Delivered by Professor Stephan Krygsman during a ‘Road Funding in South Africa - Feedback from Operators’ event held in Midrand, Johannesburg.

1. DRiVE:a Distance-based Road user chargeVoluntary
Experiment
14 March 2019 © The content of this presentation is confidential.

2. ❑ 6 December 2018:
o “A history of road funding in SA”
▪ Were did it all start and where are we now and where are
we heading?
▪ What is the meaning with road user charges and the user
pay principle?”
❑ 14 February 2019:
o “The relationship between roads and economic
development”
❑ 14 March 2019:
o “Feedback on DRiVE: Distance-based Road user charge
Voluntary Experiment”
Three presentations

3. ❑ 2016 - SARF and SABITA funded a project on Road
funding in South Africa
❑ 2017 – Distance-based road user charging (DRIVE)
❑ 2017 – Namibia: Determining efficient road user charges
❑ 2017 – Producer benefit of rural road upgrading
❑ 2018 – Viability of a provincial fuel levy
❑ 2018 – Fuel levy sharing methodology
❑ 2018 – Congestion Charging
❑ 2018 – Impact of Electric Vehicles on Government Revenue
❑ 2018 – Forecasting vehicle ownership in South Africa
❑ 2018 - The relationship between roads and economic development
❑ Team of 6 working
Acknowledge SARF/SABITA

4. ❑ Presentation 1
o History …
▪ Not a lot has been done in South Africa since the beginning
1980’s
▪ Limited data, knowledge of costs, LT planning …
⚫ Confusion between funding and financing
▪ Pieces of policy and user should pay
❑ Presentation 2
o There is a relationship between roads and economic
development
▪ Not linear … tapers off significantly
▪ BUT you need
1. Efficient government and clear policies
2. Productive labour …
3. Technology and systems in modern day logistics very NB
4. Sufficient financing …. (capital)
What did we learn from each of these …

5. ❑ Of course we should pay for roads …
o In the correct environment, infrastructure will assist with
economic development
❑ The issue is how much, and how
1. How much …?
o The charge should cover the costs …
▪ Then Government can either add a tax or not
⚫ EU load with taxes …PS …
⚫ US min. tax.
o Pay too much --- erodes development …
▪ As all taxes …
2. How…?
o Fuel tax (and the host of taxes associated with the fuel use)
o Toll and Congestion charges
o License, Parking, Carbon, Tyre, Development contribution
So what remains …

7. How do we collect income from road users
How do we collect income from road users?
❑ Main income source is the fuel levy
o 2014/5 values…
▪ Some Facts
1.Fuel levies – 70% of road user generated income
2.Vehicle license fees - 7% of road user generated income
3.Fines / fees and permits- 11% of road user generated income
4.Toll fees- 10% of road user generated income
5.Co2 emissions- 2% of road user generated income

8. The value of the fuel levy to government…
❑ Contribution:
o 5% of national tax revenue – R47,5 billion (2014 / 2015)
o 4th highest income stream

9. Some fuel trends …

10. Co₂ emission tax (1.6%) Vehicle license fees (7.4%)
Fuel tax (47.7%) Fines / fees and permits (10.7%)
RAF levy (22.5%)
Toll fees (10.1%)
Infrastructure expenditure Infrastructure expenditure
Operational expenditure Operational expenditure
Infrastructure expenditure
Infrastructure 41%
Operational 59% Operational expenditure
* Income collected on 746 835 kms of roads by a vehicle fleet of 10 350 835 travelling a distance of 162 405 499 396 kms in 2014
** R 0.30 spend on road infrastructure per vehicle km
R 0.44 spend on road operations per vehicle km
R 70,244,237,000
Expenditure
R 1,684,160,000
R 47,724,564,000
R 22,457,948,000
R 10,068,251,816
R 14,584,260,052
R 35,744,274,000 R 12,000,031,000
R 14,507,056,000
State-owned Entities
R 99,962,864,816
(R 0.62 per km)
THE FUNDING OF SOUTH AFRICAN ROADS UNPACKED (2014)
National Government
Provincial Government
Municipal Government
Expenses on the road network and to ensure an regulated road user**:
R 119,505,355,052
(R 0.74 per km)
R 22,499,932,000
Provincial Government
Municipal Government
State-owned Entities
Income from road use and road users*:
R 49,261,118,052
R 7,349,077,000
R 10,678,864,000
R 20,169,802,000
• Developer contributions (?)
• Parking income (?)
• Tyre levy (R500 000 000)
New environmental levy of
12c per liter
+/- 22 000 000 000 liters of
fuel sold
+/- R2 500 000 000 in
revenue

11. And our allocation process …

12. The fuel levy … efficiency …?
Is this trusted cost recovery method becoming
inefficient?
❑ Generating less income per vehicle per annum
per litre of fuel used / sold
o Year 2000 = 100
o Roughly 1.1% decrease per year (inflation could decrease this further by 5%)
o This graph does not even take into account the other fuel levies such as the Road
Accident Fund
o PS: Note that fuel efficiency is still dwarfed by inflation and specifically transport
construction inflation
❑ TRENDS:
o Technology: 1) due to improved vehicle fuel efficiency
2) introduction of electric and hybrid vehicles
o Socio-demographics: 1) people are buying less cars
2) shared ownership / rideshare
3) Social consciousness - alternative fuels / less travel
o Policy: 1) government under pressure to only charge for use
100%
87%
81%
73%
62%
52%
44%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2010 2015 2020 2030 2040 2050
Efficiency
Year

13. New technology emerging…

14. Business as usual is not possible…

15. And the World is responding …

17. How much should the user pay?
The obvious questions …

18. Some basic principles …
Final ‘price’
The users
The charge
Road User
Charge
Freight
Social Marginal
Costs (SMC)
Road
Damage Congestion Environment
Accident
Final consumers
Non-toll
SMC +
pure tax
Toll
Alternative
Willingness to
pay
No
alternative
Willingness
to pay –
price
regulation

19. ❑ Components of User Charge
1. Infrastructure Cost: Maintenance and Administration
2. Environmental Cost (pollution, noise, etc.)
3. Accident Cost
4. Congestion Cost
o Only those cost that can be attributable to the users …
❑ This is the user pay principle
❑ Requires very accurate records
o South Africa has not done any work on these costs
o Fortunately the EU, the USA and Asia has worked on
this extensively
What is included in User Price?

20. We can even model the impact of tax …
❑ https://un-modelling.github.io/tax-fuel-
development-visualisation/dist/index.html

21. Ask the experts …

22. ❑ This is collected from users
because we have roads
❑ This is part of the total tax
we all pay …
Users are paying in South Africa …?
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Average South African Average fuel-based motorist Average electric-based motorist
PERCENTAGE
Housing Food Water Communication Education Electricity Health Fuel Fuel levies Road use charges and fees Other expenditure

24. Applying EU MSC to South Africa
Some background
❑ Road user are paying 62 c / km
❑ Government is spending 74c / km
❑ Tot sustain our road network we
need R1.27

26. PS … our neighbor … Namibia …

27. How do you pay for this

29. The costs … and the charges
Fuel and
Accident
tax
22
82
65
71
21
30
Vehicle class AADT
Infrastruc
ture
Accident
Environm
ental
Total
Average
N$ cents
per km
4x4 69 0.001807 0.018455 0.081318 0.10158 10
Articulated Truck 20 1.283236 0.005349 0.011976 1.300561 130
Bus 1 0.415696 0.000267 0.000599 0.416562 42
Heavy Truck 12 0.596433 0.00321 0.007186 0.606829 61
Medium Car 105 0 0.028084 0.062876 0.09096 9
Mini Bus 17 0.001807 0.004547 0.1018 0.16534 17
Average Costs per vehicle type (N$/veh-km)
Case A (61.05km)
Vehicle class AADT
Infrastruc
ture
Accident
Environm
ental
Total
Marginal
N$ cents
per km
4x4 70 0.000215 0.000302 0.002431 0.002948 7
Articulated Truck 20 0.027177 0.000088 0.065835 0.0931 80
Bus 1 0.000353 0.000004 0.014488 0.014845 41
Heavy Truck 12 0.006071 0.000053 0.045256 0.05138 47
Medium Car 105 0 0.00046 0.002438 0.002898 6
Mini Bus 17 0.000026 0.000074 0.003687 0.003787 12
Case A (61.05km)
Marginal External Costs per vehicle types (N$/veh-km)

31. And now the how …
And maybe the need for a new approach …

32. What are our options ….
❑ Keep in mind
Drive for governmental decentralisation, … in the current situation where provincial
governments have wide ranging spending responsibilities, but very limited local
taxation opportunities and have to obtain most of their income from in the form of
grants from national government …
1. Road user levies
o Toll systems
o Supplementary licensing (congestion charge)
o Electronic toll systems
2. Vehicle use and vehicle ownership levies
o Taxation on fuel
o Taxation on tyres
o Levies on vehicle spare parts
o Mass-distance taxation
o Taxation on new vehicles
o License fees
o Road transport permits
o Axle or Wheel tax
3. Parking and loading levies
4. Trip generation levies
• Contributions by established businesses
• Land development contributions
5. Commercialisation
• Service Delivery
• Income from assets
6. Local government tax
• Property and land taxation
• Service levies / fees
• ETC….

33. Problems with Fuel Levy benefits of a
Distance-based Road User Charge
❑ Fuel Levy
o Do not deliver sufficient
income for national
government
o 1 – 2 % increase in fuel
levy efficiency per year
leading to less income
o Not equitable
▪ Poor pay more that rich folks
– not really what you want
▪ Fairness — not proportional
to extent of use
▪ Other propulsion sources...
▪ Do not grow along with VMT,
as economy and population
grow.
▪ Is not indexed to inflation.
▪ Impossible to differentiate
based on costly highways,
lower for local streets &
roads (unlike fuel tax).
▪ The causal link between the
original users-pay/users-
benefit principle
❑ Distance based RUC
• Will deliver income = costs of system
• Not influenced by vehicle efficiency
• Equitable / Fairness
• Everyone pays according toVKT and
weight of vehicle
• Fairness — proportional to extent
of use.
• Applies regardless of propulsion
source.
• Will grow along withVKT, as
economy and population grow.
• Could be indexed for inflation.
• Could be higher for costly highways,
lower for local streets & roads
(unlike fuel levy).
• Would restore the original users-
pay/users-benefit principle on which
fuel taxes used to be based.

34. So what is the rest of the world doing about this ?
Advancement of Technology, and Government Policy and
Democracy!
❑ New direct road user charging recovery methods are being
designed, piloted and implemented
▪ Move closer to implementing correct road user charges
▪ And citizens are demanding insight, participation and value for money
▪ Other countries have embraced and adopted technology
▪ South Africa lags these trends for various reasons ...
⚫ Technology is not one of them …

35. What the State of Oregon is doing…

36. What is Distance-Based Road User charge?
The concept is really very simple …
❑ Use new technology (GPS and GSM)
o to track different vehicle types
o in order to charge for actual road use
o Charge based on … distance travelled, weight of
vehicle,time of day, location of travel
❑Create road user invoices:
o Use variable fares
o Users know the charge per road / time of day
o Supplementing the fuel levy
o Tell people to optimise their trip

37. What is Distance-based road user charging?
❑ Other sectors / businesses already show you
your use and costs…
▪ Why not roads?

39. Alternative pricing regimes…
Current SA fuel tax: general fuel levy
(2017)
Current SA fuel tax: combined fuel
levies (2017)
OReGo model*
Freeman
model**
Petrol Diesel Petrol Diesel Petrol Diesel
(c/l) (c/l)
(c/l)
(c/l)
(c/km)
(c/km)
(c/km)
Motorcars
315 300
492.33
467.01
33.9
32.1 58
LDV’s – Bakkies
315 300
492.33
467.01
33.9
32.1 58
Minibuses
315 300
492.33
467.01
33.9
32.1 58
Buses
315 300
492.33
467.01
33.9
32.1 125
Trucks
315 300
492.33
467.01
33.9
32.1 146
Motorcycles
315 300
492.33
467.01
33.9
32.1 50
Other & Unknown
315 300
492.33
467.01
33.9
32.1 113*Based on an average vehicle fuel efficiency of 6.9l/100km
-- Based on South Africa’s road expenditure of R117 billion (2017)

41. Distance-based road user charging
❑ Results so far:
▪ We can get technology working
▪ Testing various devices
▪ We can extract accurate data:
▪ Data from GPS is very accurate (depend on service provider)
▪ We can calculate a road user invoice based on marginal social cost!
▪ (maintenance, congestion, accident and environment)
▪ Even differentiate per time of day and level of congestion

42. Distance-based road user charging
❑ Results so far … cont.
▪ Results show we are able to recover the true road user
cost and this cost is accurate
▪ Even from fuel efficient, electric and hybrid vehicles
▪ May also result in a change in travel behaviour if users
know their travel cost
▪ We show them their road usage cost per month
▪ Also travelling statistics such as time, speeding etc.
▪ A lot of other benefits
▪ No more need for origin and destination surveys
▪ Household surveys ?

43. Some preliminary results…
14 23

44. Short-run marginal cost pricing structure
Region Road type Free flow Near capacity Over capacity
(c/km) (c/km) (c/km)
Car Metropolitan Motorway 0.00 244.96 563.04
Main roads 8.55 1 293.18 1 658.72
Other roads 22.79 1 459.33 2 219.86
Urban Main roads 5.70 445.30 694.06
Other roads 22.79 1 276.09 2 109.72
Rural Motorway 0.00 122.48 281.52
Main roads 3.80 167.62 555.42
Other roads 1.90 384.54 1 274.19
Rigid truck Metropolitan Motorway 0.00 465.43 1 069.77
Main roads 16.24 2 457.04 3 151.57
Other roads 43.30 2 772.74 4 217.73
Urban Main roads 10.82 846.07 1 318.72
Other roads 43.30 2 424.57 4 008.47
Rural Motorway 0.00 232.72 534.88
Main roads 7.22 318.47 1 055.29
Other roads 3.61 730.62 2 420.96
Articulated truck Metropolitan Motorway 0.00 710.39 1 632.80
Main roads 24.78 3 750.22 4 810.30
Other roads 66.08 4 232.07 6 437.59
Urban Main roads 16.52 1 291.37 2 012.78
Other roads 66.08 3 700.65 6 118.19
Rural Motorway 0.00 355.20 816.40
Main roads 11.01 486.09 1 610.70
Other roads 5.51 1 115.15 3 695.15
Bus Metropolitan Motorway 0.00 612.41 1 407.59
Main roads 21.36 3 232.94 4 146.81
Other roads 56.97 3 648.34 5 549.65
Urban Main roads 14.24 1 113.25 1 735.16
Other roads 56.97 3 190.22 5 274.30
Rural Motorway 0.00 306.20 703.79
Main roads 9.49 419.04 1 388.54
Other roads 4.75 961.34 3 185.47
• Maintenance cost
• Congestion cost
• Accident cost
• Environmental cost

45. This is where the World is now looking…

46. ❑ PS …
❑ Government is proposing a Congestion Tax for
SA….
❑ So we will pay fuel tax, accident tax, carbon tax,
toll and congestion tax …

47. System cost…
❑ Collection cost:
❑ Fuel levy
o <1%
❑ Toll roads
o 30%
❑ Vehicle license fees / fines / permits
o 50%
❑ Co2 gas emissions
o 1%
❑ DBRUC
o 5% - 13% (DRiVE 9%)

48. Some results of what is possible… other
benefits …

49. Issues that must be addressed …
❑ Privacy protection
❑ Evolution of technologies
❑ Scalability of systems
❑ Flexibility of systems for policy adaptations
❑ Complexity of implementation
❑ Difficulty of operations
❑ Making compliance simple and easy
❑ Interoperability among provinces
❑ Data security
❑ Cost of administration
❑ Equity by income, geography and vehicle type
❑ Transition
❑ Etc.

50. What they now consider Likely Success Factors
❑ Understand contentious issues and address them up front.
o Build trust.
❑ Include choices for participants, so they are in control.
❑ Tackle privacy head on and involve privacy advocates.
o It is not so much that you have data about me, it is what you
are doing with the data
❑ Conduct trials and educational outreach.
o Include elected officials, media, and stakeholders in the trials.
❑ Start simple and add on layers over time.
❑ Build a system that is flexible and easy to adapt and add
on and can integrate with other systems.
❑ Involve private sector and use competition.
❑ TEST, TEST, TEST

51. Public Participation
❑ https://sunsurveys.sun.ac.za/Road_Funding.aspx

53. What did international opinion surveys find?
❑ Only 24% support for DBRUC
❑ After user experience with system
o 37 – 71% support
❑ Issue with Privacy
o 50% of respondents
o less than 10% … with experience this is not such a big
issue
❑ Concerns over government’s administration of
system
o Errors in billing
o Administration cost (30% vs 10%)

54. 1. Applying the user pay principle does not guarantee fiscal neutrality
✓ As used by Government, it will lead to a deficit
✓ You ‘make’ money from congestion, you ‘lose’ money in rural areas and off
peak
✓ Getting prices right involves a systems approach involving all roads and all
modes
2. Enough resources in the system
✓ Allocation very complex … maybe not fair
✓ The problem is not funding … problem is efficiency
3. We need to look at an entirely new road funding approach
✓ Move away from only a general fuel levy to user charge
✓ The fuel levy cannot be increased any more a s general tax
✓ What about splitting the fuel levy 50 : 50 between National and Provinces ?
4. Who represent the industry
✓ Who is stating the case for fair and transparent funding for roads?
❑ There is a trust problem … because there is a policy and information
void … because there is an ownership problem
So here my take on the findings:

55. ❑ Three proposals…
o Establish Road Users Authority
▪ road users & civil society stakeholders
▪ to encourage better management, demand for efficiency,
oversight and agree on the problem
▪ Assign responsibility
o Establish Road Fund and Financing Guidelines
▪ NOT RINGFENCED
▪ Stable and predictable road financing through road users
charges
▪ Legislation, etc.
o Establish a Transport (Economic) Regulator
▪ Simply to take care of the current conflicts and multiple
demands on road funding.
Finally …

56. Something in life cannot be solved by a
technical solution ….
Thank you
Any comments will be much
appreciated:
Skrygsman@sun.ac.za