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Tolls – Higher traffic off motorways

13 April 2012 Saijil Singh, lead analyst, Coface South Africa

The furore over the implementation of tolling in Gauteng has continued even as the 30 April deadline looms.

South African road users have been impacted by continuous fuel price increases, in addition to which Gauteng motorists will have to pay a toll levy in and around Johannesburg and Pretoria. The impact on companies will likely be cushioned by increasing their prices, resulting in the consumer paying more.

Studies conducted in the United States show that there is a major change in the road-use habits of logistics firms once tolling is implemented. In cases where companies felt the tolls made their businesses unviable, alternate routes were used. As is expected, this had the effect of increasing traffic on back roads resulting in greater than normal congestion.

A further knock-on effect was increased traffic in residential areas as an alternative to tolled motorways. Increased congestion and higher pollution levels from a larger volume of vehicles often resulted. This led to a decline in the value of property adjacent to these routes.

The inverse is that property values have shown an increase when located within convenient reach of the Gautrain stations. It is likely that a similar scenario will play itself out with commuters using the Gautrain once the tolls are enforced.

The US survey also indicated an increase in accidents as a result of the diversion of traffic. A combination of higher traffic volumes and poor maintenance on these routes could contribute to more incidents.

It is clear that Government’s lack of funding for infrastructure, or more importantly the lack of proper allocation of funding, has already resulted in a decline in the quality of suburban roads which are managed by local councils.

The shift in traffic will likely result in even further degradation of this infrastructure, raising the question, how will municipalities fund the repair or improve the roads?

From a consumer perspective, the cost of tolls is likely to have an indirect impact. The survey showed that reduced efficiency of logistics chains resulted in higher costs and a general increase in the price of goods. Firms that make use of alternate routes do so because they consider them second-best to their preferred route which is normally more direct and efficient.

Less efficient routes resulted in higher fuel costs and longer delivery times, having an impact on the final cost of products.

The income generated by the tolls must exceed the costs incurred to run the tolling system. The user-pays principle, which proponents of the GFIP are touting, is clearly not applicable if this is the case. It is likely that any revenue generated in excess of the cost of running the toll system will be used to subsidise other projects across the country.

This effectively results in the over taxation of Gauteng as the economic centre of the country to pay for infrastructure in other parts of South Africa. The big question is whether this will result in inter-urban migration – the movement of people from one metropolis to another? Could it result in the migration of skills as well?

It is clear that Gauteng, as the most important province in terms of economic growth, will be placed under immense strain. Whilst this has generally always been thought of as a province-specific issue, the issue of tolling could have far reaching effects on the country as a whole.

What is certain is that tolling will be implemented on newly renovated routes. Whilst this project can be considered one which failed, in that original costing and public acceptance was greatly understated and that usage costs needed to be scaled down, government cannot allow the collection of fees to be lower than expected because there are still significant debts to be repaid.

The full effect of the new system is yet to be seen, but it is fairly certain that the impact on the social and economic landscape of Gauteng will be substantial. So substantial in fact that it is likely to reshape the cityscape as we know it.

The following could be the worst case scenario: When the tolls become operational, they could be rolled out in all major cities. The price of consumer goods and FMCG products will rise. Smaller businesses will not be able to pass the costs on to consumers. Liquidations will increase and most commuters will feel the pinch in their disposable income reducing consumer spending.

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