Welfare Implications of E-Tolling

Discuss the possible welfare implications of e-tolling in Gauteng with respect to the administrative and monitoring costs of the system:

Standish (2010) says that one of the key constraints to economic growth of a country is their inadequate transport network. As per the European Commission (2014) is good quality infrastructure “a key ingredient for sustainable development”. A country’s economic growth is associated with the conditions of its roads (World Bank, 2014).

Poor infrastructure can hamper economic growth and a country’s ability to trade in the global economy (European Commission, 2014). According to Infrastructure Consortium of Africa (ICA), they found that there is about a 40% increase in costs of goods traded in African countries secondary to poor road, rail and harbour infrastructure. Poor road conditions reduce the mobility of labour and affects exporters to get their product to international markets, with resulting higher supply costs.

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The current national roads authority in South Africa is known as SANRAL (South African National Roads Agency Limited). The minister of Transport represents the government which is a shareholder and owner of SANRAL. Their mandate is to fund, improve, supervise and sustain the national road network of South Africa. They introduced the concept of PPP (Public Private Partnership) and have two primary sources of income. As per SANRAL 2013 annual report, the National Treasury department financed non- toll roads while toll roads are financed by money borrowed from the capital markets or through concessioning of roads to the private sector consortium.

The Gauteng Freeway Improvement project (GFIP) is SANRAL’s largest highway upgrade project (SANRAL, 2014). The GFIP supplies, installs and operate the open road electronic toll collection system and its associated infrastructure. (SANRAL, 2014).

Welfare implication:

As per Standish (2010) is the road user’s benefit greater by driving on an upgraded toll road and paying a toll fee than on existing roads and not paying a toll fee. He feels that as toll roads are improved roads, there is lesser traffic congestion and faster travelling times, smaller change of road accidents as roads are in a better condition and also lower vehicle maintenance costs to users of toll roads.

Standish (2010) says that the two most important macro-economic effects of e-tolling are the creation of jobs and the contribution to the gross domestic product (GDP). Increases in the GDP leads to an increase in a country’s economic standard of living. More jobs, higher wages and reduced economic hardships are all results of an increased GDP. The 2013 annual SANRAL report mentions that the SANRAL projects trained 18 161 people in elements of road-building. Almost half of these trained people, namely 7 252 were women and in terms of job creation a total of 110 401 job opportunities of varying durations were created, at a total cost of R2 billion. Currently the Electronic Tolling operations in Midrand are employing around 1300 staff.

Standish (2010) describes that businesses benefit from toll roads in following way: improved productivity and higher turnover as road are less congested and this leads to faster turnaround times, greater reliability and timekeeping by staff also improves business productivity and toll payments are tax deductible.

Public transport users also benefits from improved toll roads due to faster travelling times. Paying toll fees increases public transport fees and these results in higher fare for users of public transport (Standish, 2010)

As per Standish (2010) is paying for better roads with a fuel tax leading to increased economic efficiency, but is paying for better roads by toll fees increasing economic equity. Standish states that the actual cost of the tolling infrastructure is an average of 8.5 cent per travelling kilometre.

Administrative cost:

Administrative costs include cost for legal and technical advice, administration costs for contracts and monitoring of toll equipment. These administrative duties also lead indirectly to job creation. The day-to-day running of toll roads contributes to on-going operating and maintenance costs associated with toll operating systems and infrastructure, pavement maintenance, maintenance of areas immediately surrounding the road (such as grassed areas) and operating and traffic management systems (Sydney’s toll roads, 2008).

ETC received the contract for the implementation of the e-toll system. 65% of ETC is owned by an Austrian based company, named Kapsch TrafficCom and 35% of ownership is held by a South African company, named Traffic Management Technologies. (www.businesstech.co.za)

With the money that is collected through e-tolling on the Gauteng network, 17c goes towards the cost to manage the operations and collecting tolls. This covers costs of wages, costs of bank transactions, costs to sustain the infrastructure, cable costs, municipal rates and taxes and postage incurred by the company administering it on behalf of SANRAL. The other 83 cents goes mainly to repaying the loan acquired to complete GFIP. (www.businesstech.co.za)

Monitoring:

Gauteng’s e-tolls roads are being monitored by an open and free-flow tolling system, also known as Intelligent Transport System (ITS). Not having any toll booths on a toll road is a new concept in South-Africa.

Success of this system will rely on two factors, namely: The workability in regards to an effective administration system and the degree of compliance of the public using the toll roads (E-tolling at an impasse, 2014)

References:

<http://www.businesstech.co.za/news/general/50729/south-african-short-sighted-on-e-tolls-economist/>

[Accessed 18 April 2014]

<http://www.businesstech.co.za/news/general/50204/5024/>

[Accessed 18 April 2014]

European Commission (2014). Infrastructure for Sustainable development. Available from <http://ec.europa.eu/europeaid/what/infrastructure-transport/index_en.htm>

[Accessed on 18 April 2014]

Infrastructure Consortium for Africa (2014). Annual Report. Available from <http://www.icafrica.org/en/knowledge-publications/article/2012-ica-annual-report-230>

[Accessed on 13 April 2014]

SANRAL (2014). 2013 Annual Report and Declaration of intent 2009-2012. Available from <www.nra.co.za>

[Accessed on 13 April 2014}

Standish, B. (2010).An economic analysis of the Gauteng Freeway Improvement Scheme. Available from <www.nra.co.za/content/Gauteng_GFIP_final_economic_report.pdf>

[Accessed on 13 April 2014]

Sydney Toll roads (2008). The economic contribution of Sydney's toll roads to NSW and Australia. <www.infrastructureaustralia.gov.au/.../Eco_contribn_of_sydney's_Toll-Roads _EY2008.pdf>

[Accessed on 18 April 2014]

World Bank (2014). Transport: Sector profile results. Available from <http://www.worldbank.org/en/results/2013/04/14/transport-results-profile>

[Accessed on 13 April 2014]