Is the finance ministry fighting the Road Fund?

By Joel Ogwang

A ‘cold war’ has for the past two years been brewing in the corridors of the finance andworks and transport ministries over the full operationalisation of the Uganda Road Fund (URF) as a second-generational fund.

Bone of contention

The URF Act, 2008 empowers URF to generate revenue from Road User Charges (RUCs) such as fuel levy, transit fees, road licences, tolls and axle load fines and disburse it to its designated agencies.

However, this has not been possible since 2010 when the fund was rolled-out because under the Uganda Revenue Authority (URA) Act, the tax body cannot deposit any revenues generated from any of its many sources into any account other than the Consolidated Fund. 

While URF has made several attempts to reconcile the URF and URA acts to ensure revenues accruing from RUCs are deposited into the fund’s accounts at the Bank of Uganda, the finance ministry has been accused of frustrating its move for fear of losing control over the body’s expenditures.

During a URF mid-term national budget review workshop recently, works state minister Eng. John Byabagambi accused the finance ministry for delaying the process to reconcile the URA and URF acts

“We should have URF generating its own revenue and only getting a top-up from the treasury in case of inadequacy,” he said.

“I don’t know why the finance ministry is fighting URF.” The criticism continued at a roads maintenance workshop in Kampala when eight MPs accused the finance ministry of frustrating URF from executing its mandate of transforming Uganda’s roads sector.

“What it (finance ministry) is doing is like giving birth to a baby and refusing to feed it,” said Iddi Isabirye, the Bunya South MP.

Nakifuma MP Kafeero Ssekitoleko noted that until Uganda creates an independent URF akin to the Kenya Road Fund, her roads would continue to deteriorate.

“In Kenya, all road user charges are directed to the Kenya Road Fund. Because they have an independent road fund, their roads are first-class,” he said.

Why URF was created

The Government created URF, a pool of funds for sustainable funding of roads, after a study that found out that funding roads from the Consolidated Fund had failed to meet expectations.

This is because of the ever-changing state priorities. It was envisioned that URF would lessen the burden on the Government by ensuring a fee-for-service package levied on road users.

In establishing URF, Uganda followed in the foot-steps of 30 other African states, including Kenya, Namibia, Tanzania, Rwanda and Zambia .

The URF Act states that the fund will run parallel with state and development partners’ funding. Being a second-generation fund, URF is legally mandated to collect and disburse monies to designated agencies                        depending on agreed work plans.

Revenue

Currently, URA levies fuel import tax of sh850 per litre of petrol and sh530 for a litre of diesel off fuel tankers from Kenya distribution depots to Ugandan retail outlets.

“But we are asking the Government to only give us sh308 per litre of petrol and sh192 per litre for diesel,” says Eng. Dr. Michael Odongo, the URF executive director.

At the present fuel import tax rate, sh309b would be raised from fuel levy, providing sh370b in total when other potential sources of revenue are accounted for.

URF envisioned collecting sh283.8b from RUCs, with fuel levy the most potent. In the 2008/09 financial year, sh288.1b was realised from taxing 338.9 million litres of petrol and sh329.8b from 622.3 million litres of diesel, all totaling sh617.9b.

Sh60b would be generated from traffic Act fees, driver permits and axle load fines. “Given the budget provision of sh283.8b, this (sh60b) would leave a balance of sh223.8b to be met from a fuel levy,” a URF one-year maintenance plan and expenditure programme reads.

Direct transfer of fuel levy from URA to URF was to commence June, 2010, but met a legal lacuna between the URA Act, 1991 and URF Act, 2008.

Due to failure to repeal the URA Act, URF is operating as a department in the finance ministry, accessing funds from the treasury, a scenario partly blamed for Uganda’s poor road network. 

Uganda spends only 0.366% of its GDP and 30% of its total annual national budget to the works and transport sector on roads maintenance.

With such a statistic, experts say it is not surprising that out of its 20,000kms of the national road network, only 3,500km are paved or tarmacked.

URF estimates a backlog of 1,800km on paved national roads, requiring sh450b to adequately address the roads messes. 

What the finance ministry must do

Considering that in Uganda, Parliament is the law making arm of the Government, it is the same institution that can repeal a law in use.

“But Parliament cannot repeal the (URA and URF) Acts unless the finance ministry writes to it, asking it to amend the URF Act,” says a source at URF.

“But the finance ministry has intentionally refused to make the move. As it stands, our hands are tied. We need to be collecting our revenues, but we cannot because of the law,” says Odongo. 

“If we, as a country, want to transit into the mid-income status, we have to create a road fund independent of state funding.”

Citing Ghana, Prof. Gennaro Odoki, an international consultant on road management and engineering, notes that Uganda needs to increase its road sector budgetary allocation from 30% to 88% to realise better roads.

This would cause a jump in URF’s revenue from sh280b to sh885.28b. “URF needs adequate funding if it is to meet its objectives and transform our roads,” he says. “This is what Ghana did, and today has one of Africa’s best road networks.”

Ministry responds

Chris Kasaami, the finance ministry permanent secretary, denied the ministry is sabotaging amendments to the URF and URA Acts. He said the works ministry has written to the Attorney General (AG) for interpretation of the law regarding URA and URF Acts.

“We have tried our best under the law (to ensure the Acts are harmonised), but we are not a law making body,” he said.

“We will follow the law when it is made, but also, URF makes its own budget and gets funding from the treasury.”

URF has drafted amendments and forwarded it to the finance ministry. “This issue should have been solved yesterday to guarantee funding for roads,” says the source.

“We are waiting for the (finance) ministry to respond.”  Finance minister Maria Kiwanuka could not be reached for a comment.