The economic efficiency of tolling roads in South Africa.
Stock, Grant Henry.
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South African infrastructure has traditionally been funded through general government budgets and dedicated taxes and fees rather than tolls. However since the early 1980's, the South African Government has adopted a strategy of tolling portions of the national road infra-structure either through PPP's or toll routes owned by the SANRA. This paper investigates whether the approach of tolling the road infrastructure together with the financing, construction and maintenance of roads by means of PPP's is the most efficient economic manner to finance such endeavours. A case study analysis of TRAC, a concession toll road project, highlights the theoretical economic inefficiencies which are primarily present in relation to marginal operating and external costs, misallocation of resources, the costs of collecting tolls, contractual efficiency as well as the efficiency in raising capital. The decision to toll routes, albeit theoretically economically inefficient, is however contextualized when viewed against the funding needs of Government, particularly in light of the fact that the South African government will continue to experience severe funding shortfalls for road maintenance, rehabilitation, and construction. However, highway needs are increasing yet public funding sources are constrained by limited resources together with spending priorities in other areas. Ostensibly the decision to toll a route is not based on theoretical economic efficiency issues but rather on a strategy to lessen the financial burden on the state by freeing up more money with the implementation of toll roads. This strategy thus allows the state to maintain those roads funded through the national fiscus by tolling certain routes and thereby continue to maintain and expand the road infrastructure with the given financial constraints.