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29 August 2017

What does Ameri deal and mandatory towing levy have in Common? – Starr Fm

Two issues have been in the news lately – the AMERI Energy Deal and the Mandatory Towing Levy- and they have triggered a fair measure of public rumblings. Both are legacies from the previous political regime. Both involve pre-commitment of fiscal obligations of some sort for many years to come. Article 35(7) of the 1992 Constitution, under The Directive Principles of   State Policy, enjoins succeeding government to “continue and execute projects and programmes commenced under the previous government” but only “as far as practicable”, in order to protect the greater public good.  Why should we be concerned about these two issues? Here are some answers.

AMERI deal and Power

On AMERI, the news headlines allege that Ghana did not get value for money. It is suspected that Ghana was billed $150 million more than the fair market value of the deal. Worse, those well-versed in energy matters have hinted that the company AMERI GROUP was perhaps a needless broker inserted in the transaction by those who, in the discharge of their public duties, saw unearned “profits” and wanted to extract it. A Swedish newspaper obliquely told Ghanaians that their own countrymen may have taken them for a ride. That much was brushed aside or vehemently denied as unthinkable.

The State is a perpetual agent. Its legacy obligations are automatically inherited by succeeding government. Unless, of course, for excellent reasons of state a new government decides to discontinue projects and programmes commenced by the previous Governments.

From ministries and agencies, from health to education and energy, multi-year procurements and fiscal pre-commitments appear to have become the stock in trade, some in manifest breach of public procurement regulations and financial management laws.

Misguided multi-year fiscal pre-commitments have two perverse outcomes. They tie the hands of in-coming administration and limit the opportunities to manage the fiscal affairs of the state as deemed fit. Second, and perhaps most objectionable, these types of procurements and contracts secure unfairly the limitless profits of those who promoted and pushed, and whose hands sealed the deals.

What about the Mandatory Towing Levy?

The attempt to introduce mandatory towing levy on all vehicle owners to finance towing services is yet another multi-year fiscal obligation hatched under the previous regime. The recommendations by the Road and Transport Committee of Parliament for the National Road Safety Commission (NRSC) to adopt the mandatory towing levy is regrettable.  This is an occasion where the new Parliamentary Committee on its own, in line with the Directive Principles of the State, should have sought extensive public consultations to inform its recommendations. By its failure, it compromised its integrity and public trust, and literally threw the rest of us under a tow truck, a felt abandon.

But there is a case for towing services.

That case goes like this.  Vehicles that break down are often left on the road side unattended to, or poorly marked for caution. They obstruct traffic. Sometimes they become major causes of road accidents. In short, they become public hazards and society must find a way to deal with that problem in order to save lives. The levy requires all vehicles, including motorcycles, to pay a graduated sum annually to fund collective towing services.

There is another case for the demand for towing services. Broken down vehicles are increasingly littering and competing for space in our residential neighbourhoods. Some become garbage dumps, some as hideouts for criminals. Use of towing services to keep our roads and neighbourhoods safe and uncluttered is a sensible solution to a public menace. A publicly debated policy on abandoned vehicles ought to be a matter of public interest.

So what are the complaints?

It is not the issue of towing that troubles the public and intrigues critics. What most of us find objectionable is how the services, the payment for it, and the fiscal arrangement between the private agent and the State institutions are being framed and sold to the public. Let me explain.

Vehicle owners are asked to pay a mandatory annual levy ranging for a start between 40 and 200 Cedis to the State. The State turns over a hefty percent (75-85 percent) of the pool of collected fees to a private company. The Driver and Vehicle Licensing Authority (DVLA) and the Police each gets 5 percent, Ministry of Finance and the NRSC also get 2.5 percent each. Here are some objections.

First, the levy imposes forced user charges on vehicle owners for a service they may never directly need or have use for. Second, the levy in its present form is a legislated cross-subsidy from those who voluntarily maintain their vehicles in favour of those who don’t, much to the benefit of a private towing company.

Third, if truth be told, the greatest danger to the public of stranded vehicles comes from those that are not easily towed – the tankers, cargo and articulated trucks. Stranded, they are often poorly marked or left in the hands of some driver mates. It is these instances coupled with the inexplicable impatience and bad driving habits of Ghanaians, even when danger looms, that provide the recipe for most tragic outcomes.

Fourth, perhaps most unsatisfactory, is that the payment to the private company arguably is based largely on the company’s planned installed capacity to compensate for its investment in tow trucks. It is not the number of vehicles towed or services rendered that determine the annual payment to the company. And the State most likely has no verification mechanisms of value for money. The fiscal arrangement therefore is not incentive compactible. In fact, it is no less than a compulsory fiscal stability agreement between the private provider and all vehicle owners for 20 years.

Finally, in a representative democracy, public institutions ought not be seen to be acting to promote the profit motive of a private monopolist financed by the public and using instruments of the State to levy and collect levies.  That arrangement eventually leads to concentrated power, public sector capture, and unbounded influence peddling by a private company who may choose to act in ways that are not always in the public interest.

There is even a bigger public consideration. Accidents do happen and when they do, the first respondents typically are the quartet of the Police, Ambulance, Fire service and Towing. This reality raises questions about the intended distribution of the collected fees and calls for a more comprehensive public solution that brings the needs of all first respondents into the conversation. The Police is promised a little slice of the pie, but not the Ambulance nor the Fire Service.

A Market Solution to a Public Problem

Think of the possibility that you and your vehicle may be stranded on the road side, somewhere, near Sympathy Junction. Like accident insurance, a towing levy may be seen as yet another mandatory auto insurance to cater for such eventualities. Seen this way, then the market for towing services should be open to competition among providers, and to the self-selection among vehicle owners of the menu of insurance products to buy.

Vehicle owners should be able to select from alternative service providers.  Insurance companies may choose to bundle towing services as part of their package of insurance products.  They would then most likely engage a private towing company of their choice to deliver that service.

Vehicle owners who value their vehicles as assets and are risk averse would buy an insurance package that includes towing services. Motor cycles owners may choose not to buy towing services as part of their insurance package.

Best practice is that towing services are best provided by the private sector at direct cost to users of the service. Government simply provides the regulations for how the industry operates, not for how fees should be levied and collected. And the goals should be to license and promote competition in the towing services industry, enhance public safety, and ensure maximum public protection.

What about those vehicle owners who choose not to buy towing services as part of their insurance? Without the towing insurance, vehicle owners shall pay for the service as needed, most likely at a much higher spot price. If an abandoned vehicle on the road side or in neighbourhoods poses imminent danger to the public, a citizen may call the police who then makes the determination to call for towing services at cost to the owner or the vehicle is impounded.

There is no reason not to have a competitive market for towing services. And there is also no reason to prevent a private company from selling membership fees for road side services. This is what the tankers, all cargo and articulated trucks should be mandated to purchase.

Automobile Associations in different parts of the world provide just that kind of service. Towing and salvaging services are emerging public needs. Let’s get on with it for a solution. But not in the form envisaged under the mandatory towing levy.

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