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Financing and Sustainability

One of the most difficult problems faced by most Corridor Management Committees is sustainable financing. Without it, much time in spent on pursuing financing for each activity rather than on the corridor improvement tasks. Some methods that have been developed are described below.

It is human nature to work harder when you have a financial stake in an activity. It is therefore recommended that organisations participating in the CMC should contribute some membership dues on an "ability to pay" formula. As major beneficiaries, port and terminal operators should be major supporters of the CMC and committed to making the improvements at the port that complement the inland improvements from which they will benefit. Ports compete for cargo. The efficiency of port operations and scope and efficiency of their inland transport and logistics system are major competitiveness factors.
The CMC has a key role to play in achieving this competitiveness. Each member government will benefit from improvements on the Corridor. Ports are major generators of job growth in the port city and therefore government has a major stake in maintaining and increasing the current traffic through its port. For example, a 1997 study of the impact of the port of Durban, South Africa on the municipal area, estimated that one port job was created for every 5,000 tonnes of additional cargo through the port. In addition, it attributed 24,000 jobs and approximately Rand 950 million in wages to businesses that serve the port and shippers. It was also estimated that these ancillary businesses spend about R500-R550 million locally for goods and services generating an additional 6,500 - 7,000 jobs in metropolitan Durban. The port country benefits from better transport to inland economic centers and the landlocked countries gain as both user and transit country in terms of job growth and access to production inputs and consumer goods at a better price. Improved overload control enforcement and decreased road accidents mean concrete savings for the corridor countries. Therefore all Corridor countries should be able to devote staff time, travel cost and some contribution to the CMC.

For the private sector (shippers, haulage and logistics companies), the CMC provides the venue for arguing on a corridor-wide basis for improvements in their operating environment and resources for improvement of their operating skills and equipment. The private sector and consumer groups should also be willing to contribute membership dues. (The Walvis Bay Corridor Group, a Namibian public private partnership seeking to develop three corridors that are served by the Port of Walvis Bay, was initiated by the Port and has an "ability to pay" formula for membership dues from Government, parastatal (port and railway) and the private sector).

Secondly, a levy might be allocated at the port based on cargo value or tonnage and its origin and destination. This system is used by the Northern Corridor Transit Transport Coordination Authority. Member states can either pay directly to the Northern Corridor Transit Transport Coordination Authority (NCTTCA) or the charge can be added to the port charges and transferred to NCTTCA. The levy must be considered carefully in relation to other ports that serve the region. The levy should not be so high as to discourage use of the port.

It is important that the CMC does not set budgetary expectations that cannot be met. Staffing should be kept small and special activities where possible financed through activity-specific donor funding. Members should be responsible for in-kind as well as actual financial transfers. Member government agencies and companies should also be doing most of the activities in the action plan. They are the ones with the local knowledge needed to achieve results.

The Trans Kalahari Corridor Management Committee (TKCMC), for example, is supported by the three contracting parties (Corridor governments) to the amount of US$45,000 per annum each. This supports a full time Programme Coordinator, office and some special activities or studies. Both public and private members cover their own travel and per diem costs in attending meetings. The TKCMC plans to find an appropriate model for shifting some of this cost to a levy system in such a way that it does not become an impediment to Corridor use.

A draft budget which explores possible income and expenditure options can be found in the Key Document at the bottom. It assumes some international cooperating partner (ICP) support during the first three years to get the organisation initiated and beginning to generate some performance results. In the third year, it assumes phasing in a levy on traffic on the Corridor. It assumes some continuing contributions from the members, both in kind for the per diem costs of the working group participation, hosting of meetings at work places and dues to offset direct costs of operations. It is recommended that some contribution should be on-going as a commitment of time and a budget line item. This puts added pressure on the CMC to deliver results. A study would need to be done to determine whether to base the levy on weight or value and on what can be added without discouraging use of the corridor.

A major objective of the CMC would be to reduce the formal charges through eliminating unnecessary paperwork, procedures, etc. as well as unauthorized charges. (On some routes, informal stops and payments are demanded of travelers and road transporters. In other cases, bribes are demanded to expedite procedures, eliminate overload charges, etc). These cost reductions should considerably outweigh the cost of the levy. If implemented simultaneously the cost of the levy should be acceptable and may be able to provide a greater share of costs and fund some of the other activities the CMC might take on. It should also be considered, that for special studies or other activities on the corridor, dedicated ICP funding might be sought.

In the draft budget (see Key Document at the bottom), expenses are for the Secretariat and travel for three permanent Committee meetings a year. It is assumed that member entities would fund the accommodation and perdiem cost of participation in standing subcommittees or ad hoc working groups. The CMC would fund airfare for these meetings. This draft budget can be used to test assumptions and costs and/or add specific activities to arrive at budgetary needs.