Huge benefits of SA's e-tolling policies a no-brainer, argues leading economist

Award-winning economist Dr Roelof Botha argued before the E-toll Review Panel today that e-tolls were the most viable way of funding the improvement of Gauteng freeways.

Dr Botha said his conclusion was based on an independent research study he conducted, following on a previous study on behalf of the Gauteng provincial government on the economic benefits of roads.

"I am in favour of e-tolls. Our roads need to be urgently improved, and quite honestly, our government does not have the money to do that," he said. He went on to state that most of the roads in Gauteng would not have been improved, like we see them today, had it not been for the user-pays funding model.

Dr Botha said his research focused on the economic value of time as a result of the easing of traffic congestion. He said his findings showed that users reaped significant economic benefits. Roads played a very important role in people's lives, such as taking them to work, hospitals, schools, shopping centres, etc, and time saved while travelling had a massive economic value. Dr Botha said his methodology was verifiable and quantifiable. For every R1 spent on e-tolls, R13.70 is saved in time, for the average user travelling in a light vehicle.

He said he was perplexed by people who rejected e-tolls because their understanding was fundamentally flawed and did not take broader economic issues into consideration. He argued the government's revenue base was very limited - consisting mostly of VAT, company tax and individual tax. In addition to that, the government was servicing a very huge public debt of about R1.6 trillion. The interest on this debt is approaching a level of R120 billion per annum, which will ultimately reduce the number of houses built, capital expenditure, etc.

He also highlighted the fact that every 1% increase in South Africa's bond yield will cost the tax payer approximately R16 billion per annum on debt repayment interest alone. This would significantly reduce money left for capital expenditure infrastructure projects.

"E-tolling is therefore the most viable route to follow," he said. He identified several primary e-tolling benefits, the most noteworthy of which he cited as creating a situation whereby SANRAL was enabled to secure an international credit rating and to raise loans for purposes of engaging in private/public partnerships.

"The resulting advantages included the timely completion of a mega-infrastructure project," said Botha - a project that had yielded several noteworthy achievements under difficult traffic conditions. Among such achievements:

* The construction of 585km of additional lanes;* The upgrading of 34 interchanges;* The building of four new flyovers;* The construction of as many as 47 new bridges;* The widening of 134 existing bridge structures;* The provision of 186km of lighting; and* The creation of 127km of concrete median barriers.

Botha emphasised these myriad remarkable achievements had been based on the concept of user charges, which he, along with many highly regarded economists around the globe, regarded as a "sound fiscal principle".

Further: "It relieves pressure on the fiscus, alleviates undue upward pressure on the long-term bond yield, protects the South African government's global credit rating, avoids cross-subsidisation by other provinces and allows for fiscal leeway to fund future road upgrading projects."

Botha contended the progressive revenue impact was particularly advantageous, pointing out that the incidence fell mainly on the highest income quintile.

"Significantly, a fuel levy increase would impact most negatively on the poorer groups. In this context, bear in mind that it is the highest income quintile that pays 94% of e-tolls for passenger cars. Equally significant is the fact that public transport is exempt from e-tolls.

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