Risk Management in Transport PPP Projects
In the Islamic Countries
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Box 21 Contract remuneration schemes: the TRAC concession
In their Assessment of Public-Private Partnerships in Mozambique, Fischer & Nhabinde describe
the remuneration scheme of the National Road N. 4 part of the Trans African Concessions
(TRAC) toll road jointly implemented by South Africa and Mozambique, under responsibility of
South Africa. The project was set up to be self-sustainable on the basis of the collection of tolls
from the users. The concessionary company has to pay 5% of toll revenue to the government
(turning to 10% upon repayment of the loans). VAT and corporate income tax are also to be paid.
TRAC benefits from an incentive in terms of tax payment, namely a percentage reduction up to
reaching a pre-defined demand threshold. The report however mentions in this respect that it is
not clear whether the government has an independent monitoring system of traffic flows, which
may compromise the factual application of such clause or its appropriate monitoring. Overall the
report considers the scheme as successful under the functional standpoint and traffic appears to
be higher than originally forecasted. Some technical problems are mentioned which relate to the
slightly worse condition of the road, likely due to the traffic levels exceeding the forecasted ones
(due to import of low price second hand cars and reduction of the toll road rates in real terms as
price adjustment is linked to Consumer Price Index and no increases occurred at the time the
report was elaborated), and inappropriate monitoring of truck loads in Mozambique. Other
problems are also mentioned in the report which relate to the unavailability of emergency and
ambulance services along the road and unauthorized construction on the land deserved for future
expansion of the road (Fischer & Nhabinde, 2012).
The TRAC implementation scheme is also meaningful in terms of concerns by the governments at
the time the concession was implemented as this was the first toll road project in Mozambique
and uncertainties existed about the reaction by the road users to the introduction of tolls. In
order to mitigate this risk the two governments guaranteed both the debt and the equity (20% of
the total project cost). Furthermore, rates inMozambique were subsidized by the tolls from South
Africa and discounts were adopted for public transport (Fischer & Nhabinde, 2012).
The information publicly available on the press and on public articles is not entirely consistent
in terms of positive or negative performance of the PPPs in economic and financial terms or
more generally with reference to the risk/benefit sharing elements usually considered in the
PPP concession agreements in Mozambique, including the concession variable fees depending
on extra profits, payment of taxes (net of possible investment incentives), employment of
national personnel generated by the PPP etc. Evidences presenting historical series of the
performance of the concessions over time, since their start year are not available and some press
articles are available either reporting in negative or positive terms on the performance of some
concessions over different and limited reporting periods, possibly also reflecting contingent
situations which do not allow presenting a reliable conclusion in the framework of this report,
also taking into consideration the reliability issue of the performance indicators of the
concessions as in the State Account Audit report for the year 2017 by the Supreme Audit
Institution.