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Tema motorway

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Frederick Senanu Ahiabor
Frederick Senanu Ahiabor

This document provides background information on plans to expand the Accra-Tema Motorway in Ghana from two lanes to four lanes through a public-private partnership. It discusses the strategic importance of the motorway in linking Accra and Tema, as well as serving neighboring countries. It notes that while the government seeks to upgrade the road, it lacks funds to do so. The document proposes a concession agreement to have a private partner design, build, finance, operate and transfer a new four-lane motorway over a 10-20 year period. It also outlines how project risks such as construction, demand, operations and maintenance would be allocated between the government and private sector partner.

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+ Expansion of the Tema- Motorway. From Two to lanes to a Four Lanes.
+ Introduction Pinamont Consulting Group is an infrastructural financing consultancy which provide specialised consultancy services to government and the private sector in infrastructure and project finance. This document is a stakeholder engagement manual prepared guide the the government and the private sector on how to collaborate through a Public Private Partnership (PPP) arrangement, for the expansion of the Accra-Tema Motorway from a two lane dual carriageway into four lane. This stakeholder engagement is necessitated because of the government of Ghanas inability to undertake necessary investment in this infrastructure and/or attract private capital for this strategic national asset.
+ Background of the Accra-Tema Motorway The Accra-Tema Motor Project is best classified as a brownfield project currently seeking a private sector investor to upgrade the existing facility. It was constructed in 1961 as a two (2) lane dual carriage motorway, to serve as a link between the capital city, Accra and Ghanas major Port & Industrial enclave, Tema. The Motorway also serves as an international route to neighboring countries Togo, Benin Cote DIvoire and Nigeria. It is approximately 19 kilometers long with cement concrete surfacing. It is an integral route in the countries National Route 1 (N1) which starts from Aflao (The Volta Region) and ends at Elubo (Western Region) as well as a part of the Abidjan-Lagos Corridor Road.
+ Background of the Accra-Tema Motorway The economic benefit of this project is not disputable. As the only highway linking this two major cities, the Accra-Tema Motorway serves a strategic purpose in the nations development. The motorway serves as a carriage way for commodities including oil, clinker, cement and general goods in transit. Tema as an industrial and port city has the following strategic national assets Tema Harbour (the nations biggest Harbour) serves the country and many land locked countries in West Africa such as Mali and Burkina Faso. The port accounts for nearly 70% of the countries maritime traffic (GIPC1).
+ Background of the Accra-Tema Motorway Tema Industrial Hub which is an enclave for many industries such as a cement factory, an oil refinery, among others. Tema ICT Hub which is projected to become the biggest technology park in the West Africa Sub Region.
+ Pictorial View of the Motorway
+ Pictorial view of the Toll Booth Section
+ Pictorial view of the Toll Booth Section
+ Statistics on the Accra-Tema Motorway Ghana Investment Promotion Agency (GIPC), a government institutions reported the weighted Average Annual Daily Traffic (AADT) as at 2008, was 65,000 vehicles per day. However recent estimate reported by myjoyonline.com a local media organisation put the number of vehicle per day to 30,000. With an average of GH 1 ($0.25) toll charged per day. The daily , monthly and year toll revenues are approximately: Daily GH 30,000 ($7,500) Monthly GH 840,000 ($210,000) Yearly GH 10,080,000 ($2,520,000). Exchange Rate: GH 4 = $ 1.
+ Statistics on the Accra-Tema Motorway According to the head of the governments PPP Unit (cited by Myjoyonline.com), the 30,000 vehicles per day means that the Accra Tema Motorway is the only Highway in Ghana that is able to generate enough revenue to operate as a self financing asset. Ghana Highway Authority in 2013 for instance raked in a revenue of GH 36,000 ($9,000) per day from the Accra-Tema Motorway. With these figures, an economic case can be made for the project.
+ Funding Challenges Currently, the Government through the Ghana Ports and Harbour Authority is reviewing plans to expand the motorway into a 3 lane facility. Government have considered several PPP options to attract needed investment into the expansion project. With several negotiation and deliberations, the government is yet to select a private partner which will undertake the needed expansion on this critical asset. A report cited in one of the national newspaper sums up the governments current challenges in sourcing the needed financing (see next page).
+ Funding Challenges
+ The Deterioration of the Motorway
+ Traffic on this route has become a mainstay
+ Infrastructure Need Since its construction in 1961, the facility has not seen any major facelift over the years despite the strategic role it continues to play in national development. Subsequent governments inability to commit to a systematic reinvestment and maintenance of the motorway has led to current constraints on the facility. Currently, the motorway, which is supposed to suppose to provide a fast link between the two cities, is now a traffic hotspot leading to commuter spending three times the estimable travel time. The facility has not seen any major upgrade despite an expansion of the Tema Port which relies heavily on this route.
+ Infrastructure Need The government realizing the clear need to expand the motorway has undertaken a number of funding initiatives to no success. For instance, the government in 2012 announced plans to expand the number of lanes from 2 to 3. However, this was abandoned two years later due to lack of funds. The government has therefore sought a PPP arrangement that will enable the construction of one additional lane. However, one year after this announcement, there have not been much progress with the expansion project.
+ Services to be Provided Pinamont Consulting Group through its extensive research proposes a concession agreement between the government and a private partner (s) to Design, Build, Finance, Operate and Transfer model (DBFOT). This will entail; The construction of two (2) High Occupancy Toll (HOT) lane on each side of the dual carriage road to ease Traffic on the existing two lanes. Rehabilitation of the existing two lane dual carriage way. Construction of four interchanges to accommodate link roads from Trassaco Valley, Sakumono, Nungua and Ashaiman. As part of the initiative, the private operator should be granted a 10-20 years concession period over which to operate the facility.
+ The Need for Private Sector Participation Ghanas economy has experienced strong economic growth over the past decade. Demand for services especially industrial and port services have increased over the year as well. There is increased competition from neighboring ports like Togo and Benin and thus the need to keep the Tema Port competitive. Government is unable to keep up with countries infrastructure investment, which the minister of finance estimated to be $10 billion per annum over the next 10 year.
+ The Need for Private Sector Participation The governments maintenance and operational credibility when it comes to infrastructure is very poor. In addition, there have been limited involvement of the private sector when it comes to infrastructure projects in Ghana. A private investment in this project is therefore well placed to ensure that; 1. The government is given a fiscal space, to operate. 2. The private sector can utilise its expertise in the construction and subsequent maintenance of this facility.
+ The Need for Private Sector Participation 3. The private sector can use it as an opportunity to foster more partnership agreement with the government. 4. The private sector can bring to bears its expertise in efficiency to bear on the project.
+ Allocation of Risk The following risks have been identified and needs to be effectively allocated to various parties through to ensure a sound risk management of the project risk. Construction Risk Demand Risk Operation and Maintenance Risk Regulatory and Legal Risk Political Risk
+ Construction Risk Construction Risk: Construction risk should be transferred to the private sector through an Engineering Procurement & Construction (EPC) contract. The private sector partner can decide to sub-contract the construction risk to an engineering counterparty or retain the risk. The contract should be structured on a turnkey basis which ensure that the engineer has the freedom to design and build the facility with enough flexibility. At the same time, the engineer will bear all construction related costs/risk such as delays, construction cost overrun, among others. The government obligation with regards to construction risk will be as minimal. Their intervention will only be needed in events like Force majeure, or natural disasters.
+ Operation and Maintenance Risk Similar to the construction risk, the private partner should be made to take up all operation and management risk that will arise with the project. Since the construction risk is managed by the private sector, there will be enough incentive if the private sector is allowed to mange and undertake maintenance of the road project over the concession period. This allocation of risk to the private sector will ensure that the private sector will induce maximum efficiency and quality throughout the construction phase since any risk arising from construction phase will be borne by the private sector during the operational phase.
+ Demand Risk The demand risk should be a shared responsibility between the private sector and the government. The concession will give the private partner the right to charge tolls on the newly constructed lanes. The existing lanes are already tolled and there shouldnt be any problem tolling the new lanes. Therefore there is already a steady stream of revenue once the contract becomes operational. However, special arrangements are needed to ensure that there is enough traffic on these lanes to meet the demand estimate. Utilizing the High Occupancy Toll (HOT) lanes, will ensure that traffic on these lanes are smoothened.
+ Demand Risk (contd.) Given that a lot of long vehicle carry heavy goods and material to and fro the Tema Port, via the motorway, the design of the contract can be such that all heavy duty and long vehicle (Goods Only) should be compelled to use these HOT lanes. This will ensure that their impact on reducing the life span of roads is limited. In addition, all corporate vehicles can be instructed to use these hot lanes as well. The hot lane can be opened to private cars and commercial transport firms during periods of high traffic volume. The use of the Hot lanes will also incorporate a variable pricing model where vehicles who use these roads will pay a slightly higher tolls during rush hours.
+ Demand Risk (contd.) To compensate for periods of low traffic volume, the government can pledge to cover any revenue shortfall so that the project remains viable. Alternatively, the government can convert these low traffic volumes to additional years which can be added to the current concession period to ensure that the private sector is able to recoup its investment and make returns on the project as well.
+ Regulatory and Legal Risk The regulatory and legal risk will be allocated to the government. The government is well placed to management all legal and regulatory requirement that the project will entail. The construction of HOT lanes will be the first of its kind in Ghana. Given the necessary changes, the government will be tasked to ensuring that all necessary legal and regulatory requirements are taken care off. This will ensure that the project can be smoothly undertaken and operated without regulatory and legal breaches.
+ Stakeholder Engagement Sensitization of road users and general public on Hot Lane. Experiences from USA and Europe where these Hot Lane are popular shows that its introduction can be quite difficult without necessary consultation and stakeholder engagement. The partners need to sensitize road users on the need for these facilities, the pricing and any changes to existing routines. Willingness to Pay Survey Willingness to pay survey should be conducted as a matter of urgency to determine how much can be charged on these Hot Lanes. This survey will have an implication on the commercial viability of the project as well as the number of years under which the concession can be granted.
+ Conclusion This stakeholder engagement manual is aimed at stimulating discussion between the government and private sector. The Accra-Tema Motorway is a viable asset that is able to recoup any meaningful investment made into it. However, this is only possible if the right incentive is provided to ensure a win-win situation for parties involved. We at Pinamont Consulting Group, believes that this manual is well position to stimulate discussion and facilitate the bankability and financing of this strategic national asset.
+ References GIPC, Upgrading of Accra Tema Motorway: http://gipcghana.com/11-investment- projects/infrastructure/construction-property/road- construction/122-upgrading-of-accra-tema-motorway.html Myjoyonline.com: Tema Motorway: 30,000 cars pay tolls daily but no facelift:http://myjoyonline.com/news/2014/March-18th/tema- motorway-30000-cars-pay-tolls-daily-but-no-facelift.php http://graphic.com.gh/news/general-news/34255-accra-tema- motorway-to-expand-into-3-lanes.html http://m.peacefmonline.com/pages/business/news/201307/168681 .php

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Tema motorway

  • 1. + Expansion of the Tema- Motorway. From Two to lanes to a Four Lanes.
  • 2. + Introduction Pinamont Consulting Group is an infrastructural financing consultancy which provide specialised consultancy services to government and the private sector in infrastructure and project finance. This document is a stakeholder engagement manual prepared guide the the government and the private sector on how to collaborate through a Public Private Partnership (PPP) arrangement, for the expansion of the Accra-Tema Motorway from a two lane dual carriageway into four lane. This stakeholder engagement is necessitated because of the government of Ghanas inability to undertake necessary investment in this infrastructure and/or attract private capital for this strategic national asset.
  • 3. + Background of the Accra-Tema Motorway The Accra-Tema Motor Project is best classified as a brownfield project currently seeking a private sector investor to upgrade the existing facility. It was constructed in 1961 as a two (2) lane dual carriage motorway, to serve as a link between the capital city, Accra and Ghanas major Port & Industrial enclave, Tema. The Motorway also serves as an international route to neighboring countries Togo, Benin Cote DIvoire and Nigeria. It is approximately 19 kilometers long with cement concrete surfacing. It is an integral route in the countries National Route 1 (N1) which starts from Aflao (The Volta Region) and ends at Elubo (Western Region) as well as a part of the Abidjan-Lagos Corridor Road.
  • 4. + Background of the Accra-Tema Motorway The economic benefit of this project is not disputable. As the only highway linking this two major cities, the Accra-Tema Motorway serves a strategic purpose in the nations development. The motorway serves as a carriage way for commodities including oil, clinker, cement and general goods in transit. Tema as an industrial and port city has the following strategic national assets Tema Harbour (the nations biggest Harbour) serves the country and many land locked countries in West Africa such as Mali and Burkina Faso. The port accounts for nearly 70% of the countries maritime traffic (GIPC1).
  • 5. + Background of the Accra-Tema Motorway Tema Industrial Hub which is an enclave for many industries such as a cement factory, an oil refinery, among others. Tema ICT Hub which is projected to become the biggest technology park in the West Africa Sub Region.
  • 6. + Pictorial View of the Motorway
  • 7. + Pictorial view of the Toll Booth Section
  • 8. + Pictorial view of the Toll Booth Section
  • 9. + Statistics on the Accra-Tema Motorway Ghana Investment Promotion Agency (GIPC), a government institutions reported the weighted Average Annual Daily Traffic (AADT) as at 2008, was 65,000 vehicles per day. However recent estimate reported by myjoyonline.com a local media organisation put the number of vehicle per day to 30,000. With an average of GH 1 ($0.25) toll charged per day. The daily , monthly and year toll revenues are approximately: Daily GH 30,000 ($7,500) Monthly GH 840,000 ($210,000) Yearly GH 10,080,000 ($2,520,000). Exchange Rate: GH 4 = $ 1.
  • 10. + Statistics on the Accra-Tema Motorway According to the head of the governments PPP Unit (cited by Myjoyonline.com), the 30,000 vehicles per day means that the Accra Tema Motorway is the only Highway in Ghana that is able to generate enough revenue to operate as a self financing asset. Ghana Highway Authority in 2013 for instance raked in a revenue of GH 36,000 ($9,000) per day from the Accra-Tema Motorway. With these figures, an economic case can be made for the project.
  • 11. + Funding Challenges Currently, the Government through the Ghana Ports and Harbour Authority is reviewing plans to expand the motorway into a 3 lane facility. Government have considered several PPP options to attract needed investment into the expansion project. With several negotiation and deliberations, the government is yet to select a private partner which will undertake the needed expansion on this critical asset. A report cited in one of the national newspaper sums up the governments current challenges in sourcing the needed financing (see next page).
  • 13. + The Deterioration of the Motorway
  • 14. + Traffic on this route has become a mainstay
  • 15. + Infrastructure Need Since its construction in 1961, the facility has not seen any major facelift over the years despite the strategic role it continues to play in national development. Subsequent governments inability to commit to a systematic reinvestment and maintenance of the motorway has led to current constraints on the facility. Currently, the motorway, which is supposed to suppose to provide a fast link between the two cities, is now a traffic hotspot leading to commuter spending three times the estimable travel time. The facility has not seen any major upgrade despite an expansion of the Tema Port which relies heavily on this route.
  • 16. + Infrastructure Need The government realizing the clear need to expand the motorway has undertaken a number of funding initiatives to no success. For instance, the government in 2012 announced plans to expand the number of lanes from 2 to 3. However, this was abandoned two years later due to lack of funds. The government has therefore sought a PPP arrangement that will enable the construction of one additional lane. However, one year after this announcement, there have not been much progress with the expansion project.
  • 17. + Services to be Provided Pinamont Consulting Group through its extensive research proposes a concession agreement between the government and a private partner (s) to Design, Build, Finance, Operate and Transfer model (DBFOT). This will entail; The construction of two (2) High Occupancy Toll (HOT) lane on each side of the dual carriage road to ease Traffic on the existing two lanes. Rehabilitation of the existing two lane dual carriage way. Construction of four interchanges to accommodate link roads from Trassaco Valley, Sakumono, Nungua and Ashaiman. As part of the initiative, the private operator should be granted a 10-20 years concession period over which to operate the facility.
  • 18. + The Need for Private Sector Participation Ghanas economy has experienced strong economic growth over the past decade. Demand for services especially industrial and port services have increased over the year as well. There is increased competition from neighboring ports like Togo and Benin and thus the need to keep the Tema Port competitive. Government is unable to keep up with countries infrastructure investment, which the minister of finance estimated to be $10 billion per annum over the next 10 year.
  • 19. + The Need for Private Sector Participation The governments maintenance and operational credibility when it comes to infrastructure is very poor. In addition, there have been limited involvement of the private sector when it comes to infrastructure projects in Ghana. A private investment in this project is therefore well placed to ensure that; 1. The government is given a fiscal space, to operate. 2. The private sector can utilise its expertise in the construction and subsequent maintenance of this facility.
  • 20. + The Need for Private Sector Participation 3. The private sector can use it as an opportunity to foster more partnership agreement with the government. 4. The private sector can bring to bears its expertise in efficiency to bear on the project.
  • 21. + Allocation of Risk The following risks have been identified and needs to be effectively allocated to various parties through to ensure a sound risk management of the project risk. Construction Risk Demand Risk Operation and Maintenance Risk Regulatory and Legal Risk Political Risk
  • 22. + Construction Risk Construction Risk: Construction risk should be transferred to the private sector through an Engineering Procurement & Construction (EPC) contract. The private sector partner can decide to sub-contract the construction risk to an engineering counterparty or retain the risk. The contract should be structured on a turnkey basis which ensure that the engineer has the freedom to design and build the facility with enough flexibility. At the same time, the engineer will bear all construction related costs/risk such as delays, construction cost overrun, among others. The government obligation with regards to construction risk will be as minimal. Their intervention will only be needed in events like Force majeure, or natural disasters.
  • 23. + Operation and Maintenance Risk Similar to the construction risk, the private partner should be made to take up all operation and management risk that will arise with the project. Since the construction risk is managed by the private sector, there will be enough incentive if the private sector is allowed to mange and undertake maintenance of the road project over the concession period. This allocation of risk to the private sector will ensure that the private sector will induce maximum efficiency and quality throughout the construction phase since any risk arising from construction phase will be borne by the private sector during the operational phase.
  • 24. + Demand Risk The demand risk should be a shared responsibility between the private sector and the government. The concession will give the private partner the right to charge tolls on the newly constructed lanes. The existing lanes are already tolled and there shouldnt be any problem tolling the new lanes. Therefore there is already a steady stream of revenue once the contract becomes operational. However, special arrangements are needed to ensure that there is enough traffic on these lanes to meet the demand estimate. Utilizing the High Occupancy Toll (HOT) lanes, will ensure that traffic on these lanes are smoothened.
  • 25. + Demand Risk (contd.) Given that a lot of long vehicle carry heavy goods and material to and fro the Tema Port, via the motorway, the design of the contract can be such that all heavy duty and long vehicle (Goods Only) should be compelled to use these HOT lanes. This will ensure that their impact on reducing the life span of roads is limited. In addition, all corporate vehicles can be instructed to use these hot lanes as well. The hot lane can be opened to private cars and commercial transport firms during periods of high traffic volume. The use of the Hot lanes will also incorporate a variable pricing model where vehicles who use these roads will pay a slightly higher tolls during rush hours.
  • 26. + Demand Risk (contd.) To compensate for periods of low traffic volume, the government can pledge to cover any revenue shortfall so that the project remains viable. Alternatively, the government can convert these low traffic volumes to additional years which can be added to the current concession period to ensure that the private sector is able to recoup its investment and make returns on the project as well.
  • 27. + Regulatory and Legal Risk The regulatory and legal risk will be allocated to the government. The government is well placed to management all legal and regulatory requirement that the project will entail. The construction of HOT lanes will be the first of its kind in Ghana. Given the necessary changes, the government will be tasked to ensuring that all necessary legal and regulatory requirements are taken care off. This will ensure that the project can be smoothly undertaken and operated without regulatory and legal breaches.
  • 28. + Stakeholder Engagement Sensitization of road users and general public on Hot Lane. Experiences from USA and Europe where these Hot Lane are popular shows that its introduction can be quite difficult without necessary consultation and stakeholder engagement. The partners need to sensitize road users on the need for these facilities, the pricing and any changes to existing routines. Willingness to Pay Survey Willingness to pay survey should be conducted as a matter of urgency to determine how much can be charged on these Hot Lanes. This survey will have an implication on the commercial viability of the project as well as the number of years under which the concession can be granted.
  • 29. + Conclusion This stakeholder engagement manual is aimed at stimulating discussion between the government and private sector. The Accra-Tema Motorway is a viable asset that is able to recoup any meaningful investment made into it. However, this is only possible if the right incentive is provided to ensure a win-win situation for parties involved. We at Pinamont Consulting Group, believes that this manual is well position to stimulate discussion and facilitate the bankability and financing of this strategic national asset.
  • 30. + References GIPC, Upgrading of Accra Tema Motorway: http://gipcghana.com/11-investment- projects/infrastructure/construction-property/road- construction/122-upgrading-of-accra-tema-motorway.html Myjoyonline.com: Tema Motorway: 30,000 cars pay tolls daily but no facelift:http://myjoyonline.com/news/2014/March-18th/tema- motorway-30000-cars-pay-tolls-daily-but-no-facelift.php http://graphic.com.gh/news/general-news/34255-accra-tema- motorway-to-expand-into-3-lanes.html http://m.peacefmonline.com/pages/business/news/201307/168681 .php