Faculty Of Commerce Department Of Accounting Bachelor Of Commerce .
FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING BACHELOR OF COMMERCE HONOURS DEGREE DISSERTATION TOPIC An assessment of the ZINARA Road Fund: A case of Ministry of Transport and Infrastructural Development By: NOSTER LIVEVERE (R111754F) A RESEARCH PROJECT SUBMITTED TO THE FACULTY OF COMMERCE IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE BACHELOR OF COMMERCE HONOURS DEGREE IN ACCOUNTING November 2014 i
MIDLANDS STATE UNIVERSITY P. Bag 9055 Telephone: (263) 54 260404/260337/260667 GWERU Fax: (263) 54 260233/260311 ZIMBABWE FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING APPROVAL FORM The undersigned certify that they have supervised the student Noster Livevere dissertation entitled, “An assessment of the ZINARA Road Fund: A case of Ministry of Transport and Infrastructural Development,” from July to September 2014 submitted in partial fulfilment of the requirements of Bachelor of Commerce Accounting Honours Degree Programme. . . Supervisor Date . Chairperson Date . External Examiner Date ii
MIDLANDS STATE UNIVERSITY P. Bag 9055 Telephone: (263) 54 260404/260337/260667 GWERU Fax: (263) 54 260233/260311 ZIMBABWE FACULTY OF COMMERCE DEPARTMENT OF ACCOUNTING RELEASE FORM NAME OF AUTHOUR LIVEVERE NOSTER TITLE OF THE PROJECT AN ASSESSMENT OF THE ZINARA ROAD FUND DEGREE PROGRAMME B.COM (HONS) IN ACCOUNTING DISSERTATION SUPERVISOR MR. K. MAZHINDU YEAR OF AWARD 2014 Permission is hereby granted to the Midlands State University library to produce single copies of this dissertation and to lend or sell such copies for private, scholarly, or scientific research only. The author reserves other publication rights and neither the dissertation nor extensive extracts from it may be printed or otherwise reproduced without the author’s written permission. SIGNED. DATE ii
PHYSICAL ADDRESS House no. 2 Hatineti Road Zengeza 5, Chitungwiza ACKNOWLEDGEMENTS My profound gratitude goes to my family for always believing in me and being there for me especially my sister Christen Livevere for the prayers, the encouragement and for instilling confidence in me that I can do it no matter the odds in life. I would like also to express my heartfelt gratitude to the entire Ministry of Transport staff for their unexpected responses to my questionnaires and interviews which were of great assistance to the completion of my research. For every research project to be successful there is always a mentor who is always giving guidance until the completion of the project. I would also like to profoundly express my gratitude to my supervisor Mr. Mazhindu guided me throughout the entire project. I would like to thank my friends for their psychological and moral support during the entire research period. Their progress in their research projects really encouraged me as I was doing mine knowing that I can also do it. Above everything my greatest gratitude goes to God, Almighty for in Him I know I can do all things. iii
DEDICATION This dissertation is a dedication to my sisters Lucia and Christen who have always stood by me through thick and thin and to my late parents Mr. and Mrs. Livevere who had always believed in me; may their souls rest in eternal peace. iv
ABSTRACT The research seeks to assess the road fund policy used by ZINARA a case of Ministry of Transport and Infrastructural Development This was motivated by the fact that ZINARA is failing to receive enough revenue to meet its operations and obligations. In literature different sources reviewed different policies used in funding the maintenance and rehabilitation of roads. The best practices in road funding that can be implemented were also reviewed. A descriptive research design and stratified sampling method were used in collecting data for the research. A sample size of 40 was used out of a population of 60 and 32 were successful which represents 80% response rate of questionnaire which administered to gather primary data. All interviews which were conducted were 100% successful. Secondary data was extracted the organisation’s records in support of primary data.On the other hand, the major finding were critically analysed and results from the presented data helped in formulating recommendation to the study. v
List of Figures Figures Page Figure 4.1 Clarification on the road fund policy to the employees 40 Figure 4.2 Existence of the policy implementation guidelines 41 Figure 4.3 Documentation of the policy implementation guidelines 42 Figure 4.4 Availability of financial guidelines in the road fund policy 43 Figure 4.5 Clarification on the controls over the ZINARA road fund policy 45 Figure 4.6 Authorisation limits on the road maintenance expenditure 46 Figure 4.7 Different levels of authorization of certain levels of road maintenance 49 expenditure Figure 4.8 Comparison of budgeted and actual road maintenance costs 52 Figure 4.9 Availability of financial resources on the program implementation 54 Figure 4.10 Future planning in road maintenance 58 vi
List of Tables TABLE PAGE Table 1.1 Allocations made to the provinces for the 2012 fiscal year 2 Table 3.1 The sample size 28 Table 3.2 Likert scale 32 Table 4.1 Questionnaire response rate 36 Table 4.2 Respondent’s gender 37 Table 4.3 Current position of the respondents 37 Table 4.4 Existence of the road fund policy at ZINARA 38 Table 4.5 Documentation of the road fund policy 38 Table 4.6 Communication of the road fund policy to road-users and other 39 stakeholders Table 4.7 Communication of the road fund policy to new personnel 39 Table 4.8 Clarification on the road fund policy for better understanding 40 Table 4.9 Existence of the road fund policy implementation guidelines 41 Table 4.10 Documentation of the policy implementation guidelines 42 Table 4.11 Availability of financial guideline in the policy implementation 42 Table 4.12 Compliance with the policy implementation guidelines 43 Table 4.13 Controls over the road fund policy implementation 44 Table 4.14 Clarification on controls over the road fund policy 44 Table 4.15 Authorization limits on the road maintenance expenditure 45 Table 4.16 Controls over funds available for road maintenance 46 Table 4.17 Preparation of reports on road maintenance funding 47 Table 4.18 Regular review of reports on road funding 48 Table 4.19 Table 4.20 Different levels of authorization on certain levels road maintenance 48 expenditure. Forecasting of road maintenance expenditure budgets 49 Table 4.21 Road fund policy control evaluation by an independent committee 50 vii
Table 4.22 The evaluation of policy on regular basis. 50 Table 4.23 Evaluation of the road fund policy cost effectiveness before 51 implementation. Table 4.24 The road funding costs budget comparisons. 51 Table 4.25 Availability of aids in evaluating the road fund policy 52 Table 4.26 Resistance from road users 53 Table 4.27 Lack of financial resources for projects execution 53 Table 4.28 Poor managerial commitment on the road maintenance projects. 54 Table 4.29 Lack of competent and committed contractors 55 Table 4.30 Poor information network dissemination 55 Table 4.31 Regular review on the road fund policy implementation. 56 Table 4.32 Compliance with the Roads Act of Zimbabwe is also reviewed. 56 Table 4.33 Feedback is given to ZINARA board on the completion each road 57 maintenance project. Table 4.34 Road maintenance programs funded by ZINARA are cost effective. 57 Table 4.35 ZINARA’s future plans in road maintenance programs. 58 TABLE OF CONTENTS APPROVAL FORM . ii viii
RELEASE FORM . ii ACKNOWLEDGEMENTS . iii DEDICATION . iv ABSTRACT. v List of Figures . vi List of Tables . vii CHAPTER 1 . 1 INTRODUCTION . 1 1.0 Introduction . 1 1.1 Background to the Study. 1 1.2 Statement of the Problem . 2 1.3 Main Research Question . 3 1.4 Sub-research Questions . 3 1.5 Objectives of the Study . 3 1.6 Significance of the Study . 3 1.7 Delimitations . 4 1.8 Limitations . 4 1.9 Assumptions. 4 1.10 Abbreviations . 5 1.11 Summary . 5 CHAPTER 2 . 6 LITERATURE REVIEW . 6 2.0 Introduction . 6 2.1 Road Funding Policies . 6 2.2 Policy Implementation Guidelines . 9 ix
2.3 Measures taken by Personnel to Implement Guidelines . 10 2.3.1 Funding Road Maintenance . 11 2.3.2 Management and organisation of Roads . 11 2.3.3 Improving operational efficiency. 11 2.3.4 Staff training and incentives . 11 2.4 Challenges over Policy Implementation . 12 2.4.1 The private sector will need to play a crucial role in filling the infrastructure deficit. 12 2.4.2 Capital budgets are not executed . 13 2.4.3 Utilities perform poorly . 13 2.4.4 Infrastructure is not maintained . 14 2.4.5 Lack of competition . 14 2.4.6 Current tariffs do not cover cost . 15 2.5 Controls over Policy Implementation . 16 2.5.1 Bank Account Managed by One Road Agency . 16 2.5.2 Bank Accounts Managed by Several Road Agencies . 16 2.5.3 Bank Accounts Managed by a Separate Administrative Body . 17 2.6 The Best Practice in the Road Fund Policy Implementation . 18 2.7 Summary . 22 CHAPTER 3 . 23 RESEACH METHODOLOGY . 23 3.0 Introduction . 23 3.1 Research Design. 24 3.1.1 Explanatory research design . 24 3.1.2 Descriptive research design . 25 3.1.3 Advantages of descriptive research design . 25 x
3.1.4 Disadvantages of descriptive research design. 25 3.1.5 Justification of choice of research methodology . 26 3.2 Population . 26 3.3 Sampling . 26 3.3.1 Systematic sampling . 27 3.3.2 Stratified random sampling . 27 3.3.3 Clustered sampling. 28 3.3.4 Justification of using stratified random sampling . 28 3.3.4 Sample size . 28 3.4 Data Sources . 29 3.4.1 Primary Data . 29 3.4.2 Secondary Data . 29 3.5 Research Instruments . 30 3.5.1 Questionnaires. 30 3.5.1.1 Advantages of using questionnaires. 30 3.5.1.2 Disadvantages of using questionnaires . 31 3.5.2 Types of Questions . 31 3.5.2.1 Open-ended questions . 31 3.5.2.2 Advantages of open-ended questions. 32 3.5.2.3 Disadvantages of open-ended questions . 32 3.5.3 Closed questions . 32 3.5.3.1 Advantages of closed-ended questions . 32 3.5.3.2 Disadvantages of closed-ended questions . 33 3.5.4 Likert Scale . 33 3.5.4.1 Advantages of likert scale . 33 xi
3.5.4.2 Disadvantages of likert scale . 33 3.6 Interviews . 34 3.6.1 Advantages of using interviews . 35 3.6.2 Disadvantages of using interviews. 35 3.7 Data Validation . 35 3.8 Data Analysis . 36 3.9 Data Presentation . 36 3. 10 Summary . 36 CHAPTER 4 . 37 DATA PRESENTATION AND ANALYSIS . 37 4.0 Introduction . 37 4.1 Response Rate . 37 4.1.1 Questionnaires Response Rate . 37 4.1.2 Interview Response Rate. 38 4.2 Presentation of the respondents’ demographic data. 38 4.3 Existence of the Road Fund Policy at ZINARA. . 39 4.4 ZINARA Road Fund Policy Implementation Guidelines . 41 4.5 Controls over Road Fund Policy Implementation . 45 4.6 Evaluation of Controls over ZINARA Road Fund Policy Implementation . 51 4.7 Challenges encountered on the ZINARA Road Fund Policy Implementation . 54 4.8 Reviews of Controls on the Road Fund Policy Implementation. 56 4.9 General Information regarding ZINARA Road Fund Programs . 58 4.10 Summary . 60 CHAPTER 5 . 61 SUMMARY, CONCLUSION AND RECOMMENDATIONS . 61 xii
5.0 Introduction . 61 5.1 Summary of chapters . 61 5.2 Major findings . 62 5.3 Conclusion . 63 5.4 Recommendations . 63 5.5 Further areas of research . 64 REFERENCE LIST . 65 APPENDIX 1 . 67 APPENDIX 2 . 68 APPENDIX 3 . 73 xiii
CHAPTER 1 INTRODUCTION 1.0 Introduction In this chapter, the researcher presents the background of the study, statement of the problem, main topic, sub-research questions, and research objectives for conducting the research, significance of the study, delimitations, limitations, assumptions, abbreviations and summary. 1.1 Background tothe Study Zimbabwe National Road Administration (ZINARA) is a corporate body which was established in 2002 and its core business, in consultation with the minister of Transport and Infrastructural Development, is fixing road user charges and collecting such charges or any other revenue of the Road Fund. Zinara is also responsible for the allocation and disbursements to Road Authorities of funds from the Road Fund in accordance with rules prescribed by the Road Administration. Road Authorities consists of Department of Roads, Urban Councils, District Development Fund (DDF) and Rural District Councils (RDCs). Zinara is empowered by the Act to audit the use of the funds to Road Authorities and to ensure that disbursed funds are utilized for the purpose for which they are intended. Zinara, as the country’s road fund, is made up of various road user charges which comprise of vehicle licence fees, toll fees, grants and loans, abnormal load charges, road transit fees and fuel levy. This was since from a transfer of the collection of such funds from ZIMRA to ZINARA in October 2012. Despite Zinara’s mission which is to effectively fund the maintenance of the national road network through fixing, collection, disbursement & monitoring of funds used for the preservation, enhancement and expansion of the network to achieve economic growth and sustainable development. It has not been an easy road to execute their mission. The corechallenge has remained that of funding. “There is a perception that Zinara is collecting a lot of money, but this is not true because it is collecting at least 40 million annually which can only fix less than a 30 kilometre stretch of road,” Mpofu the Minister of Transport and Infrastructure Development said addressing 1
journalists after a meeting with driving school operators in Bulawayo. “If we rely on the money gathered by Zinara, it will take more than 100 years to repair the country’s roads,” he added on. Table 1.1 Allocations made to the provinces for the 2012 fiscal year. PROVINCE: MANICALAND MIDLANDS MASHONALAND CENTRAL MASHONALAND EAST MASVINGO MASHONALAND WEST MATEBELELAND NORTH MATEBELELAND SOUTH GRAND TOTAL DISBURSEMENTS 3,167,090.00 3,634,626.00 2,388,387.00 8,645,424.00 2,641,041.00 3,771,280.00 5,922,307.00 3,367,591.00 33,537,719.00 MINIMUM REVENUE REQUIRED REVENUE FROM ROAD FEES DEFICIT BUDGETED AMOUNTS 225,000,000.00 222,500,000.00 115,500,000.00 505,000,000.00 210,500,000.00 200,000,000.00 300,000,000.00 221,500,000.00 2,000,000,000.00 (2,000,000,000.00) 33,537,719.00 (1,966,462,281.00) Source: ZINARA financial statements 2012 The above information shows that the road fund is facing a deficit on funds. The rehabilitation of existing national road network requires a minimum of US 2 billion. This eliminates the construction of new roads. Donor funding has not been coming through and lines of credit have not been forthcoming. Since 2012 with the fees which were charged on toll plazas, Zinara was collecting US 40 million annually. Funding is needed to help pay back the US 206, 6 million that Zinara borrowed from the Development Bank of Southern Africa to finance the rehabilitation our national roads. 1.2 Statement of the Problem ZINARA is currently the only corporate body which has the mandate to collect various road-user charges. Despite tollgate revenues that rose by almost 100 % early 2013 after Zinara took control of toll collection from to ZIMRA in October 2012 and millions of dollars secured from loan funds, ZINARA has of late been failing to receive enough revenue to meet its operations and obligations. The deficit has persuaded the research to be undertaken. 2
1.3 Main Research Question An assessment of the ZINARA Road Fund: a case of Ministry of Transport and Infrastructure Development. 1.4 Sub-research Questions What is the ZINARA Road Fund policy? What are the policy implementation guidelines? What is the capacity of personnel to implement guidelines? What challenges are in place over the policy? What controls are in place over policy implementation? What is the best practice in the road fund policy implementation? 1.5 Objectives of the Study To examine the ZINARA Road Fund policy. To evaluate the policy implementation guidelines. To assess measures taken by personnel to implement guidelines. To investigate challenges that are in place over the policy. To assess controls in place over the policy. To assess the best practice in the road fund policy implementation. 1.6 Significance of the Study To the researcher The study is done in partial fulfilment of the requirements for the Bachelor of Commerce Honours degree in Accounting of the Midlands State University. The research also enables the researcher to gain some research skills for other research studies in future. To the university The research if useful is used as reference material for the University and other related researches. 3
To ZINARA and Ministry of Transport and Infrastructure Development The findings of this study are going to provide recommendations for further considerations. 1.7 Delimitations The research is only limited to MOTID Head Office, Harare and the period under consideration is 2011 to 2014. 1.8 Limitations Time The period and time was a limiting factor as the project had to be finished before the semester ends. The use of emails and internet has been very useful in getting information from the company and other sources relevant to the study. Respondents to interviews had busy work schedules which delayed data gathering. The researcher had to use weekends and after work hours to carry out the study. Confidentiality Some of the information was not available to the research as it was considered highly confidential. Since these are government properties access to the material was likely to be limited. The researcher therefore used sources of information that were at disposal during workrelated learning with a guarantee that findings were for academic purposes only. Financial constraints The research faced challenges in meeting the printing, photocopying, internet food and travelling expenses among others that are inherent to the study. The researcher had to make personal finance sacrifices to overcome this. 1.9 Assumptions The study was carried out on the following underlying assumptions; The study respondents would be co-operative and provide reliable data. There were no changes in regulations over the research period. 4
1.10 Abbreviations ZINARA- Zimbabwe National Road Administration ZIMRA- Zimbabwe Revenue Authority MOTID- Ministry of Transport and Infrastructure Development 1.11 Summary This chapter covered background of the study, statement of the problem, main research question, sub-research questions, and objectives of the study, significance of the study, assumptions and delimitations. Chapter two focuses on literature review. 5
CHAPTER 2 LITERATURE REVIEW 2.0 Introduction This chapter covers the road funding policies, policy implementation guidelines, measures taken by personnel to implement guidelines, challenges over the policy implementation, controls over the policy and the best practice in the road funding policy implementation. 2.1 Road Funding Policies According to Matt Shands (2007), “The idea behind road funding policy is to create a more equitable revenue system if vehicles were charged a road user fee that more accurately reflect the costs to repair or maintain road and bridge infrastructure resulting from damage imposed by each class of vehicle.” There are three common transport policies used in funding of roads and highways infrastructure. Many states envisage various sources of road funding such as fuel tax, tolling, vehicle tax and concessions. According to www.wikipedia.org 14
a research project submitted to the faculty of commerce in partial fulfilment of the requirements of the bachelor of commerce honours degree in accounting dissertation topic infrastructural development by: noster livevere (r111754f) november 2014 i
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