Ghana Priorities: Rural Transport
Technical Report
The Problem
The economic growth literature suggests that the volume of infrastructure stock as well as its quality positively and impacts economic growth by, among others, decreasing the cost of production and transportation of goods and services, improving the productivity of input factors, and creating indirect positive externalities. The extant evidence in Ghana, however, depicts a significant deficit in both volume and quality of infrastructure, thereby, limiting the country’s potential in harnessing its resources. The road infrastructure, for example, has a total network of 78,402 kilometers with only 49% either maintained or rehabilitated. In addition, the total track length of the rail network is 1300km, with the rail industry operating a route length of 947km. Notably, up to 60% of the rail network is not used on a regular basis, with the decay of the rail infrastructure often cited among the main causes. There is, thus, a strong need for interventions aimed at revamping and extending both the road and rail routes to link important points, especially rural areas to main district capitals to enhance economic activities. Public policies should, thus, direct economic resources towards developing such infrastructure. This is necessary to boost the competitiveness in doing business in Ghana and stimulate and enhance the country’s growth prospects.
Intervention 1: Development of Rural Roads
The greater part of the inland transport in Ghana happens on the roads, with the road transport system taking up 96% of freight and 97% of passenger traffic. However, the road network is poor, with only 49% of the total length of the road network either maintained or rehabilitated. Of particular note, the feeder roads networks constitute 62% of the total road network. These feeder roads link a large part of rural communities, where the majority of the population lives, to main centers of commerce, among others. In addition, many of the tourist attraction in Ghana, e.g., Kakum and Bole National Parks, Tagbo & Wli waterfalls as well as Mount Afadjoto, are all located in rural areas. However, 65% of feeder roads is deemed to be not in good shape. This limits commerce in the rural areas and the contribution of the rural economy to Ghana economic growth prospects. Committing public resources to develop the road network, particularly in agricultural producing areas as well as tourist attractions, has the potential to enhance the welfare of rural dwellers as well as improving Ghana’s growth prospects.
Implementation Considerations for road intervention
The intervention consists of the construction of 1888km of roads to be completed over a period of 11 years. We assess the viability of the intervention over a 30-years period, starting in 2019. The expected net present values of the cost of the project is GHS5.3 billion at 8 percent discount rate.
Costs and Benefits
Costs
The total cost of the project comprises construction cost, including a 22.5% cost overrun, routine and periodic road O&M costs. The total estimated cost for the intervention amounted to GHS5.3 billion at 8 percent discount rate. An annualized cost breakdown is further provided.
Benefits
The total monetized benefit for the intervention encompasses a reduction in generalised cost (comprising vehicle operating cost, and travel time), carbon emission avoided, reduction in transportation cost and reduction in post-harvest losses. The expected total net present value of the benefit for the road intervention is estimated to be GHS6.5 billion at 8% discount rate.
Intervention 2: Rehabilitation and expansion of Railway tracks
Railway transport is a viable alternative to road transport especially regarding the transportation of bulk cargoes and freights across the country. However, the poor state of the Ghana railway transport sector has remained a drag on the development of the sector and the economy. Rail transport accounts for a mere 4% and 3% of passenger and freight traffic in Ghana, respectively. Although there were initially only two operational railway lines; the Western and Eastern railway lines, only the eastern line has remained operational as the western railway line was suspended in 2008. It is noteworthy to highlight the meagre coverage of the rail tracks network of 947 km, out of which more than 60% is often out of use due the poor state of disrepair. Public investments in modern railway system would improve Ghana international competitiveness and market access, stimulate industrial and labour productivity growth rates, attract agglomeration effects and boost economic growth with huge social welfare implications.
Implementation Considerations for rail intervention
The rail intervention project consists of the rehabilitation of 668 km of existing narrow gauge tacks by converting them into single-tracks standard gauge as well as the expansion of rail networks to the northern region of Ghana by constructing new standard gauge tracks with a total length of 3340km. We assess the viability of the intervention over a 30-years period, starting in 2019. The expected net present value of the cost of the rail project is GHS72.1 million per kilometer at 8 percent discount rate.
Costs and Benefits
Costs
The total cost of the rail project comprises new construction and rehabilitation cost, routine and periodic track maintenance costs, rolling stock capital cost as well as the rolling stock maintenance cost. The expected total net present value of the cost for the rail intervention is estimated to be GHS 72.9 million per kilometer. An annualized cost breakdown is further provided.
Benefits
The total measured benefit for the rail intervention encompasses travel time savings, avoided cost of road transport, carbon emissions avoided, accident fatalities avoided and reduction in postharvest losses. Other expected benefits include the residual values accruing from both new track construction and rehabilitation of existing tracks. The expected net present value of benefits for the rail intervention is estimated to be GHS109 million per kilometer.
Key Take Away
There is clear economic justification for public policies to direct economic resources to road and rail infrastructure development in rural areas in Ghana. This paper arrived at this determination by comparing the expected cost of committing such resources to financing road and rail infrastructure against the expected benefits.
Specifically, for road infrastructure, we identify and monetize four (4) benefits from building roads that link certain high agricultural producing areas and tourist attractions to nearest main centers in the country. These are generalized cost savings, value of carbon emissions avoided, transport cost savings, and reduction in post-harvest losses (PHL). Of these, the reduction in the PHL brings about the greatest gain.
After accounting for all expected costs, including cost overruns, the analysis indicates that linking the identified areas of high agricultural production and tourist attractions to nearest main centers in the country will return 123 pesewas for every cedi spent. This informs that the project will deliver positive net present value to the country.
The rail intervention project involves the conversion of 668km of existing narrow gauge to standard to single-track standard gauge 1,435 mm (4 ft 8 1⁄2 in) and the construction of new 3340km rail tracks. Similar to the road intervention project, we identify and quantify, in monetary terms, six benefits that are reasonably expected to result from the implementation of this intervention. These are time savings, avoided cost of road transport, revenue from increased passenger traffic, carbon emissions saved, accident (road) savings, and post-harvest losses. Among these, time savings presents the highest benefit.
Compared to the expected cost of the rail project, the analysis shows that a cedi spent on rail intervention returns 150 pesewas per kilometer, confirming the viability of the intervention.