Financing and evaluation of investments in road infrastructure development

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Date
SEPTEMBER 2009
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The role of road transportation as a catalyst for accelerated socio-economic development is not in doubt. Road Transportation facilitates the movement of people, goods and services within the country. It provides service to other sectors such as tourism, mining, health, trade, education, agriculture, energy among others. Investments in Road infrastructure development may not be evaluated using only traditional appraisal methods such as the Net Present Value (NPV), Internal Rate of Return (IRR), Accounting Rate of Return (ARR), Payback Method etc. This is due to the fact that road infrastructure comes with other social and economic benefits that are difficult to quantify in monetary terms. For example, when a locality is opened up through the construction of efficient roads, people get more access to social services like schools, health, entertainment and others. These social benefits in turn improve the well-being of the citizenry concerned. Better roads also lead to a reduction in the average travel time. This reduction in time in turn leads to savings in terms of fuel and man hours. Thus the evaluation of investments in road infrastructure development should not be based solely on the economic benefits expected from the road in question. The Government is the main financier of road infrastructure development in Ghana. This funding comes from three main sources; the Consolidated Fund, the Ghana Road Fund and Donor Funds. Because government alone does not have all the required financial resources to undertake the needed road infrastructure development, there is the need to involve the private sector in this area. Since the main aim of the private businessman is profit maximization, their involvement in road financing should be regulated to prevent them from exploiting the general public.
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A thesis submitted to the Institute of Distance Learning, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the degree of Commonwealth Executive Masters In Business Adminstration (CEMBA),
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