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Tuesday Apr 17, 2012

'Tolling will reshape the cityscape as we know it'

The furore over freeway tolling in Gauteng has continued even as the April 30 implementation deadline looms. South African road users have been affected by continuous fuel price increases, in addition to which Gauteng motorists will have to pay a toll levy on major highways in and around Johannesburg and Pretoria. The effect on companies will likely be cushioned by increasing their prices, resulting in the consumer paying more.

Studies conducted in the US showed that there was a major change in the road-use habits of logistics firms once tolling was 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 freeways. 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 commuter rail 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 a rise 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 the 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 is likely to result in even further degradation of this infrastructure, raising the question: how will municipalities fund the repair or improvements of the roads?

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

The income generated by the tolls must exceed the costs incurred to run the tolling system. The user-pays principle, which proponents of the Gauteng Freeway Improvement Project 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 will effectively result 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?

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 tolls become operational, they could be rolled out in all major cities. The price of consumer goods will rise, cutting spending power. Smaller businesses will not be able to pass the costs on to consumers so liquidations will increase.

Saijil Singh (lead analyst for credit solutions provider Coface South Africa)

Business Report

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