Third African Road Safety Conference The Economics of Road Safety Stephen Karingi Director, Regional Integration and Trade Division ECA 9 July 2015 Addis Ababa

2 ●Context ●Rationale for estimating the economic cost of road crashes ●Methodologies to estimate the costs of road crashes: A review of literature ●Conclusion & Way Forward

Context Unprecedented sustained economic growth in Africa Spurred, partly, by spending in infrastructure, notably construction of roads Spending in Africa’s infrastructure grew by 8% between 2011 and 2013 Cape Verde, Namibia, Uganda and South Africa allocated 44%, 39%, 28%, and 24% respectively of their budgets to infrastructure in 2012 Implications for road safety Improved quality and coverage of roads could increase road crashes Rapid economic growth is translating into increase in car ownership which increases road conflicts Efforts needed to demonstrate that the benefits of investing in road safety outweigh the cost 3

Rationale for Estimating the Cost of Road Crashes (1)  Advocacy for road safety is often based on a moral perspective Sympathy with victims and their families But this has not generated sufficient political and financial support Need to base advocacy on an economic case  Various studies estimate the cost of road crashes between 1-6% of national GDP Mozambique 1.5 – 2.5%; Kenya 5.5%; Zambia 2.3%; Developing Countries % Wide variations affect credibility of figures  Most of these studies undertaken in the 1990s Need for new studies to assess current situation 4

Rationale for Estimating the Cost of Road Crashes (2)  Active participation of politicians and Ministers of Finance is critical for improving road safety Decision Makers can use figures on cost of road crashes to improve policy making process Increase resources devoted to road safety and thereby reduce road crashes  Comprehensive evaluation of road crashes include social damages in monetary terms Important to include injuries and fatalities when evaluating damages due to crashes Equally important when evaluating benefits of remedies aimed at reducing road crashes 5

Who is Interested in the Cost of Road Crashes?  Research has been conducted by experts/ practitioners/scholars in a wide range of disciplines, including: Health Development studies Social and economic studies Traffic and Transport Business and insurance Banking and Finance 6

Where have studies been undertaken? Relevant studies have been undertaken across the world: Jordan, India, Sweden, US, Italy, Mexico, Spain, Japan, Turkey, Kenya, Mozambique, South Africa, Trinidad & Tobago, Colombia, etc. 7

Categorisations of Economic Costs of Road Crashes Material damage Health care costs Production losses Cost of vehicle damage Medical care Compensation for injuries and fatalities Material damage Medical care Labour loss Tangible costs Vehicle damage cost Medical costs Cost incurred by Police and emergency service crew Intangible Costs Time individuals involved spend in hospital or individual’s incapacity costs Human cost 16/08/2015 8

Methodologies Approaches to estimate Road Accidents  The Human Capital approach  The Comprehensive approach  Years Lost Plus Direct Cost approach  Willingness-to-Pay Cost approach  Discount Rate approach 16/08/2015 9

Methodologies Approaches to estimate Road Accidents  The Human Capital approach The Human Capital approach measures only market costs (property damage, medical treatment, and lost productivity). This typically places the value of saving a human life at $0.5-1 million, with lesser values for injuries. 16/08/

Methodologies Approaches to estimate Road Accidents  The Comprehensive approach In addition to market costs, this approach includes non-market costs, including pain, grief, and reduced quality of life, as reflected by people’s willingness-to- accept increased crash risk and damages. 11 components of the comprehensive cost are: property damage, lost earnings, lost household production, medical costs, emergency services, travel delay, vocational rehabilitation, workplace costs, administrative, legal, and pain and lost quality of life 16/08/

Methodologies Approaches to estimate Road Accidents  Years Lost Plus Direct Cost approach includes the same cost components as the comprehensive cost category; however, it replaces lost earnings, lost household production, and pain and lost quality of life with a non-monetary measure 16/08/

Methodologies Approaches to estimate Road Accidents  Willingness-to-Pay Cost approach refers to the costs people are willing to pay for safety improvements to avert a fatality or injury. Willingness-to-pay cost is another name for comprehensive cost  Discount Rate approach used to compute the present value of future monetary costs of injury. 16/08/

Cost Components in South African Study Loss of output –due to premature death, minor and major injuries Estimated using likely future earnings & GDP per capita Property damage – inside and outside vehicle Goods; road furniture and fixed property Pain, suffering and loss of amenities of life Hospital, medical and funeral costs Administrative costs insurance, police investigation and administrative costs Legal costs Miscellaneous costs Loss of time (visiting insurance companies, repair shops, etc.) Other cost such as telephone calls 14

Types of loss identified in Japan Human Loss Fatal Serious (aftereffect) Slight Material loss Loss to employers Loss to public organisations Ambulance service cost; Police costs; Court costs; Lawsuit costs; Prosecutor fiscal costs; Insurance operation costs; Social welfare costs for physically handicapped people; Emergency care system maintenance costs; and Congestion costs 15

Key Questions What is the experience in different African countries in estimating the cost of road crashes? What are the challenges to estimate the cost of road crashes in African countries? Which is the most appropriate approach to estimate the cost of road crashes in Africa? 16

17 Thank You