General News of Friday, 4 August 2017
Road Safety Management Ltd, its allied companies implementing the controversial mandatory towing levy, could bag $1billion by the end of the contract.
Award-winning social innovator and founder and president of mPedigree Bright Simons in an article ‘Towing Tax: The Lowdown’ breaks down the RSML’s 20-year contract with government explained, the company could bag at least $20m annually, in the deal.
But the mandatory towing levy is pitting the government against vocal sections of the public.
The government has okayed a plan to charge motorists mandatory fees to tow automobiles in case of a break down on the road.
The move it believed, will reduce accidents caused by broken-down vehicles.
Depending on the tonnage, motorists could pay from GH?10 to GH?200 for both commercial and non-commercial vehicles.
But critics say the plan is a lazy attempt to fleece motorists and cast doubt on the credibility of RSML.
Weighing in on the controversy, Bright Simmon’s analysis is based on a number of assumptions.
He assumes total capital expenditure of RSML including the purchase of brand new tow trucks is likely to cost $20m.
But with 85% of levy proceeds is going to RSML, Bright Simons says the returns on the scheme is “highly lucrative”.
His projections is also based on 75% of Ghana’s two million vehicle population complying with the payment of the levy.
Doing what he called “Back of the envelope calculations”, Bright Simons explained that;
“60% of the vehicles in Ghana are commercial or considered ‘heavy engine’ (i.e. > 2000cc)”.
“…..using the advertised levy rates for commercial and private vehicles (from 20 for private cars all the way to 200 GHS for heavy duty trucks), show that RSML could make $50 million dollars a year (ignoring surcharges) should they succeed in ensuring a 75% fee payment compliance rate among motorists”.
“But even if the returns to RSML end up amounting to no more than $20 million per annum, the total take will be in excess of $1 billion over the lifetime of the contract if increases in the levy merely tracks inflation in insurance premiums over the last decade”.
The controversial contract is being executed mainly by RSML which sub-contracts the project to six other companies which are expected to also engage several sub-contractors.