Public Private Partnership as an Alternative Source of Financing Highway in Ghana

December 7, 2012 Posted by admin

Charles Andoha*, Ebenezer Agyakwa Millsb and Daniel Quayec
aDepartment of Finance and cDepartment of Marketing and Customer Management
University of Ghana Business School, Legon, Accra, Ghana
b
Ghana Highway Authority, P.O. Box GC 1641, Kimbu Road, Accra, Ghana
, University of Ghana Business School, Accra, Ghana.

Abstract
This paper assesses the profitability of a private entity going into partnership with the Ghanaian government for the construction and management of highways. The paper derives the conditions under which public private partnership highway financing can be viable in Ghana. A mathematical model that can be used by a businessman or an organization (or a concessionaire) to determine the optimal profit, the optimal number of different vehicle sizes, and the optimal toll rates for a given concessionary period are developed. The model is a very good and useful planning and decision-making tool for any business man or organization interested in venturing into partnership with any government with regard to highway construction and management. Using the model and data from the Ghana Highway Authority, we show that public private partnership financing is applicable on a number of roads through the right mix of two variables, the concession period and the road toll rate. Our findings can be useful to investors interested in partnering with government in highway financing on the type of highway to choose and its accompanying cost. Furthermore, this paper will provide the government with better insight when partnering with the private sector in highway financing.

Keywords: Concessionary period, mathematical model, optimization, reconstruction, rehabilitation, toll rate, upgrading.

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