The Road Fund Administration (RFA) on Tuesday held its strategic business plan stakeholder’s consultation for April 2021 to March 2026 and shared the revenue overview for this period. Revenue estimates were based on the economic forecasts supplied by FirstRand Namibia, with the assumption that the domestic economy grows by 0.8% in 2021, 1.1% in 2022, and 1.5% in 2022. Also, in-house forecasts for fuel consumption and cross-border traffic volumes were used.
According to the CEO of RFA, Ali Ipinge, revenue from Road User Charges (RUCs) are expected to increase by 2.35% annually over the business plan period, increasing from N$2.27 billion in 2022 financial year to N$2.5 billion in 2026. He further stated that expenditure forecasts were based on funding requests from approved authorities.
“Funding determinations were made based on the economic efficiency of the funding requests and finally adjusted to fit within the available revenues. To this end, N$3.9 billion was requested in the 2022 financial year, the full N$3.9 billion was deemed economically efficient, as approved authorities were notified beforehand of the funding constraints. However, only N$2.6 billion could be funded, thus leaving a funding shortfall of N$1.3 billion,” said Ipinge.
Over the past two decades, both diesel and petrol levies have lagged behind key economic indicators. Diesel and petrol levies have increased by 3.4% and 2.7%, respectively, whilst the overall price level in Namibia, as measured by the consumer price index, increased by 5.9%, disposable income increased by 9.7%, and GDP went up by 9.9%.
Ipinge noted that this shortfall has effectively eroded the funding share dedicated to road maintenance, which is a key enabler for economic growth. As such, the petrol levy currently stands at N$1.41, well below the inflation-adjusted benchmark of N$2.42. He added that the perennial underfunding of N$1.2 billion increases overall transport costs by a staggering N$3.9 billion, thus resulting in a N$2.7 billion net loss to society or 1.5% of GDP.
“This loss is reflected in higher vehicle operating costs, increased tyre damage, damaged suspensions, and increased travelling times. Therefore, the optimal level of road maintenance must be restored through a comprehensive review of the current road user charges and the applicability thereof to maintain the extent and quality of the road asset,” Ipinge elaborated.
The RFA has, however, submitted a request for further increases in Road User Charges to the Minister of Finance for consideration. The RUCs were increased by 4% by the Minister of Finance and subsequently came into effect in July 2020. These increases have been taken into account in estimating revenue for the financial year 2021, but no subsequent increases have been considered. – mndjavera@nepc.com.na