Chief economist at Economists.co.za, Mike Schussler, has broken down the monumental task South Africa faces in financing and maintaining its crumbling road infrastructure – and what it would cost road users if a fuel levy was the only method used.
Schussler made his presentation while moderating a Transport Forum Working Group event in Johannesburg recently.
According to Schussler, the total cost to replace all the roads in South Africa was quoted at R2 trillion in 2013 – taking inflation into account that figure is now around R2.75 trillion.
To replace the roads over the next 20 years, we would need to find R137.5 billion each year. But that’s not the total cost, the economist said.
Added to this would be debt service costs of R4 billion a year, with a further R27 billion a year needed to grow the road network by 1% a year. Public transport costs would add a further R33 billion.
So total funding required from motorists, if only motorists pay, is over R190 billion a year, he said.
According to Schussler, to fund the upkeep of South Africa’s roads from the fuel tax – that is the roads that exist without any new roads being built – it would require a fuel tax of R6.18 per litre.
To account for growth, with the public transport sector also paying, this would increase to R7.82 per litre.
If public transport and taxis are subsidised through exclusion from fuel taxes, however, the figure could be as high as R10 per litre, Schussler said.
“Fuel tax alone is a very expensive option – particularly for trucks,” he said, adding that if trucks bear the higher prices, this will be fed onto consumers.
Currently, the fuel levy (excluding the Road Accident Fund Levy) brings in about R80 billion however, Schussler stressed however that this goes into the general tax pool, and is not reserved for roads or infrastructure.
What was clear, Schussler said, was that South Africa’s major road problem cannot be resolved through any single fee alone.
“Whatever it will be, it will have to be a mixture – and we will have to look into it and implement it soon,” he said.
Schussler highlighted some other avenues where government could make up the shortfall:
- Licence fees – while this could help, the currently bring in relatively little, ie single-digit billions. To make up the balance, fees would have to be thousands of rands per vehicle each year, which would not work for road users at all.
- Local fuel levy – provincial governments are empowered to charge a local fuel levy, but currently none do. The Western Cape did research into it, but nothing came of it. Metros currently get some of the national fuel levy taxes back as part of their budgets.
- Congestion charges – time of day charge or a place charge.
- Distance charges – charging road users something like R1 per kilometre.
- Other charges – things like municipal charges for parking.