A good quality road network holds numerous benefits to any country, but is dependent on sufficient and stable modes of funding and adequate financing. Funding for roads in South Africa is complex, controversial and faces different viewpoints. In this environment, it is difficult to implement any new form of road user charges, including the user-pay principle, or promote a sustainable road infrastructure policy framework.
This article examined the road funding framework in South Africa to fully understand its capability to fund the country’s road infrastructure network while quantifying and presenting the linkage between road-generated income, its distribution, allocation and the expenditure of these funds through a consolidated report and comparing the country’s income and expenditure on roads to international standards.
Numerous financial statements were assessed through a budget analysis to present the current road funding framework in South Africa in terms of the income generated from the road sector, its allocation, distribution and the expenditure of these funds. Local road funding trends were then compared with selected countries in terms of road-generated income, its allocation and expenditure.
South Africa’s current road funding framework collects a substantial amount from road users, but there is a mismatch between road-generated income collected and governmental road expenditure. Furthermore, South Africa’s road expenditure in not outside the norm compared to international countries.
Investigation into the effectiveness of South Africa’s current road cost recovery methods is needed, and the impact of future technologies on its income-generating potential must be examined.
Roads are undeniably important to any country as, among others, good roads can lead to an improved standard of living for the public, create more employment, provide a social service, bring about spatial agglomeration benefits and improved accessibility and support economic growth and development (Lakshmanan
Despite the general belief in the importance of roads, funding is often controversial, faces many conflicting viewpoints and is notoriously complex. This situation is amplified in a developing country, such as South Africa, facing numerous developmental needs, limited income opportunities and a relatively small road user base. Given the nature of road infrastructure, that is, indivisible, chunky and that relies on the public good nature, financing for roads in the South African framework is nearly always under pressure. The government cannot always ensure that sufficient funds are spent on roads given other urgent developmental requirements, or that the spending on roads is done in an economically efficient manner.
South Africa has seen its fair share of public debate on how the government should fund road infrastructure and, increasingly, transport operations such as public transport. Roads, in particular, have received a lot of attention in the popular press, with statements ranging from alternative funding options, to increase funding demands being made by three main interest groups: the government, state-owned entities (SOE) and the public. The viewpoints are often conflicting with groups arguing for and against the fuel levy, ring-fencing the fuel levy, toll roads, arguing that motorists are unfairly taxed and that the road sector is subsidising other economic sectors. A general theme in government policy papers seems to indicate their preference for adopting the user-pay principle to fund roads.
The aim of this article was to examine the current road funding framework in South Africa to fully understand its capability to fund the country’s large road infrastructure network. This includes quantifying and presenting the linkage between road-generated income, its distribution, allocation and the expenditure of these funds through a consolidated report while comparing the country’s income and expenditure on roads to international standards. According to the South African Department of Transport’s Roads Infrastructure Policy Framework Draft (Department of Transport
There is a growing body of literature on road funding, both internationally and in South Africa in response, at least partly, to transport infrastructure investment demands, pricing of transport infrastructure and new technological trends that impact infrastructure demand and supply. A general review of this literature found that many studies focus on (1) the long term viability of the general fuel levy (or gas tax) in the light of technological developments such as increased fuel efficiency and electric vehicles, (2) estimating the social cost of road use to ensure economically efficient pricing or (3) considering alternative cost recovery mechanisms and approaches such as distance-based charging via GPS to accommodate both these trends (Bousquet & Queiroz
Despite an active public debate internationally and in South Africa about fuel levies, toll roads and other road use taxes, very little research has been undertaken in South Africa that qualifies and quantifies transport funding, and more explicitly road funding. This study contributes to the body of knowledge by addressing this research need by providing an overview of revenue collected from road users and road expenditure in South Africa and comparing these values to international standards.
The following section presents a review of literature pertaining to the history and evolution of road funding in South Africa. Thereafter, the research methodology is presented. This is followed by research results, which explores the current type and magnitude of funding for road infrastructure in South Africa, while the section ‘International road funding trends’ compares local road funding trends with selected international countries. This article concludes with a discussion on how South Africa could improve its road funding policy.
The literature review briefly discusses the evolution of the South African road funding framework from its humble beginnings to the current policy framework and proposed changes.
Before 1935, road construction and maintenance in South Africa was the responsibility of provincial and local authorities who funded the infrastructure through local tax income (Floor
This fuel levy had to be increased numerous times over the next 40 years to sustain the pace of road construction and maintenance. Despite these increases, the fund experienced declining income from 1974 because of a decrease in fuel use as a result of international sanctions imposed on South Africa, a rapid rise in construction costs because of inflation and high design standards (Floor
At present, the fuel levy is still South Africa’s main method to collect income from road users supplemented by vehicle- and user-based charges that include licence and toll fees (Van Rensburg & Krygsman
With the possible exception of the National Transport Master Plan (NATMAP) (Department of Transport
Overall South African transport policy documents emphasise that the transport sector, specifically the road sector, is experiencing funding problems. For example, the Draft White Paper on Roads Policy for South Africa (2018) emphasise the shortage of funds for roads and maintenance in particular, leading to a significant backlog in maintenance. The Policy mentions a current road maintenance backlog of R197 billion (Department of Transport
The Economic Regulation of Transport Bill, published for comments in 2018, aims to ‘consolidate the economic regulation of transport within a single framework and policy, to establish the Transport Economic Regulator, to establish the Transport Economic Council’ to, importantly, administer price regulation in the transport sector (Department of Transport
Lastly, the Draft Revised White Paper on National Transport Policy (
For this study, a budget analysis was performed to determine how and to what magnitude the South African government source income from road users, how this income is managed and ultimately spent. The study also compared local road funding trends with selected countries, in terms of three ratios, for example, road expenditure to income ratio, a road expenditure to gross domestic product (GDP) ratio and road expenditure to allocated road expenditure ratio (Gomez & Vassallo
For the budget analysis, numerous government acts, bills and policy framework documents were, assessed to determine which spheres of government are mandated with the responsibility to finance and provide road infrastructure and road-related operation and regulation activities in South Africa (Department of Transport
All the road cost recovery methods, which are used by all road-related entities in South Africa to collect income from road users, were determined based on research by Stander and Pienaar (
In 2015, a review of each entitie’s publicly available financial statements and budget reports were undertaken to account for all road-generated income collected. This was followed by tracing all road-generated income by means of the various financial statements to the point where it was spent on road construction, maintenance, upgrade or road-related operation and regulation activities. The expenditure was further divided into expenditure that was allocated or ring-fenced for specific expenditure programmes, expenditure on all road infrastructure programmes and expenditure on road operation and regulation activities.
Following the assessment of the consolidated financial records, local road funding trends were then compared through a comparative analysis with selected countries, which included the United States, France, Spain, the United Kingdom, Germany and Switzerland, in terms of a road expenditure to road income ratio, a road expenditure to GDP ratio and road expenditure to allocated road expenditure ratio, based on the methodology by Gomez and Vassallo (
The research in this article is part of J.A.v.R.’s doctoral study on distance-based road user charges. Ethical clearance was obtained in 2018 under project number 7188 from the Research Ethics Committee: Human Research (Humanities) of Stellenbosch University.
The results section, firstly, provides an overview of the South African road infrastructure network, after which an account is given of the collection of revenue from road users, the allocation of these funds, the expenditure of funds on the road network, the fund distribution process and finally the comparison of South Africa’s road funding trends with international countries.
South Africa boasts the 10th largest road network and 18th largest paved road network in the world (Kannemeyer
While scientific evidence is scant, SANRAL has argued that the portion of the national road network that was older than its original 20-year design life has grown from 36% to 78% in 2008 and that the current road maintenance backlog is estimated at R197bn (Kannemeyer
According to eNatis, there were 10.35 million self-propelled vehicles using the country’s roads network in 2014 (eNatis
Road users in South Africa pay various taxes, charges and fees as a result of owning and operating a vehicle. In 2014, R166.4bn was collected from road users and vehicle owners (
Road-generated income (’000).
Income sources | 2010 | 2011 | 2012 | 2013 | 2014 | % | Collected by |
---|---|---|---|---|---|---|---|
Fuel levy | R34 417 577.00 | R36 602 263.00 | R40 410 389.00 | R43 300 000.00 | R47 516 564.00 | 29 | National |
Road accident fund | R14 474 058.00 | R16 989 071.00 | R17 380 217.00 | R20 352 981.00 | R22 457 948.00 | 13 | SOE |
Fines/fees and permits | R9 011 537.00 | R10 988 624.00 | R12 933 722.00 | R10 853 033.00 | R10 678 864.00 | 6 | Provincial |
License fees | R5 057 977.00 | R5 953 006.00 | R6 530 434.00 | R6 765 016.00 | R7 349 077.00 | 4 | SOE and local |
Toll fees: concessions |
R3 987 937.00 | R4 605 700.00 | R5 029 190.00 | R5 420 129.00 | R5 846 819.00 | 3 | SOE |
Toll fees: SANRAL | R2 073 060.00 | R1 987 379.00 | R2 199 090.00 | R2 759 839.00 | R4 221 433.00 | 3 | SOE |
CO2 emissions | R625 891.00 | R1 617 353.00 | R1 567 382.00 | R1 636 848.00 | R1 684 160.00 | 1 | National |
DSML | R51 000.00 | R53 000.00 | R152 000.00 | R140 000.00 | R170 000.00 | < 1 | National |
Pipeline levy | R31 000.00 | R32 000.00 | R33 000.00 | R35 000.00 | R37 000.00 | < 1 | National |
IP marker levy | R1000.00 | R1000.00 | R1000.00 | R1000.00 | R1000.00 | < 1 | National |
VAT on vehicle sales | R28 197 380.00 | R31 099 740.00 | R34 993 000.00 | R37 154 040.00 | R37 893 660.00 | 23 | National |
Import duties: vehicle | R10 442 000.00 | R14 348 000.00 | R18 702 000.00 | R21 635 000.00 | R22 567 000.00 | 3 | National |
VAT on vehicle parts | R3 909 640.00 | R4 126 080.00 | R4 496 380.00 | R4 788 700.00 | R5 009 760.00 | 14 | National |
Custom and excise levy | R817 000.00 | R847 000.00 | R875 000.00 | R922 000.00 | R981 000.00 | < 1 | National |
Total income |
R113 097 057.00 | R129 250 216.00 | R145 302 804.00 | R155 763 586.00 | R166 414 285.00 | 100 | - |
Direct income | R69 731 037.00 | R78 829 396.00 | R86 236 424.00 | R91 263 846.00 | R99 962 865.00 | 60 | - |
Indirect income | R43 366 020.00 | R50 420 820.00 | R59 066 380.00 | R64 499 740.00 | R66 451 420.00 | 40 | - |
SANRAL, South African National Road Agency; CO2, carbon dioxide; DSML, demand side management levy; IP, illuminating paraffin; VAT, value-added tax; SOE, state-owned entities.
, This is an estimate based on Annual Average Daily Traffic and tariff.
, Other income sources from road users include: (1) developer contributions, (2) parking fees and permits, and (3) tyre tax (R500 000 000 in 2015).
The national government collects 31% of the direct income, provincial government 6%, SOE 19% and local governments collected 4%, as illustrated in the last column of
Funds from the road-generated income and other government sources can be earmarked for road construction and maintenance projects. This is known as allocated income, which is defined as the annual income that is dedicated to funding roads, without taking into account whether or not it is dedicated to specific road projects (Gomez & Vassallo
Allocated income (’000).
Grants and toll income | 2010 | 2011 | 2012 | 2013 | 2014 |
---|---|---|---|---|---|
Toll fees: SANRAL | R2 073 060.00 | R1 987 379.00 | R2 199 090.00 | R2 759 839.00 | R4 221 433.00 |
Toll fees: concessions | R3 987 937.00 | R4 605 700.00 | R5 029 190.00 | R5 420 129.00 | R5 846 819.00 |
SANRAL: non-toll | R4 065 177.00 | R5 262 566.00 | R5 934 636.00 | R6 394 541.00 | R7 515 300.00 |
SANRAL: Coal Haulage | - | R464 782.00 | R667 959.00 | R648 910.00 | R665 498.00 |
SANRAL: Gauteng Freeway Improvement Project | - | R5 750 000.00 | - | - | - |
Overload control | R5390.00 | - | - | - | - |
Provincial road maintenance | R4 862 460.00 | R6 389 635.00 | R8 988 337.00 | R8 696 210.00 | R9 361 498.00 |
Public transport infrastructure | R3 699 462.00 | R4 988 103.00 | R4 803 347.00 | R4 668 676.00 | R4 968 029.00 |
SANRAL, South African National Road Agency.
The largest share of the allocated income was for the Provincial Roads Maintenance Grant and SANRAL’s non-toll network, which consist of over 273 000 km and 18 000 km, respectively. Allocated income increased by 121.5% over the period 2010–2014.
Annual expenditure on roads by all spheres of government and SOE includes infrastructure investment and maintenance grants (
Road expenditure (’000).
Transport entities | 2010 | 2011 | 2012 | 2013 | 2014 |
---|---|---|---|---|---|
National government | - | - | - | - | - |
Provincial government | R14 269 254.00 | R15 993 253.00 | R17 634 059.00 | R18 571 254.00 | R20 169 802.00 |
Municipalities | R9 893 480.00 | R12 260 308.00 | R12 181 889.00 | R13 564 588.00 | R14 507 056.00 |
SOE | R18 972 179.00 | R15 852 104.00 | R15 191 965.00 | R15 253 520.00 | R14 584 260.00 |
SANRAL | R13 523 456.00 | R12 638 823.00 | R12 881 594.00 | R13 079 213.00 | R12 850 991.00 |
SANRAL: concessions | R5 448 723.00 | R3 213 281.00 | R2 310 371.00 | R2 174 307.00 | R1 733 269.00 |
SANRAL, South African National Road Agency; SOE, state-owned entities.
For the 2014–2015 financial year, the South African Revenue Services (SARS) collected R49.4bn from road users with the local and provincial governments and SOE collecting the remaining R50.5bn to account for the R99.9bn, as shown in
The RAF collected levies of R22.4bn (in 2014) from road users in the form of a levy raised on fuel. As with other taxes, the RAF levy is paid to SARS, who transferred it to the RAF in accordance with provisions of the
State-owned entities and provincial and municipal governments may also use their own income to fund road operation activities and infrastructure investment. The own income includes tolls (R10bn) in the case of SANRAL and the toll concessionaires and local licensing fees, parking and permit charges, developer contributions (R18bn) and so on in the case of provincial and municipal governments. Furthermore, the provincial and municipal governments may also access loans, government grants and their equitable revenue share or own receipts from non-transport-related activities (such as property tax) to fund transport infrastructure and operations.
For the 2014–2015 financial year, R119.5bn was spent on road network infrastructure, transport operations and regulation in South Africa. Of this amount, only R49.2bn (
The funding of roads in South Africa (2014).
In summary, during 2014–2015, R99.9bn was collected through various charges, levies and taxes by all levels of government. A simple calculation reveals that assuming a vehicle fleet of 10 350 835 travelling a distance of 162 405 499 396 km, an average hypothetical vehicle contributed R0.62 per vehicle kilometre to the public treasury (Department of Transport
Despite the active road funding debate, it is unclear whether South Africa spends comparatively more or less on its road network than its peers. Even with the values stated in the previous section, it is not known how South Africa compares to them. To put road funding into perspective, the country’s road funding framework is compared to selected international examples. The South African road funding model was compared with other countries, by calculating three ratios, that is, the road expenditure to income ratio, the road expenditure to GDP ratio and the road allocation to income ratio.
The road expenditure to income ratio shows the money spent on roads (construction and maintenance) for every South African Rand charged for road use. It is obtained by dividing road expenditure by road-generated income.
Expenditure to income ratio for selected countries.
Three groups of countries can be distinguished: firstly, nations with a high commitment of road income (more than 60%) to road purposes that includes America and Switzerland. Secondly, with an average expenditure rate of road income (between 40% and 50%) that includes France, Spain and South Africa. Thirdly, countries with low levels of expenditure (30% or below) that includes Germany and the United Kingdom. The third group still spends much on roads, but their taxes for road use is also very high (Van Rensburg & Krygsman
The second ratio, the road expenditure to GDP, shows the amount of money spent on road construction and maintenance for every South African Rand the country generates through the production of goods and services or our GDP. The GDP measures the value of economic activity within a country. Strictly defined, GDP is the sum of the market values, or prices, of all final goods and services produced in an economy during a period of time. What is immediately apparent from
Road expenditure to gross domestic product ratio for selected countries.
The road allocation to income ratio shows the share of road-generated income earmarked for road construction and maintenance projects (
Road allocation to income ratio for selected countries.
Roads support economic development and satisfy most of the government’s social and development objectives. A clear case can therefore be made to fund roads and ensure a sufficient and reliable income source. The question is therefore how much funding should be allocated to roads and how to secure income from road users.
The literature gives the impression that South Africa does not have a specific, structured and extensive road policy yet. The magnitude of funding required for the road sector is relatively unknown; the amounts stated or projects proposed by the road industry role-players are not necessarily economically justified and the share of costs that road users should pay for funding South Africa’s road infrastructure is unknown. Current policy documents extensively advocate for the user-pay principle, but this principle in terms of price setting for public infrastructure has a specific meaning or rather purpose and does not guarantee that sufficient levels of funding are achieved. It is rather difficult to determine if road users currently pay too much or less than what is required of them, but it is known that the current price of our fuel levy which is ultimately paid by the road users is not sporadically too high or low compared to international countries given our large road infrastructure network. Furthermore, current policy documents do not regulate road tariffs, and although there is a move to establish an economic transport regulator, it will not necessarily look at road taxation. This seems to be based more on a fiscal decision to collect income for the national fiscus and that economically efficient road taxes based on the user-pay principle are not taken into consideration. These policy documents also do not quantitatively show the actual need for funding.
This article illustrated that there are various revenue sources of different magnitudes in South Africa’s road funding framework of which the fuel levy only contributd 29% in 2014. Accordingly South Africa collects quite a lot from road users through actual road use and from owning a vehicle, but this is less than what is invested in the road sector each year. A lot of funding seems to be diverted from the purpose of administration and regulation in the road sector and as such only about 40% of the income collected gets invested in actual road infrastructure. Compared to selected developed countries in terms of how much income South Africa generates and spends on road infrastructure as a percentage of GDP, it is definitely not under the norm. The problem may be structural as South Africa has a big road network and a very small vehicle fleet, where too many roads were built and historically road funding was not done economically. It, however, seems that national governments are actively allocating (spending) more on road infrastructure each year compared to provincial and municipal governments that are not increasing road infrastructure spending at a stable level out of their income account but rather at a marginal level because of the prioritisation of other expenditure programmes.
South Africa needs a comprehensive, detailed policy drawn up by independent and verifiable research that indicates how much we should pay to maintain the infrastructure that is important for economic development. It must be acknowledged that roads compete with other infrastructure and social activities and that total cost will not always be covered given our large road infrastructure and small user base. Thus, hard decisions will have to be taken. An economic regulator is indeed needed to set prices at the correct level and to win the confidence of the public, which is not the case in the current setting. To improve South Africa’s road funding policy, data and performance measures are needed. The assessment of current cost recovery methods is also needed, investigating the effectiveness thereof and the impact of future technologies on its income-generating potential. It is important to strive for fair and efficient road user charges that adhere to the user-pay principle, whose meaning is not clearly defined and calculation thereof non-existent. The framework should not be oblivious of new cost recovery techniques that are made possible through innovation in technology, and that may possibly replace current income sources such as distance-based road user charges through location-aware technologies that may be more suited to adapt the user-pay principle. It may be time for tariffs to be differentiated based on external cost that shows the need for congestion pricing to be implemented in South Africa.
The authors declare that they have no financial or personal relationships that may have inappropriately influenced them in writing this article.
S.C.K. is the project leader and is the promoter for J.A.v.R.’s doctoral study, who was primarily responsible for the research. Both authors contributed to the writing of the article.
The research presented in this article was partly funded by the Southern African Bitumen Association (SABITA) and the South African Road Federation (SARF). The Department of Logistics, University of Stellenbosch, thanks them for the support.
Data sharing is not applicable to this article as no new data were created or analysed in this study.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any affiliated agency of the authors or the funder.