A critical evaluation of road pricing in South Africa Duncan Lishman.

Abstract

In an attempt to provide much-needed finance for road investments, the government’s national road agency has introduced numerous toll roads over the last three decades. It is currently in the process of introducing open road tolling on a network of Gauteng’s highways. Economic theory provides a rich understanding for pricing road use, particularly with regard to the pricing of externalities. By quantifying these externalities for the South African case, this paper reveals evidence of gross mispricing for road use. Specifically, the magnitude of road freight trucks’ external costs indicates that there is an absolute underpricing of road use for these vehicles. On the grounds of the externalities considered in this paper, passenger cars should, in fact, face a toll negligible in comparison to heavy vehicles. That they do not points to massive cross-subsidisation and that the relative price between light and heavy vehicles should be revisited. Appropriate pricing will improve economic efficiency by reducing cross-subsidisation. It will also rationalise the choice of freight modalities in South Africa, with the likely effect that a greater volume of goods will be carried by rail. Despite the welfare gains that the policy offers, one must be cognisant of the distortions that optimal road pricing may have.