THE FUEL price would rise by 50 percent if the fuel levy were the only way to fund road-building, says economist Mike Schüssler. African News Agency (ANA)
JOHANNESBURG - South Africa cannot put all its road-funding eggs in one basket, according to a presentation by Mike Schüssler, an economist at economists.co.za, at the recent Transport Forum.

Schüssler said the use of a fuel levy alone to fund roads is not a viable solution to South Africa’s needs:

1. Roads are the lifeblood of our economy. He said the country’s total road surface had not increased much, while some roads are no longer drivable. Yet, about 80percent of all South Africa’s land transport is performed by road, up from 73percent in June 2009.

2. R138 billion was needed annually to fund road maintenance and a further R28bn to expand our road network to meet the needs of the economy. South Africa’s total road network replacement cost is estimated at R2.75 trillion in today’s money. The average road needs to be replaced every 20 years. If we replace the roads linearly over 20 years, he calculates we would have to pay R137.5bn a year for the next 20 years.

“In addition, to grow the road network just 1percent a year would require about R27.5bn.” This means that total road funding required from motorists, without any leakage from collection, would be R165bn. (It also implies that this funding is not shared with other imperatives like housing, as is the case with fuel tax.)

3. We are using less and less fuel, which is a diminishing tax stream. Schüssler said that total South African fuel sales (excluding paraffin, jet fuel and marine diesel) increased by 50percent between 1997 and 2018, from 16 billion litres to 24 billion litres annually, although the number of cars on South Africa’s roads almost doubled during this time.

According to Schüssler, the average car in 1998 consumed about 3000 litres of fuel a year. By 2018, the average car consumed about 2100 litres annually. In other words, the country’s vehicle park is 30percent more fuel efficient now than it was 11 years ago.

4. The fuel price would increase by at least 50 percent if the fuel levy were used to fund roads. Based on these assumptions, Schüssler had modelled that, with fuel tax the only road funding method, about R7.80 would be payable, per litre, in fuel tax to maintain current roads and support a 1percent increase in the road network annually. (R6.18 per litre in tax would be enough only to meet our current upkeep and replacement requirements.)

He said that if all public transport was subsidised and if all taxis were exempt from the fuel tax, non-exempt road users would have to cough up R10 per litre in fuel tax. The fuel tax alone would, therefore, be a very expensive funding option - particularly for heavy trucks - whose operators would likely pass the costs on to consumers.

This article was developed from a presentation given at the Transport Forum Working Group by Mike Schüssler.

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