A year on the debate on e-tolls remains highly contentious, with large numbers of individuals in Gauteng vehemently opposed to the institution of the e-tolling process. Spreading e-tolling to the remaining provinces will very likely cause the same reaction by those citizens.
Proponents of e-tolling, mainly the government, argue that e-tolls have many benefits and are understandably eager to institute the process in order to start earning revenue from this source. Unfortunately, most of the arguments given in support of e-tolls are essentially the benefits of improved road infrastructure, and not benefits relevant only to e-tolling. In other words, exactly the same benefits can be achieved by other sources of funding the improvement to road infrastructure, such as a higher fuel levy.
It is definitely possible to increase the fuel levy in Gauteng and not in other provinces (avoiding cross-subsidisation by other provinces), as Gauteng already pays an inland rate for petrol and the levies are paid by motorists at the pumps.
Surely this is a better solution than raising the ire of a significant segment of the taxpaying population? The problem, however, is that the government has not only instituted much of the e-tolling process and employed staff, but has also put in place the physical infrastructure.
While arguably pre-emptive without adequate public consultation, these costs nevertheless have to be recouped. And government finances are already squeezed by expenditure commitments to the point where the rating agencies have downgraded South Africa’s sovereign credit rating due to slower economic growth and rising expenditure commitments, with the possibility of further downgrades when the government’s creditworthiness is reassessed next year.
The potential selective treatment of the poor provided by the proposed e-tolls means that it is the middle and lower-middle income earners who will bear the brunt of the cost of e-tolls. These earners, who are already the most negatively affected by the well above consumer price inflation electricity and water costs, will find their disposable incomes severely reduced by e-tolls. This means they will have to cut back in other areas, and potentially get deeper into debt. In particular, consumer spending (and related services) is likely to be negatively affected, which will reduce the job creation potential of services sector.
A fuel levy increase could fund the provision of the same benefits more cheaply than the e-tolls, as it does not rely on expensive gantry systems. Indeed the expense of e-tolling means many would resort to alternative routes, greatly increasing the congestion, wear and tear and incidence of accidents on these roads. Alternative routes are also not always available, practical or in good repair. There is also an insufficient level of safe, reliable, efficient and affordable public transport available.
The taxes already collected by the government via the fuel levy and licensing fees are not ring fenced for the maintenance of the roads, but go instead into general tax revenue. But the lifespan of the upgraded road infrastructure should be longer than five years and the recoupment of costs should match the time period, and so be lower for the user.
The higher cost of e-tolling, if it goes ahead, versus the fuel levy option, would also unnecessarily raise the cost of transporting goods and services across the country, pushing up the cost of living for all, and the poor in particular.
Annabel Bishop is Investec’s group economist.