Public Sector Governance and Accountability Series: Budgeting and ...

70 Salvatore Schiavo-Campo
BOX 2.3 Malawi: The Patronage Risks of Road Funds
Malawi’s road fund was created in 1997 under the National Road Authority
(NRA) Act as an integral part of the NRA itself. Initially, following the establishment
of the fund, the management and financing of Malawi’s paved road
network improved. It was not long, however, before the flaws in the institutional
setup of the NRA became apparent. Whereas at first the governing
board was selected on the basis of technical competence, in the early 2000s
many of the members were chosen on the basis of political influence, de facto
eliminating the board’s formal independence.
In particular, the board chairman appeared to come under the control of
the chief executive, who paid him “board sitting” allowances for every day of
the month. Critical decisions were made by the chief executive, board chairman,
and roads minister without the participation of the other board members and
with their concerns not being heard or being largely sidelined. Private sector
participation and consultation with civil society were perfunctory when they
took place at all.
Thus, although on the surface the Malawi road fund that was created in
1997 appears to be an illustration of a second-generation road fund, in reality it
operated with much the same handicaps of politicization and patronage as did
the old road funds of the 1970s and 1980s, with equally disappointing results.
It is hoped that the situation will change following the election of a new
president, who has already replaced many top officials in various sectors.
Additional legislation may be needed to insulate the road fund board from
undue political interference and to mandate more systematic participation in
and transparency of decision making.
Source: Adapted and expanded from Andreski 2005.
A specific tax or fee for a broad end use, such as lottery proceeds that
finance investments
A general tax earmarked for a specific end use, such as a fixed-percentage
revenue devoted to specific programs.
In most cases, arrangements that earmark a share of total revenues from
general taxes are questionable (issues of social security are reviewed later).
Concerning other specific taxes and fees, a distinction is generally made
between (a) strong earmarking, in which the link between the payment of a
user charge and the associated expenditure is close (for example, fees for
attending courses of a university), and (b) weak earmarking, in which the link
between the benefit and the fees or the taxes is less clear (for example, the use
of lottery proceeds for investments) (see Hemming and Miranda 1991).