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The government has consistently said the money spent on roads and public transport outweighs the revenue it earns from the petrol tax, says Vusi Mona.
Opponents to tolling have raised the decibels in their call for the fuel levy to fund the Gauteng Freeway Improvement Project (GFIP). Curiously, they don’t tell us what ought to be done with the other roads that are already tolled.
Will tolling on those roads be stopped and funded by the fuel levy or is this supposed to be a special dispensation for the GFIP? And will Treasury increase the fuel levy every time there is a major road development to be undertaken?
Have they conducted research to indicate by how much the fuel levy will have to be increased to fund new roads and the road maintenance backlog of nearly R150 billion?
The only semblance of research we have seen is one paragraph by the Opposition to Urban Tolling Alliance that says: “Our simple calculations indicate that for the 20 billion litres we sell per annum, at 10c/litre, ring-fenced for GFIP, we will raise the approximately R2bn per annum required to fund the R20bn capital requirement and interest (at 9 percent) costs over a 15-year payback period. At R1 per litre, we would pay the road off in less than two years.”
Simple calculation and simple research indeed.
While simplicity should be extolled, road funding and budgeting for a country are not that simple. The issue of ring-fencing of a fuel levy to finance the implementation of the GFIP was carefully considered by the government as a matter of policy and ultimately rejected.
The fuel levy is a nationally raised tax. The government took the view that it was inequitable to expect all road users in the country to pay for heightened levels of road services in Gauteng while there were areas in South Africa that do not have adequate basic levels of service. Indeed, allocating nationally raised revenue towards a single province would not be consistent with the redistributive objectives of the government.
In this regard, account had to be taken of the recommendations of the Financial and Fiscal Commission, established in terms of the constitution, which require funds like the fuel levy or the general revenue to be distributed equitably between provinces and between national, provincial and local government.
The principle of equity in allocating nationally raised resources has proven difficult to grasp, especially by those who argue that Gauteng contributes more in terms of the fuel levy and should therefore get the lion’s share. That would be inconsistent with the principles of equity, redress and fairness in fiscal arrangements and with the government’s programme of poverty alleviation.
But then, every country has its own version of the Tea Party – essentially a movement of the middle class that is sponsored by business in its belief that taxes and social welfare must be reduced and that the well-off have no responsibility towards the less privileged. One of this movement’s defining features is its lack of focus on social equity accompanied by a special emphasis on economic and limited government issues.
Its view of taxes is that they “disappear” into a government pot to fund social welfare services – hence its opposition in the US to the Patient Protection and Affordable Care Act (otherwise known as Obamacare).
Locally, we have heard similar views about the fuel levy allegedly disappearing “into the pot to fund the many other socio-economic issues our government has to deal with”. Its local adherents are saying: “We want the fuel levy, we want it for ourselves, and we want it largely for Gauteng.”
The other reason the fuel levy was rejected is that it is already being shared with metro municipalities and the Road Accident Fund. Add to that the diesel fuel levy refund scheme which benefits our primary sectors and you’ll realise a large sum of the current fuel levy revenue pool is already committed.
Treasury is on record as saying the current fuel levy is insufficient to cover existing road construction and maintenance budget allocations. Anyone who has done maths at school or run a household budget can figure this out.
Treasury collected R42bn in fuel levies in the past financial year. Take R20bn of that and allocate it to the GFIP – which is what Sanral borrowed to finance the project – and you are left with R22bn for the entire country. This, after allocating nearly 50 percent of the fuel levy to one project in one province!
South Africa once had the National Road Fund which was funded through the fuel levy. It ran into financial difficulties in the 1970s. Increases in fuel prices had the effect of reducing consumption to below what was projected and this had a knock-on effect on the fund’s revenue.
Bernal Floor, author of The History of National Roads in South Africa, states that in 1974, the fund’s revenue fell to 65 percent of what was projected.
Faced with constraints on the fuel tax, other sources of revenue had to be found.
Thus tolling was introduced, giving us the first toll road in South Africa in 1984, the Tsitsikamma Toll Road.
We have been here before and the fuel levy did not necessarily rise to the occasion.
Of course, it did not help that part of it was used to fight misguided border wars by some of the people who are today telling us how wonderful the fuel levy is.
* Vusi Mona is head of communications at Sanral.
** The views expressed here are not nessarily those of Independent Newspapers.