The future of South African urban highways

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By Cees Bruggemans, Chief Economist of FNB.

From pure wilderness, South Africa’s dash to urban modernity these past two centuries has been marked by various transport revolutions beyond the traditional going on foot, horse, donkey cart and ox wagon.

Today we enjoy availability of modern high-technology railways, bus and taxi services and passenger and commercial road transport on an extensive network of public railways and highways in and around major cities whose economic concentration and capacity contribute over 85% of GDP.

With only half the 50-million strong population so far urbanised, it is a skewed modernity, with the urban skill and wealth concentrations and their ease of transport (and energy and communication) mutually reinforcing each other’s development.

As elsewhere in the world, these urban concentrations offer escape from rural backwardness as populations urbanise, industralise, gain modern labour skills and experience and the income and wealth generating opportunities that accompany them.

South Africa, too, is yet far from finished travelling this arduous development path. If nothing intervenes that would hold it back, and our now very slowly growing population continues to increase per capita GDP sufficiently to ensure employment expansion, the share of the population enjoying urbanised modernity should eventually also reach nearly 85% within another generation (or two).

Just like for instance Brazil already has.

Crucially, this assumes all hallmarks of modernity will advance along with this growing degree of urbanisation. In other words, not only work opportunity but also access to housing, water, electricity, communication, transport, shopping, sport and other public amenities.

From this historic and futuristic overview back to the everyday present, where we tend to take for granted the presence of modern transport to ease our daily life and long-term development. And where we mostly assume future development needs will be appropriately provided.

But it turns out that nothing should any longer be taken for granted.

In the historic modernising epoch that lies behind us, certain forces drove the provision of public infrastructure, its adequacy and financing within a greater set of public choice options.

Today we hear that settler colonialism, capitalism and commodity exploitation as much as industralisation, urbanisation and racial discrimination shaped our geographic distribution, concentration and nature.

Not everyone accepts the commodity basis of this historic legacy nor the future options that ‘path dependency’ (more of the same driven by inertia) would suggest.

In other words, revolution is in the air.

But it is a kind of revolution that is kindled by many fires, and understanding these takes some doing.

The first force, now some two decades in the making, is a fairly radical shift in public priorities, one which emphasises income redistribution in favour of public servant remuneration (much higher in real terms) and their numbers, and in social delivery (especially transfers – welfare).

Not only was the transport infrastructure relatively starved of maintenance during this historic interval, but its expansion in line with a growing economy had taken a backseat as more pressing social ambitions took precedence in budget allocations.

When infrastructure backlogs had reached dangerous proportions, a new urgency was found to address the matter in stages.

But with one crucial handicap.

Budget space was to be limited, given everything else that had happened, is still happening and no doubt will still keep happening for a long time to come in our still young democracy plagued by so many skewed imbalances.

Thus we find Sanral, the public road transport agency, limited to a R6.8bn annual budget allocation, to serve the multiple maintenance and expansion demands of our modern road infrastructure as envisaged in terms of our historic legacies (how we have developed) and its future pathway (how it will logically still develop from here).

To cross this gaping divide between needs and now severely limited public means, it didn’t take long to come up with the “user principle”.

Existing state revenue streams have been prioritised for many things, with only R6.8bn going to Sanral. If the middle class urban populace needs more road than that, it will have to finance it from own resources, mainly through tolls.

A simple idea and decision, except that just as much as democracy operated in foreclosing on the country’s budget space for more important priorities, so another part of our young democracy decided it didn’t want toll roads.

Instead, give us our needed highways WITHOUT having to pay from private sources.

This was basically an invitation to revisit the proposition that the country’s budget space is foreordained for priorities other than highways, except the allocated R6.8bn.

But two can play this game.

If road users don’t want to pay toll to augment Sanral’s finances, the highways needed by future modernity as suggested by current path dependency and extrapolation may simply not materialise.

And then what?

Government Ministers are saying publicly that only the rich capitalistic component of our modernity (car owners or users, only about 30% of the population) would benefit from more highways. Instead, future priority should focus on rural, township and working class folk, favouring public transport (trains and buses).

Revolutionary stuff. Let’s become what we are not.

We find some of our intellectuals effectively suggesting that all existing middle-class-oriented infrastructure is a subsidised luxury the country can ill afford. Instead, its development path should change tracks away from traditional lines yielding us today’s skewed modernity in favour of different pathways, focused on the less privileged two-thirds of the population.

There is certainly a lot of talk about doing things differently, industry-wise, work-wise, location-wise.

Meanwhile, the existing growth engine driven by the rich capitalist urban middle classes should perhaps start wondering where their future highways, electricity generation, water supply and export railway lines really will be coming from if they don’t want to finance it privately on the side IN ADDITION to their existing tax burden earmarked for other things?

These are fundamental questions.

Personal electricity use that cost the equivalent of R1 in late 2009 will cost R2 in late 2012 and R4 in late 2015. Already rich airport taxes are to go up by a further 160% by 2015. And then there are the many ‘planned’ toll roads.

This is in addition to ordinary municipal rates and taxes rising by between 10% and 30% annually.

The danger, in the presence of a government focused on social delivery seriously limiting its budget space, a modern urban middle class unwilling to pay yet more for its increasingly pressing infrastructure needs of all kinds and activist intellectuals wishing to undo the colonial-capitalist legacies and reshaping our everyday reality in new moulds, is that the whole show may come to a grinding halt through newly skewed public choices, under-provision of urban infrastructure and a capping of modern development below stall speed?

So if you are against tolls of any kind, and find it not doable to shift government priorities or undo wastefulness, you may end up not getting the highways, electricity or water that our modern growth path logic divines, potentially accompanied by a radical shift in the nature of our infrastructure development.

A more likely outcome over time in response to the unfolding needs of economic development is that the overall tax burden on South Africans will rise.

Existing budget space is likely to remain earmarked mainly for redistribution. The modern core of the economy may gain more needed infrastructure whose funding won’t come through higher income, corporate or indirect taxes but through focused user charges taxes.

Alternatively, user charges are dropped in favour of higher income and corporate taxes.

It is a debate that has hardly begun but the outcome of which will crucially shape the next generation.

References

Setumo Stone, “Sanral has taken state’s job – Cronin”, Business Day 13 October 2011.

Blade Nzimande, “SACP message to 2011 Satawu Congress”, Satawu 12 October 2011.

Source: Cees Bruggemans, FNB, October 18, 2011.

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