Road Needs in South Africa (and how to finance them)

Road Needs in South Africa(and how to finance them)

Peter Copley Pr EngEvaluation Specialist

DBSA

SARF/RPF Conference, Fernhill HotelPMB/Msunduze, KZN8th May 2012

What is sustainability?

Environmental

Economic

Financial Institutional

Technical

Social

Real Gross Fixed Capital Formation by General Government and Public Corporations on Economic and Social Infrastructure, 1946 -2007 (Rm)

1946

1949

1952

1955

1958

1961

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1970

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1982

1985

1988

1991

1994

1997

2000

2003

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0

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25

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General government Public corporations Private business enterprises Total

Perc

enta

ge

04/22/2023 SARF_RPF Conference, Fernhill: PMB/Msunduze

Strategic road network of South Africa (SANRAL: 2005)

Condition of Roads Serving an Economic & Social purpose (generally provincial)

A provincial response (PIG)Annual Provincial Road Expenditure

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1800.0

Limpopo KZN Mpumalanga Free State Western Cape Eastern Cape North West NorthernCape

Gauteng

Province

R m

illio

ns

20012002200320042005

The Municipal Infrastructure Grant (MIG) for Social Infrastructure in general (competing alternatives)

Capital Expenditure

-

5,000

10,000

15,000

20,000

25,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

R m

illio

ns

Water Sanitation Electricity Solid Waste Roads Public services

0

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4

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8

10

12

Num

ber o

f hou

seho

lds

(mil-

lions

)Water Sanitation Electricity

Chasing Moving Targets

CoverageBacklog

water 10.0 1.8

11.1 1.4

sanit 9.8 2.0

11.2 1.3

elec 8.3 3.5

10.0 2.5

cell 3.8 8.0

9.1 3.4


Capital revenue source by municipal category (for South Africa)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A B1 B2 B3 B4

MIG Housing subsidies Development charges Internal funds Funding gap / Borrow ing requirement

Budgeted vs. Modelled roads operating expenditure by municipal category (for South Africa)

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Budget Model Budget Model Budget Model Budget Model Budget Model

A B1 B2 B3 B4

R m

illio

n

PPP Funding Options practiced in SADC


Vehicles Road Rolling Stock and Locomotives

Rail Port facilities

Port equipmen

t

Ports Pipelines Aircraft Airports Energy Water

Leasing

Franchising

Concessioning

Contracting out

Bond financing

Equity investments

Venture capital

World Oil Production Forecast

Source: Energy Watch Group (2007)

Transport Energy Efficiency

Source: http://openlearn.open.ac.uk/file.php/1697/t206b1c01f49.jpg04/22/2023 SARF_RPF Conference, Fernhill:

PMB/Msunduze13

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Key sector Challenges (problem statement):• Inefficient operations• Underinvestment in infrastructure and operations• Inappropriate policy and regulatory frameworks

What have we not done right? • Failure to make timely decisions regarding critical transport infrastructure

investments• Inappropriate regulatory frameworks• Lack of transparency on cross subsidisation• No involvement of private sector in infrastructure provision and operations

What are we going to do differently? • Develop and provide policy clarity to facilitate timeous decision-making• Develop a framework for economic regulation and competition• Introduce and enhance private sector involvement in infrastructure investment

and operations• Secure adequate funding for infrastructure investment

Output 3: Ensure maintenance and strategic expansion of road and rail network, operational efficiency, capacity

and competitiveness of sea ports

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SUB-OUTPUTS ACTIVITIES LINKAGES TO OUTPUT 3

Increase the market share of total freight to rail to an annualized 250 mt from the current 177 mt by 2014

• Achieve increase in corridor traffic on rail

Increased use of rail as a mode will enable competitive supply chains for bulk exports from SA

Introduction of private investment in rail

• Introduce Public Private Partnerships (PPPs) in rail

Alternative sources of funding will ensure adequate infrastructure without SOE balance sheet constraints

Implement the Ports Act and create transparent cross subsidies between ports and rail

• Review Ports Act and propose integrated port and rail infrastructure

Integrated planning to provide a responsive and sustainable transport backbone

Sub-outputs and activities for transport

16

SUB-OUTPUTS ACTIVITIES LINKAGES TO OUTPUT 3

Review of transport industry structure to consistently drive the principle of separating policy from regulation from operations

• Comprehensive review of existing policy framework in ports and rail• Review of the National Freight Logistics Strategy

An appropriate industry structure will clarify roles of public and private sector in the provision of adequate infrastructure that meets growth demands

Measures to implement the Ports Act and the introduction of competition within ports

Finalize the economic framework for private sector participation in port operations

This will achieve the objective of a globally competitive infrastructure network that is responsive to global industry trends in ports

Completion of the Rail Act which establishes the framework for economic and safety regulation as well as competitors within the rail sector

• Completion of draft Rail Act• Finalize enabling legislation for branch lines

Sub-output will address regulatory challenges within the sector and

Sub-outputs and activities for transport

Indicators, baseline, targets, resources and funding

Sub-output: Increase the market share of total freight to rail to an annualized 250 mt from the current 177 mt by 2014Indicator Baseline Targets Resources FundingIncrease freight corridor traffic moved by rail

Corridor traffic on road 213mt (13%) and rail 45mt (3%) in 2008

Increase in rail corridor traffic to 6% (2012) and 10% by 2014

Skilled resources in rail operations, turnaround specialists and supervisory functions

R44 billion budget for Transnet Freight Rail (TFR) capex over the next 5 years

Sub-output : Coal haulage LogisticsIndicator Baseline Targets Resources Funding

Development and implementation of a coal haulage road funding solution

Inadequate allocation for maintenance and rehabilitation of coal roads

A sustainable funding mechanism for road maintenance from public and private sectors.

Road maintenance skills to be enhanced at provincial level

R440m over 2009/10 MTEF, further R750m for 2010/11 and 2011/12 MTEF(R1.5b). Allocation of R100m per month for 2010/11 from shadow tolling with Eskom

17

Indicators, baseline, targets, resources and funding

Sub-output: Measures to implement the Ports Act and the introduction of competition within ports

Indicator Baseline Targets Resources FundingIntroduction of a private operator to establish Ngqura as a transshipment * terminal

No licensed operator

Licensed private operator for Ngqura container terminal by 2012

Legal resources to oversee the transaction process

Funding is part of the Transnet National Ports Authority (NPA) budget

Sub-output : Completion of the Rail Act which establishes the framework for economic and safety regulation as well as competitors within the rail sector

Indicator Baseline Targets Resources FundingEnabling legislation for branch lines regulation

No legislation Branch lines regulatory legislation completed by Dec 2011

Policy development skills Funds allocated in Department of Transport

Completion of Rail Act No Rail Act Draft Rail Bill completed by March 2011 (inclusive of branch lines

Policy development skills Funds allocated to the Department of Transport

18

19

OBJECTIVE OPERATIONAL INDICATOR

BASELINE TARGET

PORTS

Improvements in productivity in container handling operations

Crane Moves per hour (in Durban Container Terminal - DCT)

22 container moves/hr in 09/10

40 container moves/hr by 2014

Improvements in ship turnaround time (STAT) in ports

Ship Turnaround Time (STAT)

48 hours in 09/10

38 hours by 2014

RAIL

Market share (rail corridor traffic)

Rail corridor traffic volume growth (%)

Corridor traffic on road 213mt (13%) and rail 45mt (3%) in 2008

Increase in rail corridor traffic to 6% by 2012 and 10% by 2014

Service reliability Average deviation from scheduled departure and arrival times

To check prior year performance

To be agreed with Transnet

Operational efficiency indicators for transport

Current Seminal Documents for Africa

• ‘Infrastructure to 2030’: (ISBN 978-92-64-02398-7 OECD Publishing, May 2006)

• ‘The African Infrastructure Country Diagnostic (Study)’:"Africa‘s Infrastructure: A Time for Transformation”: The World Bank, released end 2009 http://www.infrastructureafrica.org/aicd

• IRF International Road and CODATU public transport statistics, published annually, together with gTKP/SUTP (German), ITDP (New York), ITSSA and ‘The New Mobility/Economy’ Cape Town

• ‘Heads in the Sand’: Martin Creamer Publications: A Report by Global Witness: October 2009


http://www.infrastructureafrica.org/aicd

Fundamental Findings: OECD• Fifteen policy recommendations, three of which

are listed here.• Infrastructure is long term in nature and its

provision is necessary irrespective of changing political persuasions

• Asset management is of equal importance to new investment

• The governments of the World can no longer afford to provide the necessary infrastructure unaided. There have to be PPPs.


Where does South Africa stand…..

• Except for Road Safety data, South Africa’s comes from 2000 and remains largely incomplete (Thanks to SABITA and SANRAL for what there is)

• Competitors’ (ie BRICs) data is complete and current viz 2005 (now 2009)

• Current IRF statistics are dated 2011, data up to 2009, available from SARF Head Office in Braamfontein at no cost if you are a paid up member of SARF

Generic observations• While the title of the IRF publication says ‘International World

Roads Statistics’ they extend very comprehensively into rail and liquid energy, also accommodating economic indicators and environmental considerations (eg fuel consumption and carbon emissions), although not yet logistics or public transport data

• RPF requested to consider how to bring South Africa back on board in providing timeous, comprehensive internationally comparative quality data within the international data set already described by and existent with the IRF (with extension into public transport, logistics and other related energy data eg electricity for both rail traction and electricity/gas for road based vehicles)

Fundamental Closing Thoughts

• Economic roads should be funded as directly as possible. This means direct user charging, using loan funding if necessary.

• Roads with a mixed economic and social function should be funded from an indirect tax. This means a levy on fuel, with decisions being taken as close to the ground as possible. Do NOT loan fund.

• Roads with a purely social function should be funded from the general tax bases, using loan funding if essential.

Takeaway• The mix of these options remains a political

choice.• Tolls; fuel levy; EPWP/Jobs Fund • Transport operational subsidies

…..sustainability?• Recognising the political nature of road and

transport investment decisions, is it not time to resuscitate the National Transport Commission, representative of government, stakeholders, users, business and civil society?

THANK YOU

Peter Copley Pr Eng: Evaluation Specialist DBSA: [email protected]

Contact Details

Development Bank of Southern Africa

Registered office Postal Address Telephone1258 Lever RoadHeadway HillHalfway HouseSouth Africa1685

PO Box 1234Halfway HouseMidrandSouth Africa 1685

+27 11 313 3911 Fax +27 11 313 3086

WEBSITE ADDRESS: www.dbsa.org

Laverene DimitrovCrynos MatenkeraMirriam ChikwandaPeter Copley

Transport SpecialistTransport SpecialistWater/RoadsSpecialistEvaluation Specialist

[email protected]@[email protected]@dbsa.org


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mailto:[email protected]

Drivers of Road Provision

Miriam Chikwanda/Peter CopleyAdvisory Unit DBSA

An indication of viability for self sustaining projects

• Road tolling in the South African model can start at between 4 000 and 4 500 vpd AADT, with approximately 17% heavy vehicles

• Rail requires 1 m tonnes per annum (South African Freight Rail) cf 300 000 tonnes per annum for the BBR and other rail concessionnaires..but fixed investment needs are substantial

• Ports appear to require 3 million tonnes per annum• Airports are difficult but appear to need in excess of 500 000

persons per annum• Below these thresholds does not imply PPP’s can’t be

developed but other measures of support need to be considered (eg shadow tolls; market guarantees; increasing the revenue base; capital from government, operations from private sector)

• In general, speaking of debt equity ratios of approx 17:83 and DSCR of between 1,0 and 1,5 in year 5 to 8


Finding ways for sustainable funding

• Looking into sources of funding and their pros and cons• What is a reasonable investment rate?

Risk/Return expectations• Equity investors five years at between 17% and 50% per

annum (Libor and Jibar rates)• Commercial banks eight years at prevailing interest rates• Merchant Banks twelve years at medium term interest

rates• Pension funds fifteen years at long term interest rates• DFI’s 20 year horizons ideally judged on economic as

opposed to financial merit


Which instrument for which aspect?

Low volume usage• Fundamental to use ICT effectively to collect revenues• Fundamental to have understandable, common legal frameworks and agreements• Transparency and consistency imperative• User acceptance and willingness to embrace (e.g. charging per tonne km and electronic through ticketing)• Capacity to administer the financial systems• Societal acceptance of the fact that infrastructure is long term in nature and needs to be taxed• Exchangeable instruments and markets to exchange these....within the regions


What is sustainable? What is ‘sustainable’?

• A steady state? Entropy, as of steam engines and the Universe?

• Environmental sustainability• Economic sustainability• Technical sustainability• Financial sustainability• Institutionally sustainable• Socially sustainable

• Compounding ‘growth’ appears to inevitably lead to collapse and renewal

04/22/2023 33SARF_RPF Conference, Fernhill: PMB/Msunduze

Some personal views

• Centrally planned economies collapsed in the 1990’s, after a life of about 80 years

• Market driven economies collapsed ten years later, in accordance with the long wave model of Kondratieff, also of about 80 years

• ‘Sustainability’ appears to lie in societies’ abilities to develop systems which can in some way try to ensure equitableness, fairness, reduced Gini coefficients and closer rankings of measures of entropy, aiming towards unity…and a common ‘unity’

• Environmental (biophysical) sustainability is indisputably the highest priority at this time


Structural weaknesses/flaws

• Fundamental that freight (truck and rail) growth will grow at the same rate as GDP growth, with personal movement (cars and public transport) growing at 1,5 times that: Gauteng traffic currently growing at 7% per annum

• The measure of success is GDP growth, euphemistically and idealistically expressed as per capita GDP growth

• With roads, priorities are determined using the Highway Design and Maintenance Model (HDM) which prioritises according to producer surplus,

• with the Rural Economic Development (RED) Model (Consumer Surplus) coming in as an after thought

• It is possible that ongoing ‘sustainability’ is an unachievable utopia


Fundamental

• In general people urbanise, with an idealised notion of creating sufficient personal resources to out migrate to more salubrious climes at a point in the future

• Need to consider central places theories (Christaller and Loesch) as existing before the 1913 Land Act for a real sense of fair and sustainable spatial distribution of our South(ern) African universe

• Ultimate sustainability lies in harmonizing with natural forces rather than endeavoring to ‘harness the forces of nature for the benefit of humankind’ (a definition of civil engineering)

• Triple bottom line accountability….and we have a long way to go in this regard


The Global Village

• European banks led the ‘Scramble for Africa’ in the 19th century, for leveraged growth of their home based equity

• The BASIC countries are now doing the same, for the same reasons

• Nothing sinister in this. Just normal human behaviour but it does color all transport investment decisions in whether we are looking at local, provincial, national, regional or sub-continental canvases against which we are thinking ‘sustainably’

• An investment in one will have an effect, frequently unforeseen, on the others…and that can be scary unless our societal systems can effectively check and balance


The Problem, internationally

The problemStudies of European transport policy highlight the difficulty of mobilising capital investment as a key problem in financing transport infrastructure projects. Research is needed to identify the optimum charging and investment policies to attract the necessary funding. One promising avenue is the creation of a European transport infrastructure fund, financed by mark-ups on transport activities. Another option is to exploit mark-ups of user costs charged by the suppliers who make the initial investment. Scientific modelling and analysis is needed to find the best option or mixture of options.

The European Deliverables


Project deliverablesReport on the economics of European infrastructure funds – June 2006 Scenarios for a European infrastructure fund and the use of mark-ups – June 2006 Results of testing the impacts of alternative scenarios for a European infrastructure fund – April 2007 Five case studies on the effects of infrastructure fund scenarios on existing Trans-European Transport Network projects – June 2007 Conclusions, recommendations and final report – December 2007

Fundamental Findings: World Bank

• Africa’s Infrastructure need is accelerating due both to economic growth and to historic and current underinvestment

• Current need is US$93 bn per annum, twice that determined only nine years ago

• Energy the dominant issue (50%), with Transport second (25%), followed by water and sanitation and ICT


Fundamental Findings: OECD

• Fifteen policy recommendations• Infrastructure is long term in nature and its

provision is necessary irrespective of changing political persuasions

• Asset management is of equal importance to new investment

• The governments of the World can no longer afford to provide the necessary infrastructure unaided


Fundamental Findings: OECD

• In the transport sector the different modes are finding their market niches based on economic forces, without need for regulation

• In particular rail is finding its role in longer distances for containers, low value high volume freight and fast people movement (BRT for Africa)

• This has great (massive) implications for the possible future of rail in Africa if there is a change in rail gauge


Dilemma - Justifying investments

• How can investment in transport programmes and projects be justified?

• Sober economic analysis (CBA, IRR, NPV) versus wider economic and social assessment of costs and benefits

• Competition with other public services• Remove emotion


SADC Intra Regional Traffic movement


The Problem, for Africa

The problemCommon experiences in African transport policy and implementation highlight the difficulty of mobilising capital investment as a key problem in financing transport infrastructure projects. Research is needed to identify the optimum charging and investment policies to attract the necessary funding. One promising avenue is the creation of various African regional transport infrastructure funds, financed by different financial sources but without mark-ups on transport activities. It is imperative that appropriate levels of mark-up of user costs charged by the suppliers (ideally PPP’s) who make the initial investment. Scientific modelling and analysis is needed to find the best option or mixture of options in an environment of low levels of usage.

The African Deliverables


Project deliverablesReport on the economics of African sourced and located infrastructure funds – June ???? Scenarios for co-ordinated Regional infrastructure funds and the use of mark-ups – June ???? Results of testing the impacts of alternative scenarios for Regional infrastructure funds– April????+1Five case studies on the effects of infrastructure fund scenarios on existing Trans-Regional Transport Network projects – June ????+1 Conclusions, recommendations and final report – December 2011

Thank you for your attention….

• I’m personally satisfied that we have a strong case to continue to develop PPP’s to provide necessary infrastructure

• Do we start small (e.g. municipal services) and work upwards?

• Or do we start big (e.g. toll roads) and work downwards?

• Fundamentally need long term committed champions from both the public and the private sector sides…together with easily understandable , robust user charging systems within legal frameworks that are trusted…by everyone


The State of South Africa’s Transport Networks

A comparative review of the IRF’s 2007 International Road Statistics:

(2005 data)

VOLUME 3: EMERGING MARKETS –NEW HUBS, NEW SPOKES, NEW INDUSTRY LEADERS?

Transportation & Logistics: PricewaterhouseCoopers EBS Business SchoolSupply Chain Management Institute: For more information on the T&L 2030 series or a download of our three T&L 2030 publications,please visit www.tl2030.com.

South Africa’s logistic competitors

• China Logistics Performance Index 3.49 (#27)• South Africa Logistics Performance Index 3.46 (#28)• Turkey Logistics Performance Index 3.22 (#39) • Brazil Logistics Performance Index 3.20 (#41)• India Logistics Performance Index 3.12 (#47)• Mexico Logistics Performance Index 3.05 (#50)• Russia Logistics Performance Index 2.61 (#94)• South Africa’s World Competitiveness Ranking

(#54)

TABLE OF CONTENTS*PageAcknowledgements and Sources iForeword ii1. Sections presentation : Definitions and specifications iii2. Data presentation conventions viSection 1 : Countries profiles 1Section 2 : Road Network 40Section 3 : Road Traffic 83Section 4 : Multimodal Traffic Comparisons 96Section 5 : Vehicles in Use 120Section 6 : Road Accidents 153Section 7 : Production, Imports, First Registrations and Exports ofMotor Vehicles186Section 8 : Road Expenditures 217Section 9 : Energy 234Appendix 261* : Detailed list of data tables in the first page of each section.

We (the IRF) have compiled data from different sources at international and intergovernmental levels in order to produce this year’s edition.Herewith is a shortlist:

United Nations Economic Commission for Europe ; United Nations Economic Commission for Africa ; World Bank ; International Monetary Fund ; International Energy Agency ; African Development Bank ; Asian Development Bank ; OECD : Organization for Economic Co-operation and Development ; Central Intelligence Agency, USA ; Eurostat ; ECMT : European Conference of Ministers of Transport ; GTZ : German Technical Cooperation ; OICA : International Organization of Motor Vehicles Manufacturers ; ERF : European Road Federation. Finally, we would like to express our gratitude to the LARSEN & TOUBRO Ltd.

South Africa thank SANRA(L), SABITA and the RTMC

There the good news ends…..

• Except for Road Safety data, South Africa’s comes from 2000 and remains largely incomplete

• Competitors’ data is complete and current viz 2005

• Current IRF statistics are dated 2010, data up to 2008, available from SARF Head Office in Braamfontein at no cost if you are a paid up member of SARF

Generic observations

• Botswana now leading South Africa and Zimbabwe in terms of an effective, balanced road network in Southern Africa

• South Africa’s road and rail (and port) infrastructure is beginning to lag its international logistics competitors (the other six identified earlier)

• All liquid fuel prices are increasing from peak oil. (Brazil the only country appearing to buck this trend possibly due to its moving into ethanol rather than methanol many years ago)

• World trend back towards rail is confirmed

• China• • GDP 2009 US$ 4,757.7bn• • GDP per capita 2009 US$ 3,566• • Merchandise export 2008 US$ 1,428.3bn• • Merchandise import 2008 US$ 1,132.4bn• • Urbanisation 2009 46.6 %• • Size of logistics market ('08) US$ 506bn• • Logistics Performance Index 3.49 (#27)

• South Africa• • GDP 2009 US$ 277.4bn• • GDP per capita 2009 US$ 5,635• • Merchandise export 2008 US$ 80.8bn• • Merchandise import 2008 US$ 99.5bn• • Urbanisation 2009 61.2 %• • Size of logistics market ('09) US$ 46bn• • Logistics Performance Index 3.46 (#28)

• Turkey• • GDP 2009 US$ 593.5bn• • GDP per capita 2009 US$ 8,427• • Merchandise export 2008 US$ 132.0bn• • Merchandise import 2008 US$ 202.0bn• • Urbanisation 2009 72.9 %• • Size of logistics market ('08) US$ 59bn• • Logistics Performance Index 3.22 (#39)

• Brazil• • GDP 2009 US$ 1,481.5bn• • GDP per capita 2009 US$ 7,737• • Merchandise export 2008 US$ 197.9bn• • Merchandise import 2008 US$ 182.4bn• • Urbanisation 2009 85.4 %• • Size of logistics market ('10) US$ 150bn• • Logistics Performance Index 3.20 (#41)• Seven routes to one goal: growth.

• India• • GDP 2009 US$ 1,242.6bn• • GDP per capita 2009 US$ 1,033• • Merchandise export 2008 US$ 177.5bn• • Merchandise import 2008 US$ 293.4bn• • Urbanisation 2009 29.8 %• • Size of logistics market ('10) US$ 125bn• • Logistics Performance Index 3.12 (#47)

• Mexico• • GDP 2009 US$ 866.3bn• • GDP per capita 2009 US$ 8,040• • Merchandise export 2008 US$ 291.7bn• • Merchandise import 2008 US$ 323.2bn• • Urbanisation 2009 77.5 %• • Size of logistics market ('03) US$ 50bn• • Logistics Performance Index 3.05 (#50)

• Russia• • GDP 2009 US$ 1,254.7bn• • GDP per capita 2009 US$ 8,873.6• • Merchandise export 2008 US$ 471.6bn• • Merchandise import 2008 US$ 291.9bn• • Urbanisation 2009 73.1 %• • Size of logistics market ('09) US$ 49bn• • Logistics Performance Index 2.61 (#94)

What is the commonality of these seven countries?

• Brazil• India• China• Turkey• Mexico• South Africa• Russia

The competing countries’ World logistics ratings

• China 3.49 (#27)• South Africa 3.46 (#28)• Turkey 3.22 (#39) • Brazil 3.20 (#41)• India 3.12 (#47)• Mexico 3.05 (#50)• Russia 2.61 (#94)• South Africa’s World Competitiveness

Ranking (#54)

VOLUME 3: EMERGING MARKETS –NEW HUBS, NEW SPOKES, NEW INDUSTRY LEADERS?

Transportation & Logistics: PricewaterhouseCoopers EBS Business SchoolSupply Chain Management Institute: For more information on the T&L 2030 series or a download of our three T&L 2030 publications,please visit www.tl2030.com.

There the good news appears to end…..

• Except for Road Safety data, South Africa’s data comes from 2000 and remains largely incomplete

• Competitors’ data is complete and current viz 2005

• However South African Rail exports 65 m tonnes coal per annum; 2,3 m tonnes of Manganese; and 61 m tonnes of iron ore per annum

• Gauteng-Durban container trains have increased from 5 per day in 2008 to a current 19 per day








Generic observations

• While the title says ‘International World Roads Statistics’ they extend very comprehensively into rail and liquid energy, also accommodating economic indicators and environmental considerations (eg fuel consumption and carbon emissions), although not yet logistics or public transport data

• RPF requested to consider how to bring South Africa back on board in providing timeous, comprehensive internationally comparative quality data within the international data set already described by and existent with the IRF (with extension into public transport, logistics and other related energy data eg electricity for both rail traction and private vehicles)

From the OECD….amongst 15 policy statements

• ‘Infrastructure is long term in nature and its provision is necessary irrespective of different political persuasions’

• ‘The governments of THE WORLD can no longer afford to provide necessary infrastructure unaided. There have to be PPP’s’

• ‘Asset management is as important as new construction’

Fundamental Findings: World Bank

• Africa’s Infrastructure need is accelerating due both to economic growth and to historic and current underinvestment

• Current need is US$93 bn per annum, twice that determined only nine years ago

• Energy the dominant issue (50%), with Transport second (25%), followed by ICT (15%) water and sanitation (10%)

• ‘Developing economies should invest more in their logistic systems’

04/22/2023SARF_RPF Conference, Fernhill: PMB/Msunduze

Sector 1974 – 82 1983 – 92

Irrigation and Drainage 17 13

Telecommunications 20 19

Transport Airports Highways Ports Railways

18 17 20 19 16

21 13 29 20 12

Power 12 11

Urban Development Water & Sanitation Water supply Sewerage

Not available 7 8 12

23 9 6 8

Infrastructure Projects 18 16

All Bank Operations 17 15

Average Economic Rates of Return (% per annum) on World Bank supported projects: 1974 –92 (Quoted from ‘World Development Report 1994’, The World Bank, Washington DC)

The water related rates are financial, not economic, rates of return

Dilemma - Justifying investments

• How can investment in transport programmes and projects be justified?


• Competition with other public services• Remove emotion


The Theoretical Problem, for Africa

Common experiences in African transport policy and implementation highlight the difficulty of mobilising capital investment as a key problem in financing transport infrastructure projects. Research is needed to identify the optimum charging and investment policies to attract the necessary funding. One promising avenue is the creation of various African regional transport infrastructure funds, financed by different financial sources but without mark-ups on transport activities. It is imperative that appropriate levels of mark-up of user costs charged by the suppliers (ideally PPP’s) who make the initial investment. Scientific modelling and analysis is needed to find the best option or mixture of options in an environment of low levels of usage.

The Practical Problem, for Africa

• Recognise that there HAVE to be PPP’s in all aspects of the logistic chain

• Recognise that Private Sector players HAVE to have consistent revenue streams to survive

• Recognise that if Africa doesn’t pull together, others will continue to provide only essential infrastructure for us

• Recognise that PPP’s mean just that – a shared partnership for mutual benefit through transparent and fair taxation of successful commercial enterprises – NOT public ownership

• Governments have to put into place level and consistently regulated playing fields in which trade can thrive and the cake made bigger for the benefit of all

• The public sector has to think long, while the private sector continues to think short (ie horizons of 30/50 years cf horizons of 15 years)

04/22/2023

Dilemma 1 - Justifying investments

• How can investment in rural roads be justified?


• Competition with other public services

SARF_RPF Conference, Fernhill: PMB/Msunduze

77

Dilemma 2 – Finding ways for sustainable funding

• Looking into sources of funding and their pros and cons

• What is a reasonable investment rate


78

Options practiced in SADC


Vehicles

Road Rolling Stock and Locomotives

Rail Port facilities

Port equipment

Ports Pipelines

Aircraft Airports

Energy Water

Leasing

Franchising

Concessioning

Contracting out

Bond financing

Equity investments

Venture capital

79

An indication of viability for self sustaining projects• Roads in the South African model can start at between 4 000

and 4 500 vpd AADT, with approximately 17% heavy vehicles• Rail requires 1 m tonnes per annum (South African Freight

Rail) cf 300 000 tonnes per annum for the BBR concessionnaire



developed but other measures of support need to be considered (eg shadow tolls, market guarantees, increasing the revenue base)



80

Dilemma 3 – Who is responsible?

• Centralization versus decentralization of funds and management

• Community involvement: how does it work and what are pros and cons?

• Capacity to manage and governance issues


81

Dilemma 4 – How to tackle negative spill-overs

• Investing in one region means decreasing competitiveness of other region

• Roads are said to cause spread of HIV/AIDS better roads, more infections: how to address?


82

Southern Africa still has the commodities! and other potential…particularly rail


83


84

85

African Economic Outlook and Development Challenges … 1

…. Africa, is a resource-rich continent with developmental headroom and large ultimate market and economic potential ….


Dilemma 5 – How do we ensure political acceptance of the need for acceptable maintenance?

• Effective asset management of any infrastructure is never ‘sexy’ when compared to new projects. How do we change that perception?

• The relative size of any road fund in smaller economies makes it an attractive target for the provision of funds for purposes different to that intended. How do we protect against that and preserve the funds for new construction, rehabilitation and maintenance of ROADS?

• The road maintenance backlog in many countries is so large that some roads can NOT be maintained. How do we decide which roads to maintain to the benefit of the overall network?


86

Approaches for involving the private sector in the development of transportation projects, including:

• Leasing• Franchising• Concessioning• Contracting out• Bond financing• Equity investments• Risk or rather Venture capital


87


Leasing• Short life assets <11years, generally mobile.• Examples include Coca Cola distribution fleet in

Tanzania• Municipal vehicles in South Africa• 100 GE diesel electric locomotives in South Africa• Frequently tax advantages• Generally service agreements• Replace with new leased assets at the end of

operational life• Particularly suitable in areas of rapid technological

obsolesence


88


Franchising• Can be used for water distribution but very sensitive• Need recognised brand and need to provide technical

and management support (eg ‘Famous Brands’ in South Africa..Wimpy, Steers, BJ’s)

• Thought of for South African Airways on the historic strength of the brand

• See no reason for why it couldn’t be applied by ACSA in South Africa for municipal airports


89

Which instrument for which aspect?Concessioning• Used very successfully in South Africa for toll road

projects of 500 km lengths over 30 year concessioning periods; currently being looked at by Zimbabwe

• Ownership rests with state• Maputo Port Concession-15 years• Mombasa and Dar es Salaam container handling

concessions, the one in Dar arguably too successful• Many rail concessions which remain under funded and

debated continuously. Gautrain 90% government funded.• Need to review these more seriously as there appears a

fundamental difference between operators and owners• Can asset strip with airlines, highlighting the difference

between financial and economic justification04/22/2023 SARF_RPF Conference, Fernhill:

PMB/Msunduze90


Contracting out• Used for routine state funded infrastructure provision and

maintenance• Traditional mechanism which requires strong

administration• Ownership rests with state or legal entity• Useful to absorb seasonal demands• Effectively being used on the Gauteng Freeway

Improvement Project in South Africa as well as the BRT projects

• Too soon to tell how financially and operationally successful these will be


91


Bond financing• Traditional funding source for rail and ports• Now being used for road financing in South Africa as well

as airport funding (ACSA)• Require credit worthiness and a means to exchange

bonds• Require strong internal Treasury function and budgetary

control• Market very unforgiving• Ownership rests with state or legal entity• Useful to absorb short term capital requirements of say 8

years but not to be used in perpetuity


92

Which instrument for which aspect?Equity Investments• Own equity particularly in mining industry (Australia)• South Africa’s OREX line was initially funded by Iscor

(now Khumba Resources)• Partial equity in concessions• Particularly useful if you have a local stock exchange• But no reason why you can’t list offshore (eg SASOL)• Require strong internal Treasury function and budgetary

control• Market fairly unforgiving but willing to take long term

views• Ownership rests with equity holder or legal entity• Useful to absorb long term capital requirements


93


Venture Capital• Gambling on medium term very high returns• Being used to fund wind energy generation in

MozambiqueRisk/Return expectations• Equity investors five years at between 17% and 50% per



opposed to financial merit04/22/2023 SARF_RPF Conference, Fernhill:

PMB/Msunduze94

Financial Partnerships, including PPP’s

• The World saw a panacea during the 1990’s in PPP’s addressing infrastructure needs

• The following two slides show how this potential solution was addressed, by World Region and by Sector (information from Annual Reports of the IFC)

• I am the first to admit that this information is dated and could form a useful research project for a student!


95

PRIVATE-SECTOR FUNDING - EMERGING MARKETS

Regional DistributionREGION No OF COST %

PROJECTS US$m

Latin America 38 5 980 48%Asia 20 4 947 40%Europe 7 1 007 8%Sub-Saharan Africa 3 102 <1%Central Asia, Middle Eastand North Africa 2 323 3%

12 360 100%

SOURCE: International Finance Corporation - Financing Private Infrastructure Projects, at the peak


96

PRIVATE SECTOR FUNDING-EMERGING MARKETS

Various Infrastructure Sub-sectors

SOURCE: International Finance Corporation - Financing Private Infrastructure Projects, again at the peak

SUB-SECTOR No OF COST %PROJECTS US$m

Power 28 5 706 46%Telecoms (inc ICT) 21 4 861 39%Ports 9 222 2%Pipelines 6 1 092 9%Railroads 3 117 <1%Water 2 362 3%Roads 1 313 2%

12 360 100%


97

Lessons from World experience


• Three general observations:– South America and the East led the way….by

far– The Private Sector will invest in sectors which

generate cash flows without fuss and as quickly as possible….energy and ICT..and which have readily developed billing systems...but can grow too quickly (Enron) if off balance sheet

– Financial returns must be in line with international risk-reward benchmarks for different sectors and for different parts of the World

98

Why did Africa not share in that boom?

• There appears a reluctance to pay real prices for international commodities

• As an example, to provide road space for trucks is US$20 per 100 km on the privately funded South African toll roads, vs the SADC agreed US$10 per 100 km

• South Africa can boast that it has amongst the lowest electricity charges in the World. The consequences are readily apparent.

• Denial of real costs vs revenues is ignored at PPP development peril !


99

How do we get there?

• Priorities are energy and transport..increasingly rail

• Project Planning…..done that• Project Preparation…..African Partnerships Unit

of DBSA (Dr Bane Maleke) with access to other funding sources

• Going to the market….Advisors (of all kinds) from market demand and environmental, through legal, technical and financial


100

How do we get there?

• Implementation…proven ability from private sector

• Operation…performance contracts• Maintenance….built in through effective

interest in life cycle costing• Termination at the end of the project• Giving it a chance to perform…and pay tax


101

Thank you for your attention….• I’m personally satisfied that we have a

strong case to continue to develop PPP’s to provide necessary infrastructure

• Do we start small (e.g. municipal services) and work upwards?

• Or do we start big (e.g. toll roads) and work downwards?

• Fundamentally need long term committed champions from both the public and the private sector sides


102

Roads come in three’s

• Economic roads – the roads on which an economy depends (the primary network)

• Roads with an economic and social function (the secondary network)

• Social roads – roads provided solely for accessibility and mobility (the tertiary network)

• Accessibility is the ability of a network to link places, enabling people to interact

• Mobility is the ability of people to make use of that network


103

Road financing

• Economic roads should be paid for as directly as possible, for example from road tolls, congestion pricing, value capture or parking charges (Direct user charging)

• Roads with a dual economic and social function should be financed through a levy on fuel and, as peak oil leads to a likely decrease in liquid fuel consumption and resultant decrease in revenue from fuel levies, we will shift to revenue from carbon tax

• Roads with a solely social function are generally funded from the general tax base (eg residential streets)


104

What does transport do?

• It permits connectivity through networks• It permits mobility through ability to use those

networks moving things (freight) and us (people)• Why do we need accessibility and mobility?• People lived before, in Europe, in the East, in the

Americas….and in Africa….without transport systems, or at least very rudimentary transport systems….walking, boats, riding, carriages, barges, trains, roads, ships, airplanes, space shuttles…


105

Leading to one fundamental

• Humans HAVE to communicate and….• They HAVE to trade…..• In markets…..• To survive, let alone to develop.• Give a bird space, it will fly more; Give a child

space, it will explore more.• Put a bird with chickens? It will begin to walk.• Put a chicken with birds? It will begin to fly.


106

Main mode of travel to work (Source: National Household Travel Survey,DoT, 2005)

Car32%

Walk23%

Train6%

Bus9%

Taxi25%

Public Transport

40%

Other5%


107

How will these modes shift in a time of liquid energy scarcity?

• The walkers (green) will remain the same• The blue (public transport) will increase marginally or,

hopefully, substantially taking from the green• The yellow (cars) will in all likelihood remain the same• with a gradual shift to electricity (DC) in cars and (AC) in

trains….hence more hydro and solar and more power pooling

• Think about this and its potential for industry creation….with an overall shift back to rail….

• together with 24/7 human activity (?) and the resultant use and development of ICT…..human interaction, education, logistics, transport and through ticketing


108

Fundamental #1

• Freight traffic grows at the same rate as GDP growth

• Passenger growth in developing economies grows at 1,5 times GDP

• People are urbanising, primarily to metropolitan areas

• Much as we can try to regulate and control, the market will come through.


109

Fundamental #2

• The World is tending to underinvest in road infrastructure due to the fact that it is difficult to develop PPP’s for road investment

• The following slide shows how South Africa’s investment into roads has declined with time from about 4% of GDP to a current <2% of GDP (the drop from the peak in 1978 was brought about by international financial sanctions)

• The second slide after that shows how the private sector favours investing in energy and ICT but not in transport and water infrastructure

• Primary reason for this is a lack of direct billing systems and hence revenue streams.


110

Fundamental #3 (from the OECD)

• Infrastructure is long term in nature and its provision is necessary irrespective of political persuasions

• The governments of the World can no longer finance necessary infrastructure unaided and there HAVE to be Public Private Partnerships

• Asset management is as important as new construction


111

Fundamental #4

• How do we get the real concept of private public partnerships to prevail?

• At present public sector appears to view PPP as private sector must provide

• Private sector views the we will provide provided government takes all risk

• This means that very little happens• There is a legitimate need for the private sector to obtain

returns commensurate with perceived and actual risk• And there is a legitimate right for society (government) to

tax profits in a consistent and transparent manner


112

Fundamental #5

• It is probable that government must take the early risk and gradually encourage the private sector to bring in more participation and funding over time

• We are seeing this with all of South Africa’s PPP’s and also with Zimbabwe’s Bulawayo-Harare-Mutare road rehabilitation

• The provision and operation of roads is a never ending exercise. They are not just paid for and built

• They are an ongoing technical and financial commodity that can be traded as with any other


113

Fundamental #6

• Financial players have different horizons• Equity investors look over five years and want a return

commensurate with that given by the stock exchange• Commercial banks look over eight years and require

short term interest commensurate with that offered over eight years

• Merchant banks have a 12 year horizon• Pension funds have a 15 year horizon• DFI’s SHOULD have a 20 year horizon• Governments should have a 20 to 50 year horizon


114

Fundamental #7

• Meet these expectations and horizons consistently and transparently and any amount of funding can be raised (eg Maputo toll road R1,4 bn; Gauteng to Durban Toll Road R2,2 bn; Bakwena R3,3 bn)

• Let’s apply this vision to the Beit Bridge-Harare-Chirundu Road, over distances sufficient to provide consistent returns…and it will happen!


115

Concluding Summary

• Continue with road infrastructure pricing, ideally as PPP’s, extending into the Region

• Increase fuel levies towards attracting capital for economically justified and ordered public transport and road programmes

• Consider value capture in the urban environment especially for BRT infrastructure

• Recognise that investment is for the long term, in support of freight flows which are growing at the same rate as GDP growth (viz approximately 6% per annum) and people flows growing at 1,5 times GDP (viz 9% per annum)


116

Funding flows

• Most public funding for public transport expenditure originates from national government,

– Gautrain is exception – jointly funded by national and provincial (equitable share allocation). – Municipalities spend relatively limited amounts of own funds on public transport, - probable that this will

increase substantially: most munics spend on building and managing transport interchanges and taxi ranks, while some municipalities run, or subsidise local bus services.

• Key areas of expenditure are:– the commuter bus system. Bus subsidies paid via the Public Transport Operating Grant (PTOG) to

provincial governments , in turn contract private bus companies to run subsidized services. There is minimal additional expenditure on these services by provincial governments.

– the commuter rail system, Metrorail. Transfers are made to PRASA (Passenger Rail Agency of South Africa) , replaced South African Rail Commuter Corporation, and is responsible for Metrorail, as well as the intercity rail and bus services.

– a taxi recapitalization program. This is financed off the national budget and pays an inflation linked capital grant of R54 300 (from April 2009) to assist taxi owners replace old taxis with new ones meeting nationally determined specifications.

– the Gautrain - a public private partnership, but capital expenditure is overwhelmingly funded by public resources.

– funding is via the Public Transport Infrastructure and Systems Grant (PTISG) - transfers primarily to municipal government; key instrument in shifting responsibility for public transport city government. Capital funding for the new Bus Rapid Transit Projects originates mainly from this grant, with some local contribution.


117

Bus fleet

Province Number of buses

Main operating companies

Eastern Cape 265 Algoa Bus CompanyFreestate 240 Inter State Bus Lines Gauteng 2130 ServicesMpumalanga 440 PutcoKZN 1600 variousLimpopo 190 Great North Northern Cape 40 variousNorthwest 220 variousWestern Cape 910 Golden Arrow TOTAL 6035

Contract type Number Percentage of subsidy budget

Interim contracts 39 68%Tender contracts 66 28%Negotiated contracts 10 4%

TOTAL 115 100%

2005/06 2006/07 2007/08 2008/09Initial allocation 2278.5 2415.2 2536.0 2829.6

Adjustment 19.2 45.1 300.0 154.5

Total allocation 2297.8 2460.3 2836.0 2984.1

Actual subsidy expenditure 2383.7 2695.6 3110.0 3688.8Annual deficit 85.9 235.2 274.0 704.7

Accumulated deficit 321.1 595.1 1299.8

Provincially subsidised bus fleets (source: Dept of Transport 2007)

Contract types in operation in 2009 (source Dept of Transport quoted in Walters 2009)

Accumulating deficit arising from difference between subsidy incurred and actual appropriation (R millions) (source Walters 2009)


118

Commuter rail

A Clear case for rail (High service level – ranks amongst top corridors and rail is clearly more appropriate and cost effective than other modes with passenger numbers at > 20 000 – 30 000 passengers per hour)

B Rail still justified (requires lower level of service than for ‘A’ but higher than current

C Case for rail uncertain (needs further review)

D No case for rail at present

Region Short term

(Rm)Medium term

(Rm)Long term

(Rm)

Tshwane R55.5m R126.0m R105.3m

Wits R2,202m R599m R2,000m

Kwa Zulu R786m R150.7m -

Western Cape R740m R90m R142.5m

Eastern Cape R218m R60m -

Total R4,001m R1,026m R2,248m

Classification of rail corridor priority grading (source SARCC/Metrorail 2006)

Capital investment plans for category A corridors by region for Metrorail excluding rolling stock requirements (SARCC/Metrorail 2006)


119

Taxi recapitalisation

R millions Actual Estimated

2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

Taxi scrapping allowances

0 0 99.5 571.6 460.5 630.8 497.6 471.5 495.0

Taxis scrapped in the financial year

1990 11429 9208 11616 9164 8682 9117

Province Number of taxisEastern Cape 10000

Free State 6000

Gauteng 44000

Mpumalanga 9000

KZN 21000

Limpopo 9000

Northern Cape 1200

Northwest 10000

Western Cape 15000

TOTAL 125200

Total estimated number of minibus taxis by province (source Dept of Transport 2007)

Transfers to taxi owners in respect of taxi recapitalisation (source National Treasurey 2009 & 2010)


120

An indication of viability for self sustaining projects• Roads in the South African model can start at between 4 000

and 4 500 vpd AADT, with approximately 17% heavy vehicles• Rail requires 1 m tonnes per annum (South African Freight

Rail) cf 300 000 tonnes per annum for the BBR concessionnaire



developed but other measures of support need to be considered (eg shadow tolls, market guarantees, increasing the revenue base)



121

Dilemma 3 – Who is responsible?

• Centralization versus decentralization of funds and management

• Community involvement: how does it work and what are pros and cons?

• Capacity to manage and governance issues


122

Dilemma 4 – How to tackle negative spill-overs

• Investing in one region means decreasing competitiveness of other region

• Roads are said to cause spread of HIV/AIDS better roads, more infections: how to address?


123

Dilemma 5 – How do we ensure political acceptance of the need for acceptable maintenance?

• Effective asset management of any infrastructure is never ‘sexy’ when compared to new projects. How do we change that perception?

• The relative size of any road fund in smaller economies makes it an attractive target for the provision of funds for purposes different to that intended. How do we protect against that and preserve the funds for new construction, rehabilitation and maintenance of ROADS?

• The road maintenance backlog in many countries is so large that some roads can NOT be maintained. How do we decide which roads to maintain to the benefit of the overall network?


124

Approaches for involving the private sector in the development of transportation projects, including:

• Leasing• Franchising• Concessioning• Contracting out• Bond financing• Equity investments• Risk or rather Venture capital


125


Leasing• Short life assets <11years, generally mobile.• Examples include Coca Cola distribution fleet in

Tanzania• Municipal vehicles in South Africa• 100 GE diesel electric locomotives in South Africa• Frequently tax advantages• Generally service agreements• Replace with new leased assets at the end of

operational life• Particularly suitable in areas of rapid technological

obsolesence


126


Franchising• Can be used for water distribution but very sensitive• Need recognised brand and need to provide technical

and management support (eg ‘Famous Brands’ in South Africa..Wimpy, Steers, BJ’s)

• Thought of for South African Airways on the historic strength of the brand

• See no reason for why it couldn’t be applied by ACSA in South Africa for municipal airports


127

Which instrument for which aspect?Concessioning• Used very successfully in South Africa for toll road

projects of 500 km lengths over 30 year concessioning periods; currently being looked at by Zimbabwe

• Ownership rests with state• Maputo Port Concession-15 years• Mombasa and Dar es Salaam container handling

concessions, the one in Dar arguably too successful• Many rail concessions which remain under funded and

debated continuously. Gautrain 90% government funded.• Need to review these more seriously as there appears a

fundamental difference between operators and owners• Can asset strip with airlines, highlighting the difference

between financial and economic justification04/22/2023 SARF_RPF Conference, Fernhill:

PMB/Msunduze128


Contracting out• Used for routine state funded infrastructure provision and

maintenance• Traditional mechanism which requires strong

administration• Ownership rests with state or legal entity• Useful to absorb seasonal demands• Effectively being used on the Gauteng Freeway

Improvement Project in South Africa as well as the BRT projects

• Too soon to tell how financially and operationally successful these will be


129


Bond financing• Traditional funding source for rail and ports• Now being used for road financing in South Africa as well

as airport funding (ACSA)• Require credit worthiness and a means to exchange

bonds• Require strong internal Treasury function and budgetary

control• Market very unforgiving• Ownership rests with state or legal entity• Useful to absorb short term capital requirements of say 8

years but not to be used in perpetuity


130

Which instrument for which aspect?Equity Investments• Own equity particularly in mining industry (Australia)• South Africa’s OREX line was initially funded by Iscor

(now Khumba Resources)• Partial equity in concessions• Particularly useful if you have a local stock exchange• But no reason why you can’t list offshore (eg SASOL)• Require strong internal Treasury function and budgetary

control• Market fairly unforgiving but willing to take long term

views• Ownership rests with equity holder or legal entity• Useful to absorb long term capital requirements


131


Venture Capital• Gambling on medium term very high returns• Being used to fund wind energy generation in

MozambiqueRisk/Return expectations• Equity investors five years at between 17% and 50% per



opposed to financial merit04/22/2023 SARF_RPF Conference, Fernhill:

PMB/Msunduze132

Financial Partnerships, including PPP’s

• The World saw a panacea during the 1990’s in PPP’s addressing infrastructure needs

• The following two slides show how this potential solution was addressed, by World Region and by Sector (information from Annual Reports of the IFC)

• I am the first to admit that this information is dated and could form a useful research project for a student!


133

PRIVATE-SECTOR FUNDING - EMERGING MARKETS

Regional DistributionREGION No OF COST %

PROJECTS US$m

Latin America 38 5 980 48%Asia 20 4 947 40%Europe 7 1 007 8%Sub-Saharan Africa 3 102 <1%Central Asia, Middle Eastand North Africa 2 323 3%

12 360 100%

SOURCE: International Finance Corporation - Financing Private Infrastructure Projects, at the peak


134

PRIVATE SECTOR FUNDING-EMERGING MARKETS

Various Infrastructure Sub-sectors

SOURCE: International Finance Corporation - Financing Private Infrastructure Projects, again at the peak

SUB-SECTOR No OF COST %PROJECTS US$m

Power 28 5 706 46%Telecoms (inc ICT) 21 4 861 39%Ports 9 222 2%Pipelines 6 1 092 9%Railroads 3 117 <1%Water 2 362 3%Roads 1 313 2%

12 360 100%


135

Lessons from World experience


• Three general observations:– South America and the East led the way….by

far– The Private Sector will invest in sectors which

generate cash flows without fuss and as quickly as possible….energy and ICT..and which have readily developed billing systems...but can grow too quickly (Enron) if off balance sheet

– Financial returns must be in line with international risk-reward benchmarks for different sectors and for different parts of the World

136







137
