PONDER MY THOUGHTS: TOLL ROAD & OTHER AGREEMENTS: CONSULT OUR GRANDCHILDREN!

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2051

BY Andrew Keili

“For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish’.”

Luke 14:28-30

Let me start by relating the story of Aunty C. When I worked at Sierra Rutile, Aunty C, a family friend had the bright idea of going into the business of selling cakes she baked to mine workers.  Sales for the initial two weeks went very well with her outselling her competitors. She was buoyant…”A sell pass den all. If you see way me cake den big big!”, she remarked. She later took stock only to find out she had lost money. Even though she was not the brightest bulb in the room, she stumbled on the solution…..”Lajila, Andrew, a losses. A tink say di cake den too big big. Nex tem a go make den small small!”. She survived for some time until some unscrupulous trader (suspected to be an agent of a competitor) sold her some chemical used on the mine as baking oil. The bout of diarrhoea amongst her loyal cake eaters forced Aunty C out of business!

Moral of the story? Planning to achieve a desired outcome is important in any type of business and one must be aware of pitfalls including the competition.

Aunty C’s story seems to be lost on our leaders who sign long term infrastructure agreements. Now it is a debate over the toll road. It is a safe bet that soon, we will have another national argument over a long-term agreement about some other infrastructure project. With a massive infrastructure deficit experienced in many African countries, Sierra Leone not excepted, it is not surprising that countries resort to Build Own Operate (BOT) schemes (or their various derivatives- build-own-operate-transfer (BOOT), build-lease-transfer (BLT), design-build-operate-transfer (DBOT) etc.), especially as funds may not be available to implement such projects. This makes perfect sense as it will allow us to develop our infrastructure – water, airports, roads, electricity etc.

Over the past fifteen years or so, we have witnessed long term infrastructure agreements signed by government with much fanfare and political spin (“Salone nor get for spend one Leone sef”!), indicating how much the country will gain, only to be followed by hitches and hardships associated with such projects. We have seen agreements come under all kinds of guises. Some are as a result of some bold political pronouncement made by the President, which supporters tout as the best thing to have happened to this country since sliced bread. Others may be unsolicited proposals brought up by dubious external groups through bent “fixers” with political connections. Still others may be as a result of initiatives undertaken by particular Ministers for good or ill. Whatever the genesis of such agreements, most go through the same harried procedures for adoption – hurried adoption by a compliant cabinet, rushed adoption by parliament and equally rushed concurrence by the Law Officers Department, with morsels of information fed to a hapless public.

The toll gate is a case in point. The China Railway Seventh Group’s (CRSG) BOT scheme for the Wellington-Masiaka road involved the widening of a 62 km two-lane highway into four. The advantages of fixing the road corridor were plenty – less congestion with wider road, safer road, less wear and tear on vehicles, shorter travelling time, development and economic growth etc. The road is estimated to have cost $161 million. Negotiations for it began in 2012. It was initially rejected by lawmakers before being reintroduced and eventually passed, critics say in suspicious circumstances in 2016. The decision was made to begin levying charges with only 10 km of the road completed.

The massive hike in toll gate fees has obviously met with scepticism and alarm by the public. The concomitant increases in fares and hence cost of goods transported to and from the provinces is not unexpected.

Many aspects of the agreement seem to be shrouded in secrecy. Not surprisingly, there have been incessant criticisms of the project from its inception to now. There were criticisms that the $161m project cost was three times what would be expected of a 62 km road. There were reports that by the agreement, 95 per cent of the gross annual toll revenue will go to CRSG as repayment, with the government cashing in the 5 per cent and that CRSG would also enjoy a corporate tax waiver for 10 years.

Fast forward to now, when the Minister of Works has announced toll fee increases of between 122% to 282%. The criticisms from an economically overburdened public have been severe. Surprisingly, statements by the Minister have indicated that all may not be well with the agreement and its implementation. It is clear that the Ministry may not even know anything about the financial performance of the company, is ignorant about toll statistics, has not seen the report of the evaluation committee set up earlier by the President to investigate the toll road contract and has no knowledge about whether the government is receiving 5 or 10% (whatever the correct figure) of the yearly tolling income after operation and maintenance costs as purportedly indicated in the contract.

Such long-term agreements have extended to several sectors and projects. We have one that relates to the new airport which some say is overpriced and ill-conceived and will impact on airfares over the long-term. We have, over the life of the previous government and this one had duplication of agreements related to the Pepel port and railway with several companies – African Minerals, China Kingho, Arise etc. We have also heard a raft of agreements for the electricity sector. All of these have attracted so much tittle tattle, with accusations of complicity on the part of some highly placed people.

The question may be legitimately asked about whether governments are not being short-changed with such agreements as they are badly formulated and implemented and not necessarily because BOT is a bad idea. BOT may sound like a win-win, but many things can go wrong. There are lots of variables that can turn what appears to be a dream arrangement into a complete nightmare. BOT projects are exceedingly complex from both a financial and a legal point of view. They require an extended period of time to develop and negotiate. There are several macroeconomic risks to be considered including foreign exchange risk; currency devaluation risk; currency inconvertibility; interest rate risk; and inflation risk. It is not uncommon for BOT schemes to be accompanied by an adjustment for currency devaluation.

 The sceptic may want to ask so many questions of our long-term agreements. Why would details of major agreements – some spanning over 25 years be either cloaked in secrecy or be so misunderstood and misinterpreted? Whatever happened to the tried and tested concept of doing feasibility studies for projects first and ensuring that projects have a firm basis and that costs are not padded? Whatever happened to stakeholder consultations, which we seem to be so good at for every other project under the sun? Whatever happened to proper duty of care by the Law Officers’ Department to avoid the spate of embarrassments we have faced with duplication of agreements or lack of attention to the finer details? Whatever happened to parliament exercising due diligence in checking these agreements and discussing with knowledgeable people to understand the details of such agreements? Who advises the President on these issues?

Where the hell is this toll agreement in any case? If the English version is not available, can someone give us the Chinese for translation? Thankfully, Parliament, which passed the agreement with their eyes closed has now asked for a pause on the proposed increase until they fully open their eyes.

But sincerely, we have to fight for our grandchildren who will have to pay for these snafus. Even though some are in nappies now and others have not even been born, they will be displeased to learn that copies of many agreements may not even have been made available to Joe Public for review, may not have even been properly read by our lawmakers and that their implementation was in many cases shady. Many of these long term agreements have started affecting us and their effects may continue with our grandchildren on an even more massive scale. We are here as proxies for them and they may never forgive us for fiddling while Rome burnt.

Ponder my thoughts.

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