‘No benefit’ if toll fees too high

2011-04-05 10:53

The economic benefits of the Gauteng Freeway Improvement Project (GFIP) will be lost if the toll tariffs are set too high, according to a report released today.

“Much of the economic benefit of the project will disappear if toll fees are set at inappropriate levels,” according to the report prepared by economist Mike Schussler.

He found that the GFIP investment was needed to improve infrastructure in Gauteng, which is South Africa’s most economically active province and the contributor of more than half of all domestic tax.

The Gauteng toll fees were set at 66 cents a kilometre before a public outcry led to them being put on hold. The GFIP e-toll steering committee was formed to reassess the pricing.

The report found that the tariffs for the GFIP, one of the biggest construction projects ever undertaken in South Africa, appeared to place an unfair burden on Gauteng residents.

“Analysis of the toll fee burden shows that the toll fees are equal to an increase of two percent in the personal income taxes of Gauteng residents. This does not include the consumer price effect as toll fees are not part of the current inflation basket.”

Gauteng is responsible for more than half of all personal taxes, although it is only home to about 20% of the population.

“It is by far the biggest provincial contributor to the fiscus, and much of this contribution is currently redistributed to other provinces,” according to the report.

Most of Gauteng’s transport infrastructure comprises municipal roads, which are maintained by the local government.

“Whereas national roads comprise 9% to 15% of roads in other provinces, in Gauteng they account for less than seven percent of the total amount of roads.

“The SA National Roads Agency Limited (Sanral) only maintains national roads and therefore has the least amount of road to maintain in Gauteng, compared to all of the other provinces in the country.”

Revenue forecasts show that Sanral, which manages the GFIP, will get the bulk of its income from Gauteng.

“In other words, the GFIP will make a disproportionately large contribution to Sanral’s income. We estimate Gauteng to make a contribution of 58% to 62% to Sanral’s income in calendar year 2012, due to both the levels of congestion in Gauteng and the high cost of GFIP toll fees.”

The commercial road freight industry in Gauteng would also be burdened with a possible increase in tax of 10 to 30%.

“The GFIP costs that the commercial road freight industry will pay every year, is R1.2 billion. This may even affect some of the weaker companies’ ability to survive,” the report found.

The impact on the poor would be disproportionately larger than other income groups.

“Though the total consumer price inflation impact will only be around 0.4%, the impact on the poor will be much larger – as the toll fees will effect disproportionately large increases in a number of items consumed by the poorest consumers.

“The high weighting of transport costs in total costs is likely to be seen in other staple food products, such as maize meal, which are bulky and of low value. The impact on the cost of food is therefore likely to be largest in the simplest and cheapest foodstuffs.”

These foods comprise a proportionately larger part of poor households’ consumption compared to other income groups.

“Inflation weights based on spending patterns in 2008 indicate that, for the poorest 20% of South African households, more than 39% of the household budget is expended on food, whereas the richest 20 percent of South Africans spend only about 11 percent on food,” according to the report.

The report, which was prepared for presentation to the GFIP e-toll steering committee today, recommends that the government consider establishing a transport regulating authority to oversee and regulate toll tariffs in South Africa.

The report was commissioned by the Road Freight Association and AfriForum.

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