As part of the preparations for taking over the Walvis Bay enclave, including the port itself, it was decided to implement a new policy for the operations of ports, as reflected in the Namibian Ports Authority Act. Although that Act establishes a Government owned legal person to operate ports, it also opens up many opportunities for the private sector. The key aspect of the legislation is that it embodies what is referred to as the Continental Model for the operations of ports. It enables the Ports Authority to focus its activities on the public dimensions of the ports, i.e. the infrastructure, safety and environmental protection, whilst operating as a financially sustainable business entity. As with operations, the Authority can involve the private sector, and this has already been done through joint ventures and commercial business contracts. This is a step-by-step process, but eventually it is expected that the Ports Authority will play a reduced role in actual port operations. This commercial framework has proved to be very successful and we now see the benefits of this. Walvis Bay is one of the most efficiently operated ports in Africa, and it is also very safe with excellent security. We believe there is scope for increasing traffic through the port by also serving neighbouring countries by rail and road to and from the port. In order to facilitate the logistics in the corridors ending in the Port of Walvis Bay and to market this route, the Walvis Bay Corridor Group has been established. The Walvis Bay Corridor Group is a public private partnership comprising a wide range of members in Namibia. The Group operates independently of government and on private sector principles. It is now playing a key role in identifying bottlenecks and identifying solutions to ensure smooth cross-border operations – a major obstacle to trade and traffic in Southern Africa. It represents a single point of logistics facilitation and costing for customers, which has proved to be a major benefit to, especially, foreign customers. Another development in Namibia of a similar nature is the reform of the airports sector. In 1999, the Government transferred the eight largest airports in Namibia to a new company, the Namibia Airports Company. The Airports Company has great freedom in going about how to provide airport services in the country. It is, in principle, expected to enrol the private sector in the development of the special purpose facilities at the airports, and it can also contract with the private sector by way of concessions to provide and run terminals. The air transport market is very small, so it has not been that easy to mobilize private sector interest in it. So far ground handling, security and cleaning have among others been contracted out. Also, a growing number of private sector outlets are establishing themselves at the airports. Let me now turn to the railway sector. Before independence, the railways were operated within a corporate framework. However, the Government was of the view that the governance framework inherited from the previous regime was inappropriate, and in 1999 a new act was therefore passed. In addition to providing a new framework for the operations of the railways and related businesses, the new law changed the arrangements for the railway infrastructure. In terms of the new legislation, the state is the formal owner of the infrastructure, whilst the existing railway operator actually manages and operates the infrastructure on behalf of the State. But when it comes to new infrastructure, there is scope for engaging private sector interests under concessions. Indeed, the new legislation also allows for concessions for the operations for the railway itself. Finally, the road sector. The Namibian road sector was operated as in many other countries. Various directorates in the ministry were responsible for planning, contracting as well as operating force account units maintaining the road network. In the case of new construction and certain maintenance work, private sector contractors were used. The scene has now changed dramatically, as Namibia has implemented a very far-reaching reform of the road sector. It will also pave the way for a completely new relationship between the private and public sectors. Namibia is here at the forefront of developments in the world. In some respects Namibia has gone further than many countries, but it should be emphasized that we are only at the very beginning of operating the new system and its ultimate success remains to be seen. There are four pillars to the new arrangements in the road sector: – A new Roads Authority (RA), which is responsible for the management of the national road network. The RA is a legal entity that plans, contracts and supervises. – A self-financing system of the road sector. The entire road sector is run on self-financing terms by way of road user charges implemented on road users. In other words the “user pay principle” has been accepted as part of the new arrangements and the RFA, in terms of the new laws, therefore has the power to impose equitable road user charges. – The establishment of the Road Fund Administration (RFA). The main role of the RFA is to act as the independent regulator of road funding in accordance with economic efficiency warrants, and it is also responsible for managing the Road Fund in accordance with sound principles of financial management. – The establishment of a Roads Contractor Company (RCC), under the Company Act. This new company is responsible for road maintenance and construction of new roads. Through the reform process, the private sector will gradually be able to start to play a much significant role in the road sector for a number of reasons. – The first is that all works will be opened up to competitive contracting. – The second is that planning and supervision in the road sector will now be undertaken in a different manner. In view of the fact that users now pay, the new legislation makes consultation with road users mandatory. A new process of dialogue will therefore start to emerge with users, and this process also extends to supervision of the activities of the RA and RFA. The legal framework imposes a number of transparency requirements with regard to these entities, which will force them to make available much more information than traditionally has been the case in the sector. – And third and finally, we envisage that the reform process will now slowly set in motion a new reform process in regard to the way the private sector is contracted to do road works. So far contracts have primarily been in the form of so-called build contracts or simplified versions thereof. The impact on the private sector will be considerable, as these contracts will require much more self-supervision than previous contracts. In addition, the private sector will be encouraged to work much more creatively, including to contract with small-scale contractors in order to apply labour-based techniques for efficiency in road maintenance and the rehabilitation of low volume roads. And above all it will change the nature of the relationship between contractor and client from being often non-cooperative to becoming much more of a partnership. I believe that this new contracting format when introduced will change the industry scene in Namibia. At the one end we will have a new contractor – a modern contractor without any real equipment. On the other we will see the growth of small-scale entrepreneurs, who will mainly prosper through subcontracting.