Deloitte SA Blog

By Kay Walsh, Economist, Deloitte Consulting

The South African National Roads Agency (SANRAL) has announced the fee structure for the extensive open road or e-tolling system it is planning to launch in Gauteng in June this year. Toll collections from the 49 toll points that will be distributed across 185km of existing national road will be used to help fund SANRAL’s six-phase Gauteng Freeway Improvement Project. The first phase, which involved upgrading 185km of existing freeway and 34 interchanges, is now almost complete.

SANRAL has emphasised that the benefits associated with the GFIP project are substantial and include improved traffic flow, improved incident management and services (IMS) and accessibility in Gauteng, reduced travel times, the creation of 30 000 jobs (over the lifespan of the project) and an injection of approximately R29 billion into the South African Economy.  But much less has been said about the costs of the project (which will largely be related to the e-tolling system) or about who will bear them.  There is little doubt that the e-tolling network will result in significantly higher transport, distribution and related services costs in Gauteng (including the cost of commuting), inflate producer and consumer prices, alter road-use patterns and potentially change the spatial distribution of economic activity. While the improvements to Gauteng’s freeway system are needed and are welcome, it is not clear that all stakeholders have given adequate consideration to the broader economic consequences of using a widespread tolling system to fund the project.

The open road tolling system will consist of 49 electronically operated toll gantries distributed on sections of the N1, N3, N12 and R21 freeways in greater Johannesburg and main links between Johannesburg and Pretoria. The system allows for tolls to be automatically charged without vehicles stopping or slowing down. The overhead gantries, 30 of which have already been installed, are fitted with toll collection equipment that will automatically communicate with vehicles fitted with an electronic tag or e-tag and deduct the toll amount from the owners linked pre-paid account. Vehicles without e-tags will be recognised by their number plates.

The main advantage of e-tolling as compared to regular boom-tolls is that it causes no disruption to traffic flow.  SANRAL also highlighted that the decision to build many rather than a few toll points was motivated by the principle that road users should only end up paying for the portion of the road they have used.

The finalised and approved toll tariffs and discount structures for the e-tolling system were released to the public on the 6^th of February 2011.  The 97.6km return trip from the Rivonia road onramp to the N1 in Sandton, along the N1 to Hatfield in Pretoria will cost the driver of a light vehicle (almost all passenger cars fall in this category) with an e-tag, R24.84 in toll fees on the way there and R20.58 on the way back. With a return trip of 97.6km costing a total of R45.42, drivers of light vehicles who have registered for an e-tag can expect to pay around approximately 47c/km.  Vehicles that have not registered for an e-tag will R60.58 for the same trip which is 33% more than e-tag users (e-tag registration is expected to take place between March and June this year).

SANRAL has however announced significant frequent user discounts for drivers of passenger vehicles.  A regular commuter travelling the Rivonia-Hatfield route 20 days a month, will clock up a total of R908.40 in tolls fees but will then be eligible for a 45% discount.  This means that the e-tolling system will add a more manageable R409 to the transport costs of a regular commuter on this route (roughly R20 a day).

SANRAL has also provided some modest discounts for travelling at off-peak times – a 25% discount for travel between 23:00pm and 04:59am, a 10% discount for travel between 5:00 and 5:59am and 18:00 and 22.59pm and a 5% discount between 10:00am and 13:59pm.  Travel on weekends and public holidays will be discounted by between 15% and 25% depending on time of day.  While the discounts are welcome, the modest 10% discounts around peak traffic times do not appear sufficient to incentivise a large number of commuters to skip peak times and travel and from work earlier or later.

While the direct toll-fees on commuters are not as high as perhaps many initially feared, tolls fees will also hit both Gauteng producers’ and consumers’ wallets indirectly –  higher toll fees result in higher  freight  transport costs and  in turn feed through to producer and consumer prices.  The fee schedule published by SANRAL suggests that the same 97.6km return trip from Rivonia road, Sandton, along the N1 to Hatfield in Pretoria will cost the driver of large heavy vehicle (Freight vehicle that is >12.5 m) with an e-tag a whopping R272.64 in toll fees, which is roughly R2.80km. And for road-hauliers and logistics firms there is no escaping these fees because there are no frequent user discounts for either small or large heavy vehicles.   Significantly higher toll fees for road freight are usually justified on the basis that trucks cause far greater damage to roads than passenger vehicle and should therefore contribute proportionately more to road maintenance.

The unfortunate reality in South Africa is that there are few viable alternatives to road freight since the parastatal-managed rail freight network continues to be hamstrung by inefficiencies.  This means that higher toll fees on road freight will increase the cost of transporting goods and services into and out of the country’s major economic hub, increasing the price of goods and services both regionally and in some cases nationally.

It is likely that e-tolling of most existing national routes in Gauteng will result in the diversion of traffic onto local and provincial alternative routes as road-users try to avoid toll fees. The increased traffic on roads ill-equipped to handle large volumes could lead to a much more rapid deterioration of the adjacent roads and increased congestion and inefficiencies.  The cost associated with increased wear and tear on adjacent roads will not be borne by SANRAL but by the Gauteng Department of Transport who is responsible for maintaining provincial roads and local municipalities and their agencies including Tshwane Municipality, Ekurhuleni Municipality and the Johannesburg Roads Agency.  Any indirect costs that might arise because of increased congestion and inefficiencies on the adjacent road network will borne by residents and firms within the region.

The fact that 49 toll points will be evenly dispersed across 185km of road should help to minimise the unnecessary and costly relocation of manufacturing and distribution centres. Experience has shown that firms will strategically locate or even relocate their facilities so as to avoid toll fees – the large industrial development in Durban just before the Mariannhill toll plaza on the N3 is a case- in-point.  That said, the e-tolling system will inevitably have an impact on the spatial distribution of economic activity with Gauteng as there are undoubtedly cost efficiencies to be gained by locating new transport and distribution hubs so as to strategically avoid unnecessary toll fees.

Both municipalities and provincial government entities can benefit from investigating and understanding the potential socio-economic impact the e-tolling system could have within their jurisdictions. It is important that public entities likely to be affected by the e-tolling system are cognisant of the potential implications the e-tolling network for their jurisdictions, so that they are able to monitor risks and associated costs and are able to engage effectively with the relevant stakeholders when necessary.

Municipal authorities for example should be aware of the fact the tolling of major access routes could make their municipality less attractive as location for residential, commercial and industrial activity, particularly if there are few alternative access routes available.

The provincial and local government entities responsible for the maintenance of roads should be aware of the risk of increased traffic and damage to adjacent routes, so that they can monitor traffic flows and engage pro-actively with the relevant stakeholders to seek compensation or find alternative solutions.

It is important that individual firms and industry associations investigate the likely impact that e-tolling will have on their business operations, relative competitiveness and bottom-line, so that they can engage proactively with relevant government stakeholders and identify opportunities to mitigate the negative impacts.

Once the tolling system has been implemented there will undoubtedly be cost efficiencies to be gained by strategically locating new transport and distribution facilities and optimising existing supply and distribution networks.

Did you find this article interesting? If so, please comment and share with your network using the share button below