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The Economic Impact of the Proposed Winelands Toll Road Project

Prepared for:

South African National Roads Agency (Pty) Ltd

Prepared by: Barry Standish, Graduate School of Business, University of Cape Town

In association with Antony Boting, Strategic Economic Solutions

Hugo van Zyl, Independent Economic Researchers

May 2008

Winelands Toll Road Project: Economic Report

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HEADLINE FINDINGS

This report has considered the economic case for upgrading and expanding the N1 N2 national roads in the Western Cape (in the concession area) and paying for this upgrade by means of tolling. Two methods of collecting tolls have been analysed. The first is the traditional method using toll plazas. The second is open road tolling (ORT) using an electronic toll collection system.

Three methods of analysis have been applied to the proposed project:

1. The first type is a cost benefit analysis. The decision about whether or not the project is economically desirable should be made on the basis of the benefits in comparison to the do-minimum option. The cost benefit analysis results are summarised in Table ES.1. They show that the upgrading of the existing network and tolling using either plazas or open road tolling offer very high benefit to cost ratios (BCRs). The project also offer far higher internal rates of return to investment (IRRs) than can be achieved on many commercial investments; and the net present values of benefits vs. costs (NPVs) are strongly positive. The project using open road tolling has the higher NPV because of the lower costs involved.

Table ES.1 Cost benefit analysis results

Scheme BCR IRR NPV (Rbn )

Toll plaza option 7.7 39% 14

Open road tolling 10.8 48% 19

For the headline findings the benefit cost ratio (BCR) is arguably the most important result. It reports the rand benefit per rand of expenditure. Upgrading and tolling the N1N2 using tradition toll plaza tolling returns a BCR of 7.7. In other words for each rand spend on the road society would benefit by R7.70. If the roads are upgraded and tolled using electronic open road tolling the BCR increases to 10.8

All three of the measures, BCR, IRR or NPV, indicate a very strong case for proceeding. In other words, there is no clear economic reason for not proceeding immediately with the proposed project.

From an economic perspective open road tolling is more desirable than using toll plazas.

• While the tolling approach allows for funding within the current commercial remit of SANRAL, the economic benefits would have been even higher if they were to be funded in part or wholly from the National Treasury. This is because tolling reduces user benefits by the cost of the tolling infrastructure and by the transactions costs of paying tolls.

• The advantage of the tolling approach to funding is that it relieves Government of the financial burden of direct funding, forces users to ‘feel’ the


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cost of travel, and also provides a valuable tool to optimise the operational management of the network. As such it probably offers the optimum solution from the perspective of “SANRAL (Pty) Ltd”.

• However it is sub-optimal in national economic terms. Some form of direct funding approach, even if still channelled through SANRAL as agent, would optimise the economic benefits to society as a whole.

2. The second type is a micro-economic analysis. This looks at the same costs and benefits but from the perspective of a range of different stakeholders. It notes that within the overall picture there are losers as well as gainers. It is designed to draw attention to the impacts of the tolling system on different categories of users. While the cost benefit analysis shows that the balance is overwhelmingly positive, this section draws attention to the impacts on the following categories:

• Lower income groups would be unable to afford as much use of the network as other groups and would remain dependent on public transport.

• Public transport vehicles using the network would have higher costs unless arrangements are made to mitigate the impact on fares.

• On uncongested parts of the network, e.g. the De Doorns, Worcester area, and Grabouw, Somerset West area, toll payments would exceed user benefits. In these cases mitigation measures are desirable.

• Effects on businesses would generally be strongly positive because of the improved accessibility. A small minority of businesses may suffer losses through reduced passing trade and increased cost of doing business.

• A small number of businesses and communities may be captive to the tolled network because access to realistic alternative routes is barred. It is not clear that mitigation can be applied successfully in these cases.

3. The third type of analysis is a macro-economic analysis. This looks at the effect of the project on the national and regional economies, including job creation and economic efficiency effects. It is therefore important from a policy perspective. This analysis shows that the investment in upgrading the N1 and N2 would bring about additional growth in the national and regional economies. As a result there would be substantial job and business creation impacts over and above those associated with the construction contracts themselves.

The proposed project has the capacity to make a contribution to national GDP of between R931.8m and R1.51bn during the first three years of construction, with a cumulative contribution of over R4bn during that period. By the end of the concession period the contribution to GDP could be as high as R557m with a large part of the stimulus coming from business time savings. The proposed project has the capacity to make a cumulative contribution to GDP of over R14bn by the end of the contract period.

The proposed toll roads would result in the creation of direct and indirect jobs. There is the potential to generate between 1,154 and 1,323 jobs annually during the initial construction phase. Subsequent maintenance and occasional increases in road capacity would continue to generate a limited number of direct jobs in construction. After construction and upgrading are complete about 600 direct and sustainable jobs


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would be created in the concession company and in operation and maintenance. The increased productivity due to business time savings could generate as much as 148 direct jobs by the end of the concession period.

Just as there are multiplied impacts on GDP, so too are there multiplied impacts on jobs. These are the so-called indirect jobs. There is the potential to generate between 1,298 and 2,109 indirect jobs during the initial construction period. In 2011 an additional 230 indirect jobs would be created due to operating & maintenance and concession company costs. These job numbers increase to 477 at the end of the concession period in 2037.


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EXECUTIVE SUMMARY

1. In March 1998 the Protea Parkways Consortium submitted a proposal to the South African National Roads Agency Ltd (SANRAL) to develop a proposal to upgrade, construct, maintain, operate and toll the N1 and N2 National Routes in the Western Cape. The Consortium was awarded Scheme Developer status in April 2000. In 2002 Protea Parkways and SANRAL commissioned a study into the socio economic impact of the proposed toll roads. This report is a follow up on that original study and has been commissioned by SANRAL who is desirous to know to what extent the expected economic impact of the proposed project may have changed since the original study was completed. The proposed toll roads are provisionally called the “Winelands Toll Road Project”.

2. The terms of reference for the original study had five key objectives. These were to determine the economic impact of the upgrading, maintaining and tolling of the N1 and N2; to determine the net economic impact on all road users; and to determine the impact of tolling on the users of public transport. This study updates the original estimates, takes into account the extension of the N2 in the Somerset West area and includes a cost benefit analysis. A further extension of this study is the potential to toll the proposed project using open road tolling (ORT) rather than the traditional toll plazas.

3. The proposed Winelands Highway Toll project is a combined project that would upgrade, in some places increase capacity, maintain and operate the N1 and the N2 from just west of the R300 to De Doorns on the N1 and Bot River on the N2. The proposed project duration is 30 years. In addition there is a contractual obligation to hand over the roads at the end of the concession period such that they are maintenance free for a further five years.

4. The study found that many of the relevant road sections of the N1 and N2 are approaching the end of their design life. The left-hand lane of the N1 and parts of the N2 are already showing signs of deterioration with uneven surfaces and road cracking. In addition to this, current traffic volumes are congesting certain sections of the roads, leading to slower travelling time and greater risks of accidents. This problem is further compounded as forecasts in traffic growth indicate serious congestion along many sections of the roads. This indicates that the N1 and N2 need rehabilitation and capacity upgrades in places within the very near future.

Appraisal methods used

5. Three types of economic analysis have been used. These are a cost benefit analysis, an analysis of microeconomic costs and benefits, and a macroeconomic analysis. In doing these analyses three different options are considered. The first is the so-called ‘do-nothing’ option. Typically the do-nothing option is not taken literally and should be understood to be the action that would be taken if the proposed project does not go ahead. The second is the upgrading of the existing freeway network and tolling using toll plazas. The third is the upgrading of the existing network and tolling using open road tolling.

6. Cost benefit analysis is a means of taking all the direct costs and all the direct benefits of a proposed project and comparing these. It is the conventional method that is used in project appraisal. The outcome of this analysis is the reporting of a


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net present value (NPV), a benefit cost ratio (BCR) and an internal rate of return (IRR). In doing this one performs both a financial and economic cost benefit analysis. The difference between the financial and economic results is that the financial analysis looks at monetary costs and benefits of the alternatives while the economic analysis includes the costs to society.

7. This latter analysis is done by adjusting for shadow prices and wages and removing the potential distortions caused by taxes and subsidies. A high BCR is usually a good indicator that it would be possible to raise finance to implement a project. In the case of a private sector investment the good BCR would be part of the business case to funders. If it is a public infrastructure project, a high BCR should give confidence that it is worth funding the project directly from the Treasury or, alternatively, to make suitable institutional arrangements for the involvement of the private sector in the project’s funding.

8. The microeconomic analysis focuses on benefits like greater economic growth, labour mobility and increased efficiencies. The costs would include changing property values, negative impacts on poorer people and potential captive communities and businesses.

9. The third type of analysis is macroeconomic analysis. This focuses on the overall contribution of the proposed project to the national economy. It reports on contribution to GDP, job creation, tax generation, etc.

Funding options

10. A key issue is how to pay for the proposed project. The most cost-effective way to pay is through a combination of fuel levies and special levies for heavy vehicles, with the revenue from these levies applied directly to freeway expansion. The special levies would be necessary because, while heavy vehicles do the most damage to roads, these damages are not fully recovered in the fuel levy.

11. The major constraint on the effective implementation of such a scheme is the financial policy on the part of government that fiscal integrity means that there should be no earmarking of funds. Hence all revenues raised, including the fuel levy, go into a common revenue fund and expenditures are made from this fund. Although in terms of national accounting, government generally raises far more per year in fuel levies (and licence fees) than it spends on roads the division of national revenues among the various departmental calls on funds is determined according to political priorities rather than the sourcing of the revenue.

12. This is common, but not universal, practice among national governments. Some countries have national road funds that are fully self funding from charges on road users, whether fuel or other sources. Namibia, for example, has a national roads fund to ensure that road construction and maintenance is adequately funded.

13. At present in South Africa, road expenditure is considerably lower than the cost benefit analysis results show to be optimum. The effect of spending less than is economically optimal is that the national economy grows less than it might otherwise do.

14. The political reality of extensive poverty and hardship in the country, as well as the need to address these issues have resulted in historic budgetary allocations


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in favour of poverty alleviation and at the expense of other areas of expenditure – like road maintenance. In consequence while tolling is a second best way of paying for roads, political realities suggest that it is the likely option.

15. There could be certain losses in efficiency as a result of this choice but there is also the potential for gains in economic efficiency. The efficiency loss is the cost of establishing and administering the tolling infrastructure. This would include the actual cost of infrastructure as well as the compliance cost to vehicle owners. Efficiency gains are the imposition of the user pay system and the potential for differential toll tariffs.

16. Clearly there is a trade off between equity and efficiency. The least cost way of funding any road project is through a fuel levy, either directly or indirectly channelled to the construction of roads. This avoids all of the costs associated with tolling.

17. It is however not perfectly equitable because all users of fuel would be paying for the project and might not necessarily benefit from the project. In the study an estimate was made of the cost of tolling. It has been calculated that the actual cost of the toll infrastructure adds, on average 3.5 cents per vehicle kilometre for the toll plaza option and 3 cents per vehicle kilometre for the open road tolling option. This is the cost that would be incurred to pay for improved equity.

Results (1) - costs benefit analysis

18. A cost benefit analysis was undertaken in order to address the first issue1. It was found that:

• In all configurations of the analysis both the financial and economic analysis indicate that upgrading and tolling the N1 and N2 is both financially and economically positive. In other words the cost increases of upgrading and tolling the roads are less than the cost increases of not upgrading the roads. This follows because the reduction in road user costs is greater than the cost of upgrading the roads.

• The financial NPV of the do nothing option is R17bn more than upgrading and tolling using traditional toll plazas. The difference in the economic NPV is R14bn. Upgrading and tolling is therefore preferable to the do nothing option. It has a financial BCR of 7.8, an economic BCR of 7.7, a financial IRR of 39% and an economic IRR of 39%.

• The financial NPV of the do nothing option is R20.9.bn more than upgrading and tolling using open road tolling. The difference in the economic NPV is R18.7bn. It has a financial BCR of 10.4, an economic BCR of 10.8, a financial IRR of 47% and an economic IRR of 48%.

1 One of the challenges faced in the analysis is that likely toll tariffs were not made available. What was made available was a high/low range of tolls. While the toll is not relevant in this part of the analysis (because it is the payment for the benefit) the toll does affect traffic volumes which in turn influence road user benefits. For the cost benefit analysis we used an average of the high/low tolls.


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• Open road tolling is financially and economically more efficient that using plazas. The difference in the financial NPV between using plazas and ORT is R3.9bn while the economic NPV is R4.4bn.

Table ES.2 Summary of cost benefit analysis results

Scheme BCR (financial)

BCR (economic)

IRR (financial)

IRR (economic)

NPV (Rbn -

financial)

NPV (Rbn - economic)

Toll plaza option 7.8 7.7 39% 39% 17 14

Open road tolling 10.4 10.8 47% 48% 21 19

19. The cost benefit analysis was taken further and a series of individual journeys were analysed. It was found that, apart from a few important exceptions, most users of the proposed toll roads would have positive road user benefits. Further to this, it was also found that in aggregate the proposed toll roads generate overall road user benefits that are greater than road user costs. Simply put this means that road user benefits would be greater by driving on the upgraded toll road than on the existing road. This is mainly due to decreased congestion and faster travelling times.

20. There are a number of key exceptions to these general conclusions where it was found that costs are greater than benefits.

• The first is that in some cases, in the earlier years of the proposed project, road user costs exceed benefits for light vehicles (i.e. class 1).

• The second, and more important, exception is that certain categories of road users would face increased costs for considerable periods of time at the proposed toll tariffs. There are three specific cases. On the N1 these are for journeys between De Doorns/Touws River and Cape Town. This is felt most acutely for journeys between De Doorns/Touws River and Worcester. On the N2 these are for journeys between Grabouw and Somerset West at the high tariff during peak traffic and at both medium and high tolls during off peak times.

• It was found that, given the exceptions above, the road user benefits accrue more than proportionately to heavy vehicles rather than light vehicles.

Results (2) - micro-economic analysis

21. The second type of analysis that was undertaken was a microeconomic analysis. This includes impacts on individual drivers and their capacity to pay; impacts on the cost of consumer goods; impacts on business generally and impacts on specific business.

22. Private Road Users. For private road users it can be argued that, for some people, there would not be an obvious saving in vehicle operating costs in the early years of the toll road. It is recognised that savings in some vehicle costs


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would be obvious and apparent – fuel costs, time costs and lower accident rates, for example. Other costs, however, are far less discrete over time and tend to be lump sum costs after a period of time – tyre costs, suspension and steering repairs, etc. Hence the immediate and obvious saving in vehicle operating costs would be for fuel, time and, possibly, accident costs. Other costs would accumulate in the future. Hence the reality would be that savings would only be realised some years into the future.

23. Therefore for cash flow purposes there would be less road user benefits in the early years of the tolled roads, as these benefits would accumulate into the future. The perception and reality would be that some drivers who currently do and would continue to use the road on a regular basis could be vulnerable to the proposed tolling. In addition less affluent owners of private vehicles may face road user costs that are different to those used in the general calculations. In particular, less affluent people would have lower time costs than others. In addition such people may choose to repair their vehicles themselves or may choose simply not to repair their vehicles at all.

24. In order to explore these issues an analysis was made of the composition of traffic currently using the N1 and N2. This was done by analysing the six sets of roadside interviews that were conducted during 2006. On the N1 these were at Sandhills, Rawsonville and Joostenbergvlakte. On the N2 the interviews were conducted at Grabouw, at Orchards and at Macassar. A total of 11,900 interviews were conducted.

• Forty four percent of drivers interviewed declared road use of less than twenty times a month, twenty five percent made between twenty and forty journeys, thirty percent made between forty and sixty monthly journeys and two percent made more than sixty monthly journeys.

• There are some people in the more rural sections of both the N1 and N2 who make frequent use of the roads. On the other hand there are also many people in these rural sections who make infrequent use of the road. At Rawsonville and Grabouw, for example, fifty three percent of people use the roads less than twenty times a month. At Sandhills this is forty five percent and thirty eight percent at Orchards.

• Work commuters are the single largest group of travellers accounting for forty five percent of all journeys. Travelling on employers business is the second highest at twenty three percent. Travelling for personal business accounted for twelve percent of the traffic.

• Of those people making between forty and sixty monthly trips, work commuters are the largest portion, followed by business travellers, people going home (excluding commuters) and people giving others a lift. The more infrequent journeys are those for the purposes of recreation, visiting friends, personal business and shopping.

• The biggest category (24%) of class 1 vehicle drivers have monthly incomes of between R6,000 and R11,000. Eighteen percent have monthly incomes of between R11,000 and R17,000 and twenty three percent have incomes in excess of R17,000. On the other side of the scale sixteen percent have monthly incomes of less than R6,000.


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• In the road side interviews nearly 2,200 drivers of light vehicles were travelling for business purposes (this is 18% of the total interviewed). Of these 856 (39% of those interviewed) make less than 20 trips a month past the roadside interview station; 35 (1.6%) travel between 20 and 40 times a month past the station; 534 (24%) travel between 40 and 60 times a month; while 769 (35%) make more than 60 trips a month past the interview station. Of those drivers making between 20 and 40 trips 37% have monthly incomes of less than R6,000. Of those drivers making between 40 and 60 monthly trips 10% have monthly household incomes of less than R6,000. Finally of those drivers making more than 60 trips 10% have monthly household incomes of less than R6,000.

• Further to this, 3,525 drivers of light vehicles who were interviewed were work commuters. This is 30% of the total number of light vehicle drivers who were interviewed. Of these 1,486 (42%) undertake less than 20 trips a month past the roadside interview station; 87 (2.5%) travel between 20 and 40 times a month past the station; 1,865 (53%) travel between 40 and 60 times a month; while 87 (2.5%) make more than 60 trips a month past the interview station. Of those drivers making between 20 and 40 trips 30% have monthly incomes of less than R6,000. Of those drivers making between 40 and 60 monthly trips 23% have monthly household incomes of less than R6,000. Finally of those drivers making more than 60 trips 30% have monthly household incomes of less than R6,000.

• The latter result is somewhat surprising and questions must be asked about affordability. How can drivers with a declared income of less than R6,000 a month make more than sixty monthly trips? There are at least two possible explanations.

o First, these drivers are travelling with other people and sharing costs. To this end vehicle occupancy was investigated and it was found that a limited number of these vehicles had more than one occupant. Eight percent of this category of vehicles had two occupants, two vehicles had three occupants, one vehicle had four occupants, one had six and one had fifteen occupants.

o Second, it is possible that the interview respondents either did not understand the question clearly or overstated number of trips or understated their income.

• For the purposes of determining the vulnerability of low income people to tolling the midpoints of the R3,000 to R6,000 and R6,000 to R11,000 income bands were used (i.e. R4,500 and R8,000). These were chosen as the bulk of drivers fall into these income bands. These drivers where then analysed by number of trips.

• In the roadside interviews some drivers indicated they made more than 60 trips a month. In consequence 75 monthly trips have been chosen as an example. For drivers making between 20 and 60 trips monthly, 40 trips have been chosen as an example. As it is a general SANRAL norm that frequent user discounts would be available for the proposed project these have been included in the analysis. Drivers with incomes of R4,500 a month, making 75 monthly trips and paying the high toll at the proposed mainline plaza east of Khayelitsha the monthly toll tariff would constitute 18% of their monthly household income. At a low tariff the expenditure is equal to 13% of their


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household income. Similar drivers travelling past Somerset West would pay high toll tariffs equal to 29% of their monthly income while the low toll constitutes 20% of household income.

• Taking the above example for drivers with household incomes of R8,000 a month, such drivers would pay the equivalent of 10% of household income for the high tariff east of Khayelitsha and 7% at the low tariff. Travelling past Somerset West 75 times a month would result in a toll tariff equal to 16% of household incomes at the high tariff and 11% at the low tariff.

• Using the above same incomes and toll tariffs for 40 monthly trips, drivers with household incomes of R4,500 a month would have toll tariffs equal to 11% of income at the high toll east of Khayelitsha and 8% at the low toll. The same drivers would have tolls equal to 18% at the high Somerset West tariff and 13% at the low tariff. Drivers with incomes of R8,000 would have tariffs equal to 6%, 5%, 10% and 7% respectively.

25. Impact on the cost of consumer goods, employment and wages. There are always concerns that a toll road would increase the cost of consumer goods and possibly destroy jobs and reduce wages. Given that the cost benefit analysis showed positive results, consumer goods prices should theoretically be less with the tolled road than without it.

26. Issues of employment are addressed in the macroeconomic section where direct and indirect job creation are quantified for some aspects of the proposed project. These include construction jobs, jobs during operation and potential jobs as a result of increases in network speed. There is also the potential for permanent job losses. Permanent job losses could occur if the transport cost increases of the proposed project are sufficient to undermine the financial viability of individual companies or entire sectors. The deciduous fruit industry of the Elgin/Grabouw areas, the table grape industry of the Hex River Valley and Tygerberg Zoo could be vulnerable to tolling. In a submission made during the comments phase of the EIA, County Fair, a major chicken producer, indicated that the chicken industry would also be vulnerable because of the competition from imported products and from the red meat industry. This occurs because imported chickens and the red meat industry are not affected by tolling to the extent that local chicken producers are. While these industries and businesses are highlighted as vulnerable the actual number of job losses could not be calculated. With the exception of the Tygerberg Zoo, this was due to the difficulty in determining the actual impacts on these industries and businesses and the resultant impact on employment.

27. In order to measure the possible impact on the cost of consumer goods a number of hypothetical journeys were established. The intention in this exercise was to measure the most extreme possible changes in the cost of consumer goods. To this end a number of possible permutations of vehicle size, load value and origin and destination were analysed. This analysis is based on the assumption that all road user benefits from the proposed project were ignored. In other words the exercise was undertaken as if the existing roads were simply tolled without any rehabilitation or capacity upgrades. This would overstate the size of the impact on the cost of consumer goods.

28. Based on this assumption it is shown that the cost of consumer goods being transported from the Cape farms and dry goods from Gauteng (such that these vehicles go through all the toll plazas on the N1) would increase by between 0.30% and 0.31% depending on the income category. This is the equivalent of 31


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cents for each R100 that is spent. For fresh produce coming from Caledon and dry goods coming from Port Elizabeth destined for Stellenbosch via Cape Town International Airport Industria the cost increase is between 0.24% and 0.29%. For goods destined for the city centre and the southern suburbs the cost increase is between 0.19% and 0.23%.

29. General impact on business. Just as private road users could initially perceive higher costs than benefits in the early years of the proposed tolling, so too could commercial vehicles. While many businesses probably have the capacity to absorb this changing cash flow over time there are two categories of business that might be impacted in the early years of the proposed tolling. These are, first, businesses that make regular use of road transport and, second, industries that are currently economically depressed for either structural or cyclical reasons.

30. Businesses would not be affected equally by changes in road transport costs brought on by tolling. The extent to which net costs would adversely affect commercial road users is dependent on their sensitivity to cost increases. One important indicator of the impact of the proposed toll road is the degree to which specific areas are either reliant on an industry that is particularly transport intensive or where a specific industry is transport intensive. The analysis shows that agriculture is likely to be most sensitive to changes in road transport costs followed by manufacturing and construction.

31. An index of road transport cost sensitivity was calculated for the areas along the route by multiplying the ratios of road transport costs to total costs with the percentages of the workforce in each sector. This index allows for the identification of areas that are particularly sensitive to increases in road transport costs. This is done by comparing the index of any particular area to that of the Western Cape as a whole. It is found that, in descending order, De Doorns, Grabouw, Bot River, Hermanus and Paarl all have indexes that are greater than the province as a whole. Businesses in these areas can expect to feel the impact of tolling more than Touws River, Worcester, Somerset West, Strand and Rawsonville which have indexes that are less than the provincial average.

32. Specific impacts on business. In addition to the more generalised impacts on business reported above, there are a number of businesses that are either captive to a particular toll plaza or may otherwise be affected by the tolling of the N1 and N2. These are:

33. Joostenbergvlakte and Kraaifontein Industria. The existence of a toll plaza so close to the area could deter customers and increase transport costs in the short term. Approximately 45 businesses, employing over 1,000 people, operate in Joostenbergvlakte and the Kraaifontein Industrial Area. However two factors would mitigate this. First, vehicles operating in the Kraaifontein area would have greater road user benefits and lower costs for an upgraded and tolled N1. Second, the Maroela Road over the railway line is being extended to link up with Plantasie Road and Voortrekker Road, so Joostenbergvlakte and Kraaifontein Industria would not be a captive community.

34. Tygerberg Zoo. A tolled N1 could potentially deter visitors to the zoo and, in the early years of the tolling, lead to cash flow difficulties for the zoo. Tygerberg Zoo has not been in a favourable financial position for some years and is sensitive to any cost increases and falling numbers of visitors.


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35. Fruit growers in the Elgin and Hex River Valleys. Changes to road user costs could reduce cash flow for fruit growers. The analytical challenge in this regard is knowing the current financial position of these farms. At times there are financial hardships while at other times business is buoyant.

36. Firlands Garage. The Firlands garage is situated adjacent to the existing T2 and offers direct access from the road. The garage is currently structured to cater for current flows and it is not clear whether it can be scaled down cost effectively or whether Shell, or any other petroleum companies, would be interested in a significantly scaled down garage.

37. Farm stalls in the Elgin Valley. Currently there are three well-established farm stalls situated along the N2 in the Elgin Valley. All of these businesses would be affected by the toll road to varying degrees as their customers react to more cumbersome yet safer access from the N2, changed visibility from the road and changes in road user costs and benefits.

38. Impact on public transport. In assessing the possible impact of the proposed toll roads on public transport an assumption was made that any cost increases would be passed directly onto commuters and bus and taxi owners would not bear any cost increase. Based on this assumption a simulation exercise was conducted to determine the toll tariff charges to commuters using public transport under various options. These toll tariff charges were then compared to the average income of the area in order to determine the potential degree of impact. The following conclusions are drawn from this exercise.

• Commuters travelling between Kraaifontein and Cape Town by taxi would pay an extra R2.08 per trip at the high tariff and 73 cents per trip at the low tariff. If that commuter makes twenty-two monthly return trips this is the annual equivalent of R1,098 at the high tariff and R384 at the low tariff. As a percentage of the average household income in the Kraaifontein area, the annual high tariff is 1.7% of average annual income and the low tariff is 0.6%. For travellers who make fifteen monthly return trips their annual toll charge is equal to 1.2% at the high tariff and 0.4% at the low tariff.

• On the N1 the most likely journeys are between Kraaifontein and Cape Town and, to a more limited extent, between Paarl and Cape Town. At the high toll tariff this represents 1.7% of average income, or R2.08 per trip extra in a taxi.

• On the N2 the most likely journeys are between Khayelitsha and Somerset West, Elgin/Grabouw and Somerset West, and Elgin/Grabouw and Hermanus. At the high toll tariff a taxi journey would cost R4.16, R6.24 and R8.32 more respectively. This is likely to prove expensive for those people for whom this is a regular commute.

Results (3) – macro-economic analysis

39. The last type of analysis that was undertaken was a macroeconomic analysis. While there are a number of different types of macroeconomic effects, the two most important are contribution to gross domestic product (GDP) and creation of jobs. The importance of job creation is obvious. Increases in GDP are synonymous with increases in peoples’ economic standards of living. Increased GDP – i.e. increased production – is experienced in the form of more jobs, higher


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wages and reduced economic hardship. It is clearly an important measure. Gross Domestic Product is the total value of all final goods and services produced in the country. It is clearly fundamental to the economic quality of life of people in the country.

40. The proposed project would make a substantial contribution to gross domestic product and the creation of direct and indirect jobs.

• The proposed project has the capacity to make a contribution to national GDP of between R931.8m and R1.51bn during the first three years of construction, with a cumulative contribution of over R4bn during that period. By the end of the concession period the contribution to GDP could be as high as R557m with a large part of the stimulus coming from business time savings. The proposed project has the capacity to make a cumulative contribution to GDP of over R14bn by the end of the contract period. The relative contributions to GDP are illustrated in Figure ES.3.

Figure ES.3 Contribution to GDP

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Business Time SavingsConcession Company CostsOperating & Maintenance CostsConstruction, Expansion & Rehabilitation Costs

• It will be appreciated that while the proposed toll roads would make a macroeconomic contribution at a national level, the effect relative to the entire economy is modest. Nevertheless there is an effect and the effect is quantifiable. The contribution to South African GDP is 0.08% in 2008, dropping slightly to 0.07% in 2009 and 0.05% in 2010. During the later years when the ongoing capital expenditure amounts reduce and the toll roads are in full operation the contribution to GDP is in the order of about 0.01%.

• The proposed toll roads would result in the creation of direct and indirect jobs. There is the potential to generate between 1,154 and 1,323 jobs annually during the initial construction phase. Subsequent maintenance and


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occasional increases in road capacity would continue to generate a limited number of direct jobs in construction. After construction and upgrading are complete about 600 direct and sustainable jobs would be created in the concession company and in operation and maintenance. The increased productivity due to business time savings could generate as much as 148 direct jobs by the end of the concession period.

• Just as there are multiplied impacts on GDP, so too are there multiplied impacts on jobs. These are the so-called indirect jobs. There is the potential to generate between 1,298 and 2,109 indirect jobs during the initial construction period. In 2011 an additional 230 indirect jobs would be created due to operating & maintenance and concession company costs. These job numbers increase to 477 at the end of the concession period in 2037.

• During construction over 72% of the total direct jobs would go to workers at the lower end of the income spectrum. This is clearly the area where job creation is the most important.

• Other macroeconomic effects include a cumulative contribution to Western Cape GGP of over R2.2bn by 2037, a cumulative contribution of R1.47bn to income tax and R6.05bn to indirect household income over the same period.


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TABLE OF CONTENTS

Headline Conclusions................................................................................................i Background to the economic analysis ..................................................................... iii Appraisal methods used .......................................................................................... iv Funding options........................................................................................................v Results (1) - costs benefit analysis..........................................................................vi Results (2) - micro-economic analysis.................................................................... vii Results (3) – macro-economic analysis.................................................................. xii

1.1 General description of the proposed project................................................. 3 1.2 Information sources ...................................................................................... 3 1.3 Study limitations............................................................................................ 3 1.4 Description of the affected economic environment....................................... 5

1.4.1 The Western Cape Province ................................................................. 5 1.4.2 The City of Cape Town.......................................................................... 8 1.4.3 Cape Winelands District ...................................................................... 10 1.4.4 The Overberg District .......................................................................... 12 1.4.5 Old Oak Interchange to the Huguenot Tunnel..................................... 13 1.4.6 Huguenot Tunnel to Sandhills ............................................................. 14 1.4.7 Vanguard Drive to Sir Lowry’s Pass .................................................... 16 1.4.8 Sir Lowry’s Pass to Bot River .............................................................. 18

2.1 Supply Side Issues ..................................................................................... 20 2.2 Demand Side Issues................................................................................... 22

3.1 Sources of efficiency................................................................................... 23 3.1.1 User pays principle .............................................................................. 23 3.1.2 Damage and distortions from heavy vehicles...................................... 23 3.1.3 Congestion tolling ................................................................................ 24

3.2 Sources of inefficiencies ............................................................................. 24 3.2.1 Funding efficiency................................................................................ 24

EXECUTIVE SUMMARY ............................................................................................iii

Table of Contents.....................................................................................................xv

List of Figures .......................................................................................................xviii

Abbreviations ........................................................................................................xxiii

Introduction ................................................................................................................1

1 Project context, study area and limitations......................................................3

2 Toll collection Systems....................................................................................20

3 Efficiency, Equity and Toll roads ....................................................................23


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3.2.2 Toll collection costs ............................................................................. 24 3.2.3 Diversions............................................................................................ 25

4.1 Total Costs and Benefits............................................................................. 27 4.1.1 Financial costs and benefits with toll plaza collection.......................... 27 4.1.2 Economic cost benefit analysis with toll plaza collection..................... 29 4.1.3 Financial costs and benefits with open road tolling ............................. 31 4.1.4 Economic cost benefit analysis with open road tolling ........................ 33 4.1.5 Comparison between plaza tolling and open road tolling .................... 34

4.2 The Cost of Tolling...................................................................................... 35 4.2.1 Financial costs and benefits of upgrading but not tolling..................... 36 4.2.2 Economic costs and benefits of upgrading but not tolling ................... 36 4.2.3 The cost of tolling using toll plazas...................................................... 37 4.2.4 The cost of open road tolling ............................................................... 37 4.2.5 The cost of tolling per vehicle kilometre .............................................. 38

4.3 Sensitivity analysis...................................................................................... 38 4.3.1 The cost of diverting ............................................................................ 38 4.3.2 Time spent at toll plazas...................................................................... 39

4.4 Cost benefit analysis summary................................................................... 40

5.1 Methodological approach............................................................................ 41 5.2 Quantifying vehicle operating costs and road users costs.......................... 42 5.3 Quantifying vehicle operating costs ............................................................ 42 5.4 Quantifying road user costs ........................................................................ 46 5.5 Quantify the cost of traffic diversions and attractions ................................. 51 5.6 Individual road user costs and benefits ...................................................... 54

5.6.1 Road user costs on the N1 .................................................................. 55 5.6.2 Road user costs on the N2 .................................................................. 63

6.1 Impact on road users and capacity to pay .................................................. 72 6.1.1 The Composition of traffic on the N1 and N2 ...................................... 73 6.1.2 Private road users ............................................................................... 76 6.1.3 Toll tariff burden for low income drivers............................................... 84 6.1.4 Number of vulnerable drivers .............................................................. 88

6.2 Impact on the cost of consumer goods, employment and wages............... 89 6.3 Impact on business................................................................................... 100

6.3.1 Generalised impacts.......................................................................... 100 6.3.2 Specific impacts................................................................................. 103

6.4 Impact on public transport ........................................................................ 105

4 Cost Benefit Analysis .......................................................................................26

5 Road user costs and benefits..........................................................................41

6 Microeconomic Impacts ...................................................................................72


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7.1 General description of macroeconomic effects......................................... 110 7.1.1 Construction and operation ............................................................... 110 7.1.2 Network work capacity and road user benefits.................................. 111

7.2 Contribution to Gross Domestic Product .................................................. 112 7.3 Job creation .............................................................................................. 113 7.4 Contribution to Gross Geographic Product............................................... 115 7.5 Other macroeconomic effects................................................................... 115 7.6 Comparative Macroeconomic effect ......................................................... 116

7 Macroeconomic Impacts ................................................................................109

8 Conclusion ......................................................................................................117

9 References ......................................................................................................121


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LIST OF FIGURES

Figure 1: Toll tariffs used in the analysis, 2007 values ............................................... 4

Figure 2: Multiple index of deprivation by ward .......................................................... 6

Figure 3: Sector shares in Gross Geographic Product and employment- Western Cape............................................................................................................................ 7

Figure 4: Western Cape Economy: Real GDP Growth, 1999-2004 ............................ 7

Figure 5: Percentage of households per income level in the City of Cape Town (1996 & 2001)........................................................................................................................ 9

Figure 6: The sectoral breakdown of formal employment in the City of Cape Town (1996 & 2001) ........................................................................................................... 10

Figure 7: Percentage of households per income level in the Cape Winelands District (1996 & 2001) ........................................................................................................... 11

Figure 8: The sectoral breakdown of formal employment in the Cape Winelands District (1996 & 2001) ............................................................................................... 11

Figure 9: Percentage of households per income level in the Overberg District (1996 & 2001) ......................................................................................................................... 12

Figure 10: The sectoral breakdown of formal employment in the Overberg District (1996 & 2001) ........................................................................................................... 13

Figure 11: Population numbers and unemployment rates for areas along the route (2001)........................................................................................................................ 13

Figure 12: Percent of households per income category for Kuilsrivier and Paarl (Source: 2001 census) .............................................................................................. 14


Figure 14: Percent of households per income category for Hex river area (Source: 2001 census)............................................................................................................. 15

Figure 15: Population numbers and unemployment rates for areas along the route 16

Figure 16: Percent of households per income category for Khayelitsha, Somerset West and Strand (Source: 2001 census) .................................................................. 17


Figure 18: Percent of households per income category for Bot River, Grabouw and Hermanus (Source: 2001 census) ............................................................................ 19

Figure 19: Generic Comparison of Different Toll Systems........................................ 21


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Figure 20: Financial cost benefit analysis with toll plaza collection.......................... 28

Figure 21: Financial Road User Costs and Diversion Costs with toll plaza collection.................................................................................................................................. 29

Figure 22: Economic cost benefit analysis with toll plaza collection ........................ 30

Figure 23: Economic Road User Costs and Diversion Costs with toll plaza collection.................................................................................................................................. 30

Figure 24: Financial cost benefit analysis with Open Road Tolling.......................... 31

Figure 25: Financial Road User Costs and Diversion Costs with Open Road Tolling.................................................................................................................................. 32

Figure 26: Economic cost benefit analysis with Open Road Tolling ........................ 33

Figure 27: Economic Road User Costs and Diversion Costs with Open Road Tolling.................................................................................................................................. 34

Figure 28: Comparison between Plaza Tolling and Open Road Tolling .................. 35

Figure 29: Financial cost benefit analysis with upgrade but no tolling ..................... 36

Figure 30: Economic cost benefit analysis with upgrade but no tolling.................... 36

Figure 31: Comparison between Plaza Tolling and No Tolling ................................ 37

Figure 32: Comparison between Open Road Tolling and No Tolling....................... 37

Figure 33: Difference in Financial NPV between do nothing and plaza tolling with different diversion costs, Rm 2007 prices ................................................................. 39

Figure 34: Difference in Financial NPV between do nothing and plaza tolling with different waiting periods at toll plazas, Rm 2007 prices ............................................ 39

Figure 35: Vehicle Operating Costs per km from HDM4 Database .......................... 43

Figure 36: Graph of riding surface quality over time for the N1 link R304 to R44..... 44

Figure 37: The impact of different rehabilitation actions .......................................... 45

Figure 38: Equivalent E80 per vehicle type............................................................. 45

Figure 39: Cost of time.............................................................................................. 47

Figure 40: Road user costs for the N1 between the R304 to R44 without upgrading49

Figure 41: Road user costs for the N1 between the R304 to R44 with upgrading .... 50

Figure 42: Traffic diversions and attractions ............................................................. 53

Figure 43: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Cape Town, Morning Peak (Rands 2007 values) ..................................................... 55


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Figure 44: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Cape Town, Off peak (Rands 2007 values). ............................................................. 56

Figure 45: Costs and Benefits to vehicles travelling from Worcester to Cape Town, Morning Peak (Rands 2007 values).......................................................................... 57

Figure 46: Costs and Benefits to vehicles travelling from Worcester to Cape Town, Offpeak (Rands 2007 values) ................................................................................... 57

Figure 47: Costs and Benefits to vehicles travelling from Paarl to Cape Town, Morning Peak (Rands 2007 values).......................................................................... 58

Figure 48: Costs and Benefits to vehicles travelling from Paarl to Cape Town, Off peak (Rands 2007 values) ........................................................................................ 59

Figure 49: Costs and Benefits to vehicles travelling from Kraaifontein to Cape Town, Morning Peak (Rands 2007 values).......................................................................... 60

Figure 50: Costs and Benefits to vehicles travelling from Kraaifontein to Cape Town, Off peak (Rands 2007 values) .................................................................................. 60

Figure 51: 20 Costs and Benefits to vehicles travelling from De Doorns/Touws River to Worcester, Morning Peak (Rands 2007 values) ................................................... 61

Figure 52: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Worcester, Offpeak (Rands 2007 values) ................................................................. 62

Figure 53: Costs and Benefits to vehicles travelling from Hermanus to Cape Town, Morning Peak (Rands 2007 values).......................................................................... 63

Figure 54: Costs and Benefits to vehicles travelling from Hermanus to Cape Town, Off peak (Rands 2007 values) .................................................................................. 64

Figure 55: Costs and Benefits to vehicles travelling from Hermanus to Somerset West, Morning Peak (Rands 2007 values)................................................................ 65

Figure 56: Costs and Benefits to vehicles travelling from Hermanus to Somerset West, Offpeak (Rands 2007 values) ......................................................................... 66

Figure 57: Costs and Benefits to vehicles travelling from Hermanus to Grabouw, Morning Peak (Rands 2007 values).......................................................................... 67

Figure 58: Costs and Benefits to vehicles travelling from Hermanus to Grabouw, Off peak (Rands 2007 values) ........................................................................................ 67

Figure 59: Costs and Benefits to vehicles travelling from Grabouw to Somerset West, Morning Peak (Rands 2007 values)................................................................ 68

Figure 60: Costs and Benefits to vehicles travelling from Grabouw to Somerset West, Off peak (Rands 2007 values) ........................................................................ 69

Figure 61: Costs and Benefits to vehicles travelling from Grabouw to Cape Town, Morning Peak (Rands 2007 values).......................................................................... 70

Figure 62: Costs and Benefits to vehicles travelling from Grabouw to Cape Town, Offpeak (Rands 2007 values) ................................................................................... 70


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Figure 63: Costs and Benefits to vehicles travelling from Somerset West to Cape Town, Morning Peak hour, Middle toll tariff (Rands 2007 values)............................. 71

Figure 64: Costs and Benefits to vehicles travelling from Somerset West to Cape Town, Offpeak traffic (Rands 2007 values)............................................................... 71

Figure 65: Frequency of trip on N1/N2...................................................................... 74

Figure 66: Frequency of trip at various locations ...................................................... 74

Figure 67: Purpose of trip on the N1/N2 ................................................................... 75

Figure 68: Trip frequency and trip purpose on the N1/N2........................................ 75

Figure 69. Vehicle class and trip purpose ................................................................. 76

Figure 70: Vehicle class and trip purpose on the N1 ................................................ 77

Figure 71: Vehicle class and trip purpose on the N2 ................................................ 78

Figure 72: Percentage of drivers by income category.............................................. 79

Figure 73: Trip purpose and driver income, all vehicle classes ................................ 80

Figure 74: Trip purpose and driver income, vehicle class 1...................................... 80

Figure 75: N1 Trip purpose and driver income, class 1 vehicles .............................. 81

Figure 76: N2 Trip purpose and driver income, class 1 vehicles .............................. 82

Figure 77: Distribution of road users by number of trips, trip purpose and income, all road side interviews .................................................................................................. 84

Figure 78: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with toll plaza collection ................................................................................ 85

Figure 79: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with frequent user discount and toll plaza collection .................................... 86

Figure 80: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with open road tolling.................................................................................... 87

Figure 81: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with frequent user discount and open road tolling ........................................ 88

Figure 82: Number of class 1 vehicles with high toll exposure and low income ...... 89

Figure 83: Impact on cost of goods 1........................................................................ 93




Figure 87: Average consumer spending patterns ..................................................... 97


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Figure 88: Spending patterns by income category.................................................... 98

Figure 89: Increased costs on consumer goods of a toll tariff without taking any benefits into account ................................................................................................. 98

Figure 90: Total increase in the cost of consumer goods from Cape Farms and Gauteng to Worcester via Cape Town International Airport Industria for various income categories ..................................................................................................... 99

Figure 91: Total increase in the cost of consumer goods from Caledon and Port Elizabeth to Stellenbosch via Cape Town International Airport Industria for various income categories ..................................................................................................... 99

Figure 92: Total increase in the cost of consumer goods from Cape Farms and Gauteng to CBD via Cape Town International Airport Industria for various income categories................................................................................................................ 100

Figure 93: Transport costs as a proportion of total costs of key economic sectors 101

Figure 94: Types of cargo carried on the N1 and N2 .............................................. 102

Figure 95: Road transport cost sensitivity of areas along routes ............................ 103

Figure 96: Toll charges per passenger for public transport on the N1 and N2 for toll plaza collection........................................................................................................ 107

Figure 97: Contribution to GDP.............................................................................. 112

Figure 98: Contribution to Gross Domestic Product............................................... 113

Figure 99: Total Direct Jobs ................................................................................... 113

Figure 100: Total Indirect jobs................................................................................ 114

Figure 101: Total number of direct and indirect jobs.............................................. 114

Figure 102: Distribution of jobs between different income categories.................... 114

Figure 103: Contribution to Western Cape GGP.................................................... 115

Figure 104: Contribution to Income Tax................................................................. 115

Figure 105: Indirect contribution to household income .......................................... 116

Figure 106: Comparative macroeconomic effect ................................................... 116


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ABBREVIATIONS

BCR: Benefit Cost ratio

BRT: Bus rapid transit

CBA: Cost Benefit Analysis

CTIA: Cape Town International Airport

DOT: National Department of Transport

ETC: Electronic toll collection

GDP: Gross Domestic Product

GGP: Gross Geographic Product

HOV: High occupancy vehicles

ICW: Initial construction works

IRR: Internal Rate of Return

IVU: In-Vehicle Unit

NLTSF: The National Land Transport Strategic Framework of 2006

NLTTA: The National Land Transport Transition Act of 2000

NPV: Net Present Value

ORT: Open road tolling

PSI: Present serviceability index

PV: Present Value

RIFSA: The Road Infrastructure Strategic Framework

RUC: Road User Cost

SANRAL: South African National Roads Agency Ltd

SIC: Standard Industrial Classification

TDM: Traffic demand management

V/C: Volume capacity

VOC: Vehicle Operating Cost


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INTRODUCTION

In March 1998 the Protea Parkways Consortium submitted a proposal to the South African National Roads Agency Ltd (SANRAL) to develop a proposal to upgrade, construct, maintain, operate and toll the N1 and N2 National Routes in the Western Cape. The Consortium was awarded Scheme Developer status in April 2000. In 2002 Protea Parkways and SANRAL commissioned a study into the socio economic impact of the proposed toll roads. The project is provisionally called the “Winelands Toll Road Project”.

This report is a follow up on that original study and has been commissioned by SANRAL who is desirous to know to what extent the expected economic impact of the proposed project may have changed since the original study was completed.

The terms of reference for the original study had five key objectives:

• To determine the economic impact of the upgrading and tolling of the N1 and N2.

• To determine the economic impact of the operation and maintenance of the N1 and N2.

• To determine the net economic impact on all road users.

• To determine the net economic impact on all road users of tolling the N1 and the N2.

• Determine the impact of tolling on the users of public transport.

This study updates the original estimates. It also takes into account changes in road alignments in the Somerset West area and includes a cost benefit analysis. A further extension of this study is the potential to toll the proposed project using electronic toll collection rather than the traditional toll plazas.

Road projects of this size and complexity necessitate the assessment of impacts at varying spatial scales. The two routes were divided into the following relatively homogeneous stretches. For the N1 the study area is divided into the section 1 from Old Oak Interchange to the Huguenot Tunnel and section 2 from the Huguenot Tunnel to De Doorns/Sandhills. In turn section 1 of the N2 is from Vanguard Drive/N7 to Sir Lowry’s Pass and section 2 from Sir Lowry’s Pass to Bot River.

The report has five major sections:

Section 1 sets the context by describing the project, the study area and limitations to the study.

Section 2 describes the various toll collection systems with particular reference to the so-called ‘open road tolling’ that tolls without using traditional toll plazas.

Section 3 considers the economic efficiency of tolling compared to other ways of paying for roads.


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Section 4 gives the results to the cost benefit analysis of the proposed project. It starts by describing the methodology that was used to determine changes in road user costs and the impact on road users.

Section 5 reports on road user costs for specific journeys at different toll tariffs at peak and off peak journeys.

Section 6 analyses the possible financial impact of the proposed project on various categories of road users and potential impacts on business.

Finally, Section 7 reports on the estimated macroeconomic impacts of the proposed project.

Many of the road sections of the N1 and N2 that have been investigated are moving towards the end of their design life. The left-hand lane of the N1 and parts of the N2 are already showing signs of deteriorating condition with uneven surfaces and road cracking. In addition to this, current traffic volumes are congesting certain sections of the roads, leading to slower travelling time and greater risks of accidents. This problem is further compounded as forecasts in traffic growth indicate serious congestion along most sections of the roads. It is therefore clear that the N1 and N2 need rehabilitation and capacity upgrades within the very near future.


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1 PROJECT CONTEXT, STUDY AREA AND LIMITATIONS

This section gives some context to the study by giving a general description of the proposed project, outlining the general study areas and identifying limitations to the study.

1.1 General description of the proposed project

The Protea Parkways N1 N2 proposal is for a combined project that would upgrade, in some places increase capacity, maintain and operate the N1 and the N2 from the R300 in the west to close to De Doorns on the N1 and Bot River on the N2. The project is for a thirty year concession period and a thirty five year contract period where the roads must be upgraded to the extent that they need minimal maintenance for five years after the concession period. It is provisionally called the “Winelands Toll Road Project”.

The so-called “do nothing” option is for the existing N1 and N2 being maintained at acceptable levels. Maintenance would be performed on the N1 and N2 and resurfacing would take place, but there would not be any major structural repairs to the roads or any capacity increases.

1.2 Information sources

Information sources for the assessment included:

• Capital and operating cost projections were originally sourced from Protea Parkways. This was updated to 2007 values with price indexes for civil engineering sourced from the South African Reserve Bank and Statistics SA.

• Project design and cost details from the project engineers (Hawkins, Hawkins and Osborne and VKE).

• Updated traffic flow modelling data from ITS in Cape Town.

1.3 Study limitations

The one potential limitation to the study relates to the tolls and discounts that were used. The so-called “preferred toll tariff” was never revealed to the researchers. In consequence we had to work with the “low” and “high” toll tariffs ranges that were made available by the project proponents. The convention in this report is to consider the preferred toll tariff as the midpoint between low and high tariff. Further to this high and low tariffs were made available only for light vehicles but not for other classes of vehicles. These were estimated based on the average differences between light and heavy vehicles on all South African toll roads and are largely in line with the ratios at the Huguenot tunnel.

In addition to these limitations the tolls that were given are in 2000 prices and it was obviously necessary to scale these up to 2007 values. The challenge is what price inflator to use for this purpose. It is expected that the original tolls would have been based on the initial capital costs, the ongoing maintenance and upgrading cost, and the administrative and personnel cost of running the concession. It is likely that capital costs would have escalated in line with the cost increases faced by the civil engineering industry while the administrative costs would probably have increased in


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line with the consumer price index. The decision was made to take the “preferred’ toll of 2000 and increase it by the consumer price index, on the one hand, and the civil engineering producer price index, on the other. The former then becomes our 2007 “middle” toll tariff and the latter our “high” toll tariff. If the original toll tariffs were correct then the 2007 equivalents must lie somewhere between the middle and high tariffs. The final toll tariffs that were used in this study are reported in Figure 1.

In addition, no frequent user discounts or local user discounts where known. In consequence we have used the standard SANRAL frequent user discount where relevant but have not used any local user discounts. The SANRAL frequent user discount is a three stage tariff: full toll tariff for the first twenty monthly trips, a twenty percent discount for twenty one to forty monthly trips and a forty percent discount for every trip over forty monthly trips. These discounts apply only to class 1 and 2 vehicles.

Figure 1: Toll tariffs used in the analysis, 2007 values

Toll Tariffs used in financial and economic assessment2007 valuesClass 1 Middle HighTariffs N1Joostenberg Mainline Plaza 10.00 14.00 Joostenberg Ramps 10.00 14.00 Hugenot Tunnel 28.00 40.00 Du Toitskloof Pass 14.00 20.00 Sandhills 16.00 23.00 Tariffs N2Khayelitsha Mainline 10.00 14.00 Strand Mainline 16.00 23.00 Firlands Ramp Plaza 16.00 23.00 Onverwacht RampsBotriver Mainline 16.00 23.00 Hermanus Mainline 16.00 23.00

Apart from toll tariffs shown above, the possible use of open road tolling by means of electronic toll collection added two further complicating factors. The first was to determine at what points the electronic tolls (the gantries) would be situated and second what the charge would be made at each gantry. As part of a separate exercise the light vehicle open road tolling for the N1 from Old Oak Road to the R304 (Koelenhof) was estimated to be 65 cents per kilometre, from the R304 to Florence at 21 cents per kilometre (in addition to the existing toll tariff at the Huguenot Tunnel) and from Florence to Sandhills / Orchard at 35 cents per kilometre. For the N2 the light vehicle tariff was estimated to be 39 cents per kilometre from the R300 to the R44 outside Somerset West, at 64 cents per kilometre from the R44 to Grabouw and at 65 cents per kilometre from Grabouw to Bot River. The consequence of setting these rates is that the total toll revenue that would be collected using open road tolling in 2011 prove to be 15% higher than by using traditional toll plazas. What this means is that open road tolling charges could probably be reduced. The implication of this is that any costs calculated for open road tolling are likely to be over stated and any benefits understated.


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1.4 Description of the affected economic environment

The significance of impacts is often highly dependent on the economic environment or context within which they occur. For example, an impact such as job losses can be highly significant in a small local community with a stagnating economy, but far less so in a larger community with a healthy economy. With this in mind, this section describes the economic environment with the purpose of informing the study.

The relatively large and economically important sections of the N1 and N2 involved are an integral part of the local, sub-regional, regional and national economy. The economic context is thus broad and complex. Bearing this in mind, this section starts with a description of the economic environment at a provincial and district municipality scale. The City of Cape Town, Cape Winelands and Overberg District Municipalities are investigated in this regard providing comparisons between 1996 and 2001 Census and other data where possible. This is followed by a more detailed discussion of the environment at a local level focusing on recent data, but providing time series data where possible. Particular emphasis is placed on areas along the routes, as they are more likely to be sensitive to changes. Note that a number of municipal boundaries changed between 1996 and 2001 making it difficult to always present clear comparisons for the same areas.

1.4.1 The Western Cape Province

1.4.1.1 Demographics and employment

The Western Cape is currently home to close to 5 million people and its population is set to grow at an annual rate of 0,7 per cent to 5,4 million by 2015 (PAWC, 2006). In 2001 unemployment in the province was estimated at 26% which was one of the lowest overall unemployment rates in the country (WESGRO, 2001). While this indicates an economy that is relatively healthy when compared to the rest of the country, there are areas within the province where unemployment is a major problem.

According to the Provincial Growth and Development Strategy (PGDS), South Africa experienced significant growth in employment before 2000. This slowed shortly after that but recent statistics again indicate an upswing in job creation at national and provincial levels. Employment is increasingly affected by structural shifts in the economy, some of which are determined by the effects of globalisation, e.g. clothing and textiles, canned products, diminishing fish resources (PAWC, 2006).

1.4.1.2 Income levels and poverty

Despite its obvious wealth and prosperity the Western Cape is still a place of extreme poverty and hardship for many. A higher human development index (HDI) in urban areas often hides pockets of severe urban poverty due to significant high levels of wealth and access to high quality services (PAWC, 2006).

Figure 2 below present data on the spatial distribution of areas with the greatest economic and social needs using a multiple index of deprivation (PAWC, 2006). It shows that, of the areas near the N1 and N2, the south east metro and Touws River face particular challenges regarding poverty.


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Figure 2: Multiple index of deprivation by ward 2

2 The Provincial Indices of Multiple Deprivation for South Africa 2001, Noble, M et al, University of Oxford, HSRC, Statistics South Africa, 2006.


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1.4.1.3 Economic sectors and production

The Western Cape produces approximately 16% of the national Gross Domestic Product (GDP) (PAWC, 2006). It has grown at a rate consistently above the national average, maintaining a rate of approximately 4% over the period 1990 – 2001 (WESGRO, 2001). Figure 3 indicates the sectors in which the bulk of production and employment occurs. From this table it is clear that the manufacturing, and financial and business services sectors make the largest contribution to Gross Geographic Product (GGP) while the manufacturing, agriculture and tourism sectors are most important from an employment creation point of view.

Figure 3: Sector shares in Gross Geographic Product and employment- Western Cape

Sector share GGP % Employment %

Agriculture 5.9 9.0

Manufacturing 20.1 14.2

Trade 11.1 8.8

Tourism 9.1 9.3

Financial and business services 17.4 6.3

Source: WESGRO, 2001

Between 1999 and 2004, the Western Cape experienced higher growth than the country as a whole outperforming it by an average of 0,7% per year (PAWC, 2006). However, the PGDS notes that although economic performance in the Western Cape has improved considerably since the late 1990s, it has not been sufficient to meet new social demands, eradicate poverty or adequately address a legacy of inequality and exclusions.

Figure 4: Western Cape Economy: Real GDP Growth, 1999-2004

1999 2000 2001 2002 2003 2004

Agriculture, forestry & fishing 6,7 -2,3 0,8 7,1 -3,6 1,8

Mining and quarrying -22,8 7,5 -13,4 -1,5 1,7 1,3

Manufacturing -0,7 5,7 2,9 1,1 -2,2 5,7

Electricity, gas and water 8,3 2,8 -1,9 2,9 11,3 7,1

Construction 10,5 5,0 -15,8 34,1 0,7 4,5

Retail trade & catering 9,8 9,9 5,7 1,3 6,8 9,7


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Transport & communication 6,3 7,9 5,8 5,6 7,1 5,2

Financial & business services 6,2 4,0 9,9 5,3 5,9 5,3

CSP services 3.9 4.8 2.2 2.4 4.1 1.4

General government -2.4 -3.2 -0.5 2.2 1.7 0.8

Western Cape GDPR 4,2 4,5 4,2 4,2 3,5 5,3

Source: Statistics SA in PERO 2006

1.4.2 The City of Cape Town

The City of Cape Town is made up of the six former Metropolitan Local Council areas (Cape Town, South Peninsula, Blaauwberg, Oostenberg, Tygerberg and Helderberg). The City as a whole is highly dependent on the N1 and N2 routes. It faces development challenges similar to other South African metropolitan areas. High population growth rates (partly due to in-migration), unemployment, poverty and housing shortages are special problems.


The 2001 population for the Cape was estimated at 2.9 million up from 2.56 million in 1996. In 2001 there were:

• Formally employed people: 939,466 (71% of the economically active population)

• Unemployed people: 386,742 (29% of the economically active population)

Measures of unemployment increased from 19% in 1996.


The information in Figure 5 indicates that approximately 25% of households in the City had incomes below R9,600 per annum in 2001 up from 15% in 1996. Cape Town is seen as an affluent city, yet over 30% of the population lives below the household subsistence level (PAWC, 2006).


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Figure 5: Percentage of households per income level in the City of Cape Town (1996 & 2001)

Household income 2001 1996

None 13% 7%

R1 - 4800 3% 2%

R4801 - 9600 9% 6%

R9601 - 19200 14% 21%

R19201 - 38400 17% 24%

R38401 - 76800 17% 18%

R76801 - 153600 14% 14%

R153601 - 307200 9% 7%

R307201 - 614400 3% 1%

R614401 - 1228800 1% -

R1228801 - 2457600 0% -

Over R2457600 0% -

Total 100% 100%

Source: Demarcation Board, 2003 using Census data


The City has a relatively well diversified economy leaving it less exposed to declines in single sectors. It maintained a growth rate of 2.5% between 1991 and 1996, above the national average of 1.5% for the same period. The following four sectors were the main contributors to the 1996 GRP of R27.9 billion:

• Manufacturing: 28%

• Trade: 21%

• Services: 19%

• Financial Services: 17%

The 1996 and 2001 sectoral breakdown of formal employment in the Cape Town is given in Figure 6 and shows the importance of the community, social and personal services (22% of jobs), wholesale and retail trade (20% of jobs), manufacturing (18% of jobs) and financial, insurance, real estate and business services (15% of jobs). Increases in the share of total employment have been most prominent for the community and financial services and trade sectors while manufacturing’s share decreased over the period. While the City is not an export-led economy, indications are that the area’s trading activities have increased significantly in recent years (CMC, 1998). Agricultural products are particularly important and make up the largest proportion of exports (26% of total exports).


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Figure 6: The sectoral breakdown of formal employment in the City of Cape Town (1996 & 2001)

Source: Demarcation Board, 2003 using Census data Note: darker columns represent 2001 figures and lighters ones, 1996 figures

1.4.3 Cape Winelands District


The 2001 population for the Cape Winelands District was estimated at 630,000 up from 560,000 in 1996. In 1996, unemployment was measured at 14% and had risen to 18% by 2001 based on the following figures:




The information in Figure 7 indicates that approximately 28% of households in the district had incomes below R9,600 per annum in 2001 up from 12% in 1996.


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Figure 7: Percentage of households per income level in the Cape Winelands District (1996 & 2001)

Household income 2001 1996None 12% 3%R1 - 4800 3% 1%R4801 - 9600 13% 8%R9601 - 19200 20% 26%R19201 - 38400 22% 18%R38401 - 76800 15% 10%R76801 - 153600 9% 7%R153601 - 307200 4% 3%R307201 - 614400 1% 0%R614401 - 1228800 0% -R1228801 - 2457600 0% -Over R2457600 0% -Total 100% 75%



The 1996 and 2001 sectoral breakdown of formal employment in the district is given in Figure 8. Agriculture is clearly the dominant economic sectors in the district when considering the employment associated with it (over 80,000 jobs in 2001). This is followed by community and personal service and retail and wholesale trade. The later sector has shown the strongest growth in employment creation between 1996 and 2001 while manufacturing has shed the greatest proportion of jobs in this period.

Figure 8: The sectoral breakdown of formal employment in the Cape Winelands District (1996 & 2001)



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1.4.4 The Overberg District


The 2001 population for the Overberg District was estimated at 203 521 (Census 2001). In the same year, unemployment was measured at 19% based on the following figures:




The information in Figure 9 indicates that approximately 29% of households in the district had incomes below R9,6000 per annum in 2001 up from 17% in 1996. These levels along with unemployment levels reported above are almost identical to those for the Cape Winelands District.

Figure 9: Percentage of households per income level in the Overberg District (1996 & 2001)

Household income 2001 1996None 10% 4%R1 - 4800 4% 1%R4801 - 9600 15% 12%R9601 - 19200 20% 37%R19201 - 38400 22% 23%R38401 - 76800 15% 12%R76801 - 153600 10% 8%R153601 - 307200 4% 3%R307201 - 614400 1% 1%R614401 - 1228800 0% -R1228801 - 2457600 0% -Over R2457600 0% -Total 100% 100%



The 1996 and 2001 sectoral breakdown of formal employment in the district is given in Figure 10. Agriculture is clearly the dominant economic sectors in the district when considering the employment associated with it (over 25,000 jobs in 2001). This is followed by community and personal service and retail and wholesale trade with the later showing the strongest growth in employment creation between 1996 and 2001.


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Figure 10: The sectoral breakdown of formal employment in the Overberg District (1996 & 2001)


1.4.5 Old Oak Interchange to the Huguenot Tunnel


Figure 11 gives the population and unemployment rates for areas along the route between Old Oak Interchange and the Huguenot Tunnel. It indicates that Kuilsrivier and to a lesser degree Paarl have a fairly uniform and relatively low unemployment rate when compared with that of the province.

Figure 11: Population numbers and unemployment rates for areas along the route (2001)

Area Population Unemployment %

Kuilsrivier 44 780 15%

Paarl 82 710 23%

Source: Census 2001


Figure 12 illustrates the percentage of households in each income group for the areas along the route and the district. As before, the income distribution for the City of Cape Town is included for purposes of perspective. Both Kuilsrivier and Paarl have a lower number of households in the lowest income brackets when compared with the City of Cape Town. Kuilsrivier had 15% of household earning less than R9,600 per annum in 2001 while Paarl had 19% compared with 25% in the City of Cape Town.


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Figure 12: Percent of households per income category for Kuilsrivier and Paarl (Source: 2001 census)

Percent of households per annual income category

0%

5%

10%

15%

20%

25%No

incom

eR1

- R4

800

R4 8

01 -

R9 6

00R9

601

- R19

200

R19

201

- R38

400

R38 4

01 -

R76 8

00R7

6 80

1 - R

153

600

R153

601

- R3

07 2

00R30

7 20

1 - R

614

400

R614

401

- R1

228

800

R1 2

28 8

01 -

R2 4

57 6

00R2

457

601

and

mor

e

Annual household income 2001

KuilsriverPaarlCity of Cape Town

1.4.5.3 Economic activity along the route

The majority of this section of the route passes through the City of Cape Town and Drakenstein district. The N1 route starts near the urban edge in the Oostenberg area. Kraaifontein Industria is situated near the beginning of the route. Joostenbergvlakte also has commercial activity on a limited scale in the form of a garden centre, cut flower suppliers and guest houses. Between Kraaifontein and the Huguenot tunnel, the predominant economic activity is agricultural production of grapes, olives, chickens and some livestock. Paarl, which is also situated along this section of the route, has an economy sustained by agriculture, agro-processing, tourism, a few other manufacturing niches and the services sector (WESGRO, 1998b).

1.4.6 Huguenot Tunnel to Sandhills


Figure 13 reports on the population numbers and unemployment rates for areas along the route. As was the case in 1996, Touws River and De Doorns are particularly vulnerable in term of unemployment with rates of 57% and 34% respectively. Touws River in particular suffers from an unusually high unemployment rate. Worcester and the Breede River district, on the other hand, have relatively low rates by comparison.


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Worcester 66 345 23%

De Doorns 8 678 34%

Touws River 6 781 57%

Source: Census 2001


Figure 14 shows the percentage of households in each income group for the local areas along the route. As before, the income distribution for the City of Cape Town is included for purposes of perspective. Two factors are immediately evident from the figure. Firstly, Worcester has a relatively lower number of people in low income brackets (18% of households earned less than R9,600 per annum in 2001) when compared Cape Town. De Doorns and Touws River provide a stark contrast to this with 45% and 47% of households earning below R9,600 per annum. These percentages are more than twice that of Worcester and close to twice that for the City of Cape Town.

Figure 14: Percent of households per income category for Hex river area (Source: 2001 census)

Percentage of households per income category

0%

5%

10%

15%

20%

25%

No inc

ome

R1 - R

4 800

R4 801

- R9 6

00R9 6

01 - R

19 20

0R19

201 -

R38

400

R38 40

1 - R

76 80

0R76

801 -

R15

3 600

R153 6

01 - R

307 2

00

R307 2

01 - R

614 4

00

R614 4

01 - R

1 228

800

R1 228

801 -

R2 4

57 60

0

R2 457

601 a

nd m

ore

Annual household income - 2001

WorcesterDe DoornsTouwsrivierCity of Cape Town


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Agriculture, primarily in the form of fruit farming, is the main sector in the Breede River district. In 1998, the region had a Gross Regional Product of R3.01 billion divided among the following sectors (WESGRO, 1999):

• Primary sector (mainly agriculture): 40%

• Secondary sector (manufacturing): 17.5%

• Trade & tourism: 20%

• Financial services: 12.5%

• Government & other services: 10%

Land use in the Hex River Valley is dominated by the production of table grapes. Other agricultural production includes other fruits, chicken farming near Worcester and olives.

1.4.7 Vanguard Drive to Sir Lowry’s Pass


Figure 15 indicates the population numbers and unemployment rates for areas along the route. Khayelitsha is relatively vulnerable in terms of unemployment with a rate of 51% in 2001 up from 41% in 1996 and relatively high population growth from 245 000 people in 1996 to 330 000 in 2001. Somerset West and Strand, on the other hand, have relatively low rates although the rate from Strand has increased from 15% in 1996 to approximately 20% in 2001.

Figure 15: Population numbers and unemployment rates for areas along the route


Khayelitsha 329 008 51%

Somerset West 60 609 14%

Strand 46 449 20%

Source: Census 2001


Figure 16 shows the percentage of households in each income group for the areas along the route. It is clear from the figure that Somerset West and the Strand have income distributions better than those for the City of Cape Town as a whole. As is well known, the same is not true of Khayelitsha where incomes are very skewed reflecting poverty levels (46% of households had incomes less than R9,600 in 2001).


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Figure 16: Percent of households per income category for Khayelitsha, Somerset West and Strand (Source: 2001 census)


0%

5%

10%

15%

20%

25%

30%

No inc

ome

R1 - R

4 800

R4 801

- R9 6

00

R9 601

- R19

200

R19 20

1 - R

38 40

0

R38 40

1 - R

76 80

0

R76 80

1 - R

153 6

00

R153 6

01 - R

307 2

00

R307 2

01 - R

614 4

00

R614 4

01 - R

1 228

800

R1 228

801 -

R2 4

57 60

0

R2 457

601 a

nd m

ore


KhayelitshaSomerset WestStrandCity of Cape Town


As residential areas and vacant land border the start of this section of the route there is limited commercial activity. Nearer the Helderberg, some agricultural activity takes place in the form of grape production. The Somerset Mall, which acts as an important local and regional shopping centre, is situated just before De Beer’s interchange.

Current commercial activity along the existing route in Somerset West is centred on Gant’s Plaza and the Somerset West Business Park. The types of goods sold in these developments include: car sales, house fittings, building supplies, garden supplies, tool hire, bulk storage, boating, food sales, adult entertainment, etc. New industrial and commercial investment opportunities in the form of nodes and centres are clustered along the existing N2 stretching from Macasar/AECI through Nomzamo-Lwandle to Gordon’s Bay. This commercial corridor not only focuses on new investment opportunities but also serves to integrate towns within the Helderberg Basin. In addition, the success of the Somerset Mall has prompted further expansion, and the Helderberg is evolving into a major regional retail centre serving both the local metropolitan population and consumers from Grabouw, Betty’s Bay and elsewhere (WESGRO, 1998a). For some time the local council and those involved in business have been concerned about the negative impact that the existing situation on the T2 has had on development. The congestion associated with having the free flow of traffic interrupted by traffic lights is seen as negative. The fact that the T2 has to accommodate N2 traffic also limits the number of intersections that can be allowed along the route which in turn hampers access for local traffic.


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1.4.8 Sir Lowry’s Pass to Bot River

This part of the route falls under the administration of the Overberg District Council. The Overberg region is further divided into four B-municipalities: Theewaterskloof, Cape Agulhas, Swellendam and Overstrand of which the route would only pass through the areas under the control of the Theewaterskloof municipality. While Hermanus is not located along this section of the route, it has been included in analysis because over half of the vehicles travelling east towards Bot River are destined for the Hermanus – Walker Bay area.


The most important reason for population growth in the Overberg can be attributed to the influx of younger blacks and mainly elderly whites from other provinces and the Cape Metropolis. These trends have implications for future development planning as the immigrating black population consists mainly of economically active young people looking for job opportunities, while the elder whites settling in most of the towns are looking forward to retirement and are often not in favour of development. Most of the members of the latter group are no longer economically active and are not creating jobs for themselves or for others though their presence may create the impression of growth, prosperity and the availability of numerous job opportunities in the towns. The expectations of both the mentioned groups need to be reconciled (ODM, 2001).

Table 12 indicates the population numbers and unemployment rates for areas along the route and shows that Grabouw is relatively vulnerable in comparison to the Overberg district and Bot River and Hermanus less so. Bear in mind that unemployment rates do not reflect differences in rates between population groups. For example, unemployment in Hermanus has been estimated at a relatively high 25% for Africans, 9% for Coloureds and only 2% for Whites (Urban Dynamics, 1999). Similar patterns can be expected for the rest of the Overberg.



Grabouw 21 587 36%

Bot River 4 052 26%

Hermanus 10 500 25%

Source: Census 2001


Figure 18 illustrates the percentage of households in each income group for the areas along the route and the district. As before, the City of Cape Town is given. All of the areas in this region have incomes that are somewhat lower than Cape Town with Grabouw showing a particularly high percentage of household in lower income groups (44% earned less than R9,600 in 2001) while Hermanus and Bot River had percentage similar to those of the City of Cape Town.


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Figure 18: Percent of households per income category for Bot River, Grabouw and Hermanus (Source: 2001 census)


0%

5%

10%

15%

20%

25%

30%

No inc

ome

R1 - R

4 800

R4 801

- R9 6

00

R9 601

- R19

200

R19 20

1 - R

38 40

0

R38 40

1 - R

76 80

0

R76 80

1 - R

153 6

00

R153 6

01 - R

307 2

00

R307 2

01 - R

614 4

00

R614 4

01 - R

1 228

800

R1 228

801 -

R2 4

57 60

0

R2 457

601 a

nd m

ore


GrabouwBotrivierHermanusCity of Cape Town


As with the rest of the Overberg, the area along the route is heavily reliant on agriculture, in particular deciduous fruit production and related industries. The fruit industry has been experiencing a protracted period of shrinking profits since the mid 1990s. Many factors have contributed to this situation. The phasing out of the General Export Incentive Scheme (GEIS) was partly instrumental and possibly also the end of the control boards. The global industry has also become increasingly competitive and over supplied in some instances. To add to this, Europe, one of South Africa’s main markets, can now store surplus stock out of season and sell it year round thus taking away the seasonal differences South Africa relied on (CCA, 2000).

Tourism has become an increasingly important part of the economy of the region. The area offers a combination of scenic beauty associated with wilderness areas such as the Kogelberg Biosphere Reserve and rural charm associated with farming activities. Three farm stalls (The Orchard, Peregrine and Houwhoek) are particularly popular with tourists along the route and continue to expand. Opportunities associated with the accommodation of tourists have been exploited particularly through the establishment of guesthouses. The historic Houwhoek Inn is also located along this stretch of the route.

Hermanus has experienced unprecedented economic and population growth over the last few years. Major growth forces have included tourism and the demand for retirement housing in the area. Aside from sectors linked to the tourist trade such as retailing and accommodation, the real estate and construction sector continues to experience a boom.


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2 TOLL COLLECTION SYSTEMS

The intention of this section is give a brief introduction to the different methods of tolling that are being considered for the proposed project. These are tolling using traditional toll plazas or open road tolling (ORT).

The traditional toll plaza system is familiar to anyone in the Western Cape who uses the Huguenot Tunnel, Chapman’s Peak or Tsitsikamma. Here you drive up to a plaza, pay the required fee and continue the journey. Often there are frequent user discounts or local area discounts. In turn this type of system can be either an open or closed tolling system. A closed tolling system aims to toll every vehicle on the road. While this is straight forward in a rural environment in an urban environment it means having plazas on every ramp of the entire freeway system. This is usually financially inefficient and the result is typically an open tolling system where there are a number of mainline plazas and a limited number of ramp plazas. The latter are either to limit diversion away from a mainline plaza or because the ramp carries a high volume of traffic.

One of the key disadvantages of the plaza system for congested urban roads is the potential for long delays at the plazas, particularly at peak periods. A potential solution to this problem is to have a number of lanes that used some kind of electronic toll collection (ETC). This could be an optical number plate reader or a transponder of some sort. Here, registered customers of the toll road slow down but do not need to stop.

The alternative to this type of tolling system is use some form of ORT. This is a system that uses electronic toll collection that partially or totally does away with the need for traditional toll plazas. Here there are gantries that span the road at regular intervals which again could use a potential variety of electronic means to record which vehicles are using the road and how far the vehicles are travelling. (It also potentially allows for the tracking of stolen vehicles and the monitoring of vehicle speeds).

In considering the use of ORT there are both demand and supply side issues. Demand side deals with issues relating to people who would use the ORT system while the supply side deals with those responsible for purchasing, implementing and maintaining the ETC system.

2.1 Supply Side Issues

Analysing the continuum it can be seen that the first and possibly the most important issue that needs to be addressed is the choice of the ORT system that would be installed. This is important as it would affect not only the implementation costs but the maintenance and enforcement costs as well.


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Figure 19: Generic Comparison of Different Toll Systems3

Manual Operation Hybrid Operation Fully Automated ETC

Maintenance High Medium-High Low

Congestion Relief Low Medium High

Required Enforcement

Low Medium-Low High

A fully automated ETC system requires little maintenance “While a conventional interchange requires 25 full-time employees, at a cost of up to one-third of the toll collection revenue, the ETC option would require only one maintenance person and account support”4 Note however the fully automated ETC system would required a labour intensive enforcement system often also requiring local traffic police assitance5. The Hybrid options make use of Express or Managed lanes; here toll users who have subscribed to the system need not wait to pay but pass through with the ETC automatically debiting their account. Once again effective enforcement procedures must be in place6

When an ETC system is implemented it requires that consumers that use the system have some type of In-Vehicle Unit (IVU). This raises two issues. Firstly who would install the IVU’s and also where would this installation take place. While secondly and most importantly, who would bear the cost of purchasing, installing and maintaining the IVU. It is issues such as this that have a high impact on the demand side decision to join the ETC system or not. Some international trends indicate that subsidisation would be preferable.

As discussed by Chen (2007) one of the major issues surrounding low subscription is that consumers are not fully aware of the benefit if the join the system. It is thus important that a marketing campaign be conducted to educate the public about the potential benefits. Chen further suggests that this needs to be an ongoing campaign. In Taiwan utilization rates still remained as low as 20% even after initial marketing.

At present no international standards of best practice with regards to ETC can be found, due to different government intervention between countries. In Japan the ETC system is entirely funded and run by the Government, while in the USA there have been moves to privatise toll collection systems (http://www.itscanada.ca).

The last supply side issue that needs to be addressed is that specific legal procedures must be in-place not only to ensure that those not paying toll fees are dealt with but also to ensure that the consumers’ right to privacy is respected.

3 Note that this table was complied by using different internet sources namely (http://www.itscanada.ca) & (http://www.calccit.org/itsdecision/serv_and_tech/Electronic_toll_collection). 4 (http://www.calccit.org/itsdecision/serv_and_tech/Electronic_toll_collection). 5 (http://www.itslessons.its.dot.gov/its/benecost.nsf 6http://www.itslessons.its.dot.gov/its/benecost.nsf)&(http://www.calccit.org/itsdecision/serv_and_tech/Electronic_toll_collection).


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2.2 Demand Side Issues

An important issue that underpins the success of an ETC system is whether consumers would join. A key factor in this decision is the cost that the consumer would have to bear and also the perceived benefit that consumer would receive. “The most prominent suggestion for improving the ETC system is cost related: availability of toll discounts (for those that are part of the system) as well as cheaper IVU’s” (Montalbo 2007). Linked to this is the marketing and public acceptance programme that should be aimed at educating the consumers about the benefits of the new system. Montalbo further showed that approximately 55% of consumers that opted not to join the ETC system did so due to high initial cost, while approximately only 23% opted not to use the system due to infrequent use of the carriage way. From this it is clear that cost to the consumer is a key factor in ensuring that the ETC system succeeds.

Interestingly an issue that needs to be taken into account when marketing the ETC system is that “Commuters do not always value time savings as highly as planners would like. In addition, minor time savings exhibited on a few of the newest ETC facilities do not justify the cost of obtaining and maintaining and IVU and a toll account”7. It is thus necessary to, when marketing the product to the consumers to ensure that a package of benefits is marketed and not just “Time Savings”

7 (http://www.itscanada.ca).


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3 EFFICIENCY, EQUITY AND TOLL ROADS

This section explores the interrelationship that exists between economic efficiency, equity and the tolling of roads. The discipline of economics distinguishes between three types of economic efficiencies. These are productive, allocative and dynamic efficiency. Productive efficiency occurs when the factors of production within a country are used in their most efficient way. Allocative efficiency refers to the actual mix of production and output. Dynamic efficiency is the degree to which productive and allocative efficiency interact with other factors to generate economic growth. Since transport is a derived demand (only some people drive purely for the pleasure of driving) the focus here is on productive efficiency.

The section starts by focusing on the ways in which the proposed project would contribute to the generation of economic efficiencies. This is followed by the identification of source of inefficiency for the project and a conclusion about the trade off between equity and efficiency.

3.1 Sources of efficiency

The proposed project has the potential to contribute to the generation of productive efficiency in at least three ways.

3.1.1 User pays principle

The requirement that the tolling system be economically efficient is captured in the government transport policy document, “Moving South Africa”. In the overview this includes the objective: ‘Recover full costs from users’. This is elucidated in two parts. The first requires that users are charged for the full cost of their use of infrastructure and operations used, and for all externalities they generate. The second requires that users not be charged above full costs in order to support infrastructure and operations that do not provide them with benefits (Moving South Africa p17).

In effect this requires that each road user pay a fee equal to the incremental costs that user imposes on the roads and on other road users. The charge can also incorporate an element to cover amortisation of the sunk costs involved, however no group of users should be cross-subsidising other users. Hence tolling increases equity because only those people who use the roads actually pay for them. Funding the roads through an increase in the fuel levy reduces equity because the benefits from the roads are localised (to specific users) while the costs are borne by anyone who pays for fuel.

3.1.2 Damage and distortions from heavy vehicles

Before toll roads there was little way in which heavy vehicles could be charged fully for the use of a road. Vehicle licences and fuel levies are not adequate here because they do not increase in proportion between light and heavy vehicles relative to the degree of damage that these vehicles cause. The consequence is that light vehicle owners are subsidising heavy vehicles by paying more than their ‘user cost’ portion of the road.

This subsidy further distorts the transport system through its impact on the rail network. Spoornet, for example, not only covers the running costs of its own haulage operations, but is also responsible for all track construction and maintenance. In


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addition, hauliers do not pay for road damages or any clean ups (e.g. chemical spills) that are necessitated by accidents involving trucks while rail operators cover all of the cost when accidents occur.

3.1.3 Congestion tolling

Vehicles impose four main costs on the rest of society – accident externalities, environmental pollution, road damage, and congestion. As these are costs that are borne by society but not by the driver this means that the journey is costing the individual less than it is costing society general. Now, while these issues are largely irrelevant on open rural roads, they become particularly important as road congestion increases. The incidence of accidents increases, and the slower moving traffic increases air and noise pollution, and adds to road user costs. It is clear that congestion is a source of economic inefficiency.

The proposed project has the capacity to address these economic inefficiencies by introducing congestion tolling. This requires a toll that varies with time of day. While such congestion tolling has not been introduced on any of South Africa’s toll roads to date they do warrant consideration because of their capacity to generate economic efficiencies.

3.2 Sources of inefficiencies

In contrast to the sources of efficiencies outlined above the proposed project also has the capacity to generate a number of inefficiencies.

3.2.1 Funding efficiency

Until comparatively recently road construction in South Africa was primarily funded by the state, either from tax revenues or through state borrowing. These traditional forms of fund raising were less costly than the private sector ones that replaced them. The state, being an effectively zero risk borrower, should be able to raise funds at a lower rate than a private sector borrower. Similarly, the collection and diversion of tax revenues should be less expensive than the collection of toll revenues.

The merchant banking industry is highly competitive, and there is every reason to believe that its fundraising is efficient. The contract between the state and the toll concessionaire may, however, impose constraints on the fundraising approaches open to the merchant bank. Without access to the contract, one cannot establish whether or not there are restrictions on the banks or the concessionaire that increase the effective cost of the moneys raised. It should be noted however, that substantial proportions of earlier contracts have been devoted to regulation of funding.

3.2.2 Toll collection costs

Paying for roads through taxes or a dedicated fuel fund is simply cheaper than imposing tolls on a road even if this is through an ORT system. The cost of collection is far lower because it does not incur the cost of toll collection system. The actual value of these costs is calculated in Section 4. As mentioned above that while a fuel levy might decrease costs (and therefore increases efficiencies) it also reduces equity and in so doing reduces efficiencies.


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3.2.3 Diversions

The increased possibility of vehicles diverting because of the proposed toll roads would generate economic inefficiencies as social costs diverge from private costs. Tolling an open highway may shift some costs onto the province and local residents as vehicles divert onto secondary roads to avoid tolls.

Where an open access tolling system on a trunk route is combined with unmonitored, uncontrolled and untolled side roads, there is an incentive for drivers to use them. Since such alternate routes are generally narrower and have lighter foundations, whenever tolling shifts a heavy vehicle to a side road it increases road damage, reduces revenue recovery, slows traffic flows and increases accident risk. The damage a vehicle does to a road rises exponentially with that vehicle’s mass and axle loading. It also rises if the road being used has light foundations, i.e. a road not designed for heavy vehicle use. Tolling that leads to heavy vehicle diversion to minor roads may thus feasibly reduce efficiency.

While it can probably be expected that there would be some diversions in the early years of the proposed project it can also be expected that the additional capacity that would be added to the N1 and N2 would attract traffic off the rest of the road network. Conversely, in the absence of adding capacity to the N1 and N2, it is a fact that sections of these roads are already at or close to full carrying capacity during morning and afternoon peak hour. Growth in vehicle ownership would then have the effect of increasing diversions to the rest of the road network and an increase in the time that peak traffic continues.

Section 5.5 reports at length on expected traffic diversions and traffic attractions of the proposed project.


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4 COST BENEFIT ANALYSIS

The decision about whether an investment project is desirable or otherwise depends on the outcome of a financial and economic cost benefit analysis (CBA). The financial cost benefit analysis compares all the direct financial costs and benefits and determines the financial desirability of a project. The economic cost benefit analysis, on the other hand, looks at the costs and benefits to society as a whole and from this determines whether a project is economically desirable. This latter analysis is done by adjusting for shadow prices and wages and removing the distortions caused by taxes and subsidies. To explore the economic value of any investment programme, the direct costs and benefits of the project are compared to the situation that would have prevailed if no such investment had been made. This latter situation is commonly referred to as the base case or “do nothing” option. Such an approach allows one both to determine the (least-cost) solution and to identify the benefits in such a way that they can be compared across the economy as an aid to rational and efficient allocation of resources. The “do nothing” option entails the proposed development not going ahead and the existing N1 and N2 being maintained at acceptable levels. Maintenance would be performed on the N1 and N2 and resurfacing would take place, but there would not be any major structural repairs to the roads or any capacity increases.

As a result of two options of collecting tolls – traditional plazas or open road tolling as described in Section 2 two sets of financial and economic cost benefit results are presented. The first compares the do-nothing option to tolling using toll plazas. The second compares the do-nothing option to tolling using open road tolling.

The CBA was developed based on international best practice and in consultation with the guidelines of the Manual for Cost Benefit Analysis in South Africa (Conningarth, 2007). The analysis has been conducted from a country wide, i.e. South African, perspective. The outcome of this analysis is the reporting of a net present value (NPV), a benefit cost ratio (BCR) and an internal rate of return (IRR) for those cases where the route is compared to a do nothing alternative. A NPV shows the total value of future costs and benefits reduced to a present day value. This is done by using a social discount rate of 8% as recommended by the Development Bank of Southern Africa. The BCR measures the changes in benefits and costs that would be caused by an investment. BCRs are typically used when there are many competing alternatives and projects need to be funded from a limited set of resources. Finally, the IRR is the discount rate that returns a NPV of zero and shows the likely economic returns to society of a project in relation to other investment opportunities.

Following international best practise the financial and economic analysis that has been used here focussed purely on direct costs and benefits and has not taken any indirect costs and benefits into account. Indirect costs and benefits would include those costs and benefits obtained through multiplier effects. For example, the upgrading of a road would have spin off effects for the construction industry and the building materials supply industries. These, in turn, would have backward linkages with other commodity suppliers and retail industries. This is done in Section 7. In addition a number of other potential economic impacts have not been taken into account in the CBA analysis. These include any positive or negative impacts on business; potential impacts on captive communities, etc. This is done in Section 6.


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The financial CBA takes six sets of costs and benefits into account. These are:

1. the capital cost of building and/or upgrading the roads;

2. the costs of maintaining the roads to specific standards (which is determined by the status of the road with national roads having a higher standard than secondary roads);

3. the costs and benefits to road users; (this is explained in Section 3)

4. the cost to road users of diverting, (this is explained in Section 5.5)

5. the cost of secondary road maintenance due to traffic diversions;

6. the compensation paid to the Helderzicht community.

Moving from a financial CBA to an economic CBA requires that transfer payments are netted out, and market prices are adjusted through the use of shadow prices reflecting scarcity and opportunity costs of goods consumed. In addition allowances must be made for VAT and company taxes. In so doing, the actual cost to society is determined. The shadow prices used in the analysis were sourced from Conningarth, 2007. These are:

• Shadow wages were used for unskilled labour. All other pay-classes were used at current salary scales.

• Shadow fuel price for petrol and diesel.

• A shadow electricity price.

• A shadow exchange rate and import duties for those components that would be imported.

4.1 Total Costs and Benefits

This section reports on the overall financial and economic CBA of the proposed project. In each case we report first using toll plazas and then using open road tolling (ORT).

4.1.1 Financial costs and benefits with toll plaza collection

There are three areas where costs increase due to upgrading and tolling. These are in construction, maintenance and operations costs of the N1 and N2; the cost of traffic diversion both to road users and the cost of maintaining secondary roads because of traffic diversion; and the compensation paid to the Helderzicht community. The benefits are the reduced costs to road users on the N1 and N2 and reduced cost of traffic being attracted off the network and onto the toll road.

The overall NPV of the financial costs and benefits of upgrading and tolling relative to the do-nothing option for toll plaza collection are given in Figure 20. In the do-nothing option the NPV of maintenance costs is R553.6m compared to R4.1bn for upgrading and tolling. In the do-nothing options road user costs are R122.2bn on the N1 and R99.0bn on the N2. This is compared to a road user cost of R111.1bn on the N1 and R98.6bn after upgrading. There are however also potential traffic attraction benefits of negative R2.4bn and negative R6.7bn for the N1 and N2 respectively. Therefore if


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the N1 and N2 are maintained but not tolled the NPV of all costs and benefits is R221.8 billion. If the road is upgraded and tolled the NPV of the costs and benefits is R204.8 billion. There is therefore a R16.9bn financial cost reduction in upgrading and tolling the N1 and N2.

Figure 20: Financial cost benefit analysis with toll plaza collection

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade PlazaConstruction, Maintenance & Operations 553.6 4,142.6 -3,589.0Road User Costs (N1) 122,213.4 111,135.7 11,077.7Road User Costs (N2) 99,038.3 98,589.9 448.4Diversions/Attractions - N1 0.0 -2,394.6 2,394.6Diversions/Attractions - N2 0.0 -6,667.1 6,667.1Compensation to Helderzicht 0.0 34.4 -34.4Total 221,805.3 204,840.9 16,964.4

Financial CBA Difference in Options

Upgrading the N1 and N2 to toll road status and applying the medium range of toll tariffs results in a financial benefit cost ratio of 7.8 and a financial IRR of 39%.

More detail of the diversion and road user costs and benefits are presented in Figure 21. The NPV of the financial road user costs is anticipated to total R122.2bn for the N1 and R99.0bn for the N2 for the no tolling option, versus R111.1bn for the N1 and R98.6bn for the N2 in the tolling option. This translates into a saving of about R11bn in road user costs on the N1 and R448m on the N2 if the road is tolled.

This saving needs to be offset against any increase in diversion costs or benefit due to attraction to both the road users and for the authorities that are required to upgrade and maintain the roads onto which the traffic is diverted. The attraction benefit for all classes of N1 road users that divert is negative R2.4bn and for the authorities is R42.2m. This means that overall the upgraded N1 attracts traffic off the rest of the network, but not uniformly for all classes of vehicles. Figure 21 shows that overall class 1 and class 2 vehicles are attracted onto the N1, whereas class 3 and class 4 vehicles divert off. Furthermore, since it is the heavier vehicles that create the most damage and while overall there is a net attraction onto the N1 the provincial and municipal authorities would still incur costs with a present value of R42.2m. The total attraction benefit for N1 users is negative R2.4bn, which should be added to the road user costs of the tolling option to determine the true road user cost savings.

For the N2 the attraction benefit is negative R6.6bn, while the cost for the authorities is negative R52.9m. This is because the N2 attracts traffic off the rest of the network and there is a resultant saving to the municipal and provincial authorities of having to maintain their roads. The total diversion cost for N2 users is therefore negative R6.7bn.

Focussing purely on road user costs and diversion costs there is an overall cost reduction with a NPV of R20.6bn if the N1 and N2 are upgraded and tolled using traditional toll plaza technology.


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Figure 21: Financial Road User Costs and Diversion Costs with toll plaza collection

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade PlazaRoad User Costs (N1)Class 1 68,237.4 66,178.6 2,058.8Class 2 8,854.6 7,880.1 974.5Class 3 7,495.5 6,445.0 1,050.5Class 4 37,625.9 30,631.9 6,993.9Sub-Total Road User Costs (N1) 122,213.4 111,135.7 11,077.7Road User Costs (N2)Class 1 79,599.3 78,520.8 1,078.5Class 2 7,215.5 7,450.7 -235.2Class 3 5,454.2 5,595.5 -141.3Class 4 6,769.3 7,022.9 -253.5Sub-Total Road User Costs (N2) 99,038.3 98,589.9 448.4Diversions/Attractions (N1)Class 1 0.0 -3,590.5 3,590.5Class 2 0.0 -75.5 75.5Class 3 0.0 16.5 -16.5Class 4 0.0 1,212.7 -1,212.7Provincial & Municipal Authorities 0.0 42.2 -42.2Sub-Total Diversions/Attractions (N1) 0.0 -2,394.6 2,394.6Diversions/Attractions (N2)Class 1 -4,436.0 4,436.0Class 2 -825.4 825.4Class 3 -564.8 564.8Class 4 -788.0 788.0Provincial Authorities -52.9 52.9Sub-Total Diversions/Attractions (N2) 0.0 -6,667.1 6,667.1Total Road User Costs and Diversions 221,251.7 200,663.9 20,587.8


4.1.2 Economic cost benefit analysis with toll plaza collection

The overall NPV of the economic costs and benefits of upgrading and tolling relative to the do-nothing option for toll plaza collection are given in Figure 22. In the do-nothing option the NPV of maintenance costs is R486.7m compared to R3.5bn for upgrading and tolling. In the do-nothing option road user costs are R106.2bn on the N1 and R87.1bn on the N2. This is compared to a road user cost of R96.7bn on the N1 and R86.7bn on the N2 after upgrading. There are however also potential traffic attraction benefits of negative R2.1bn and negative R5.2bn on the N1 and N2 respectively. Therefore if the N1 and N2 are maintained but not tolled the NPV of all economic costs and benefits is R193.8 billion. If the roads are upgraded and tolled the NPV of the costs and benefits would be R179.5 billion. There is therefore a R14.3bn economic cost reduction in upgrading and tolling the N1 and N2.

Upgrading the N1 and N2 to toll road status and applying the middle range of toll tariffs results in an economic benefit cost ratio of 7.7 and an economic IRR of 39%.


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Figure 22: Economic cost benefit analysis with toll plaza collection

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade PlazaConstruction, Maintenance & Operations 486.7 3,462.1 -2,975.4Road User Costs (N1) 106,211.5 96,677.9 9,533.6Road User Costs (N2) 87,132.8 86,704.2 428.7Diversions/Attractions - N1 0.0 -2,104.7 2,104.7Diversions/Attractions - N2 0.0 -5,247.0 5,247.0Compensation to Helderzicht 0.0 34.4 -34.4Total 193,831.0 179,526.8 14,304.2

Economic CBA Difference in Options

There are three areas where costs increase due to upgrading and tolling. These are in construction, maintenance and operations costs; maintenance costs for the provincial and municipal authorities; and compensation to the Helderzicht Community. The increased benefits are to road users.

More of the detail of the diversion and road user costs and benefits are given in Figure 23. The NPV of the economic road user cost is anticipated to total R106.2bn for the N1 and R87.1bn for the N2 in the no tolling option, versus R96.7bn for the N1 and R86.7bn for the N2 in the tolling option. This translates into a saving of R9.5bn in road user costs for the N1 if the road is tolled and R428.7m for the N2 if it is tolled.

Figure 23: Economic Road User Costs and Diversion Costs with toll plaza collection

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade PlazaRoad User Costs (N1)Class 1 60,179.5 58,357.3 1,822.2Class 2 7,758.7 6,898.8 859.9Class 3 6,604.7 5,673.1 931.6Class 4 31,668.6 25,748.7 5,919.9Sub-Total Road User Costs (N1) 106,211.5 96,677.9 9,533.6Road User Costs (N2)Class 1 70,354.8 69,379.1 975.7Class 2 6,299.6 6,507.4 -207.8Class 3 4,791.9 4,917.5 -125.6Class 4 5,686.5 5,900.1 -213.6Sub-Total Road User Costs (N2) 87,132.8 86,704.2 428.7Diversions/Attractions (N1)Class 1 0.0 -3,130.8 3,130.8Class 2 0.0 -63.3 63.3Class 3 0.0 16.9 -16.9Class 4 0.0 1,035.2 -1,035.2Provincial & Municipal Authorities 0.0 37.4 -37.4Sub-Total Diversions/Attractions (N1) 0.0 -2,104.7 2,104.7Diversions/Attractions (N2)Class 1 -3,394.2 3,394.2Class 2 -668.7 668.7Class 3 -478.1 478.1Class 4 -659.0 659.0Provincial Authorities -47.1 47.1Sub-Total Diversions/Attractions (N2) 0.0 -5,247.0 5,247.0Total Road User Costs and Diversions 193,344.3 176,030.4 17,313.9


However, these savings need to be seen in conjunction with the savings of commuters who previously used the rest of the network and are now attracted onto


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the toll road, as well as any cost savings that could accrue to the provincial and municipal authorities. The attraction savings for all classes of road users that are attracted onto the N1 is R2.1bn, while the authorities still incur costs of R37.4m (this is due to the fact that class 1 and class 2 vehicles are attracted onto the N1, while class 3 & 4 vehicles divert off it). The total attraction saving for N1 users is therefore R2.1bn, which should be added to the road user costs of the tolling option to determine the true road user cost savings. For the N2 the savings from traffic being attracted onto the road are R5.2bn, while the savings to the authorities is R47.1m. The total diversion cost for N2 users is therefore R5.2bn.

Focussing purely on road user costs and diversion costs, the reduction in total economic costs is expected to be R17.3bn if the N1 and N2 are upgraded to toll road status and tolls are collected using traditional toll plazas.

4.1.3 Financial costs and benefits with open road tolling

The overall NPV of the financial costs and benefits of upgrading and tolling using open road tolling relative to the do-nothing option are given in Figure 24. In the do-nothing option the NPV of maintenance costs is R553.6m compared to R3.8bn for upgrading and tolling. In the do-nothing option road user costs are R122.2bn on the N1 and R99.0bn on the N2. This is compared to a road user cost of R104.0bn on the N1 and R102.1bn on the N2 after upgrading. There are however also potential traffic diversion costs of R3.6bn for vehicles diverting off the N1 and attraction savings of R12.7bn for vehicles being attracted onto the N2. Therefore if the N1 and N2 are maintained but not tolled the NPV of all costs and benefits is R221.8 billion. If the roads are upgraded and tolled the NPV of the costs and benefits is R200.9 billion. There is therefore a R20.9bn cost reduction in upgrading and tolling the N1 and N2 using ORT compared to the do nothing option.

Figure 24: Financial cost benefit analysis with Open Road Tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade ORTConstruction, Maintenance & Operations 553.6 3,828.0 -3,274.4Road User Costs (N1) 122,213.4 104,009.7 18,203.8Road User Costs (N2) 99,038.3 102,089.3 -3,051.0Diversions/Attractions - N1 0.0 3,592.6 -3,592.6Diversions/Attractions - N2 0.0 -12,652.8 12,652.8Compensation to Helderzicht 0.0 34.4 -34.4Total 221,805.3 200,901.1 20,904.2


Upgrading the N1 and N2 to toll road status and utilising an open road tolling system results in a financial BCR of 10.4 and a financial IRR of 47%.

More detail of the diversions, attractions and road user costs and benefits for ORT are presented in Figure 25. The NPV of the financial road user costs for ORT is anticipated to total R122.2bn for the N1 and R99.0bn for the N2 in the do nothing option, versus R104.0bn for the N1 and 102.1bn for the N2 in the ORT option. This translates into a saving of about R18.2bn in road user costs on the N1 and an increase of R3.1bn on the N2 if the road is tolled. The increase in road user costs is attributed to the significantly higher volume on the N2 after the upgrade, mainly due to the construction of the N2 around Somerset West.

These road user costs and savings need to be offset against an increase (or decrease) in diversion (attraction) costs to both the road users and for the authorities


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that are required to upgrade and maintain the roads onto which the traffic is diverted. The diversion cost for all classes of N1 road users that divert off the toll road is R3.5bn and for the authorities is R132.1m. The total diversion cost for N1 users is R3.6bn, which should be added to the road user costs of the ORT tolling option to determine the actual road user cost savings. On the other hand vehicles are attracted onto the N2 and there are savings of R12.6bn for road users that previously did not use the N2, but that now view it as a more attractive option (despite being tolled) than the network. The consequence of this is that road maintenance on the rest of the road network is reduced and savings to provincial and local authorities has an NPV of R70.6m8.

Taking all sets of road user costs and diversion costs into account, there is an overall cost reduction with a NPV of R24.2bn if the N1 and N2 are upgraded and tolled using ORT technology compared to the do nothing option.

Figure 25: Financial Road User Costs and Diversion Costs with Open Road Tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade ORTRoad User Costs (N1)Class 1 68,237.4 62,227.1 6,010.3Class 2 8,854.6 7,370.8 1,483.8Class 3 7,495.5 6,027.5 1,468.1Class 4 37,625.9 28,384.3 9,241.6Sub-Total Road User Costs (N1) 122,213.4 104,009.7 18,203.8Road User Costs (N2)Class 1 79,599.3 81,427.4 -1,828.2Class 2 7,215.5 7,725.3 -509.8Class 3 5,454.2 5,769.7 -315.5Class 4 6,769.3 7,166.9 -397.6Sub-Total Road User Costs (N2) 99,038.3 102,089.3 -3,051.0Diversions/Attractions (N1)Class 1 0.0 -251.8 251.8Class 2 0.0 348.6 -348.6Class 3 0.0 357.5 -357.5Class 4 0.0 3,006.1 -3,006.1Provincial & Municipal Authorities 0.0 132.1 -132.1Sub-Total Diversions/Attractions (N1) 0.0 3,592.6 -3,592.6Diversions/Attractions (N2)Class 1 -9,489.2 9,489.2Class 2 -1,242.0 1,242.0Class 3 -835.4 835.4Class 4 -1,015.7 1,015.7Provincial Authorities -70.6 70.6Sub-Total Diversions/Attractions (N2) 0.0 -12,652.8 12,652.8Total Road User Costs and Diversions 221,251.7 197,038.8 24,212.9


8 It is thought that the reason why there are diversions off the N1 and attractions onto the N2 is that the N2 has extensive upgrades and becomes the route of choice for some traffic that previously used the N1. Therefore the N1 loses traffic to the N2.


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4.1.4 Economic cost benefit analysis with open road tolling

The overall NPV of the economic costs and benefits of upgrading and tolling relative to the do-nothing option are presented in Figure 26. In the do-nothing option the NPV of maintenance costs is R486.7m compared to R3.2bn for upgrading and tolling. In the do-nothing option road user costs are R106.2bn on the N1 and R87.1bn on the N2. This is compared to a road user cost of R90.5bn on the N1 and R89.8bn after upgrading. There are however also potential traffic diversion costs of R3.1bn for the N1 and traffic attraction savings of R11.5bn for the N2. Therefore if the N1 and N2 are maintained but not tolled the NPV of all economic costs and benefits is R193.8 billion. If the road is upgraded and tolled the NPV of the costs and benefits is R175.1 billion. There is therefore a R18.7bn economic cost reduction in upgrading and tolling the N1 and N2 using ORT technology.

Upgrading the N1 and N2 to toll road status with ORT would result in an economic benefit cost ratio of 10.8 and an economic IRR of 48%.

Figure 26: Economic cost benefit analysis with Open Road Tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade ORTConstruction, Maintenance & Operations 486.7 3,188.9 -2,702.2Road User Costs (N1) 106,211.5 90,483.6 15,727.9Road User Costs (N2) 87,132.8 89,826.6 -2,693.8Diversions/Attractions - N1 0.0 3,073.4 -3,073.4Diversions/Attractions - N2 0.0 -11,459.3 11,459.3Compensation to Helderzicht 0.0 34.4 -34.4Total 193,831.0 175,147.6 18,683.4


There are three areas where costs increase due to upgrading and tolling. These are in construction, maintenance and operations costs; diversion costs on the N1; and compensation to the Helderzicht Community. The increased benefits are to road users. More of the detail of the diversion and road user costs and benefits are given in Figure 27. The NPV of the economic road user costs is anticipated to total R106.2bn for the N1 and R87.1bn for the N2 in the no tolling option, versus R90.5bn for the N1 and R89.8bn for the N2 in the ORT option. This translates into a saving of R15.7bn in road user costs for the N1 if the road is tolled and additional costs of R2.7bn for the N2 if it is tolled and tolls are collected using ORT.

These road user costs and savings needs to be offset against an increase (decrease) in diversion (attraction) costs to both the road users and for the authorities that are required to upgrade and maintain the roads onto which the traffic is diverted. The diversion cost for all classes of N1 road users that divert is R3.0bn and for the authorities is R116.9m. The total diversion cost for the N1 is R3.1bn, which should be added to the road user costs of the ORT option to determine the true road user cost savings. For the N2 there are road user savings of R11.4bn. The savings to the authorities is R62.8m. The total attraction saving for the N2 would be R11.5bn.

Focusing purely on road user costs and diversion costs, the reduction in total economic road user costs is expected to be R21.4bn if the N1 and N2 are upgraded to toll road status.


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Figure 27: Economic Road User Costs and Diversion Costs with Open Road Tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade ORTRoad User Costs (N1)Class 1 60,179.5 54,875.0 5,304.5Class 2 7,758.7 6,452.1 1,306.7Class 3 6,604.7 5,304.8 1,299.9Class 4 31,668.6 23,851.7 7,816.8Sub-Total Road User Costs (N1) 106,211.5 90,483.6 15,727.9Road User Costs (N2)Class 1 70,354.8 71,981.2 -1,626.4Class 2 6,299.6 6,750.6 -451.0Class 3 4,791.9 5,072.6 -280.7Class 4 5,686.5 6,022.2 -335.7Sub-Total Road User Costs (N2) 87,132.8 89,826.6 -2,693.8Diversions/Attractions (N1)Class 1 0.0 -219.5 219.5Class 2 0.0 307.0 -307.0Class 3 0.0 316.8 -316.8Class 4 0.0 2,552.2 -2,552.2Provincial & Municipal Authorities 0.0 116.9 -116.9Sub-Total Diversions/Attractions (N1) 0.0 3,073.4 -3,073.4Diversions/Attractions (N2)Class 1 -8,660.9 8,660.9Class 2 -1,113.3 1,113.3Class 3 -750.5 750.5Class 4 -871.9 871.9Provincial Authorities -62.8 62.8Sub-Total Diversions/Attractions (N2) 0.0 -11,459.3 11,459.3Total Road User Costs and Diversions 193,344.3 171,924.3 21,420.0


4.1.5 Comparison between plaza tolling and open road tolling

The comparison between plaza tolling and an open road tolling system is presented in Figure 28. It can be seen from the table that the total financial cost of operating a plaza type toll road system has a present value of R204.8bn, compared to the R200.9bn of an open road tolling system. This means that there would be a saving of R3.9bn if an open road tolling system is used instead of a plaza type system. The plaza type system has a financial benefit cost ratio of 7.8 and a financial IRR of 39%, compared to the 10.4 and 47% of the open road tolling system.

The main difference between the two systems is the road user costs. The road user costs, when including diversions, are lower for the open road tolling than for the plaza system. This needs to be viewed in conjunction with the fact that at open road tolling rates comparable to the plaza toll tariffs the ORT system is estimated to generate revenues 15% higher than the plaza system in the first year of operations as reported in Section 1.3. If the ORT tolls were lower the NPV, IRR and BCR would all be higher.


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Figure 28: Comparison between Plaza Tolling and Open Road Tolling

Tolling Option NPVs(R Millions, 2007 Prices)Construction, Maintenance & Operations 4,142.6 3,828.0 3,462.1 3,188.9Road User Costs (N1) 111,135.7 104,009.7 96,677.9 90,483.6Road User Costs (N2) 98,589.9 102,089.3 86,704.2 89,826.6Diversions/Attractions - N1 -2,394.6 3,592.6 -2,104.7 3,073.4Diversions/Attractions - N2 -6,667.1 -12,652.8 -5,247.0 -11,459.3Compensation to Helderzicht 34.4 34.4 34.4 34.4Total 204,840.9 200,901.1 179,526.8 175,147.6Difference in NPVs 3,939.7 4,379.2Benefit Cost Ratios 7.8 10.4 7.7 10.8IRR 39% 47% 39% 48%

Plaza System

Open Road Tolling

Financial Comparison Economic ComparisonPlaza

SystemOpen Road

Tolling

From an economic perspective the present value of the plaza system is R179.5bn versus the R175.1bn of the open road tolling. Society would therefore benefit by R4.4bn from the open tolling system. The plaza type system has an economic benefit cost ratio of 7.7 and an economic IRR of 39%, compared to the 10.8 and 48% of the open road tolling system.

4.2 The Cost of Tolling

In Section 3 of this report it was pointed out that there is a trade off between equity and efficiency. From an equity perspective it is clearly desirable that the user pays principle is important and that people in other parts of the country should not be expected to cover the costs of roads in the Western Cape. On the other hand, it was also argued that from a collection perspective a fuel levy was the most inexpensive way of collecting the revenues in order to pay for the upgrading of the roads. This section explores these financial and economic costs.

As with the rest of the cost benefit analysis the financial costs are given followed by the economic costs. We first present the difference between the do nothing option compared to upgrading without tolling. Then we compare upgrading and plaza tolling to upgrading and not tolling followed by a comparison of upgrading and ORT to upgrading and not tolling.

It will be realised that the costs and benefits extend beyond just the toll plazas and concession company costs. They also include changing costs to all drivers. In the absence of tolling more vehicles would be attracted onto the roads and off the existing network. This in turn alters the costs and benefits of other people who would have been on the N1 and N2 anyway as well as other drivers on the existing network.

Two sets of results are reported. The first is for the full cost of tolling taking into account all the changes in costs as discussed above. The second takes a more narrow focus and looks purely at the cost of toll collection. This includes the cost of toll plazas, concession company costs, etc.

An implicit assumption that is made in this section is that in the absence of tolling the cost of upgrading is passed into the fuel levy. However, given that this higher fuel levy would be carried by all vehicle users in the county, on the one hand, and that fuel is highly price inelastic, on the other, that there would be little noticeable change in driver habits because of the marginally higher fuel price.


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4.2.1 Financial costs and benefits of upgrading but not tolling

The overall NPV of the financial costs and benefits of upgrading compared to the do-nothing option are presented in Figure 29. In the do-nothing option the NPV of maintenance costs is R553.6m compared to R2.8bn for upgrading without tolling. In the do-nothing option road user costs are R122.2bn on the N1 and R99.0bn on the N2. This is compared to a road user cost of R115.5bn on the N1 and R111.5bn on the N2 after upgrading. In addition traffic is attracted off the network which generates road user savings of R8.4bn and R22.6bn respectively. Therefore if the N1 and N2 are maintained but not tolled the NPV of all costs and benefits is R221.8 billion. If the road is upgraded and not tolled the NPV of the costs and benefits is R198.8 billion. There is therefore a R23.0bn cost reduction in upgrading the N1 and N2 without tolling.

Figure 29: Financial cost benefit analysis with upgrade but no tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade OnlyConstruction, Maintenance & Operations 553.6 2,760.5 -2,206.9Road User Costs (N1) 122,213.4 115,493.3 6,720.1Road User Costs (N2) 99,038.3 111,530.3 -12,492.1Diversions/Attractions - N1 0.0 -8,428.6 8,428.6Diversions/Attractions - N2 0.0 -22,619.8 22,619.8Compensation to Helderzicht 0.0 34.4 -34.4Total 221,805.3 198,770.1 23,035.2


4.2.2 Economic costs and benefits of upgrading but not tolling

The overall NPV of the economic costs and benefits of upgrading and tolling relative to the do-nothing option for toll plaza collection are presented in Figure 30. In the do-nothing option the NPV of maintenance costs is R486.7m compared to R2.4bn for upgrading without tolling. In the do-nothing option road user costs are R106.2bn on the N1 and R87.1bn on the N2. This is compared to a road user cost of R100.5bn on the N1 and R98.1bn on the N2 after upgrading. Traffic attractions result in network savings of R7.5bn for the N1 and R20.0bn for the N2. Therefore if the N1 and N2 are maintained but not tolled the NPV of all economic costs and benefits is R193.8 billion. If the road is upgraded without tolling the NPV of the costs and benefits is R173.6 billion. There is therefore a R20.2bn economic cost reduction in upgrading the N1 and N2 without tolling and passing the upgrade cost through the fuel levy.

Figure 30: Economic cost benefit analysis with upgrade but no tolling

Tolling Option NPVs(R Millions, 2007 Prices) Do Nothing Upgrade OnlyConstruction, Maintenance & Operations 486.7 2,372.1 -1,885.4Road User Costs (N1) 106,211.5 100,500.5 5,711.0Road User Costs (N2) 87,132.8 98,115.0 -10,982.1Diversions/Attractions - N1 0.0 -7,456.4 7,456.4Diversions/Attractions - N2 0.0 -19,982.0 19,982.0Compensation to Helderzicht 0.0 34.4 -34.4Total 193,831.0 173,583.5 20,247.5



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4.2.3 The cost of tolling using toll plazas

This section gives the financial and economic costs to society of tolling the N1 and N2 by means of a toll plaza system. The results are presented in Figure 31. It can be seen from the table that the total financial cost of operating a toll plaza system has a present value of R204.8bn, compared to the R198.8bn of upgrading the roads but not tolling them. This means that the financial cost of operating the upgraded road under a toll plaza system is R6.1bn.

Figure 31: Comparison between Plaza Tolling and No Tolling

Tolling Option NPVs(R Millions, 2007 Prices)Construction, Maintenance & Operations 4,142.6 2,760.5 3,462.1 2,372.1Road User Costs (N1) 111,135.7 115,493.3 96,677.9 100,500.5Road User Costs (N2) 98,589.9 111,530.3 86,704.2 98,115.0Diversions/Attractions - N1 -2,394.6 -8,428.6 -2,104.7 -7,456.4Diversions/Attractions - N2 -6,667.1 -22,619.8 -5,247.0 -19,982.0Compensation to Helderzicht 34.4 34.4 34.4 34.4Total 204,840.9 198,770.1 179,526.8 173,583.5Difference in NPVs 6,070.8 5,943.3Benefit Cost Ratios 7.8 12.4 7.7 12.6IRR 39% 55% 39% 56%

Financial Comparison Economic ComparisonPlaza

SystemUpgrade & NO Tolling

Plaza System

Upgrade & NO Tolling

From an economic perspective the present value of the plaza system is R179.5bn versus the R173.6bn without tolling. It can therefore be concluded that the overall economic cost of tolling using toll plazas is in the order of R5.9bn.

4.2.4 The cost of open road tolling

The financial and economic costs to society of tolling the N1 and N2 by means of an open road tolling system are presented in Figure 32. It can be seen from the table that the total financial cost of operating an open road tolling system has a present value of R200.9bn, compared to the R198.8bn of upgrading the roads but not tolling them. This means that the financial cost of operating the upgraded road under an open road tolling system is R2.1bn.

Figure 32: Comparison between Open Road Tolling and No Tolling

Tolling Option NPVs(R Millions, 2007 Prices)Construction, Maintenance & Operations 3,828.0 2,760.5 3,188.9 2,372.1Road User Costs (N1) 104,009.7 115,493.3 90,483.6 100,500.5Road User Costs (N2) 102,089.3 111,530.3 89,826.6 98,115.0Diversions/Attractions - N1 3,592.6 -8,428.6 3,073.4 -7,456.4Diversions/Attractions - N2 -12,652.8 -22,619.8 -11,459.3 -19,982.0Compensation to Helderzicht 34.4 34.4 34.4 34.4Total 200,901.1 198,770.1 175,147.6 173,583.5Difference in NPVs 2,131.0 1,564.1Benefit Cost Ratios 10.4 12.4 10.8 12.6IRR 47% 55% 48% 56%

Financial Comparison Economic ComparisonOpen Road

TollingUpgrade & NO Tolling

Open Road Tolling

Upgrade & NO Tolling

From an economic perspective the net present value of the open road tolling system is R175.1bn versus the R173.6bn of the open road tolling. It can therefore be


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concluded that the overall economic cost of tolling using ORT is in the order of R1.6bn.

4.2.5 The cost of tolling per vehicle kilometre

In order to put the above results into perspective some calculations were made about the vehicle kilometre cost of tolling. In other words how much more are drivers paying because the roads are tolled? This is reported for both toll plaza collection and ORT. In both cases two sets of results are reported. The first set is for the full cost of tolling. These costs include the changing costs to all drivers. In the absence of tolling more vehicles would be attracted to the roads and off the existing network. This in turn alters the costs and benefits of other people who would have been on the N1 and N2 in any case as well as other drivers on the existing network. The second set of results is just for the cost of toll collection itself without taking into account any changes in road user costs. It was found that:

• For toll collection using toll plazas the cost of tolling is an average 18 cents per vehicle kilometre over the project lifetime if all collection and road user costs are taken into account.

• The actual cost of the tolling infrastructure of toll plazas, concession company costs, etc is an average of 3.5 cents per vehicle kilometre.

• For toll collection using open road tolling the cost of tolling is an average 9 cents per vehicle kilometre over the project lifetime if all collection and road user costs are taken into account.

• The actual cost of the tolling infrastructure of open road tolling, concession company costs, etc is an average of 3 cents per vehicle kilometre.

4.3 Sensitivity analysis

Two sets of sensitivity analysis were conducted on the economic analysis to determine whether the conclusions that are drawn above are significantly influenced by changes in two key assumptions. The first of these assumptions relates to the cost of diverting off the N1 or N2 onto the rest of the road network. The second focuses the potential time spent waiting at a toll plaza.

4.3.1 The cost of diverting

The traffic projections show that vehicles would both divert off the proposed toll roads and, in some cases, be attracted onto the toll roads. What is not known is the additional costs people are prepared to incur simply to avoid using a toll road. The starting assumption for the CBA analysis has been that road users who divert off the road would incur costs 25% more than using the toll road (shown in bold in Figure 33). Similarly road users who now attracted off the network and onto the N1 and N2 toll roads are assumed to have a 25% saving in road user costs.


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Figure 33: Difference in Financial NPV between do nothing and plaza tolling with different diversion costs, Rm 2007 prices

Increased Costs of Diverting

% Change

Savings in Road User

Costs

Difference in NPV

-50% 15,150.8 11,527.40% 18,775.5 15,152.110% 19,500.4 15,877.025% 20,587.8 16,964.450% 22,400.2 18,776.8100% 26,024.8 22,401.4

Figure 33 illustrates the impact on road user costs and the difference in the financial NPV of upgrading and tolling with plazas compared to the do nothing option if the diverted road user costs are different to the initial 25% assumption. If the road user costs of the diverted traffic were the same as those encountered on the toll road (i.e. 0% increase) then the financial NPV of the project would drop from R17.0bn to R15.2bn. If the road user costs of the diverted traffic had to increase by additional 50% over and above those encountered on the toll road then the NPV of the project would increase to R18.8bn. The NPV increases to R22.4bn if the diverted costs are double those encountered on the toll road.

The unlikely case of the diverted costs being 50% less than those encountered on the toll road has also been examined. The financial NPV drops to R11.5bn if the diverted costs are half those of the toll road. The theoretical switching value for increased diversion costs is -209% although in reality a switching value of more than -100% cannot be attained.

The conclusion drawn from this is that the results of the cost benefit analysis remain consistent even for very large changes in the cost of traffic diversion.

4.3.2 Time spent at toll plazas

In the CBA an assumption was made that all road users would, on average, spend 1 minute at any single toll plaza including time taken to slow down and then accelerate. A sensitivity analysis was conducted around this assumption.

Figure 34: Difference in Financial NPV between do nothing and plaza tolling with different waiting periods at toll plazas, Rm 2007 prices

Time Spent at Toll Plaza

Time at Plaza

Savings in Road User

Costs

Difference in NPV

0 min 21,050.2 17,426.81 min 20,587.8 16,964.42 min 20,125.5 16,502.15 min 18,738.4 15,115.020 min 11,802.9 8,179.5

The impact of changing this assumption is illustrated in Figure 34 where the base case of the 1 minute waiting time at plazas is shown in bold. Figure 34 illustrates that the results are not sensitive to the amount of time spent at the toll plazas. The


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financial NPV of the project increases from R17.0bn to R17.4bn if no time were to be spent at the toll plaza (as would be the case with ETC). Conversely, if the toll plazas were to delay the entire traffic stream by 5 minutes then the financial NPV of the project would reduce to R15.1bn, and R8.2bn for a 20 minute waiting time.

The switching value for waiting time at the toll plazas is 37.7minutes. This means that it would be better to choose the do nothing option if the waiting time at plazas had to on average exceed 37.7 minutes.

4.4 Cost benefit analysis summary

The following conclusions are made based on the cost benefit analysis that has been presented above:

• In all configurations of the analysis both the financial and economic analysis indicate that upgrading and tolling the N1 and N2 is both financially and economically positive. In other words the cost increases of upgrading and tolling the roads are less than the cost increases of not upgrading the roads. This follows because the reduction in road user costs is greater than the cost of upgrading the roads.

• The difference between the financial NPV of the do nothing option compared to upgrading and tolling using tradition toll plazas is R17bn. The difference in the economic NPV is R14bn.

• The difference between the financial NPV of the do nothing option compared to upgrading and tolling using open road tolling is R20.9.bn. The difference in the economic NPV is R18.7bn.

• Open road tolling is financially and economically more efficient. The difference in the financial NPV between using plazas and ORT is R3.9bn while the economic NPV is R4.4bn.

• A calculation was made to determine the actual cost of tolling. The starting point of the calculation was to compare the NPVs of the do nothing to upgrading without tolling. This option has a financial NPV of R23bn and an economic NPV of R20.2bn.

• It therefore follows that the financial cost of tolling using toll plazas has an NPV of R6bn and an economic NPV of R5.9bn. The financial cost of ORT has an NPV of R2.1bn and an economic NPV of R1.6bn.






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5 ROAD USER COSTS AND BENEFITS

One of the critical issues in the economic assessment of the proposed project is how tolling the roads would impact on people and business. There are a variety of potential impacts.

• The first is that people would now pay a toll to use sections of the roads.

• The second is that there would be potential cost savings to road users because the increased capacity and surface upgrades reduce vehicle operating costs and accident costs.

• Increased capacity would reduce traffic congestion and therefore reduce travel times on the proposed toll roads and the costs associated with travel.

• Potential for increased journey times if there is congestion at the toll plazas.

• The increased capacity of the proposed toll roads could attract additional traffic to the toll roads. If this occurs there would be less traffic on the rest of the road network generally. This would lead to reduced congestion and lower travel costs for road users and lower road maintenance costs for local authorities.

• There is the potential for the proposed toll roads to cause traffic diversions, particularly in the earlier years. Where this occurs there would be slower travelling times, increased chance of accidents and the costs associated with these changes. If there were substantial heavy vehicle deviation then there would be increased road maintenance costs to local authorities.

The section starts with a brief description of methodology. Second, estimated costs and benefits to individual road users are reported on. This section also includes some discussion on the cost of traffic diversion. Finally, we calculate the costs and benefits for a number of journeys on the proposed toll roads.

5.1 Methodological approach

The approach followed was to determine the current and future road user costs for individual and total vehicle usage for the situation where, first, the roads are not tolled and, second, where the roads are upgraded and tolled. The difference between these two sets of costs, less any toll tariff that would be paid, is the net financial cost or benefit to the road user.

There are a number of factors that complicate estimating the changes in costs:

The tolled and untolled roads would have different carrying capacities and different riding surfaces. The proposed toll roads make provision for initial and ongoing increases in carrying capacity. In turn it has been assumed that the untolled roads would have no capacity increases and sufficient maintenance to keep a reasonable road surface as described in the do-nothing option. In consequence there would be different road user costs for the tolled and untolled roads.

Increased capacity would attract traffic to the upgraded roads where the toll tariff charged determines the degree of attraction. If the toll tariff were raised too high it would repel traffic onto the rest of the road network. The result of attracting or


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repelling traffic affects the riding quality of the road particularly if there are changes in flows of heavy vehicles.

As discussed in the section on study limitations both of the issues above are further complicated by the fact that there are no definitive toll tariffs for the proposed project. (See Section 1.3 for a full discussion of these issues).

There are several computer software programmes available that assist in calculating benefits to road users for alternative road transport projects. One of the most well known software programmes is the Highway Design and Maintenance Standard Model 4 (HDM4) (www.worldbank.org/transport/roads/rd_tools/hdm4.htm). It was developed by the World Bank and is used extensively by traffic engineers in South Africa. The HDM4 computer model takes its starting point as the concept of “pavement life cycle analysis” and is able to generate vehicle operating costs (VOC) and road user costs (RUC) per kilometre of road for various classes of vehicles, road alignments, traffic flows and pavement conditions.

The methodological approach used here follows the logic of the HDM4 software for the calculation of vehicle operating costs and road user charges but does not use HDM4 explicitly. Rather a spreadsheet modelling approach was used to replicate the HDM4 algorithms and output. The main reason for following this approach was because HDM4 is very ‘black-box’ in its presentation and does not have the transparency or flexibility of a spreadsheet model.

5.2 Quantifying vehicle operating costs and road users costs

Technically two different costs are defined in the use of a vehicle. The first are the so-called vehicle operating costs. These are specific to the cost of using a vehicle. Second are road user costs. Road user costs include vehicle operating costs but also include costs of potential accidents and time costs. The methodological approaches to these two costs are discussed below.

5.3 Quantifying vehicle operating costs

Vehicle operating costs (VOC) are direct costs incurred by the owner or driver of a vehicle. Specifically these include fuel, capital, maintenance, tyres and oil. These costs vary according to the type of vehicle that is operated as well as the type of road and terrain covered by the road. In addition to this, the age of the road and the type of traffic the road has been subjected to also affect operating costs. SANRAL supplied the information used in these calculations as an output from the HDM4 software.

Different types of roads in different topographical locations result in different basic VOC and Road User Costs (RUC). The N1 and N2 are made up of different types of road as a result of varying levels of traffic. For instance the N1 and N2 alternate between four and six lane dual carriageways close to Cape Town, while further away the roads are normally two lane bi-directional roads. In hilly and mountainous areas, the road can again change to either a 4 lane bi-directional road (as at Sir Lowry’s Pass) or a 4 lane dual carriageway (as at Houwhoek Pass).

The VOCs for each section of road were treated separately according to the type of road and the data was read from the HDM4 database, which is incorporated into the model. An example of the VOC’s from the database is shown in Figure 35.


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Figure 35: Vehicle Operating Costs per km from HDM4 Database

Vehicle Class DUAL4F VOC DUAL6R VOC PAVED2PR VOC

Class I R2.30 R2.30 R2.30

Class II R6.17 R6.18 R6.84

Class III R8.17 R8.19 R9.79

Class IV R15.48 R15.54 R17.99

For any given road, VOCs are determined by the quality of the road surface. Good road surfaces result in lower vehicle operating costs while bad road surfaces result in higher costs. The quality of the road surface is given by the so-called Present Serviceability Index (PSI) factor. The road quality deteriorates over time due to both vehicle usage and weather damage. Typically new or upgraded roads would have a PSI of 4.0 and a PSI of 2.5 to 2.0 under normal traffic conditions by the end of its design life.

For the purpose of analysis the challenge was to model the PSI of each section of the roads. (Where road sections are consistent with the traffic modelling specifications). This exercise was done because the PSI and carrying capacity vary on different sections of the roads and traffic flows and traffic projections vary from link to link. In addition, there are projected future increases in capacity and upgrades and these also vary from section to section. The final challenge faced was that some defined sections have multiple traffic volumes because there are interchanges within each road section. In consequence the roads were divided into sections and, where necessary, each section was further divided into links where a link is the section of road between interchanges.

VOC and RUC need to be adjusted for different road qualities and congestion values. The quality of the riding surface of the existing road is inferior to that of a newly built or upgraded road. The PSI of a road is calculated from the following formula (CB Roads):

PSI(t) = PSInew – (PSInew – PSIend) x (E80(t) / Design E80)n

Where PSI(t) is the current PSI of the riding surface

PSInew is the PSI of a new or rehabilitated pavement

PSIend is the desired PSI at the end of the road’s design life

E80(t) is the number of equivalent 80kN (8 ton) single axle loads (E80’s) that have used the pavement over a period of time (t).

Design E80 is the number of E80’s for which the pavement has been designed, usually over a period of 20 years.

n is the pavement equivalency exponent, which for tarred roads is 4 and for concrete roads is 6.

The various sections of the existing N1 and N2 currently have PSIs of between 2.6 and 3.9 with most in the 3.2 range. Given the age of the roads on one hand, and the


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current and projected traffic growth, on the other, most sections of the roads are expected to reach a PSI of 2.5 within the next five years and many sections reaching a PSI of 2.5 within 2 years. In consultation with SANRAL, the assumption was made that if the N1 and N2 were not tolled SANRAL would have sufficient funding to maintain these roads at a PSI that would average around 2.5. For the purposes of the proposed toll roads the consulting engineers have detailed estimates about the frequency and scale of upgrades and repair work for each section of the road.

Figure 36 illustrates the points made above for Section 3 of the N1 for the link from the R304 to the R44. Section 3 is the N1 from the R304 Interchange to the Huguenot Tunnel Toll Plaza. The current PSI of this subsection of road is 3.5. Given projected vehicle volumes without tolling the PSI is expected to fall to 2.5 within six years. As part of the proposed tolling strategy there would be two major upgrades to this section of the road and one minor upgrade. These are expected to take place in years three, fifteen and twenty-eight, respectively. In each case the upgrade would return the PSI to a value of 4.0.

Figure 36: Graph of riding surface quality over time for the N1 link R304 to R44

Road Quality versus Time

2.0

2.5

3.0

3.5

4.0

4.5

-5 -3 -1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33Time from Present (Years)

Pre

sent

Ser

vice

Inde

x (P

SI)

Upgraded Road

Existing Road

In the figure above it can be seen that under different rehabilitation actions, different effects occur. Some rehabilitation actions would improve the quality of the riding surface more than others, while some might only slow down the rate of deterioration. The assumed effects of the different rehabilitation actions are given in Figure 37.


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Figure 37: The impact of different rehabilitation actions

Road Widening and Structural RehabIncrease to PSIconstruct 4.0

PSIterminal 2.5Design Life of Road Rehabilitation 20

Design E80 25 millionn = 4

Rehabilitation and Asphalt OverlayIncrease in PSI per Rehab. & Asphalt Overlay 1.1

Increase in Service Life of Road 12 yearsRehabilitation and Single Seal

Increase In PSI per Rehab. & Single Seal 0.25Increase in Service Life of Road 8 years

Asphalt Overlay OnlyIncrease in PSI per Asphalt Overlay 1

Increase in Service Life of Road 10 yearsRejuvenation

Increase in PSI 0.1Increase in Service Life of Road per Rejuvination 5 years

Source: REACT Economic Analysis of Short-Term Rehabilitation Actions

The traffic projections for class 1, 2, 3 and 4 vehicles have been converted into equivalent E80 loads using the factors in Figure 38 (Source TMH4 Table 6). These E80s are then summed and inserted into the PSI formula given above to determine the cumulative effect on the quality of the riding surface.

Figure 38: Equivalent E80 per vehicle type

Equivalent E80's per Vehicle ClassClass I Class II Class III Class IV

0.0 1.2 1.8 3.5

From PSI, we can obtain QI. QI is “the quarter car index and is measured by means of a linear displacement integrator (LDI) which measures and sums the displacements between the rigid axle of a vehicle and the body of the vehicle as the vehicle moves over the road” (Van der Merwe & Grant 1980 as cited in Sabita 1994).

The relationship between QI and PSI is given as (Visser, 1982):

QI = 92.63 – 56.39 x ln(PSI)

And from QI we can obtain frl and frh, where frl is the roughness coefficient for light vehicles and frh for heavy vehicles:

frl = 0.0081 x QI + 0.676 for light vehicles, and

frh = 0.0036 x QI + 0.856 for heavy vehicles

Finally, fr = (1-%HV) x frl + %HV x frh for 2 lane bi-directional roads, or

fr = 0.8 + 0.3 x (1-%HV) x frl + 0.9 x %HV x frh for multi lane roads


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The proportion of heavy vehicles in the daily traffic is given as %HV. There is some debate regarding the accuracy of the second formula for fr, and its impact has been limited by changing the 0.3 factor to 0.2 for light vehicles.

By multiplying the VOC with fr, one can obtain the Vehicle Operating Costs for a particular quality road and for a particular traffic count. The model does this for each link for the before and after upgrading options, i.e. VOCBEFORE and VOCAFTER per link. The VOC’s are unique on each link because of the different proportion of vehicle classes that occur there, the different type of road and the varying quality of the riding surface.

5.4 Quantifying road user costs

Road user costs are the sum of vehicle operating costs, potential costs of accidents and the cost of time. As has been shown above, type of road and terrain as well as the quality of the road surface affect the vehicle operating costs. The HDM4 approach to accident costs is to allow cost changes depending on road and terrain type. Accident costs also increase as a result of increasing traffic congestion. Accident costs are given as a fixed value for road and terrain type and as a variable factor (the so-called fc) for congestion where fc is the congestion factor. Finally, time costs are considered because of the opportunity cost of a journey and are typically measured as earnings foregone.

Accident costs are determined from a SANRAL database, based on accident related statistics. The accident statistics are classified by the number of fatal, serious and light accidents and the damage per 100 million vehicle kilometres for different types of roads. This is done according to the type of intersections encountered on the road (at grade or grade separated) and according to the type of shoulder on the road (paved or unpaved). The length of the road link is multiplied by the appropriate accident statistic to obtain the potential cost of an accident per commuter.

The key issue for changes in road user costs relates to traffic congestion. As congestion increases so too does the probability of an accident and the opportunity cost of the journey. The upgrading and capacity increases of the proposed project would allow these roads to carry more traffic with less congestion than would be the case if the roads are maintained at their current capacity and riding quality. In order to measure these changed road user costs resort was made to HDM4 type methodology for the measurement of the cost of accidents. For measuring the cost of time the traffic engineers supplied predicted speeds for different options for each link on the N1 and N2. Taking the speed saving and applying a cost of time value and vehicle occupancy rate allowed for a value to be placed on the savings in road user costs.

The cost of time and vehicle occupancy rates were based on the road side interviews conducted during 2006 as part of the N1N2 traffic surveys and the 2001 Census (adjusted for economic growth and inflation). The time costs have been divided into working time and non-working time costs for class 1 vehicle owners and working time costs for all other classes. According to K.W. Gwouldiam (1997), as cited in Belli et al (1998), working time only applies to people driving on work-related business and does not include commuting to and from work. The same report suggests that non-working time be taken as one third that of working time. The number of people per car during peak and off peak times is determined from the roadside interviews to produce the total cost of time per vehicle per hour. The traffic engineers have supplied the speed of the different classes of vehicles over the length of the link of road under consideration, which thus determines the time spent per length of road


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link. The cost of time per vehicle per road link is then calculated. The actual values used in the cost of time calculations are given in Figure 39.

Figure 39: Cost of time

Winelands Engen - Joostenbergvlakte RSI (IN & OUT)Cost of Time (Rands/hour) No occups Ave Sal CoT (R/hr) Ave Ann Sal CoT (R/hr)Class I Vehicles, Working Time 1.68 R 13,532 R 86.72 10,692 R 67.59Class I Vehicles, Non-Working Time 1.70 R 5,457 R 35.07 4,312 R 27.33Class II, III & IV Vehicles, Working Time 1.58 R 7,310 R 48.86 5,776 R 37.89Class II, III & IV Vehicles, Non-Working Time 2.84 R 3,021 R 38.59 2,387 R 28.22% of Class I working people in traffic (Peak) 13.4%% of Class II, III & IV working people in traffic (Peak) 92.6%% of Class I working people in traffic (Off-Peak) 26.9%% of Class II, III & IV working people in traffic (Off-Peak) 95.8%% of Class I working people in traffic (AADT) 20.6%% of Class II, III & IV working people in traffic (AADT)) 94.3%

Financial Economic

Congestion also has an impact on the Road User Costs. The capacity of the road would be increased with its upgrading, and the effect of the reduced congestion would magnify the difference in the vehicle operating costs for the before and after upgrading scenarios, as well as the accident costs. At low vehicle flows, there is no magnification, but once the number of vehicles on the road starts exceeding 40% of the road capacity then there is a difference as shown in the formulae below:

If V/C <= 0.4, then fc = 1.00

0.4 < V/C <= 1.00, then fc = (V/C + 0.6) 1.15

V/C > 1.00 then fc = 1.6 1.15

Where: V/C is the number of vehicles as a proportion of the capacity of the road and fc is the multiplication factor for the road user costs.

The final Road User Costs (RUC) are then obtained from

RUC = (Accident Costs x fc + Time Costs + VOC x fr x fc) x length of road

Road User Costs can now be obtained for the before and after upgrading scenarios. The difference in before and after, multiplied by the length of road that the user would be commuting on, should be more than the toll fee charged if the proposal is to be of a benefit to that road user.

It will also be recognised that as traffic congestion varies according to the day and according to the season, allowances need to be made as to how these impact on road user costs. To this end three types of estimates have been made. The first two are for individual vehicles travelling in peak hour traffic and in offpeak traffic. The second is the overall changes in costs and benefits for all road users. In the latter case the estimates are made not for peak and offpeak traffic but rather for average annual daily traffic (AADT) and the capacity of the road to handle the AADT.

The quantification of the change in road user costs follows from the calculations of the road PSI and the vehicle operating cost outlined in the section above. From these calculations we know the vehicle operating costs for the tolled and untolled roads for each link along each road. From the traffic engineers we also know the volume of traffic on each link and vehicle speed (again recognising that volumes and travelling speeds differ according to the tolled and untolled option as well as at low, high and preferred toll tariff).


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Hence the difference in road user benefits are the reduced road user costs as a result of the upgrading of each section and link. Finally, some links have mainline plazas and/or ramp plazas on them and driving on these links involves substantial costs. The overall change in road user costs is therefore the difference between the cost of driving on the untolled road without upgrades and difference in road user costs and benefits of driving on the upgraded and tolled road.

A practical example of this methodological approach is illustrated in Figure 40 and Figure 41. These tables illustrate the VOC and RUC for the section on the N1 between the R304 and the R44. Figure 40 gives the estimated costs and benefits for the N1 without any upgrading while Figure 41 conducts the identical exercise for a road that is upgraded. The most important numbers in these tables are those for “Road User Cost per section of road”. Here a comparison of the numbers on the two tables indicates the cost savings due to upgrading. No toll tariff is removed in these calculations because the proponents preferred location is not on this section. For those sections where a plaza is located the benefits are reduced by that toll.


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Figure 40: Road user costs for the N1 between the R304 to R44 without upgrading

% HeavyRoad Cap

Date Class I Class II Class III Class IV Total Vehicles Per Hour V/C fc Qi fr Basic Mod Basic Mod Basic Mod Basic Mod2007 2,384 110 65 107 2,667 10.6% 4,964 0.54 1.1594 26.96 1.131 2.301 2.602 6.923 7.828 9.729 11.001 17.967 20.3182008 2,822 130 77 127 3,157 10.6% 4,964 0.64 1.2758 30.86 1.141 2.301 2.624 6.923 7.896 9.729 11.096 17.967 20.4942009 3,260 151 89 147 3,646 10.6% 4,964 0.73 1.3936 36.60 1.155 2.301 2.658 6.923 7.996 9.729 11.237 17.967 20.7532010 3,698 171 101 167 4,136 10.6% 4,964 0.83 1.5127 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502011 4,136 191 113 186 4,626 10.6% 4,964 0.93 1.6331 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502012 4,338 201 118 195 4,852 10.6% 4,964 0.98 1.6890 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502013 4,539 210 124 205 5,078 10.6% 4,964 1.02 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502014 4,741 219 129 214 5,303 10.6% 4,964 1.07 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502015 4,943 229 135 223 5,529 10.6% 4,964 1.11 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502016 5,145 238 140 232 5,755 10.6% 4,964 1.16 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502017 5,247 243 143 236 5,869 10.6% 4,964 1.18 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502018 5,350 247 146 241 5,984 10.6% 4,964 1.21 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502019 5,452 252 149 246 6,098 10.6% 4,964 1.23 1.7169 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.950

Vehicle Operating CostsClass IVClass IIIClass IIClass IPeak Hour AM Traffic

Morning and Afternoon Peak Traffic, Per Hour

Cl I Cl II Cl III Cl IV

Fatal Serious Slight Damage Total Class ICls II, III,

IVClass I

WorkingClass I non-

worII, III, IV working

II, III, IV non-wor Individ. Individ. Individ. Individ.

0.05 0.02 0.01 0.05 0.12 99.7 99.7 0.87 0.35 0.49 0.39 27.29 74.06 102.16 184.680.05 0.02 0.01 0.05 0.12 99.4 99.4 0.87 0.35 0.49 0.39 29.94 81.80 112.99 204.590.05 0.02 0.01 0.05 0.12 99.1 99.1 0.88 0.35 0.49 0.39 32.77 90.09 124.59 225.910.05 0.02 0.01 0.05 0.12 98.8 98.8 0.88 0.35 0.49 0.39 35.60 98.36 136.17 247.200.05 0.02 0.01 0.05 0.12 98.5 98.5 0.88 0.36 0.50 0.39 38.18 105.90 146.72 266.580.05 0.02 0.01 0.05 0.12 97.7 97.7 0.89 0.36 0.50 0.39 39.40 109.43 151.64 275.610.05 0.02 0.01 0.05 0.12 96.9 96.9 0.89 0.36 0.50 0.40 40.03 111.20 154.11 280.120.05 0.02 0.01 0.05 0.12 96.1 96.1 0.90 0.36 0.51 0.40 40.05 111.23 154.14 280.150.05 0.02 0.01 0.05 0.12 95.4 95.4 0.91 0.37 0.51 0.40 40.08 111.26 154.17 280.180.05 0.02 0.01 0.05 0.12 94.6 94.6 0.92 0.37 0.52 0.41 40.11 111.29 154.21 280.220.05 0.02 0.01 0.05 0.12 93.3 93.3 0.93 0.38 0.52 0.41 40.15 111.35 154.26 280.270.05 0.02 0.01 0.05 0.12 92.0 92.0 0.94 0.38 0.53 0.42 40.20 111.40 154.31 280.320.05 0.02 0.01 0.05 0.12 90.8 90.8 0.96 0.39 0.54 0.43 40.25 111.46 154.37 280.38

Total accident costs per commuter per day per kmRoad User Costs per Link

Cost of Time (Rands) per kilometreAverage Speed


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Figure 41: Road user costs for the N1 between the R304 to R44 with upgrading

% HeavyRoad Cap

Date Class I Class II Class III Class IV Total Vehicles Per Hour V/C fc Qi fr Basic Modified Basic Modified Basic Modified Basic Modified2007 2,384 110 65 107 2,667 10.6% 4,964 0.54 1.1594 26.96 1.131 2.301 2.602 6.923 7.828 9.729 11.001 17.967 20.3182008 2,822 130 77 127 3,157 10.6% 4,964 0.64 1.2758 30.86 1.141 2.301 2.624 6.923 7.896 9.729 11.096 17.967 20.4942009 3,260 151 89 147 3,646 10.6% 4,964 0.73 1.3936 36.60 1.155 2.301 2.658 6.923 7.996 9.729 11.237 17.967 20.7532010 3,698 171 101 167 4,136 10.6% 4,964 0.83 1.5127 40.96 1.166 2.301 2.683 6.923 8.072 9.729 11.344 17.967 20.9502011 4,185 194 114 189 4,681 10.6% 4,964 0.94 1.6467 20.40 1.114 2.301 2.564 6.923 7.714 9.729 10.840 17.967 20.0212012 4,398 203 120 198 4,919 10.6% 4,964 0.99 1.7057 20.40 1.114 2.301 2.564 6.923 7.714 9.729 10.840 17.967 20.0212013 4,610 213 126 208 5,157 10.6% 4,964 1.04 1.7169 20.41 1.114 2.301 2.564 6.923 7.714 9.729 10.841 17.967 20.0212014 4,823 223 132 217 5,395 10.6% 4,964 1.09 1.7169 20.47 1.114 2.301 2.564 6.923 7.715 9.729 10.842 17.967 20.0242015 5,036 233 137 227 5,633 10.6% 4,964 1.13 1.7169 20.63 1.115 2.301 2.565 6.923 7.718 9.729 10.846 17.967 20.0312016 5,249 243 143 236 5,871 10.6% 4,964 1.18 1.7169 21.01 1.116 2.301 2.567 6.923 7.725 9.729 10.855 17.967 20.0482017 5,377 249 147 242 6,014 10.6% 4,964 1.21 1.7169 21.73 1.118 2.301 2.571 6.923 7.737 9.729 10.873 17.967 20.0812018 5,505 255 150 248 6,158 10.6% 4,964 1.24 1.7169 23.01 1.121 2.301 2.579 6.923 7.759 9.729 10.904 17.967 20.1392019 5,633 260 154 254 6,301 10.6% 4,964 1.27 1.7169 25.13 1.126 2.301 2.591 6.923 7.796 9.729 10.956 17.967 20.234

Peak Hour AM Traffic Class IVVehicle Operating CostsMorning and Afternoon Peak Traffic, Per Hour

Class IIIClass IIClass I

Cl I Cl II Cl III Cl IV

Fatal Serious Slight Damage Total Class IClasses II, III, IV

Class I Working

Class I non-wor

II, III, IV working

II, III, IV non-wor Individ. Individ. Individ. Individ.

0.05 0.02 0.01 0.05 0.12 99.7 99.7 0.87 0.35 0.49 0.39 27.29 74.06 102.16 184.680.05 0.02 0.01 0.05 0.12 99.4 99.4 0.87 0.35 0.49 0.39 29.94 81.80 112.99 204.590.05 0.02 0.01 0.05 0.12 99.1 99.1 0.88 0.35 0.49 0.39 32.77 90.09 124.59 225.910.05 0.02 0.01 0.05 0.12 98.8 98.8 0.88 0.35 0.49 0.39 35.60 98.36 136.17 247.200.05 0.02 0.01 0.05 0.12 98.4 98.4 0.88 0.36 0.50 0.39 36.98 102.25 141.58 257.080.05 0.02 0.01 0.05 0.12 98.7 98.7 0.88 0.36 0.50 0.39 38.18 105.77 146.51 266.140.05 0.02 0.01 0.05 0.12 98.9 98.9 0.88 0.35 0.49 0.39 38.40 106.43 147.44 267.860.05 0.02 0.01 0.05 0.12 99.2 99.2 0.87 0.35 0.49 0.39 38.39 106.43 147.45 267.880.05 0.02 0.01 0.05 0.12 99.5 99.5 0.87 0.35 0.49 0.39 38.40 106.46 147.49 267.970.05 0.02 0.01 0.05 0.12 99.7 99.7 0.87 0.35 0.49 0.39 38.42 106.53 147.60 268.180.05 0.02 0.01 0.05 0.12 99.6 99.6 0.87 0.35 0.49 0.39 38.48 106.70 147.84 268.620.05 0.02 0.01 0.05 0.12 99.6 99.6 0.87 0.35 0.49 0.39 38.58 107.00 148.25 269.380.05 0.02 0.01 0.05 0.12 99.5 99.5 0.87 0.35 0.49 0.39 38.74 107.49 148.93 270.64

Total accident costs per commuter per day per kmRoad User Costs per section of road (i.e. N

Cost of Time (Rands) per kilometreAverage Speed


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5.5 Quantify the cost of traffic diversions and attractions

While there are clear benefits to the road network as a whole there are also potential costs in the form of traffic diversions or potential savings in the form of traffic attraction onto the toll road. At first sight it may seem to be contradictory that there can be increases in network speed and traffic diversion. The reason that both can exist is that (the traffic models show) heavy vehicles are more likely to divert off the tolled roads and light vehicles are attracted onto the roads. If sufficient light vehicles are attracted then network speed would increase while heavy vehicles are still diverting. Figure 42 lists the daily diversion (attraction) volumes for the links on the N1 and N2, the percentage of the traffic stream affected, the estimated E80s of the diversions and the estimated E80kms.

There are clear costs of heavy vehicle diversion of which the most important is the impact on the riding quality of the secondary roads. Other costs like increased noise, pollution and accidents are likely to be localised and, if the network speed increases, lower pollution, noise, etc elsewhere on the network would offset these. The impact on the riding quality of the secondary roads is important because it is heavy vehicles that cause the most damage to a road surface. Someone would have to pay for the increased maintenance – at the moment that would be the province and local authorities. Conversely though, if the toll roads were to attract traffic, including heavy vehicles, off the rest of the network then there would be subsequent savings to the provincial and municipal authorities.

An accurate estimation of the costs of traffic diversion to the province and local authorities was beyond the resources and scope of this study. In reality, the road network is designed to various carrying capacities, all of which are at different stages of their design life. In addition, the carrying capacity of a road is not linear across time. In other words the closer a road is to the end of its design life the more it feels the effect of increased traffic. As a further complication, different roads would be affected differently by the impact of traffic diversion. What this means is that an accurate measurement of the cost of diversion would have to be conducted road by road, link by link, year by year.

A more high level analysis was conducted in order to determine the indicative magnitude of the impact of traffic diversion on the province and local authorities of the N1 and N2. The starting point in the methodology was to estimate the total E80km diversion (or attraction) for the N1 and N2. The first step in the calculation is to determine traffic diversion on each link of the roads by using traffic projections supplied by the traffic engineers. These traffic diversions are converted to E80s by vehicle class as per the assumptions in Figure 38. E80s were converted to E80km by treating the length of diversion as 25% longer than the link length. All E80kms were summed to determine total E80km diversion. Finally a monetary value was attached to this E80km diversion. The approach followed here to determine the annual cost of road diversion was to apply a cost of 27c per E80km and the net present value of this annual stream was calculated (at a real discount rate of 8%). The cost of 27c per E80km is based on previous work done on other roads, and escalated according to changes in the Building Producer Price Index.

The advantage of such an approach is that it was manageable in the time available and the results are indicative of potential costs. The approach does however have some potential flaws. First, the length of diversion is probably understated because the


52

diversion is probably significantly longer than the link that is being diverted from. Second, the actual impact of diversion would depend on how the diversions take place. If these are spread over the entire road network, on the one hand, there would be hardly any noticeable impact on pavement surfaces. If, on the other hand, all the diversions are centred on a few roads, then the impact would be very noticeable.

Recognising the limitations of the approach adopted in this section, the estimated cost to local authorities and the province of possible traffic diversion is reported in each of the cost benefit analysis tables. In those cases where traffic (including all forms of heavy vehicles) are attracted onto the toll road the cost of diversion is reported as a saving to the local authorities.

On the basis of these calculations the indicative potential cost to the province and local authorities of potential road damage could range between a cumulative cost over the contract period of between R180m and R555m for the N1, while cumulative savings to the network due to the construction of the N2 could range between R265m and R393m. The cumulative cost increase for the N1 has a net present value of between R42m and R132m, which would need to be offset against the net present value of savings for the N2 of between R53m and R71m.


53

Figure 42: Traffic diversions and attractions

Diversions in 2011Section of RoadDurban Rd to Old Oak -30,949 29.5% 846,211 2,140,913Old Oak to R300 -18,778 24.6% 721,718 916,582R300 to Brackenfell -11,388 12.0% 571,545 743,009Brackenfell to Okavango -13,891 13.9% 670,175 951,648Okavango to M15 Kraaifontein / Brighton 2,107 2.6% -120,086 -282,201Kraaifontein to Joostenbergvlakte 11,213 13.6% -703,643 -1,407,286Joostenbervlakte I/C 6,270 9.0% -498,382 -199,353Joostenbergvlakte to R304 I/C 11,604 14.9% -699,972 -3,716,850R304 I/C to R44 I/C -512 0.9% 41,874 319,916R44 I/C to R45 I/C -922 3.9% 82,596 708,677R45 I/C to R301 I/C -731 3.2% 90,313 275,454R301 I/C to Dal Josafat I/C 322 2.2% -51,239 -175,751Dal Josafat I/C -72 0.5% 11,703 5,851Dal Josafat to Plaza 388 2.5% -65,226 -39,135Plaza to Tunnel W Portal 388 2.5% -117,974 -135,670Tunnel W Portal to E Portal 388 2.5% -176,343 -1,606,488Tunnel E Portal to Florence 902 5.3% -152,455 -1,959,052Florence to R101 Rawsonville 912 5.8% -168,513 -3,051,765R101 Rawsonville to R43 Ceres 919 5.8% -187,914 -187,914R43 Ceres to R43 Worcester 915 5.4% -212,676 -370,056R43 Worcester to Karoo Gardens 395 2.5% -93,253 -192,100Karoo Gardens to W East (R60) 441 3.7% -104,227 -237,639W East (R60) to Glen Heatlie 301 4.2% -83,711 -519,847Glen Heatlie to Sandhills / Orchard 319 4.2% -92,081 -1,237,566Borchard's Quarry (M22) to R300 I/C -2,572 3.3% 86,575 415,558R300 I/C to M44 I/C (Mew Way) 17,278 20.9% -537,417 -1,451,025M44 I/C (Mew Way) to M32 (Spine Road) 24,621 37.4% -676,768 -2,165,657M32 (Spine Road) to R310 (Baden Powell) 30,562 49.5% -900,434 -3,061,477R310 to Macassar 10,446 18.9% -301,041 -1,806,245Macassar to De Beers I/C (Broadway - R44) 9,217 12.6% -252,544 -1,113,719De Beers I/C (R44) to Van Riebeeck Rd (R102) -14,278 22.2% 413,482 -330,243Firlands to Bottom of Sir Lowry's Pass -1,530 4.6% 78,391 -1,093,096Bottom to Top of Sir Lowry's Pass -1,530 5.0% 79,655 396,681Top of Sir Lowry's Pass to Grabouw West -1,523 5.3% 80,521 445,281Grabouw West to Grabouw East -1,584 5.7% 84,849 195,153Grabouw East to Viljoenshoop Road -956 4.0% 51,690 139,562Viljoenshoop Road to Kromco 938 3.1% -51,346 -260,839Kromco to Houwhoek 938 3.4% -51,346 -375,853Houwhoek to Bot River West 975 3.5% -54,508 -333,047Bot River West to Bot River Central 327 2.1% -18,314 -21,977Bot River Central Interchange 324 3.2% -18,506 -18,506Bot River Central to Bot River East 280 2.1% -16,009 -6,404Bot River West to R43 Link 564 6.1% -32,240 -70,283New N2 Van Riebeeck Rd (R102) to Victoria Street -78,700 N/A 3,617,101 3,255,391New N2 Victoria Street to Firlands I/C -33,276 N/A 1,606,130 16,382,523New N2 Firlands I/C -29,517 N/A 1,487,717 595,087

Diversions / (Attractions)

% of traffic

Estimated E80s

Estimated E80 kms


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5.6 Individual road user costs and benefits

This section reports on the estimated changes in road user costs for individual journeys for some journeys on the N1 and N2.

Road user costs on the N1 for journeys from:

• De Doorns / Touws River to Cape Town and to Worcester.

• Worcester to Cape Town

• Paarl to Cape Town

• Kraaifontein to Cape Town

Road user costs on the N2 for journeys from:

• Bot River to Cape Town, to Somerset West and to Grabouw

• Grabouw to Somerset West and to Cape Town

• Somerset West to Cape Town

The changes in road user costs are given for the four different vehicle classes annually for the years 2011 to 2016 and then at five year intervals after that. In addition, and largely because of the lack of certainty about toll tariffs, the changes in road user charges are given for the middle and high toll tariffs for morning peak hour traffic and off peak traffic for the toll tariffs as given in Figure 1. The intention in reporting these various permutations is to test the upper limit of possible changes in road user costs. In addition we also report on ORT based on the middle toll tariff expressed as a charge per kilometre. No local or frequent user discounts have been applied to the toll tariffs.

It will be shown that, apart from a few important exceptions, many users of the proposed toll roads would have positive road user benefits at the middle and high toll tariffs. Simply put this means that road user benefits would be greater by driving on the upgraded toll road than on the existing road. This is due in earlier years to rapid deterioration in the existing road PSI as the roads near the end of their design life and in latter years due to increased congestion and slower travelling times should the roads not be upgraded with capacity increases.

There are a number of key exceptions to these general conclusions.


• The second, and more important, exception is that some road users would have increased costs in travelling on the tolled roads relative to travelling on the untolled roads. There are three specific cases. On the N1 these are for journeys between De Doorns/Touws River and Cape Town. This is felt most acutely for the section between De Doorns/Touws River and Worcester. On the N2 these


55

are for journeys between Grabouw and Somerset West at the high tariff during peak hour traffic and at both medium and high tolls during off peak times.

It would also be shown that, given the exceptions above, the road user benefits accrue more than proportionately to heavy vehicles rather than light vehicles. As the class of vehicle increases so too does the increased benefit. In this case we find the improved riding quality results in more than proportionate savings in vehicle operating costs for heavy vehicles.

5.6.1 Road user costs on the N1

5.6.1.1 De Doorns/Touws River to Cape Town

The first of the detailed cases shown is for vehicles travelling between the De Doorns/Touws River area and Cape Town. In morning peak hour traffic at the middle toll tariff light vehicles would have increased costs of R9.58 cents a journey in 2011, as illustrated in Figure 43. By 2021 these costs would have decreased to R1.11 per journey and by 2026 this cost would have turned into a benefit of R1.88. The change from cost to benefit is due to increased capacity on the road, as well as the deteriorating surface of the untolled and un-upgraded road. By 2040 light vehicles would have cost savings of R31.47 per journey between an upgraded and tolled N1 compared with an untolled N1 with a PSI of 2.5 and no capacity increases. In latter years the major difference in the tolled and untolled options is traffic congestion and longer trip times.

Benefits to heavy vehicles are more pronounced for the middle toll tariff. In 2011 class 2 vehicles would have expected savings of R26.19 per trip, class 3 R66.74 per trip and class 4 of over R150. These remain relatively constant until 2016 and then increase to R125.00, R203.46, and R386.83 respectively by 2040.

Figure 43: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Cape Town, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 -9.58 26.19 66.74 150.58 -26.18 -45.38 -18.84 38.86 -5.22 35.61 78.67 169.572012 -9.80 24.94 65.04 146.68 -26.29 -46.28 -20.03 35.89 -4.89 35.95 79.19 169.772013 -9.45 25.29 65.54 146.80 -26.03 -46.21 -19.90 35.32 -5.35 33.94 76.40 163.842014 -9.09 25.47 65.72 146.35 -25.81 -46.36 -20.15 34.04 -5.30 33.22 75.32 161.072015 -8.56 25.97 66.31 146.59 -25.34 -45.99 -19.74 33.93 -4.61 34.13 76.43 162.312016 -8.00 26.40 66.73 146.44 -24.86 -45.75 -19.55 33.34 -3.93 34.88 77.28 162.972021 -1.11 48.23 102.38 206.32 -19.40 -27.77 10.93 83.57 3.64 58.39 115.03 226.952026 1.88 55.06 111.75 222.13 -15.57 -18.50 23.66 105.73 7.51 67.69 127.77 249.112031 15.41 88.95 154.46 303.85 -1.72 16.46 68.01 190.30 21.37 102.12 170.98 331.942036 24.00 109.01 181.95 351.04 7.28 37.55 96.89 239.99 30.17 122.55 198.91 379.862040 31.47 125.00 203.46 386.83 15.46 55.45 121.03 280.59 38.10 139.85 222.31 418.94

High Toll Tariff Open Road TollingN1 AM Peak

Middle Toll Tariff

For the high toll tariff light vehicles do not have benefits from the toll road at peak times, i.e. the toll tariff outweighs any benefits that they might experience from the upgraded road. Class 2 and class 3 vehicles have increased costs until 2026 and 2016 respectively, while class 4 vehicles only experience benefits. The costs/benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R26.18, -R45.38, -R18.84 and R38.86 respectively. These change to R15.46, R55.45, R121.03 and R280.59 by 2040.


56

The open road tolling system is very similar to the middle toll tariff, with the costs being slightly less and the benefits slightly higher. Once again during peak hour the costs outweigh the benefits until 2021 for class 1 vehicles, while heavy vehicles only experience benefits. In 2006 class 1 vehicles experience increased costs of R5.22, while class 2, class 3 and class 4 vehicles experience benefits of R35.61, R78.67 and R169.57 respectively. By 2040 all vehicles have benefits. These are R38.10, R139.85, R222.31 and R418.94 respectively.

For this journey the maximum toll tariff that can be charged in 2011 without class 1 vehicle users incurring an overall cost during the morning peak hour is R27.42.

At off peak times the benefits are greater because of the relatively lower road congestion and higher vehicle travelling speeds between the upgraded and un-upgraded roads. This is illustrated in Figure 44. There are significant capacity increases proposed for 2020 that would result in substantial increases in road user benefits from 2021 onwards.

For off peak travelling times, class 1, 2, 3 & 4 vehicles experience benefits of R5.06, R66.78, R122.67 and R254.44 in 2011 respectively. These increase to R57.58, R208.50, R321.18 and R614.33 by 2040.

For the higher toll tariff, class 1 vehicles experience increased costs until 2016, while class 2 vehicles experience increased costs in 2011 only. For all other years and for class 3 & 4 vehicles only benefits are experienced.

Figure 44: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Cape Town, Off peak (Rands 2007 values).

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 5.06 66.78 122.67 254.44 -11.15 -3.56 38.83 146.01 10.17 77.20 135.64 275.822012 6.58 70.89 128.49 264.87 -9.69 0.40 44.47 156.09 11.56 80.97 141.02 285.452013 8.31 75.55 135.07 276.73 -7.97 5.06 51.05 167.94 13.02 84.96 146.71 295.652014 10.25 80.80 142.43 290.06 -6.00 10.42 58.56 181.55 14.52 89.09 152.58 306.202015 12.14 85.88 149.53 302.92 -3.98 15.86 66.17 195.34 16.14 93.49 158.81 317.412016 13.77 90.19 155.59 313.82 -2.13 20.82 73.12 207.90 17.74 97.81 164.91 328.392021 30.73 139.12 227.68 442.55 15.12 70.51 146.26 338.56 35.28 148.45 239.51 461.602026 37.86 158.38 254.61 491.46 23.06 92.00 176.16 393.09 43.81 171.98 272.44 521.632031 52.18 195.77 303.65 583.72 36.17 126.67 221.99 479.04 57.35 206.79 317.59 607.042036 56.45 206.44 318.30 609.92 40.40 137.19 236.41 504.87 61.02 215.73 329.82 628.832040 57.58 208.50 321.18 614.33 41.80 140.03 240.34 511.25 62.30 218.23 333.29 634.34

High Toll Tariff Open Road TollingN1 Off Peak

Middle Toll Tariff

The open road tolling situation results in benefits for all years under examination, with the magnitude slightly higher than the middle toll tariff plaza option.

5.6.1.2 Worcester to Cape Town

The second of the detailed cases shown is for vehicles travelling between Worcester and Cape Town and is indicated in Figure 45 and Figure 46.

In morning peak hour traffic at the middle toll tariff light vehicles would have increased benefits of R3.19 per journey in 2011. By 2040 these benefits have increased to R43.48 per journey. In latter years the major difference in the tolled and untolled options is


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traffic congestion and longer trip times. Benefits to heavy vehicles are more pronounced. In 2011 class 2 vehicles would have expected savings of R47.15 per trip, class 3 R89.76 per trip and class 4 of over R174. These increase to R145.47, R223.31 and R406.82 respectively by 2040.

For the high toll tariff light vehicles do not experience a benefit from the toll road at peak times until 2026. Class 2 vehicles experience increased costs until 2016, while class 3 and 4 vehicles only experience benefits. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R6.42, -R11.31, R19.92 and R83.37 respectively. These change to R34.41, R88.91, R156.45 and R321.25 by 2040.

Figure 45: Costs and Benefits to vehicles travelling from Worcester to Cape Town, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 3.19 47.15 89.76 174.09 -6.42 -11.31 19.92 83.37 -0.35 42.18 84.91 171.522012 2.97 45.90 88.06 170.19 -6.52 -12.20 18.73 80.39 -0.03 42.52 85.44 171.712013 3.32 46.24 88.56 170.31 -6.27 -12.13 18.86 79.82 -0.49 40.51 82.64 165.792014 3.68 46.43 88.74 169.87 -6.04 -12.28 18.62 78.55 -0.43 39.79 81.56 163.022015 4.21 46.94 89.34 170.11 -5.57 -11.91 19.03 78.45 0.26 40.71 82.68 164.272016 4.77 47.37 89.76 169.98 -5.08 -11.66 19.23 77.87 0.94 41.46 83.54 164.942021 10.48 67.61 120.79 223.58 -0.80 4.73 45.08 121.83 7.33 63.38 116.66 222.662026 13.49 74.47 130.19 239.47 3.03 14.03 57.85 144.05 11.20 72.70 129.43 244.862031 27.01 108.33 172.86 321.12 16.87 48.96 102.16 228.56 25.06 107.11 172.61 327.642036 35.65 128.53 200.54 368.65 25.92 70.16 131.19 278.55 33.88 127.60 200.61 375.702040 43.48 145.47 223.31 406.82 34.41 88.91 156.45 321.25 41.99 145.36 224.62 415.94

Open Road TollingHigh Toll TariffN1 AM Peak

Middle Toll Tariff

For the open road tolling option light vehicles do not experience a benefit from the toll road at peak times until 2015. Class 2, 3 & 4 vehicles experience only benefits. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R0.35, R42.18, R84.91 and R171.52 respectively. These change to R41.99, R145.36, R224.62 and R415.94 by 2040. The reason why the open road tolling benefits are lower than the middle toll tariff benefits is that road users would pay for the full section of toll road from Worcester to Cape Town under the open road tolling strategy, whereas under the plaza tolling strategy they would only pay for the section of toll road from Florence to Old Oak and would effectively be using the section from Worcester to Florence for free.

Figure 46: Costs and Benefits to vehicles travelling from Worcester to Cape Town, Offpeak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 17.93 87.73 145.68 277.94 8.71 30.51 77.59 190.51 14.96 83.77 141.89 277.782012 19.45 91.84 151.50 288.38 10.17 34.47 83.22 200.58 16.35 87.55 147.27 287.402013 21.17 96.51 158.08 300.24 11.89 39.13 89.80 212.44 17.81 91.54 152.95 297.602014 23.12 101.76 165.44 313.56 13.87 44.49 97.32 226.05 19.31 95.67 158.83 308.152015 25.01 106.84 172.55 326.43 15.88 49.93 104.93 239.85 20.92 100.07 165.06 319.382016 26.64 111.16 178.62 337.36 17.74 54.90 111.89 252.43 22.53 104.39 171.17 330.372021 42.42 158.49 246.08 459.80 33.81 103.00 180.40 376.81 38.89 153.45 241.14 457.312026 49.37 177.27 272.31 507.47 41.57 124.00 209.61 430.09 47.24 176.48 273.36 516.062031 62.61 211.75 317.26 592.34 53.60 155.77 251.35 508.65 59.70 208.39 314.44 594.112036 65.02 217.40 324.83 605.78 55.96 161.25 258.66 521.67 61.48 212.23 319.48 602.922040 64.96 216.27 323.13 602.02 56.13 160.78 257.87 519.62 61.40 211.05 317.73 599.05

Open Road TollingN1 Off Peak

High Toll TariffMiddle Toll Tariff


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On the whole benefits are greater at off peak times because of the relatively lower road congestion and higher travelling speeds. This can be seen in Figure 46. For the middle toll tariff the benefit to class 1 vehicles is R17.93 per journey in 2011. By 2040 the benefits are R64.96 per journey. For class 2 vehicles the benefits increase from R87.73 in 2011 to R216.27 in 2040, class 3 vehicles increase from R145.68 to R323.13 and class 4 vehicles from R277.94 to R602.02. For the higher toll tariff all classes of vehicles experience only benefits. The open road tolling situation results in benefits for all years under examination, with the magnitude smaller than for the middle toll tariff option for the same reason as explained for the peak time journey.

5.6.1.3 Paarl to Cape Town

The third of the detailed cases is for vehicles travelling between Paarl and Cape Town. Once again it is found that the expected road user benefits would be positive for all vehicle classes under the middle toll tariff option.

In morning peak hour traffic at the middle toll tariff light vehicles would have increased benefits of R2.45 per journey in 2011. By 2040 these benefits have increased to R17.21 per journey. In latter years the major difference in the tolled and untolled options is traffic congestion and longer trip times. Benefits to heavy vehicles are more pronounced. In 2011 class 2 vehicles would have expected savings of R37.52 per trip, class 3 R70.20 per trip and class 4 of over R128. These increase to R65.44, R105.17 and R181.03 respectively by 2040.

For the high toll tariff light vehicles do not experience a benefit from the toll road at peak times until 2021. Class 2, 3 and 4 vehicles only experience benefits. The costs/benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R0.16, R33.42, R65.59 and R124.61 respectively. These change to R15.06, R63.03, R103.25 and R181.87 by 2040.

Figure 47: Costs and Benefits to vehicles travelling from Paarl to Cape Town, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 2.45 37.52 70.20 128.36 -0.16 33.42 65.59 124.61 1.50 37.39 71.15 133.502012 1.73 34.87 66.53 120.88 -0.76 31.15 62.45 118.09 1.33 36.35 69.72 130.162013 1.55 33.71 64.89 117.11 -1.04 29.70 60.43 113.61 0.33 32.81 64.77 120.292014 1.38 32.36 62.91 112.71 -1.35 28.01 58.00 108.34 -0.16 30.52 61.46 113.452015 1.45 31.59 61.68 109.65 -1.34 27.06 56.55 104.84 0.04 30.06 60.63 111.152016 1.78 31.36 61.15 107.81 -1.15 26.51 55.60 102.20 0.37 29.84 60.09 109.312021 5.77 46.68 85.10 148.63 1.37 37.87 74.25 133.12 5.04 46.83 86.17 154.272026 7.60 50.13 89.45 155.59 4.10 43.95 82.18 146.86 7.85 53.08 94.30 168.362031 18.00 75.36 120.11 215.20 14.78 70.13 114.34 209.04 18.57 78.80 125.39 228.942036 16.95 69.08 110.99 195.25 14.17 64.96 106.71 191.82 17.55 72.39 116.02 208.462040 17.21 65.44 105.17 181.03 15.06 63.03 103.25 181.87 17.86 68.87 110.45 194.48


Middle Toll Tariff

For the open road tolling option all vehicles experience benefits for all the years, apart from a brief cost to class 1 vehicles in 2014. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are R1.50, R37.39, R71.15 and R133.50 respectively. These change to R17.86, R68.87, R110.45 and R194.48 by 2040.


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On the whole benefits are more at off peak times because of the relatively larger differences in road congestion and vehicle travelling speeds. This can be seen in Figure 48, where all the vehicle classes experience only benefits for all toll system options. For the middle toll tariff the benefit to class 1 vehicles is R8.90 per journey in 2011. By 2040 the benefits are R19.88 per journey. For class 2 vehicles the benefits increase from R55.07 in 2011 to R85.40 in 2040, class 3 vehicles increase from R93.62 to R135.23 and class 4 vehicles from R173.04 to R247.42.

Figure 48: Costs and Benefits to vehicles travelling from Paarl to Cape Town, Off peak (Rands 2007 values)



Middle Toll Tariff

For the higher toll tariff, the benefits for class 1, 2, 3 & 4 vehicles in 2011 are R6.68, R52.21, R90.75 and R172.56 respectively. These change to R17.77, R83.36, R133.91 and R249.49 by 2040.

The open road tolling situation results in benefits for all years under examination and the benefits are comparable in magnitude to the middle toll tariff.

5.6.1.4 Kraaifontein to Cape Town

The fourth of the detailed cases on the N1 is for vehicles travelling between Kraaifontein and Cape Town. It is found that the expected road user benefits would be positive from the beginning of the project for all vehicle classes under all the tolling options, apart from a brief cost under the open road tolling option in 2012 for class 1 vehicles. The benefits under the open road tolling option are less than under both the middle and high toll tariff options. The reason for this is that under the toll plaza system commuters from Kraaifontein going to the CBD would not pass through a toll plaza, whereas for the open road tolling system they would probably pass several gantries.

In morning peak light vehicles, at the middle toll tariff, would have increased road user benefits of just under R4.10 per journey in 2011. By 2040 these benefits would have increased to R9.10 per journey. As before benefits to heavy vehicles are more pronounced. In 2011 class 2 vehicles would have expected savings of R22.09 per trip, class 3 R38.53 per trip and class 4 of over R63. These decrease to R17.77, R23.55 and R34.26 by 2040.

The benefits for the high toll tariff option are slightly higher than for the middle toll tariff option. The reason is due to the less traffic from north-east of the Joostenbergvlakte


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Mainline plaza (higher diversions because of the higher toll tariff) which means that the congestion on the tolled road for the high toll tariff is slightly less than for the middle toll tariff option, resulting in lower vehicle operating costs and higher speeds.

Figure 49: Costs and Benefits to vehicles travelling from Kraaifontein to Cape Town, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 4.10 22.09 38.53 63.37 4.58 23.22 40.00 66.06 0.02 14.64 29.69 52.212012 4.14 21.57 37.70 61.38 4.53 22.48 38.88 63.51 -0.02 13.93 28.61 49.772013 4.31 21.35 37.24 60.05 4.60 22.01 38.08 61.56 0.03 13.39 27.73 47.652014 4.81 21.92 37.81 60.62 4.88 22.00 37.90 60.71 0.36 13.55 27.75 47.192015 5.36 22.55 38.44 61.24 5.44 22.64 38.53 61.32 0.92 14.18 28.39 47.812016 5.99 23.25 39.14 61.91 6.06 23.34 39.23 62.00 1.55 14.90 29.10 48.512021 5.84 18.05 27.97 44.49 5.89 18.12 28.05 44.60 1.59 10.27 18.75 32.642026 6.74 18.29 27.71 42.67 6.75 18.31 27.73 42.72 2.29 10.08 17.90 29.822031 6.98 15.66 21.66 33.00 7.29 16.52 22.85 35.14 3.38 9.85 15.19 26.312036 8.00 16.79 22.76 34.01 8.07 16.88 22.86 34.12 3.54 8.42 12.71 20.632040 9.10 17.77 23.55 34.26 9.24 17.99 23.82 34.64 4.78 9.68 13.87 21.49

Open Road TollingHigh Toll TariffN1 AM Peak

Middle Toll Tariff

For the open road tolling option light vehicles generally experience a benefit from the toll road at peak times except for 2012 when they incur an overall cost of R0.02. Class 2, 3 & 4 vehicles experience only benefits. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are R0.02, R14.64, R29.69 and R52.21 respectively. These change to R4.78, R9.68, R13.87 and R21.49 by 2040.

Figure 50: Costs and Benefits to vehicles travelling from Kraaifontein to Cape Town, Off peak (Rands 2007 values)


Open Road TollingHigh Toll TariffN1 Off Peak

Middle Toll Tariff

On the whole benefits are slightly higher at off peak. Here the benefit to class 1 vehicles is R5.94 per journey in 2011 and R5.93 in 2040. For the heavy vehicle classes 2, 3 and 4 the benefits decrease between 2011 and 2040 but all remain positive. Similar trends can be observed for the high toll tariff option and for the open road tolling option. For the open road tolling option the benefits for class 1, 2, 3 & 4 vehicles in 2011 are R3.52, R24.12, R42.36 and R76.57 respectively. This changes to R2.16, R10.88, R18.14 and R34.68 by 2040.


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5.6.1.5 De Doorns to Worcester

The final of the detailed case studies on the N1 is for vehicles travelling between De Doorns/Touws River and Worcester. Although Touws River is further away from Cape Town and outside of the concession area the benefits / costs to commuters from Touws River would be the same as for commuters from De Doorns. They would travel on the same length of upgraded road as commuters from De Doorns. The road user costs and benefits for peak and off peak are presented in Figure 51 and Figure 52 respectively.

For the middle toll tariff option, class 1 vehicles would have increased trip costs of R14.30 per trip in 2011. Class 2 would have increased costs of R23.76, class 3 R26.48 and class 4 R29.27. The results in Figure 51 assumed that all road users pay the full toll tariff and no local user or frequent user discount has been applied. By 2040 there would be road user costs equal to R13.34, R22.77, R22.64 and R24.60 respectively for each of the classes.

For the high toll tariff option, class 1 vehicles would have increased trip costs of R21.29 per trip in 2011. Class 2 would have increased costs of R36.88, class 3 R42.22 and class 4 R50.37. Once again the results in Figure 51 assumed that all road users pay the full toll tariff and no local user or frequent user discount has been applied. By 2040 there would be road user costs equal to R20.34, R35.89, R38.39 and R45.60 respectively for each of the classes.

Figure 51: 20 Costs and Benefits to vehicles travelling from De Doorns/Touws River to Worcester, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172012 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172013 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172014 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172015 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172016 -14.30 -23.76 -26.48 -29.37 -21.29 -36.88 -42.22 -50.37 -3.85 -4.59 -3.97 -0.172021 -13.34 -22.77 -22.64 -24.60 -20.34 -35.89 -38.39 -45.60 -2.89 -3.60 -0.13 4.602026 -13.34 -22.77 -22.64 -24.60 -20.34 -35.89 -38.39 -45.60 -2.89 -3.60 -0.13 4.602031 -13.34 -22.77 -22.64 -24.60 -20.34 -35.89 -38.39 -45.60 -2.89 -3.60 -0.13 4.602036 -13.34 -22.77 -22.64 -24.60 -20.34 -35.89 -38.39 -45.60 -2.89 -3.60 -0.13 4.602040 -13.34 -22.77 -22.64 -24.60 -20.34 -35.89 -38.39 -45.60 -2.89 -3.60 -0.13 4.60

Open Road TollingN1 AM Peak


The option with the lowest costs to users on this section of road is the open road tolling option. The reason for this is that users only pay for the section of road that they use, whereas for the toll plaza system users are paying a tariff for upgrading the road between Worcester and Florence. For the open road tolling option, class 1, 2, 3 & 4 users experience increased costs of R3.85, R4.59, R3.97 and R0.17. It is possible that with local user and frequent user discounts that these road users would experience benefits on this section of road under ORT.

In off peak traffic the road user costs start at generally the same levels as with morning peak hour but then decrease from about 2021 onwards as additional capacity is added to the road. All classes of vehicles still experience costs though, with only class 4 vehicles experiencing a benefit of R7.70 in 2040 under the middle toll tariff option. It is


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possible, however, that under the middle toll tariff local and frequent users would experience benefits if they had to receive discounts.

Figure 52: Costs and Benefits to vehicles travelling from De Doorns/Touws River to Worcester, Offpeak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172012 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172013 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172014 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172015 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172016 -14.39 -23.75 -26.47 -29.37 -21.39 -36.87 -42.22 -50.36 -3.77 -4.60 -3.97 -0.172021 -13.44 -22.76 -22.64 -24.59 -20.44 -35.88 -38.38 -45.59 -2.81 -3.61 -0.14 4.602026 -13.25 -22.24 -21.91 -23.27 -20.24 -35.36 -37.65 -44.27 -2.62 -3.09 0.59 5.922031 -12.18 -19.36 -17.85 -15.96 -19.18 -32.48 -33.60 -36.95 -1.55 -0.21 4.65 13.242036 -10.27 -14.21 -10.59 -2.84 -17.26 -27.33 -26.33 -23.83 0.36 4.95 11.91 26.362040 -8.73 -10.07 -4.75 7.70 -15.72 -23.18 -20.50 -13.30 1.90 9.09 17.75 36.89



Once again the open road tolling system incurs the least costs on road users, with all vehicles experiencing benefits towards the latter years. These benefits could be experienced at an earlier date if local and frequent user discounts were applied,


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5.6.2 Road user costs on the N2

5.6.2.1 Hermanus to Cape Town

The first of the detailed cases for the N2 is for vehicles travelling between Hermanus and Cape Town. (Again as with Touws River on the N1 only the concession part of the journey is considered and the trip from Bot River to Hermanus is excluded from the calculations). On the whole vehicles travelling between Hermanus and Cape Town would have increased road user benefits. The peak and off peak benefits for this case are presented in Figure 53 and Figure 54.

In morning peak light vehicles at the middle toll tariff would have increased benefits of R24.92 a journey in 2011. By 2021 these benefits have increased to R40.16 per journey and by 2040 light vehicles would have cost savings of R58.94 per journey between an upgraded and tolled N2 compared to the do nothing option. In latter years the major difference in the tolled and untolled options is traffic congestion and longer trip times. Reduced congestion is evident from the outset where some sections of road are widened and in Somerset West where the N2 is built to relieve congestion on the T2. The reduction in congestion would be greater in the latter years because of the proposed capacity increases.

Benefits to heavy vehicles are more pronounced. At the medium toll tariff in 2011 class 2 vehicles would have expected savings of R88.00 per trip, class 3 R134.94 per trip and class 4 R283.04. These increase to R122.16, R178.50 and R354.76 respectively by 2021 and R161.14, R227.41 and R426.44 by 2040.

Figure 53: Costs and Benefits to vehicles travelling from Hermanus to Cape Town, Morning Peak (Rands 2007 values)



Middle Toll Tariff

The benefits for class 1, 2, 3 & 4 vehicles for the high toll tariff at peak times in 2011 are R10.55, R63.95, R107.38 and R253.50 respectively. These increase to R46.88, R143.80, R208.75 and R413.99 by 2040.

The open road tolling system has benefits which are similar to the middle toll tariff for all classes of vehicles. In 2011 class 1 vehicles experience benefits of R24.03, while class 2, class 3 and class 4 vehicles experience benefits of R83.81, R127.86 and R266.17


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respectively. By 2040 these benefits would have increased to R56.48, R157.10, R222.41 and R418.38 for class 1, 2, 3 & 4 vehicles respectively.

At off peak the benefits in the earlier years are more pronounced and all vehicles experience benefits at all toll tariffs and under all tolling systems. At the middle toll tariff class 1, 2, 3 & 4 vehicles experience benefits of R37.51, R121.83, R184.22 and R370.72 in 2011. These benefits increase slightly over time and by 2040 are R44.66, R127.11, R184.19 and R358.87 for the various classes of vehicles. For the high toll tariff the benefits in 2011 for class 1, 2, 3 and 4 vehicles are R23.79, R102.32, R163.41 and R355.51. These benefits change to R36.73, R123.49, R185.08 and R383.34 by 2040.

Figure 54: Costs and Benefits to vehicles travelling from Hermanus to Cape Town, Off peak (Rands 2007 values)



Middle Toll Tariff

As for the peak hour journeys, the off peak open road tolling system benefits are generally similar to the middle toll tariff option. In 2011 the benefits for class 1, 2, 3 and 4 vehicles are R35.67, R113.55, R171.66 and R342.93 respectively. These change to R35.24, R97.54, R142.60 and R277.31 in 2040.

Major benefits would occur in the region of Somerset West if the N2 was constructed as a freeway through Somerset West, relieving traffic on the existing T2. The existing T2 is a 4-lane dual carriageway, with the proposed N2 also being a 4-lane dual carriageway. The new section of N2 would relieve the congestion on the T2. To illustrate, the traffic engineer’s projected speeds on some of the links on the T2 are in the order of about 50kph in 2006 and vary from 15 to 45 kph in 2040 if no upgrading or tolling occurs. With tolling and upgrading, the speeds on the T2 are in the order of 15 to 20kph higher than the no upgrading option. For the new portion of the N2 constructed through Somerset West the projected traffic speeds are in the order of 100kph for all tolled traffic flows for all tolls, resulting in a significant timesaving.

5.6.2.2 Hermanus to Somerset West

The second of the detailed cases for the N2 is for vehicles travelling between Hermanus and Somerset West. It is found that the expected road user benefits would be positive for all vehicles for middle toll tariffs and for the open road tolling system at both morning peak and off peak. The high toll at peak would cause increased road users costs for light vehicle classes in the early years of the proposed project, while heavy vehicles would


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only experience benefits. All vehicle classes would only experience benefits at off peak travel times under the high toll tariff option.

In morning peak hour traffic at the middle toll tariff light vehicles would have increased road user benefits of R2.40 per journey in 2011. By 2021 these benefits have increased to R6.47 per journey and by 2040 light vehicles would have cost savings of R23.23 per journey between an upgraded and tolled N2 compared with an untolled N2.

Benefits to heavy vehicles are somewhat more pronounced. In 2011 class 2 vehicles would have expected savings of R26.94 per trip, class 3 R52.17 per trip and class 4 of over R125. These benefits increase to R83.30, R130.14 and R264.58 respectively by 2040.

Figure 55: Costs and Benefits to vehicles travelling from Hermanus to Somerset West, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 2.40 26.94 52.17 125.25 -11.15 2.08 22.61 86.92 10.10 40.84 68.22 144.652012 2.89 28.37 54.21 128.96 -10.57 3.80 25.06 91.45 10.71 42.59 70.72 149.202013 3.44 29.93 56.43 132.99 -10.04 5.38 27.29 95.58 11.27 44.20 73.01 153.362014 4.18 32.09 59.51 138.60 -9.36 7.39 30.16 100.85 12.03 46.38 76.11 159.022015 4.66 33.42 61.41 142.02 -8.94 8.58 31.87 103.92 12.51 47.73 78.04 162.482016 5.05 34.47 62.91 144.67 -8.55 9.62 33.34 106.52 12.90 48.80 79.56 165.182021 6.47 38.30 68.31 154.28 -6.86 14.40 40.06 118.75 14.57 53.49 86.17 177.192026 14.21 59.61 98.01 208.16 0.72 35.12 68.94 171.00 22.04 73.82 114.51 228.362031 18.07 69.98 112.44 234.02 5.20 47.70 86.46 203.00 25.99 84.54 129.43 255.182036 21.50 78.99 124.60 255.33 8.72 57.05 99.09 225.25 29.29 93.08 140.94 275.212040 23.23 83.30 130.14 264.58 10.38 61.12 104.30 233.84 30.90 97.01 145.95 283.43



For the high toll tariff at peak times light vehicles do not experience a benefit from the toll road until 2026, i.e. the toll tariff outweighs any benefits that they might experience from the upgraded roads. All classes of heavy vehicles only experience benefits. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R11.15, R2.08, R22.61 and R86.92 respectively. These change to R10.38, R61.12, R104.30 and R233.84 by 2040. No local or frequent user discounts have been applied to the toll tariffs.

The open road tolling system has the most benefits for the road user and all classes of vehicles experience only benefits. In 2011 class 1 vehicles experience benefits of R10.10, while class 2, class 3 and class 4 vehicles experience benefits of R40.84, R68.22 and R144.65 respectively. By 2040 these benefits would have increased to R30.90, R97.01, R145.95 and R283.43 for class 1, 2, 3 & 4 vehicles respectively.

On the whole benefits are higher in the earlier years at off peak because of the relatively smaller differences in road congestion and vehicle travelling speeds, but then become less in the later years. All forms of vehicles, however, only experience benefits for all toll tariffs and for all toll operating systems. At the middle toll tariff in 2011 class 1, 2, 3 and 4 vehicles experience benefits of R21.51, R76.46, R121.06 and R246.78 respectively. These benefits drop to R10.66, R36.52, R61.46 and R124.64 in 2040. For the high toll tariff the benefits in 2011 for class 1, 2, 3 and 4 vehicles is R11.07, R62.53, R106.67 and R238.63. These benefits change to R4.54, R34.64, R63.74 and R146.74 by 2040.


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Figure 56: Costs and Benefits to vehicles travelling from Hermanus to Somerset West, Offpeak (Rands 2007 values)




As for the peak hour journeys, the off peak open road tolling system benefits are generally higher than for the middle and high toll tariff options. In 2011 the benefits for class 1, 2, 3 and 4 vehicles are R28.98, R89.35, R135.74 and R263.57 respectively. These change to R12.46, R32.57, R52.89 and R98.10 by 2040.

5.6.2.3 Bot River / Hermanus to Grabouw

The third section examined along the N2 is for vehicles travelling between Bot River and Grabouw, including vehicles travelling between Hermanus and Grabouw. It is found that the expected road user benefits would be positive for all vehicles for middle toll tariffs and for the open road tolling system at both morning peak and offpeak times. The high toll at peak time would cause increased road users costs for light vehicle classes in the early years of the proposed project, while heavy vehicles would only experience benefits (apart from class 2 vehicles in the AM peak hour in 2011). All vehicle classes would only experience benefits at offpeak travel times under the high toll tariff option.

In morning peak hour traffic at the middle toll tariff light vehicles would have increased road user benefits of R1.47 per journey in 2011. By 2021 these benefits have increased to R6.46 per journey and by 2040 light vehicles would have cost savings of R13.86 per journey between an upgraded and tolled N2 compared with an untolled N2.

The benefits to heavy vehicles are somewhat more pronounced. In 2011 class 2 vehicles would have expected savings of R12.99 per trip, class 3 of R25.99 per trip and class 4 of R62.17. These benefits increase to R47.08, R73.84 and R148.48 respectively by 2040.

For the high toll tariff at peak times light vehicles do not experience a benefit from the toll road until 2026, i.e. the toll tariff outweighs any benefits that they might experience from the upgraded roads. All classes of heavy vehicles experience benefits, apart from class 2 vehicles in 2011. The costs/benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R5.53, -R0.13, R10.25 and R41.17 respectively. These change to R7.73, R37.05, R62.39 and R136.03 by 2040.


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Figure 57: Costs and Benefits to vehicles travelling from Hermanus to Grabouw, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 1.47 12.99 25.99 62.17 -5.53 -0.13 10.25 41.17 2.35 14.87 27.97 64.352012 2.07 14.75 28.49 66.76 -4.93 1.63 12.74 45.77 2.95 16.63 30.47 68.942013 2.71 16.63 31.16 71.69 -4.29 3.51 15.42 50.70 3.59 18.51 33.14 73.872014 3.54 19.09 34.65 78.12 -3.46 5.97 18.91 57.14 4.42 20.97 36.63 80.312015 4.10 20.72 36.96 82.37 -2.90 7.60 21.23 61.40 4.98 22.60 38.95 84.562016 4.57 22.06 38.88 85.85 -2.42 8.95 23.14 64.89 5.46 23.94 40.86 88.042021 6.46 27.34 46.30 99.37 -0.54 14.21 30.56 78.37 7.34 29.22 48.29 101.552026 9.59 35.84 58.22 120.88 2.59 22.73 42.48 99.91 10.38 37.40 59.74 122.162031 12.37 43.56 69.00 140.46 5.88 32.22 55.73 124.41 13.13 45.00 70.36 141.422036 13.31 45.83 72.14 145.73 7.10 35.50 60.27 132.46 14.04 47.18 73.38 146.442040 13.86 47.08 73.84 148.48 7.73 37.05 62.39 136.03 14.56 48.36 74.98 148.98


Middle Toll Tariff

For the open road tolling system in 2011 class 1 vehicles experience benefits of R2.35, while class 2, class 3 and class 4 vehicles experience benefits of R14.87, R27.97 and R64.35 respectively. By 2040 these benefits would have increased to R14.56, R48.36, R74.98 and R148.98 for class 1, 2, 3 & 4 vehicles respectively.

Figure 58: Costs and Benefits to vehicles travelling from Hermanus to Grabouw, Off peak (Rands 2007 values)


Open Road TollingHigh Toll TariffN2 Off Peak

Middle Toll Tariff

On the whole benefits in the early years are higher at off peak times because of the lower road congestion and higher vehicle travelling speeds. All vehicles experience benefits for all toll tariffs and for all toll operating systems. At the middle toll tariff in 2011 class 1, 2, 3 and 4 vehicles experience benefits of R16.13, R52.14, R80.43 and R159.29 respectively. These benefits drop to R10.59, R32.08, R50.21 and R96.36 in 2040. For the high toll tariff the benefits in 2011 for class 1, 2, 3 and 4 vehicles is R10.87, R45.16, R73.23 and R155.31. These benefits change to R9.10, R35.96, R58.06 and R120.03 by 2040. The off peak open road tolling system benefits in 2011 for class 1, 2, 3 and 4 vehicles are R16.85, R53.20, R81.31 and R159.35 respectively. These change to R6.06, R17.05, R28.82 and R54.41 in 2040.

5.6.2.4 Grabouw to Somerset West

It is proposed that that the section of road from the top of Sir Lowry’s Pass to Grabouw would be upgraded from 2 lanes to 4 lanes. Savings are therefore experienced in the


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form of reduced congestion, accidents, vehicle operating costs and travelling speed. What is of particular relevance to this section of road is the savings in accident costs. The cost of an accident after upgrading is half that of an accident before upgrading. This is due to the increased number of lanes of the road and the separation of intersections from “at grade” to “grade separated”. However the toll tariff for road users exiting at Somerset West is the same as for road users by-passing Somerset West on the N2, although the former do not experience the full benefits of the new N2. This high toll tariff results in road users experiencing overall increased costs despite the high benefits between Grabouw and Somerset West.

In the morning peak light vehicles at the middle toll tariff would have increased road user costs of R2.37 per journey in 2011. By 2021 these costs would have increased to R3.26 per journey, but thereafter benefits are experience because of upgrades to the road and by 2040 light vehicles would have cost savings of R4.04 per journey between an upgraded and tolled N2 compared with an untolled N2. At the middle tariff all heavy vehicles travelling between Grabouw and Somerset West at peak times would experience increases in road user benefits from 2011. At the high tariff class 1 vehicles only experience costs, while class 2 and 3 vehicles alternate between experiencing benefits and costs. Class 4 vehicles only experience benefits under the high toll tariff option.

For the open road tolling in 2011 class 1 vehicles experience benefits of R5.85, while class 2, class 3 and class 4 vehicles experience benefits of R20.39, R31.69 and R63.86 respectively. By 2040 these benefits would have increased to R12.41, R37.64, R54.86 and R104.57 for classes 1, 2, 3 & 4 respectively.

For the high toll tariff at peak times light vehicles do not experience a benefit from the toll road, i.e. the toll tariff outweighs any benefits that they might experience from the upgraded road. Class 2 vehicles experience costs until 2021 and class 3 vehicles benefits between 2011 and 2013, costs from 2014 to 2021 and then benefits again from 2026 onwards. Class 4 vehicles only experience benefits. The costs/benefits for class 1, 2, 3 & 4 vehicles in 2011 are –R8.91, -R5.99, R0.66 and R25.12 respectively. These costs / benefits change to –R2.68, R10.44, R22.65 and R63.74 by 2040.

Figure 59: Costs and Benefits to vehicles travelling from Grabouw to Somerset West, Morning Peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 -2.37 5.75 14.46 42.45 -8.91 -5.99 0.66 25.12 5.85 20.39 31.69 63.862012 -2.47 5.43 14.02 41.57 -8.93 -6.02 0.61 25.04 5.87 20.39 31.70 63.822013 -2.57 5.10 13.56 40.67 -9.05 -6.33 0.17 24.24 5.79 20.11 31.31 63.042014 -2.65 4.81 13.15 39.84 -9.20 -6.78 -0.46 23.07 5.71 19.84 30.92 62.272015 -2.73 4.51 12.74 39.01 -9.33 -7.21 -1.07 21.88 5.63 19.56 30.53 61.482016 -2.82 4.21 12.32 38.18 -9.42 -7.53 -1.51 20.99 5.55 19.28 30.14 60.702021 -3.26 2.84 10.40 34.46 -9.59 -7.94 -2.10 19.92 5.36 18.78 29.43 59.382026 0.27 12.72 24.10 59.51 -6.23 1.34 10.77 43.32 8.70 28.00 42.22 82.632031 1.00 14.48 26.51 63.58 -5.37 3.54 13.79 48.60 9.57 30.22 45.28 87.982036 2.94 19.73 33.47 75.95 -3.62 8.12 19.82 59.13 11.39 35.09 51.71 99.322040 4.04 22.59 37.04 82.04 -2.68 10.44 22.65 63.74 12.41 37.64 54.86 104.57


Middle Toll Tariff

On the whole benefits are higher off peak in the earlier years, because of the relatively smaller differences in road congestion and vehicle travelling speeds, but then reduce in


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the later years. At the middle toll tariff in 2011 class 1, 2, 3 and 4 vehicles experience benefits of R0.13, R10.94, R21.68 and R53.94 respectively. These benefits become costs for classes 1 – 3 of –R3.82, -R4.88, -R1.80 by 2040 with class 4 having a benefit of R5.97. For the high toll tariff the benefits for class 1, 2, 3 and 4 vehicles is –R5.11, R3.80, R14.24 and R49.31 in 2011. These benefits reduce to -R8.77, -R11.54, -R8.59 and R2.18 by 2040. The off peak open road tolling system gives benefits for all road users. The benefits in 2011 for class 1, 2, 3 and 4 vehicles are R8.22, R25.20, R38.38 and R74.40 respectively. These change to R3.64, R8.08, R13.16 and R23.76 in 2040.

Figure 60: Costs and Benefits to vehicles travelling from Grabouw to Somerset West, Off peak (Rands 2007 values)

Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 4 Cl 1 Cl 2 Cl 3 Cl 42011 0.13 10.94 21.68 53.94 -5.11 3.80 14.24 49.31 8.22 25.20 38.38 74.402012 0.02 10.44 20.93 52.35 -4.90 4.24 14.80 50.19 8.14 24.79 37.76 73.052013 -0.20 9.62 19.71 49.90 -4.79 4.38 14.92 50.22 7.95 24.06 36.67 70.852014 -0.40 8.81 18.51 47.46 -4.68 4.52 15.04 50.26 7.77 23.34 35.59 68.652015 -0.60 8.01 17.31 45.01 -4.55 4.68 15.18 50.32 7.60 22.63 34.51 66.452016 -0.79 7.21 16.11 42.56 -4.60 4.34 14.62 49.08 7.44 21.93 33.44 64.242021 -1.28 5.12 12.89 35.88 -4.83 3.00 12.44 44.37 7.52 21.66 32.76 62.462026 -2.28 1.18 7.11 24.10 -5.95 -1.33 6.09 31.50 5.79 15.40 23.75 44.462031 -2.73 -0.75 4.21 18.10 -6.50 -3.58 2.74 24.61 4.99 12.36 19.33 35.552036 -3.34 -3.06 0.86 11.36 -7.77 -8.00 -3.54 12.19 3.97 9.06 14.63 26.472040 -3.82 -4.88 -1.80 5.97 -8.77 -11.54 -8.59 2.18 3.64 8.08 13.16 23.76


Middle Toll Tariff

5.6.2.5 Grabouw to Cape Town

Vehicles travelling between Grabouw and Cape Town would have positive increases in road user benefits for all vehicle classes for all years (in the permutations that were tested). In general the highest road user benefits are to be found under the open road tolling option for vehicles travelling in the morning peak time. These benefits are slightly less at off peak.

In morning peak light vehicles at the middle toll tariff would have increased road user benefits of R20.11 per journey in 2011. By 2021 these benefits have increased to R30.37 per journey and by 2040 light vehicles would have cost savings of R39.69 per journey between an upgraded and tolled N2 compared with an untolled N2. Benefits to heavy vehicles are somewhat more pronounced. In 2011 class 2 vehicles would have expected savings of R66.67 per trip, class 3 R97.04 per trip and class 4 R199.88. These benefits increase to R100.24, R134.05 and R243.41 respectively by 2040.

All road users experience benefits for all years under the high toll tariff option. The benefits for class 1, 2, 3 & 4 vehicles in 2011 are R12734, R55.74, R85.23 and R191.34 respectively. These benefits increase to R33.76, R92.94, R126.85 and R243.41 by 2040.

The open road tolling system has the most benefits for the road user and all classes of vehicles experience only benefits. In 2011 class 1 vehicles experience benefits of R25.79, while class 2, class 3 and class 4 vehicles experience benefits of R78.50, R111.39 and R222.69 respectively. By 2040 these benefits would have increased to R41.54, R102.52, R136.12 and R243.96 for class 1, 2, 3 & 4 vehicles respectively.


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Figure 61: Costs and Benefits to vehicles travelling from Grabouw to Cape Town, Morning Peak (Rands 2007 values)


N2 AM Peak

High Toll Tariff Open Road TollingMiddle Toll Tariff

On the whole benefits are lower at off peak because of the relatively smaller differences in road congestion and vehicle travelling speeds. All forms of vehicles experience benefits for all toll tariffs and for all toll operating systems. At the middle toll tariff in 2011 class 1, 2, 3 and 4 vehicles experience benefits of R16.08, R56.17, R84.65 and R177.53 respectively. These benefits increase to R30.12, R85.52, R120.67 and R239.73 in 2040. For the high toll tariff the benefits in 2011 for class 1, 2, 3 and 4 vehicles are R7.56, R43.46, R70.79 and R165.84. These benefits increase to R23.35, R77.12, R112.49 and R238.31 by 2040.

Figure 62: Costs and Benefits to vehicles travelling from Grabouw to Cape Town, Offpeak (Rands 2007 values)


High Toll TariffN2 Off Peak

Open Road TollingMiddle Toll Tariff

The open road tolling system results in benefits for all road users at off peak times. The benefits in 2011 for class 1, 2, 3 and 4 vehicles are R20.34, R63.48, R92.93 and R188.73 respectively. These increase to R31.75, R86.38, R120.40 and R235.47 in 2040.

5.6.2.6 Somerset West to Cape Town

The final journey tested on the N2 was the trip between Somerset West and Cape Town. Road users travelling between Somerset West and Cape Town would experience positive increases in road user benefits for all vehicle classes for all years.


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In general we find that the higher road user benefits are to be found for the open road tolling option and that the benefits were similar for both the peak and off peak periods. For example, there is an estimated R9.63 road user benefit for light vehicles in 2011 under the open road tolling option. This reduces slightly to R9.56 for vehicles travelling during off peak. Under the middle and high toll tariff options the light vehicle benefit at peak hour in 2011 is R8.18 and R7.24 respectively, while at off peak these benefits are R5.19 and R1.79.

Figure 63: Costs and Benefits to vehicles travelling from Somerset West to Cape Town, Morning Peak hour, Middle toll tariff (Rands 2007 values)




In 2040 a class 1 vehicle would experience benefits to the value of R17.80 during the morning peak hour under the open road tolling system. The same benefit increases to R25.39 for the off peak journey. Under the middle toll tariff option, the class 1 road user benefits increase from R17.85 during the AM peak to R21.07 for the off peak journey in 2040. Under the high toll tariff option, the class 1 road user benefits increase from R16.62 during the AM peak to R18.07 for the off peak journey in 2040.

Figure 64: Costs and Benefits to vehicles travelling from Somerset West to Cape Town, Offpeak traffic (Rands 2007 values)



Middle Toll Tariff


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6 MICROECONOMIC IMPACTS

The previous section has demonstrated that in many cases there are more benefits to road users than there are costs in the proposed project. Hence the general conclusion that can be drawn is that proposed tolling is good for private motorists, business vehicles and public transport. However, there are a number of potential microeconomic impacts that should be explored. These include impacts on individual drivers and their capacity to pay; impact on jobs and wages; impacts on the cost of consumer goods; impacts on business generally and impacts on specific business.

6.1 Impact on road users and capacity to pay

While it has been shown that the proposed project would have positive economic impacts in general, at least two arguments can be made against some of the general conclusions that have been drawn.

First, it can be argued that, for some people, there would not be an obvious saving in vehicle operating costs in the early years of the toll road. It is recognised that savings in some vehicle costs would be obvious and apparent – fuel costs, time costs and lower accident rates, for example. Other costs, however, are far less discrete over time and tend to be lump sum costs after a period of time – tyre costs, suspension and steering repairs, etc. Hence the immediate and obvious saving in vehicle operating costs would be for fuel, time and, where relevant, accident costs. Other costs would accumulate in the future. Hence while the above section shows road user benefits in each year the reality is that the savings would only be realised some years into the future. Therefore for cash flow purposes there would be less road user benefits in the early years of the tolled roads, as these benefits would accumulate into the future. The perception and reality would be that some drivers who currently do and would continue to use the road on a regular basis could be vulnerable to the proposed tolling.

Second, less affluent owners of private vehicles or those who are cash constrained may face road user costs that are different to those used in the general calculations. In particular, less affluent people would have lower time costs than others. In addition such people may choose to repair their vehicles themselves or may choose simply not to repair their vehicles at all. Hence, for example, minor accident damage may simply be left and not repaired. Mechanical repairs may be more rudimentary or make use of second hand or salvaged parts.

In order to explore these issues an analysis was made of the composition of traffic currently using the N1 and N2. This was done by analysing the six sets of roadside interviews that were conducted during 2006. On the N1 these were at Sandhills, Rawsonville and Joostenberg. On the N2 the interviews were conducted at Grabouw, at Orchards and at Macassar. A total of 11,900 interviews were conducted.

The starting point is to describe the composition of the traffic using the road side interviews. This is followed by an analysis of three categories of road users who may be vulnerable. These are the less affluent private vehicle owners, commercial vehicles from depressed industries and people who use motorised public transport.


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6.1.1 The Composition of traffic on the N1 and N2

An illustration of the composition of traffic and purpose of journey on the N1/N2 is given below in Figure 66, Figure 67 and Figure 68. An examination of these reveals some clear indicators about the composition of traffic of these roads. In the road side interviews drivers were asked how many times they make the journey “in this direction”. It has been assumed for the purpose of this analysis that drivers also return on the same road. Therefore if a driver declared that they use the road once a week “in this direction” we have analysed this as twice a week.

Figure 65 illustrates the frequency that people drive on the road. Forty four percent of drivers interviewed declared road use of less than twenty times a month, twenty five percent made between twenty and forty journeys, thirty percent made between forty and sixty monthly journeys and two percent made more than sixty monthly journeys.

• Some more detail about trip frequency is shown in Figure 66. Sandhills, at nine percent, has the highest proportion of people making more than sixty trips a month. This is followed at two percent by Joostenberg and Grabouw. At Rawsonville one percent of people make more than sixty journeys a month. At Orchards forty three percent of people make between forty and sixty journeys a month and thirty seven percent at Macassar. The implication of this is that there are some people in the more rural sections of both the N1 and N2 who make frequent use of the roads. On the other hand there are also many people in these rural sections who make infrequent use of the road. At Rawsonville and Grabouw, for example, fifty three percent of people use the roads less than twenty times a month. At Sandhills this is forty five percent and thirty eight percent at Orchards.

• Figure 67 illustrates the purpose of people’s journey. Work commuters are the single largest group of travellers accounting for forty five percent of all journeys. Travelling on employers business is the second highest at twenty three percent. Travelling for personal business accounted for twelve percent of the traffic.

• The description of traffic is taken somewhat further by Figure 68 which is a combination of Figure 65 and Figure 67. This shows trip purpose by trip frequency. While the results are similar to the previous two figures what this shows is that of those people making between forty and sixty monthly trips, work commuters are the largest portion, followed by business travellers, people going home (excluding commuters) and people giving others a lift. The more infrequent journeys are those for the purposes of recreation, visiting friends, personal business and shopping.


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Figure 65: Frequency of trip on N1/N2

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

<20 20-40 40-60 >60

Frequency of trips on N1/N2

Figure 66: Frequency of trip at various locations

Frequency of monthly trips

Number of monthly trips<20 20-40 40-60 >60

Sandhills 45% 26% 20% 9%Rawsonville 53% 25% 21% 1%Joostenberg 38% 32% 28% 2%Grabouw 53% 20% 25% 2%Orchards 38% 19% 43% 0%Macassar 41% 22% 37% 0%Total 44% 25% 30% 2%


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Figure 67: Purpose of trip on the N1/N2

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Home

Employers business

Workplace

School/collage

Shopping

Personal Business

Visit friends

Recreation

Purpose of trip on N1/N2

Figure 68: Trip frequency and trip purpose on the N1/N2

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Home

Employers business

Workplace

School/collage

Shopping

Personal Business

Visit friends

Recreation

Giving a lift.

Monthly trip frequency and purpose

<2020-4040-60>60


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6.1.2 Private road users

This section explores the degree to which private road users might be financially vulnerable to the proposed project. This was analysed by determining the number of less affluent vehicle owners who use the roads on a regular basis.

The detailed approach takes as its starting point the description of road users given in the section above. From this an analysis was then conducted on trip frequency for certain trip purposes and vehicle classes. Finally, conclusions are made by bringing together the analysis of trip frequency and declared income in an attempt to determine the degree of vulnerability to tolling.

Figure 69 reports on the purpose of a trip by vehicle class. It is clear that the predominant purpose of a journey for vehicle classes 2, 3 and 4 is for travelling to the work place and for employers business. The same is largely true for class 1 vehicles with forty four percent being work commuters and twenty one percent travelling on employers business.

There are some minor but not substantial variations in trip purpose across the six interview stations. These results are given in Figure 70 and Figure 71.

Figure 69. Vehicle class and trip purpose

Proportion of vehicles by purpose of trip and vehicle class

All road side interviewsVehicle class

Trip purpose 1 2 3 4Home 1% 1% 0% 0%Employers business 21% 38% 43% 41%Workplace 44% 59% 53% 57%School/collage 2% 1% 0% 0%Shopping 3% 0% 0% 0%Personal Business 13% 1% 1% 1%Visit friends 8% 0% 1% 0%Recreation 7% 0% 2% 0%Giving a lift. 1% 1% 0% 0%


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Figure 70: Vehicle class and trip purpose on the N1


SandhillsVehicle class


RawsonvilleVehicle class


JoostenbergVehicle class



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Figure 71: Vehicle class and trip purpose on the N2


GrabouwVehicle class


OrchardsVehicle class


MacassarVehicle class



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Figure 73 and Figure 74 report on the purpose of a trip by the declared income of the driver. Figure 73 does this exercise for all vehicle classes while Figure 74 is for drivers of class 1 vehicles only. The logic of the exercise was to determine driver income generally. However as drivers of heavy vehicles (class 2-4) are more likely to be employees rather than self employed, the major personal burden in the early years of tolling would be borne by drivers of light vehicles. As is illustrated in Figure 72 little difference was found between incomes of drivers of all vehicle classes and incomes of the light vehicles. As could be expected drivers of class 1 vehicles tend to have incomes that are slightly higher than in other classes. In consequence commentary is given for light vehicles only.

Figure 72: Percentage of drivers by income category

0% 5% 10% 15% 20% 25%

<R1,000

R1 000-R3 000

R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000

>R28 000

Refusal

Don't know

Percentage of drivers by income category

Class 1All vehicles

The biggest category (24%) of class 1 vehicle drivers have monthly incomes of between R6,000 and R11,000. Eighteen percent have monthly incomes of between R11,000 and R17,000 and twenty three percent have incomes in excess of R17,000. On the other side of the scale sixteen percent have monthly incomes of less than R6,000. (Note that 21% of respondents did not or could not answer the question).

There is some variation in these figures if the interviews are disaggregated by trip purpose (Figure 73 and Figure 74). Here school and collage trips tend to have income that are slightly lower than average (as could be expected). The same is true of those people who are giving lifts (we speculate that some of this would be the lifting of school children) and, surprisingly, work commuters. On the other side of the scale those travelling for the purpose of recreation have incomes that are higher than average as do those who are travelling ‘home’.


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Figure 73: Trip purpose and driver income, all vehicle classes

Proportion of vehicles by purpose of trip and driver incomeAll vehicle classesAll road side interviews

Income

Trip purpose <R1,000R1 000-R3 000

R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total

Home 1% 4% 6% 16% 19% 19% 3% 9% 19% 5% 100%Employers business 0% 2% 10% 23% 21% 17% 5% 3% 16% 4% 100%Workplace 1% 5% 17% 29% 16% 8% 4% 4% 14% 3% 100%School/collage 7% 10% 11% 12% 10% 11% 5% 2% 18% 16% 100%Shopping 1% 4% 11% 20% 19% 11% 6% 4% 18% 5% 100%Personal Business 1% 3% 8% 20% 16% 12% 8% 5% 21% 6% 100%Visit friends 2% 3% 10% 22% 17% 10% 7% 7% 17% 5% 100%Recreation 1% 2% 5% 12% 15% 14% 14% 13% 16% 7% 100%Giving a lift. 3% 8% 11% 18% 14% 14% 4% 4% 17% 8% 100%Overall 1% 4% 12% 24% 17% 11% 6% 4% 16% 4% 100%

Figure 74: Trip purpose and driver income, vehicle class 1

Proportion of vehicles by purpose of trip and driver incomeClass 1 vehicles onlyAll road side interviews

Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total

Home 1% 4% 6% 16% 19% 18% 3% 9% 19% 5% 100%Employers business 0% 2% 7% 19% 24% 19% 6% 3% 15% 4% 100%Workplace 1% 5% 16% 27% 17% 9% 4% 4% 14% 4% 100%School/collage 7% 9% 11% 12% 10% 11% 5% 2% 18% 16% 100%Shopping 1% 4% 11% 20% 19% 11% 6% 4% 19% 5% 100%Personal Business 1% 3% 8% 20% 16% 12% 8% 5% 21% 6% 100%Visit friends 2% 3% 10% 22% 17% 10% 7% 7% 17% 5% 100%Recreation 1% 2% 5% 12% 15% 14% 14% 13% 16% 7% 100%Giving a lift. 3% 8% 11% 18% 14% 14% 4% 4% 17% 8% 100%Overall 1% 4% 11% 22% 18% 12% 6% 5% 16% 5% 100%

These generalised results have variations at the different places where the road side interviews were conducted where these do, to some extent, reflect the socio economic circumstances of those communities.

Figure 75 reports on this for the N1. At Sandhills there is a downward skew with those who are travelling home, shopping and giving a lift. We suspect these are largely residents of the area. On the other hand those travelling for the purposes of recreation and visiting friends tend to have higher than average incomes. We suspect that this is largely through traffic. At Rawsonville and Joostenberg there appears to be little discernable differences between to the general trends for all class 1 vehicles.


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Figure 75: N1 Trip purpose and driver income, class 1 vehicles

Proportion of vehicles by purpose of trip and driver income - N1

Class 1 vehicles onlySandhills Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total

Home 14% 0% 14% 29% 0% 0% 0% 0% 14% 29% 100%Employers business 0% 4% 16% 16% 20% 9% 9% 4% 20% 3% 100%Workplace 3% 4% 18% 25% 11% 8% 3% 2% 22% 4% 100%School/collage 4% 9% 13% 13% 9% 0% 4% 4% 35% 9% 100%Shopping 0% 13% 8% 8% 0% 0% 4% 0% 54% 13% 100%Personal Business 6% 2% 8% 15% 10% 9% 8% 1% 32% 9% 100%Visit friends 0% 2% 0% 25% 19% 17% 6% 4% 19% 8% 100%Recreation 0% 0% 4% 19% 19% 19% 13% 9% 15% 2% 100%Giving a lift. 22% 0% 22% 11% 0% 0% 0% 0% 22% 22% 100%

Class 1 vehicles onlyRawsonville Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total


Class 1 vehicles onlyJoostenberg Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total



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Figure 76: N2 Trip purpose and driver income, class 1 vehicles

Proportion of vehicles by purpose of trip and driver income - N2

Class 1 vehicles onlyGrabouw Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total


Class 1 vehicles onlyOrchards Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total


Class 1 vehicles onlyMacassar Income


R3 000-R6 000

R6 000-R11 000

R11 000-R17 000

R17 000-R23 000

R23 000-R28 000 >R28 000 Refusal

Don't know Total


Figure 76 is the N2 equivalent of Figure 75. There are a few significant differences between traffic at specific sections on this road than on the N1 N2 totals. At Grabouw school/collage drivers have incomes well below their other counterparts while those giving lifts tend to have higher incomes than their other counterparts. At Orchards, drivers who are travelling home or on employers business tend to have incomes in line with most drivers on the N1 N2. All other travel categories have incomes that are lower than their generalised equivalents. At Macassar students have income considerably lower than other students on the N1 N2. On the other hand those travelling home, shopping and on employers business tend to have higher incomes.

It is clear from the tables above that there is the potential for certain categories of road users to be vulnerable to any increased cost of travelling, again recognising that this would be felt largely in the early years of the proposed toll roads.

Taking cognisance of the results and the discussion above, two categories of trip purposes were analysed for light vehicles only. For vehicle class 1 the two trip purposes analysed were business purposes and work commuter. For these purposes it is assumed that work commuters would bear the cost of tolling from their own household incomes. It is unclear whether people travelling for business purposes are doing this on their own behalf or are employed – the roadside interviews did not ask this question. However, some drivers of light vehicles would be travelling for the purposes of their own business and it is for that reason that this is included in the table. The results to this


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analysis are given in Figure 77. A separate analyse was done for each of the roadside interview stations but as there was little variation and these analyses are not reported.

In the road side interviews nearly 2,200 drivers of light vehicles were travelling for business purposes (this is 18% of total the total interviewed). Of these 856 (39% of those interviewed) make less than 20 trips a month past the roadside interview station; 35 (1.6%) travel between 20 and 40 times a month past the station; 534 (24%) travel between 40 and 60 times a month; while 769 (35%) make more than 60 trips a month past the interview station. Of those drivers making between 20 and 40 trips 37% have monthly incomes of less than R6,000. Of those drivers making between 40 and 60 monthly trips 10% have monthly household incomes of less than R6,000. Finally of those drivers making more than 60 trips 10% have monthly household incomes of less than R6,000.

Further to this, 3,525 drivers of light vehicles who were interviewed were work commuters. This is 30% of the total number of light vehicle drivers who were interviewed. Of these 1486 (42%) undertake less than 20 trips a month past the roadside interview station; 87 (2.5%) travel between 20 and 40 times a month past the station; 1,865 (53%) travel between 40 and 60 times a month; while 87 (2.5%) make more than 60 trips a month past the interview station. Of those drivers making between 20 and 40 trips 30% have monthly incomes of less than R6,000. Of those drivers making between 40 and 60 monthly trips 23% have monthly household incomes of less than R6,000. Finally of those drivers making more than 60 trips 30% have monthly household incomes of less than R6,000.

The latter result is somewhat surprising and questions must be asked about affordability. How can drivers with a declared income of less than R6,000 a month make more than sixty monthly trips? There are at least two possible explanations.

• First, these drivers are travelling with other people and sharing costs. To this end vehicle occupancy was investigated and it was found that a limited number of these vehicles had more than one occupant. Eight percent of this category of vehicles had two occupants, two vehicles had three occupants, one vehicle had four occupants, one had six and one had fifteen occupants.

• Second, it is possible that the interview respondents either did not understand the question clearly or overstated number of trips or understated their income.


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Figure 77: Distribution of road users by number of trips, trip purpose and income, all road side interviews

Distribution of Journey Purpose by income by trip frequencyAll road side interviews, class 1 vehicles only

Percent travelling for business purposesNumber of monthly trips

<20 20-40 40-60 >60Number of interviews 856 35 534 769Income of Driver<R1,000 0% 0% 0% 1%R1 000-R3 000 1% 11% 1% 2%R3 000-R6 000 4% 26% 9% 7%R6 000-R11 000 17% 17% 19% 21%R11 000-R17 000 22% 14% 22% 27%R17 000-R23 000 21% 14% 20% 17%R23 000-R28 000 8% 0% 6% 4%>R28 000 4% 9% 2% 3%Refusal 18% 6% 14% 14%Don't know 4% 3% 4% 3%

100% 100% 100% 100%Percent travelling as work commutersNumber of interviews 1486 87 1865 87Income of Driver<R1,000 1% 2% 1% 2%R1 000-R3 000 5% 8% 5% 8%R3 000-R6 000 14% 20% 17% 20%R6 000-R11 000 26% 25% 29% 25%R11 000-R17 000 17% 9% 17% 9%R17 000-R23 000 11% 6% 9% 6%R23 000-R28 000 6% 0% 3% 0%>R28 000 4% 3% 2% 3%Refusal 13% 22% 14% 22%Don't know 4% 5% 2% 5%

100% 100% 100% 100%

6.1.3 Toll tariff burden for low income drivers

For the purposes of determining the vulnerability of low income people to tolling the midpoints of the R3,000 to R6,000 and R6,000 to R11,000 income bands were used (Hence R4,500 and R8,000). These were chosen as the bulk of drivers fall into these income bands. These drivers where then analysed by number of trips and through toll collection either through the traditional toll plaza collection or through electronic toll collection.

Figure 78 indicates the possible high and low tolls for the mainline plazas east of Khayelitsha and at Somerset West. Hence the maximum toll at the plaza east of Khayelitsha is R14 and the minimum R10 while for Somerset West these are R23 and R16 respectively.


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In the roadside interviews some drivers indicated they made more than 60 trips a month. In consequence 75 monthly trips have been chosen as an example. For drivers making between 20 and 60 trips monthly, 40 trips have been chosen as an example.

For drivers with incomes of R4,500 a month, making 75 monthly trips and paying the high toll at the proposed mainline plaza east of Khayelitsha the monthly toll tariff would constitute 23% of their monthly household income. At a low tariff the expenditure is equal to 17% of their household income. Similar drivers travelling past Somerset West would pay high toll tariffs equal to 38% of their monthly income while the low toll constitutes 27% of household income.

Taking the above example for drivers with household incomes of R8,000 a month such drivers would pay the equivalent of 13% of household income for the high tariff east of Khayelitsha and 9% at the low tariff. Travelling past Somerset West 75 times a month would result in a toll tariff equal to 22% of household incomes at the high tariff and 15% at the low tariff.

Using the above same incomes and toll tariffs for 40 monthly trips results in lower but still significant increases in costs. Here drivers with household incomes of R4,500 a month would have toll tariffs equal to 12% of income at the high east of Khayelitsha toll and 9% at the low toll. The same drivers would have tolls equal to 20% at the high Somerset West tariff and 14% at the low tariff. Drivers with incomes of R8,000 would have tariffs equal to 7%, 5%, 12% and 8% respectively.

Figure 78: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with toll plaza collection

Toll tariff burden

East of Khayelitsha Somerset WestHigh Low High Low

Toll tariff 14 10 23 16 Number of monthly trips 75 Monthly cost 1,050 750 1,725 1,200 Cost as a percentage of:

R4,500 income 23% 17% 38% 27%R8,000 income 13% 9% 22% 15%

Number of monthly trips 40 Monthly cost 560 400 920 640 Cost as a percentage of:

R4,500 income 12% 9% 20% 14%R8,000 income 7% 5% 12% 8%

As has been mentioned earlier it is possible (and is a general SANRAL norm) that frequent user discounts would be available for the proposed project. Figure 79 indicates the toll tariff burden based on the usual SANRAL frequent user discounts. Here we find that drivers with incomes of R4,500 a month, making 75 monthly trips and paying the high toll at the proposed mainline plaza east of Khayelitsha the monthly toll tariff would


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constitute 18% of their monthly household income. At a low tariff the expenditure is equal to 13% of their household income. Similar drivers travelling past Somerset West would pay high toll tariffs equal to 29% of their monthly income while the low toll constitutes 20% of household income.

Taking the above example for drivers with household incomes of R8,000 a month such drivers would pay the equivalent of 10% of household income for the high tariff east of Khayelitsha and 7% at the low tariff. Travelling past Somerset West 75 times a month would result in a toll tariff equal to 16% of household incomes at the high tariff and 11% at the low tariff.

Using the above same incomes and toll tariffs for 40 monthly trips drivers with household incomes of R4,500 a month would have toll tariffs equal to 11% of income at the high east of Khayelitsha toll and 8% at the low toll. The same drivers would have tolls equal to 18% at the high Somerset West tariff and 13% at the low tariff. Drivers with incomes of R8,000 would have tariffs equal to 6%, 5%, 10% and 7% respectively.

Figure 79: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with frequent user discount and toll plaza collection

Toll tariff burden with frequent user discount

East of Khayelitsha Somerset WestHigh Low High Low

Toll tariff 14 10 23 16 Number of monthly trips 75 Monthly cost 798 570 1,311 912 Cost as a percentage of:

R4,500 income 18% 13% 29% 20%R8,000 income 10% 7% 16% 11%


R4,500 income 11% 8% 18% 13%R8,000 income 6% 5% 10% 7%

The same analysis that was applied to toll collection through toll plazas was also applied to ORT with and without frequent user discounts. The results are reported in Figure 80 and Figure 81. In this case the journeys need to be more specific because the costs are distance based rather than just the cost of going through a toll plaza. The first journey is from Khayelitsha (i.e. the R310) to the end of the concession at the R300. The second journey is from Somerset West (Onverwacht Road) to the R300.

For drivers with incomes of R4,500 a month, making 75 monthly trips and paying the high ORT toll the monthly toll tariff would constitute 6.6% of their monthly household income. At a low tariff the expenditure is equal to 3.3% of their household income. Similar drivers travelling from Somerset West would pay high toll tariffs equal to 18% of their monthly income while the low toll constitutes 9% of household income.


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Taking the above example for drivers with household incomes of R8,000 a month such drivers would pay the equivalent of 3.7% of household income for the high tariff east of Khayelitsha and 1.9% at the low tariff. Travelling from Somerset West 75 times a month would result in a toll tariff equal to 10% of household incomes at the high tariff and 5% at the low tariff.

Using the above same incomes and toll tariffs for 40 monthly trips results in lower costs. Here drivers with household incomes of R4,500 a month would have toll tariffs equal to 3.5% of income at the high ORT toll and 1.8% at the low toll. The same drivers would have tolls equal to 9.6% at the high Somerset West tariff and 4.8% at the low tariff. Drivers with incomes of R8,000 would have tariffs equal to 2%, 1%, 5.4% and 2.7% respectively.

Figure 80: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with open road tolling

Toll tariff burden for Electronic Toll Collection

Khayelitsha (R310) to R300 Onverwacht Rd to R300High Low High Low

Toll tariff (cents/km) 40 20 40 20 Distance 9.9 9.9 27.1 27.1 Number of monthly trips 75 Monthly cost 297 149 813 407 Cost as a percentage of:

R4,500 income 6.6% 3.3% 18.1% 9.0%R8,000 income 3.7% 1.9% 10.2% 5.1%


R4,500 income 3.5% 1.8% 9.6% 4.8%R8,000 income 2.0% 1.0% 5.4% 2.7%

Figure 81 indicates the toll tariff burden based on the usual SANRAL frequent user discounts. Here we find that drivers with incomes of R4,500 a month, making 75 monthly trips and paying the high toll at the proposed mainline plaza east of Khayelitsha the monthly toll tariff would constitute 5% of their monthly household income. At a low tariff the expenditure is equal to 2.5% of their household income. Similar drivers travelling past Somerset West would pay high toll tariffs equal to 39% of their monthly income while the low toll constitutes 20% of household income.

Taking the above example for drivers with household incomes of R8,000 a month such drivers would pay the equivalent of 2.8% of household income for the high tariff from Khayelitsha and 1.4% at the low tariff. Travelling from Somerset West 75 times a month would result in a toll tariff equal to 13.7% of household incomes at the high tariff and 6.9% at the low tariff.


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Using the above same incomes and toll tariffs for 40 monthly trips drivers with household incomes of R4,500 a month would have toll tariffs equal to 3.2% of income at the high east of Khayelitsha toll and 1.6% at the low toll. The same drivers would have tolls equal to 8.7% at the high Somerset West tariff and 4.3% at the low tariff. Drivers with incomes of R8,000 would have tariffs equal to 1.8%, 0.9%, 4.9% and 2.4% respectively.

Figure 81: Toll tariff for east of Khayelitsha and Somerset West for variable trips and income with frequent user discount and open road tolling

Toll tariff burden for ETC and frequent user discounts

Khayelitsha (R310) to R300 Onverwacht Rd to R300High Low High Low

Toll tariff (cents/km) 40 20 40 20 Distance 9.9 9.9 27.1 27.1 Number of monthly trips 75 Monthly cost 225.7 112.9 617.9 308.9 Cost as a percentage of:

R4,500 income 5.0% 2.5% 13.7% 6.9%R8,000 income 2.8% 1.4% 7.7% 3.9%

Number of monthly trips 40 Monthly cost 142.6 71.3 390.2 195.1 Cost as a percentage of:

R4,500 income 3.2% 1.6% 8.7% 4.3%R8,000 income 1.8% 0.9% 4.9% 2.4%

6.1.4 Number of vulnerable drivers

Given the rather severe impact that tolling could have on low income frequent travellers it is important to determine the potential number of drivers who could be vulnerable to the proposed tolling. The results are presented in Figure 82.

In 2006, daily traffic counts for light vehicles (class 1 vehicles) on the N1 was 5,435 at Sandhills, 12,086 at Rawsonville and 41,796 at Joostenbergvlakte. On the N2 the counts were 19,624 at Grabouw, 19,617 at Orchards and 39,814 at Macassar. From the roadside interviews 0.44% of drivers had monthly household incomes less than R1,000 at Sandhills and 0.03% at Joostenbergvlakte and made more than 60 monthly trips. If the roadside interview sample reflects the general population (and there is no reason to think otherwise) then 24 light vehicles fall into this daily category at Sandhills and 13 at Joostenbergvlakte. At the same income levels there are in total 342 drivers making between 40 and 60 monthly journeys with the largest portion being at Joostenbergvlakte (161).

At the slightly higher monthly income level of between R1,000 and R3,000 there are a total of 655 vehicles making more than sixty monthly trips. Joostenbergvlakte and Macassar host the majority of these at 121 and 280 respectively. At the same income levels there are a total of 2,108 vehicles making between 40 and 60 monthly trips. These


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were measured at the road side interviews at Orchards (716), Grabouw (543), Joostenbergvlakte (430) and Macassar (295).

Finally at the monthly income level of R3,000 to R6,000 a total of 314 class 1 vehicles make more than sixty monthly trips with Sandhills (128), Grabouw (93) and Joostenbergvlakte (67) having the most. A total of 5,756 vehicles in this income class make between forty and sixty monthly journeys. Here the most were measured at Macassar (1,771), Joostenbergvlakte (1,479) and Orchards (1,146).

Figure 82: Number of class 1 vehicles with high toll exposure and low income

Total Number of VehiclesSandhills Rawsonville Joostenberg Grabouw Orchards Macassar

Current class 1 traffic count (AADT) 5435 12086 41796 19624 19817 39814Percent with income <R1,000

making >60 trips a month 0.44% 0.00% 0.03% 0.00% 0.00% 0.00%making 40 - 60 trips per month 0.44% 0.21% 0.39% 0.00% 0.36% 0.15%

Current numbers with income >R1,000making >60 trips a month 24 - 13 - - -

making 40 - 60 trips per month 24 26 161 - 72 59 Percent with income R1,000-R3,000


Current numbers with income R1,000-R3,000making >60 trips a month 88 68 121 79 18 280

making 40 - 60 trips per month 56 68 430 543 716 295 Percent with income R3,000-R6,000


Current numbers with income R3,000-R6,000making >60 trips a month 128 9 67 93 18 -

making 40 - 60 trips per month 239 367 1,479 754 1,146 1,771

6.2 Impact on the cost of consumer goods, employment and wages

There are always concerns that a toll road would increase the cost of consumer goods and possibly destroy jobs and reduce wages. Given that the cost benefit analysis showed positive results, consumer goods prices should theoretically be less with the tolled road than without it.

Nevertheless, in order to test the limits the following assessment quantifies the effects of tolling while ignoring all the benefits of the toll road project.

Such an assessment can be undertaken at various levels of detail where this detail is determined largely by the amount of available information, the time frame for the study and resources made available for the study. A full assessment of these issues would demand a detailed and minute analysis of the impact of the roads on every sector, at least, if not also on individual companies. Bear in mind that this type of information is usually considered confidential by all companies, affected or not. An assessment of this nature is beyond the scope, the time frame or resources available for such a study.

Issues of employment are addressed in the macroeconomic section where direct and indirect job creation are quantified for some aspects of the proposed project. These include construction jobs, jobs during operation and potential jobs as a result of increases in network speed.


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There is also the potential for permanent job losses. Permanent job losses could occur if the transport cost increases of the proposed project are sufficient to undermine the financial viability of individual companies or entire sectors. The deciduous fruit industry of the Elgin/Grabouw areas, the table grape industry of the Hex River Valley and Tygerberg Zoo could be vulnerable to tolling. In a submission made during the comments phase of the EIA, County Fair, a major chicken producer, indicated that the chicken industry would also be vulnerable because of the competition from imported products and from the red meat industry. This occurs because imported chickens and the red meat industry are not affected by tolling to the extent that local chicken producers are. While these industries and businesses are highlighted as vulnerable the actual number of job losses could not be calculated. With the exception of the Tygerberg Zoo, this was due to the difficulty in determining the actual impacts on these industries and businesses and the resultant impact on employment.

Following from this, because wages are a function of the demand and supply of labour, the study was not able to determine the overall changes in demand and supply of labour or draw conclusions about the likely impact of the proposed project on wages.

In order to measure the possible impact on the cost of consumer goods a number of hypothetical journeys were established. The intention in this exercise was to measure the most extreme possible changes in the cost of consumer goods. To this end a number of possible permutations of vehicle size, load value and origin and destination were analysed.

This analysis is based on the following key points and assumptions:

• All road user benefits from the proposed project were ignored. In other words the exercise was undertaken as if the existing roads were simply tolled without any rehabilitation or capacity upgrades. This would overstate the size of the impact on the cost of consumer goods.

• The analysis ignores the fact that some consumer goods would not be affected by tolls because they are not moved on the N1 or N2. This would overstate the size of the impact on the cost of consumer goods.

• It is assumed that all toll tariffs would be passed on to the final consumer. Some of the cost increases could be absorbed by the producer either because of the known resistance of major supermarket chains to cost increases or because of competition from products that are either imported or from other areas not affected by tolling. This would overstate the size of the impact on the cost of consumer goods.

• The toll tariff on the return journey has also been included because the vehicle may, for example, be returning empty (an unlikely event) or carrying farm supplies back to the farm. This would overstate the size of the impact on the cost of consumer goods if the return vehicle is carrying goods destined for sale out of the province.

• The analysis does not take into account other possible cost increases like the increased cost of staff being transported to work or the travel costs of sales


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representatives. This would understate the size of the impact on the cost of consumer goods.

• All toll tariffs are 2007 values as given in Figure 1

• Journeys are described as ‘Origin’ and ‘Destination’ and toll tariffs summed for proposed toll plaza positions.

The methodology that was followed was to base it on the vehicle fleet and location of a transport company based close to Cape Town International Airport (CTIA) which is responsible for delivering goods to the stores of a major retail chain9. Two types of food stuffs were analysed – fruit and vegetables, and dry goods. The reason for the choices was that fruit and vegetables were moved in smaller vehicles while dry goods were typically moved in larger vehicles.

For fruit and vegetables the average value of cargo moving to Worcester was R15,000 with a typical minimum of R13,000. Similar deliveries to Hermanus averaged R12,000 with a minimum of R10,000. When dry goods were delivered to Worcester these had an average value of R120,000 with a minimum trip value of R110,000. Similar deliveries to Hermanus had an average value of R110,000 with a minimum value of R100,000.

The measure that is adopted here to determining the impact of tolls on consumer goods is to estimate the percentage increase in cost of the movement of consumer goods into and out of the depot at CTIA. This was done for a variety of journeys, vehicle size and freight. In addition the estimates were also made for the case were vehicles are currently choosing to use Du Toit’s Kloof Pass rather than the Huguenot Tunnel because the project proposal is to toll Du Toit’s Kloof Pass.

The estimates that were made are reported in below. Figure 83 and Figure 84 report on the impact of the cost of fruit and vegetables while Figure 85 and Figure 86 report on the estimates for dry goods.

As a means of understanding the tables, the first column of Figure 83 estimates the increased cost of fruit and vegetables being moved from Western Cape farms to the depot at CTIA and back to Worcester for sale. In the process the goods that are moved are valued at R12000 and are moved in a class 2 vehicle. In the process the vehicle would go through all the toll plazas on the N1, starting at De Wet and ending at Joostenberg Vlakte. The Du Toit’s Kloof Pass toll is included because this is the toll for the road between De Wet and the Tunnel. The vehicle then turns onto the R300 and delivers produce to the depot. The farm vehicle now either returns empty or picks up supplies and drives back through all the toll plazas. This adds 1.44% to the cost of the goods.

The goods are then processed and loaded into a class 2 vehicles for delivery to Worcester. The average value of such a load is estimated to be R15,000. This vehicle

9 This analysis is based on the original EIA calculations updated by consumer price index values, toll values and updated household expenditure patterns.


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then drives to Worcester, pays all the tolls and returns empty, again paying all the tolls. This adds a further 0.65% to the cost of the goods. The overall cost increase for such a trip with the value of goods being carried would add 2.09% to the cost of these goods.

Columns 2 and 3 of Figure 83 estimate the cost of the same journey using larger vehicles and more cargo typical of vehicles delivering produce from Gauteng. Column 2 makes estimates for a class 3 vehicle moving goods to the value of R60,000 from Gauteng to the depot and then a class 3 vehicle moving R30,000 worth of goods back to Worcester. Column 3 make the estimates for a class 4 vehicle moving goods worth R100,000 and a class 2 vehicle moving goods to the value of R15,000 to Worcester. Under the conditions of column 2 the cost of fruit and vegetables would increase by 0.78% and in column 3 by 0.96%.

Column 4 is a similar journey as that of column 1 with the final destination being Paarl. Under these conditions the cost of these goods would have increased by 1.70%. Columns 5 and 6 are similar to 2 and 3 except that the journey ends in Paarl. Here cost of fruit and vegetable would increase by 0.53% and 0.96% respectively.

Columns 7, 8 and 9 replicate 4, 5 and 6 except here the final destination is the Cape Town CBD or other area where deliveries can be made from the depot without having to pay tolls on the delivery journey. For these journeys the cost of fruit and vegetables would increase by 1.44%, 0.36% and 0.31% respectively.

Figure 84 replicates Figure 83 but estimates the impact on the cost of fruit and vegetables in Somerset West, Hermanus and Stellenbosch for each of the specifics of the journeys. Here it can be seen that the cost of fruit and vegetables could increase between 0.49% and 2.71% depending on the type of vehicle used and the value of the cargo.

The possible impact on the cost of dry goods is given in Figure 85 and Figure 86. The methodology is same as are the types of journeys. Because of the higher value of dry goods relative to their mass the lower value loads are omitted (for instance dry goods delivered to Worcester have an average value of R140,000 with a minimum trip value of R110,000.

Dry goods that are transported from Gauteng to the depot and then delivered to Worcester would have a cost increase of 0.34% when R140,000 of cargo is moved by a class 3 vehicle. If a class 4 vehicle is used (class 3 with a trailer) then the cost increase is 0.26% if the cargo has a value of R140,000. Goods that are produced in Epping (or come in by sea or by rail) and are then delivered to Worcester would have a cost increase of 0.11% and 0.09% respectively for the given value of cargo and vehicle class. Dry goods from Gauteng destined for delivery in Somerset West would have a cost increase of 0.19% respectively. From Gauteng to these values are 0.25% and 0.24%. From Epping (by sea or rail) to Hermanus these values are 0.18%. From Port Elizabeth to Hermanus these values are 0.21%.


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Figure 83: Impact on cost of goods 1

Impact on the cost of Fruit and Vegetables for various journeys, vehicle classes and values of cargo

1 2 3 4 5 6 7 8 9

OriginCape farm lands Gauteng Gauteng

Cape farm lands Gauteng Gauteng

Cape farm lands Gauteng Gauteng

Value of incoming load 12,000 60,000 100,000 12,000 60,000 100,000 12,000 60,000 100,000 Vehicle class 2 3 4 2 3 4 2 3 4

Toll at De Wet 38 47 67 38 47 67 38 47 67 Toll at Du Toit's Kloof ramp plaza 29 37 54 29 37 54 29 37 54

Toll at Joostenberg Vlakte 19 25 36 19 25 36 19 25 36 Tolls on inward journey 86 109 157 86 109 157 86 109 157 Tolls on outward journey 86 109 157 86 109 157 86 109 157 Toll as a percentage of load value 1.44% 0.36% 0.31% 1.44% 0.36% 0.31% 1.44% 0.36% 0.31%

Destination Worcester Worcester Worcester Paarl Paarl Paarl CBD CBD CBDValue of outgoing load 15,000 30,000 15,000 15,000 30,000 15,000 15,000 30,000 15,000 Vehicle class 2 3 2 2 3 2 2 3 2

Toll at Joostenberg Vlakte 19 25 19 19 25 19 Toll at Du Toit's Kloof ramp plaza 29 37 29

Tolls on inward journey 49 62 49 19 25 49 - - - Tolls on outward journey 49 62 49 19 25 49 - - - Toll as a percentage of load value 0.65% 0.42% 0.65% 0.26% 0.17% 0.65% 0.00% 0.00% 0.00%Percentage increase in cost of fruit & vegetables 2.09% 0.78% 0.96% 1.70% 0.53% 0.96% 1.44% 0.36% 0.31%


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Impact on the cost of Fruit and Vegetables for various journeys, vehicle classes and values of cargo

1 2 3 4 5 6 7 8 9

OriginCape farm lands Gauteng Gauteng

Cape farm lands Gauteng Gauteng Caledon Port Elizabeth Port Elizabeth

Value of incoming load 12,000 60,000 100,000 12,000 60,000 100,000 12,000 60,000 100,000 Vehicle class 2 3 4 2 3 4 2 3 4

Toll at De Wet 38 47 67 38 47 67Toll at Du Toit's Kloof ramp plaza 29 37 54 29 37 54

Toll at Joostenberg Vlakte 19 25 36 19 25 36Toll at Baden Powell Drive 16 21 31

Toll at Firlands 27 35 51Toll at Bot River 37 47 68

Tolls on inward journey 86 109 157 86 109 157 80 103 150 Tolls on outward journey 86 109 157 86 109 157 80 103 150

1.44% 0.36% 0.31% 1.44% 0.36% 0.31% 1.34% 0.34% 0.30%

DestinationSomerset West

Somerset West

Somerset West Hermanus Hermanus Hermanus Stellenbosch Stellenbosch Stellenbosch

Value of outgoing load 15,000 30,000 15,000 15,000 30,000 15,000 15,000 30,000 15,000 Vehicle class 2 3 2 2 3 2 2 3 2

Toll at Baden Powell Drive 19 25 19 19 25 16 16 21 16Toll at Firlands 33 42 27

Toll at Bot River 44 56 37Tolls on inward journey 19 25 19 96 123 80 16 21 16 Tolls on outward journey 19 25 19 96 123 80 16 21 16 Toll as a percentage of load value 0.26% 0.17% 0.26% 1.28% 0.82% 1.07% 0.22% 0.14% 0.22%Percentage increase in cost of fruit & vegetables 1.70% 0.53% 0.57% 2.71% 1.19% 1.39% 1.56% 0.49% 0.52%


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Impact on the cost of Dry Goods for various journeys, vehicle classes and values of cargo

1 2 3 4 5 6 Origin Gauteng Gauteng Epping Epping Gauteng GautengValue of incoming load 140,000 200,000 140,000 200,000 140,000 200,000 Vehicle class 3 4 3 4 3 4

Toll at De Wet 47 67 47 67 Toll at Du Toit's Kloof ramp plaza 37 54 37 54

Toll at Joostenberg Vlakte 25 36 25 36 Tolls on inward journey 109 157 - - 109 157 Tolls on outward journey 109 157 - - 109 157

Toll as a percentage of load value 0.16% 0.16% 0.00% 0.00% 0.16% 0.16%

Destination Worcester Worcester Worcester Worcester CBD CBDValue of outgoing load 140,000 200,000 140,000 200,000 140,000 200,000 Vehicle class 3 4 3 4 3 4

Toll at Joostenberg Vlakte 25 30 25 30Toll on R300 13 17 13 17

Toll at Du Toit's Kloof ramp plaza 37 45 37 45Tolls on inward journey 75 92 75 92 - - Tolls on outward journey 75 92 75 92 - -

Toll as a percentage of load value 0.11% 0.09% 0.11% 0.09% 0.00% 0.00%Percentage increase in cost of dry goods 0.26% 0.25% 0.11% 0.09% 0.16% 0.16%


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Impact on the cost of Dry Goods for various journeys, vehicle classes and values of cargo

1 2 3 4 5 6

Origin Gauteng Gauteng Epping Epping Port Elizabeth Port ElizabethValue of incoming load 140,000 200,000 140,000 200,000 140,000 200,000 Vehicle class 3 4 3 4 3 4

Toll at De Wet 47 67 Toll at Du Toit's Kloof ramp plaza 37 54

Toll at Joostenberg Vlakte 25 36 Toll at Baden Powell Drive 25 36

Toll at Firlands 42 61 Toll at Bot River 56 81

Tolls on inward journey 109 157 - - 124 178 Tolls on outward journey 109 157 - - 124 178

0.16% 0.16% 0.00% 0.00% 0.18% 0.18%

DestinationSomerset West

Somerset West Hermanus Hermanus Stellenbosch Stellenbosch

Value of outgoing load 140,000 200,000 140,000 200,000 140,000 200,000 Vehicle class 3 4 3 4 3 4

Toll at Baden Powell Drive 25 36 25 36 21 31Toll at Firlands 42 61

Toll at Bot River 56 81Tolls on inward journey 25 36 123 178 21 31 Tolls on outward journey 25 36 123 178 21 31

Toll as a percentage of load value 0.04% 0.04% 0.18% 0.18% 0.03% 0.03%Percentage increase in cost of dry goods 0.19% 0.19% 0.18% 0.18% 0.21% 0.21%


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Following from these conclusions it is important to establish the degree to which fruit, vegetables, milk and, to a lesser extent (because of higher cargo values), grain mill products contribute to the overall spending of consumers. The average spending patterns of people in South Africa is illustrated in Figure 87 below. This is shown for the thirteen largest types of expenditure categories and is given for five different income levels as well as pensioners.

Figure 87: Average consumer spending patterns

- 2.00 4.00 6.00 8.00 10.00 12.00 14.00

Percent of total expenditure

Grain products

Meat

Fish

Dairy

Fats & oils

Fruits

Vegetables

Sugar

Other food

Non alcoholic beverages

Alcoholic beverages

Clothing & footwear

Furniture

Spending patterns by income category

Pensioners>R 55 160R 24 366-R 55 159; R 12 264-R 24 365; R 8 071-R 12 263;< R 8 070;

Source: Statistics SA Statistical Release P P0141.5

These spending patterns were used as the basis to estimate the overall change in the cost of consumer goods. This was calculated by taking the weighted changes in the cost of transport and determining the percentage increase in the cost of consumer goods for certain specific journeys and for the income categories shown in the figure above.

Figure 88 gives the detail spending patterns across five income categories and pensioners.

Figure 89 gives the estimated cost increase (as based on the methodology above) for different types of consumer goods for three sets of origin and destination.

Based on the methodology described above, and recognising the limitations of the methodology, the impact of the tolling of the N1 and N2 on the cost of consumer goods appears to be limited.


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Figure 90 shows the impact on consumer goods being transported from the Cape farms and dry goods from Gauteng (such that these vehicles go through all the toll plazas on the N1) the cost of consumer goods would increase by between 0.30% and 0.31% depending on the income category. This is the equivalent of 31 cents for each R100 that is spent. For fresh produce coming from Caledon and dry goods coming from Port Elizabeth destined for Stellenbosch via Cape Town International Airport Industria the cost increase in between 0.24% and 0.29% (Figure 91). For goods destined for the city centre and the southern suburbs the cost increase is between 0.19% and 0.23% (Figure 92).

Figure 88: Spending patterns by income category

Spending patterns for different income categories

Annual household income between: < R 8 070;R 8 071-R 12 263;

R 12 264-R 24 365;

R 24 366-R 55 159; >R 55 160 Pensioners

Grain products 13.66 12.88 10.24 6.92 2.36 4.97 Meat 10.23 10.34 10.49 8.73 4.52 7.23 Fish 0.89 1.01 0.96 0.86 0.62 0.80 Dairy 3.42 3.99 3.67 3.02 1.55 2.42 Fats & oils 2.29 2.05 1.72 1.24 0.54 1.05 Fruits 2.08 2.02 1.90 1.52 0.90 1.32 Vegetables 6.33 5.31 4.56 3.25 1.42 2.73 Sugar 2.38 1.97 1.48 0.91 0.29 0.76 Other food 7.86 7.52 6.83 5.41 2.65 4.38 Non alcoholic beverages 1.80 1.77 2.05 1.54 0.91 1.05 Alcoholic beverages 1.64 1.36 2.27 1.45 1.31 0.92 Clothing & footwear 4.71 5.31 5.89 5.41 2.55 3.00 Furniture 1.14 1.31 2.01 2.85 2.56 2.56 Other items 41.57 43.16 45.93 56.89 77.82 66.81

Source: Total_SIC to be found in In&Ex95 folder on CD

Figure 89: Increased costs on consumer goods of a toll tariff without taking any benefits into account

Toll tariff increase to cost of goodsCape farms and Gauteng to Worcester

Caledon and Port Elizabeth to Stellenbosch

Gauteng to CBD, etc

Grain mill products 0.26% 0.21% 0.16%Sugar factories & refineries 0.25% 0.21% 0.16%Slaughtering, preparing & preserving of meat 0.25% 0.21% 0.16%Agriculture 2.09% 1.56% 1.44%Other food products 0.25% 0.21% 0.16%Clothing, except footwear 0.25% 0.21% 0.16%Coal mining 0.25% 0.21% 0.16%Tobacco products 0.25% 0.21% 0.16%Petroleum refineries & products of petroleum and coal 0.25% 0.21% 0.16%Dairy products 2.09% 1.56% 1.44%Wood and wood products, except furniture 0.25% 0.21% 0.16%Footwear 0.25% 0.21% 0.16%Vegetable & animal oils and fats 0.25% 0.21% 0.16%Other products 0.25% 0.21% 0.16%


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Figure 90: Total increase in the cost of consumer goods from Cape Farms and Gauteng to Worcester via Cape Town International Airport Industria for various income categories

Cape farms and Gauteng to Worcester

Annual household income between: < R 8 070; R 8 071-R 12 263;

R 12 264-R 24 365;

R 24 366-R 55 159; >R 55 160 Pensioners

Grain products 13.70 12.91 10.27 6.94 2.37 4.98 Meat 10.26 10.37 10.52 8.75 4.53 7.25 Fish 0.89 1.01 0.96 0.86 0.62 0.80 Dairy 3.49 4.07 3.75 3.08 1.58 2.47 Fats & oils 2.30 2.06 1.72 1.24 0.54 1.05 Fruits 2.09 2.03 1.90 1.52 0.90 1.32 Vegetables 6.35 5.32 4.57 3.26 1.42 2.74 Sugar 2.39 1.97 1.48 0.91 0.29 0.76 Other food 7.88 7.54 6.85 5.42 2.66 4.39 Non alcoholic beverages 1.84 1.81 2.09 1.57 0.93 1.07 Alcoholic beverages 1.64 1.36 2.28 1.45 1.31 0.92 Clothing & footwear 4.72 5.32 5.90 5.42 2.56 3.01 Furniture 1.14 1.31 2.02 2.86 2.57 2.57 Other items 41.67 43.27 46.04 57.03 78.01 66.98 Total increase in cost of consumer goods 0.35% 0.36% 0.36% 0.33% 0.30% 0.31%

Figure 91: Total increase in the cost of consumer goods from Caledon and Port Elizabeth to Stellenbosch via Cape Town International Airport Industria for various income categories

Caledon and Port Elizabeth to Stellenbosch


R 12 264-R 24 365;

R 24 366-R 55 159; >R 55 160 Pensioners



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Figure 92: Total increase in the cost of consumer goods from Cape Farms and Gauteng to CBD via Cape Town International Airport Industria for various income categories

Gauteng to CBD, etc


R 12 264-R 24 365;

R 24 366-R 55 159; >R 55 160 Pensioners


6.3 Impact on business

Just as private road users could initially perceive higher costs than benefits in the early years of the proposed tolling, so too could commercial vehicles. While many businesses probably have the capacity to absorb this changing cash flow over time there are two categories of business that might be impacted in the early years of the proposed tolling. These are, first, businesses that make regular use of road transport and, second, industries that are currently economically depressed for either structural or cyclical reasons.

6.3.1 Generalised impacts

Businesses would not be affected equally by changes in road transport costs brought on by tolling. The extent to which net costs would adversely affect commercial road users is dependent on their sensitivity to cost increases. One important indicator of the impact of the proposed toll road is the degree to which specific areas are either reliant on an industry that is particularly transport intensive or where a specific industry is transport intensive. Figure 93 reports on the degree to which transport costs affect specific industries. Note that this reports on total costs and not road specific costs. The latter data is not available.10

It is clear from the table that the mining industry is particularly transport intensive. However, given that limited importance of that industry in the Western Cape, the next most transport intensive is agriculture (at 5.5%) followed by manufacturing (at 4.8%), construction at 4%.

10 The calculations were made from the 2002 Social Accounting Matrix. The numbers are therefore understated because of the significant fuel price increases since that time but no updated information is available.


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Figure 93: Transport costs as a proportion of total costs of key economic sectors

Transport costs as a percentage of total costs

Agriculture, hunting; forestry and fishing 5.5%Mining and quarrying 13.0%Manufacturing 4.8%Electricity; gas and water supply 3.2%Construction 4.0%Wholesale and retail trade 3.1%Transport; storage and communication 1.8%Financial, insurance, real estate and business service 1.0%Community, social and personal services 0.4%

Source: Statistics SA, Social Accounting Martix 2002

What follows from this is that agriculture is likely to be most sensitive to changes in road transport costs followed by manufacturing and construction.

These cost ratios are now compared to the composition of cargo that was carried on the N1 N2 during the time of the roadside interviews. There were a wide variety of different types of cargo carried and Figure 94 reports for those cargoes that constituted more than one percent of total freight. It should be noted that the roadside interviews were conducted during November 2006 and would therefore not reflect the harvest and movement of grapes and deciduous fruit from Hex River and Grabouw respectively.

The most common cargo carried during the roadside interview period was food at 19% of the sample. Building materials follow this at just over 10% etc. The pattern that emerges reflects the estimates made from the Social Accounting Matrix. Agriculture, in the form of wine, fruit, vegetables, meat and chickens, and construction, in the form of sand, bricks and cement are dominant in the list and therefore most sensitive to increased transport costs. On the manufacturing side (and bearing in mind that there is a relatively small sample) the industries most sensitive to increased transport costs include packaging vehicles, steel and packaging materials.


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Figure 94: Types of cargo carried on the N1 and N2

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Food

Building material

Mixed cargo

Sand/Stone

Vehicles

Beverages

Steel

Boxes

Parcels

Fruit/Veg

Paper

Electrical Appliances

Passangers

Animals

Machinery

Petrol

Cargo on the N1/N2

Having identified the economic sectors that are likely to be particularly sensitive to increased transport costs, the areas where these sectors form a significant part of the local economy were identified and flagged as areas of greater potential impact. This was done using the Census 2001 data on the percentage of the total workforce per economic sector for the areas along the route giving an adequate indication of the significance of the sectors within each area. Note that the data are somewhat limited as an indicator as they require the added assumption that the sectors in question use the specific roads that would be tolled. This is considered a reasonable assumption given the heavy reliance of the areas on the routes.

An index of road transport cost sensitivity was calculated for the areas along the route by multiplying the ratios of road transport costs to total costs with the percentages of the workforce in each sector. This index allows for the identification of areas that are particularly sensitive to increases in road transport costs. This is done by comparing the index of any particular area to that of the Western Cape as a whole. It is found that, in descending order, De Doorns, Grabouw, Bot River, Hermanus and Paarl all have indexes that are greater than the province as a whole. Businesses in these areas can expect to feel the impact of tolling more than Touws River, Worcester, Somerset West, Stand and Rawsonville which have indexes that are less than the provincial average.


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Figure 95: Road transport cost sensitivity of areas along routes

Index of Road Cost SensitivityBased on 2001 census

Western Cape 1.221Somerset West 1.110Strand 1.112Grabouw 1.636Bot River 1.501Hermanus 1.399Paarl 1.212Rawsonville 1.131De Doorns 1.708Worcester 0.943Touws River 0.863

6.3.2 Specific impacts

In addition to the more generalised impacts on business reported above, there are a number of businesses that are either captive to a particular toll plaza or may otherwise be affected by the tolling of the N1 and N2.

On the N1 these are:

6.3.2.1 Joostenbergvlakte and Kraaifontein Industria

The existence of a toll plaza so close to the area could deter customers and increase transport costs in the short term. Approximately 45 businesses employing over 1000 people, operate in Joostenbergvlakte and the Kraaifontein Industrial Area. It has been demonstrated in Section 5.6.1 that vehicles operating in the Kraaifontein area would have greater road user benefits and lower costs for an upgraded and tolled N1 than if the road is left without upgrading and capacity increases. In addition to this, as plans are in progress to extend Maroela Road over the railway line to link up with Plantasie Road and Voortrekker Road, Joostenbergvlakte and Kraaifontein Industria would not be a captive community.

However, there are two sets of factors that suggest a certain degree of discomfort would be felt in the Kraaifontein area.

First, there would be increases in transport costs. Using the Maroela Road extension would add between 3 and 5 minutes to a journey to Cape Town. There are costs involved in this. Paying a toll would also involve a cost. In consequence there is the potential for some financial difficulty in the area.

Second, and more importantly, businesses that rely on passing traffic could be badly affected. Tolls not only impact on the running costs of businesses, but can also impact on the willingness of customers to visit businesses. One can differentiate between businesses that are more or less likely to lose customers based on the characteristics of their products and their relationship with their customers. Those


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that are more likely to lose customers would generally have the following characteristics:

• Low levels of customer loyalty

• Low levels of specialisation (i.e. their products can be easily found elsewhere)

• High levels of competition from other similar businesses

• The sale of cheaper items (e.g. businesses selling, say, plants versus cars)

6.3.2.2 Tygerberg Zoo

A tolled N1 could potentially deter visitors to the zoo and, in the early years of the tolling, lead to cash flow difficulties for the zoo. Tygerberg Zoo has not been in a favourable financial position for some years and is sensitive to any cost increases and falling numbers of visitors. Given this, estimates were made in collaboration with zoo staff of the impact of tolling. The results of this modelling exercise indicated that the zoo could experience a 13% loss in revenue for high tariffs and a 5% loss for low tariffs. These losses, particularly at the high tariff, could potentially lead to the closure of the zoo.

6.3.2.3 Fruit growers in the Elgin and Hex River Valleys

Changes to road user costs could reduce cash flow for fruit growers that are already in an unfavourable financial position. The deciduous fruit sector is critical to the functioning of the economies in the rural and semi-rural area along the proposed toll roads. A significant number of permanent and seasonal jobs are supported by the industry. It makes an important contribution to the generation of foreign exchange and has the highest economic multiplier of all agricultural sectors.

Deciduous fruit farmers in the Western Cape have not been in a favourable financial position for some years now making them highly sensitive to cash flow changes associated with the proposed tolling. In addition, they are captive to the toll road and would thus be forced to use it.

On the N2 these are:

6.3.2.4 Firlands garage

The Firlands garage is situated adjacent to the existing T2 and offers direct access from the road. The owner estimates that 60 to 70% of his customers are motorists passing by on the N2 that are not residents of the Helderberg. He thus anticipates that he would lose 60 to 70% of his business if the N2 were realigned through Firlands. Business from local residents may increase slightly as congestion on the T2 decreases. It is not clear at this stage whether he would be able, or willing, to scale the garage down in order to remain viable with decreased traffic flows. The garage is currently structured to cater for current flows and it is not clear whether it can be scaled down cost effectively or whether Shell, or any other petroleum companies, would be interested in a significantly scaled down garage.


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6.3.2.5 Farm stalls in the Elgin Valley

Currently there are three well-established farm stalls situated along the N2 in the Elgin Valley. Driving away from Cape Town along the N2, The Orchard is the first stall situated on the northern side of the N2 at the first turn-off to Grabouw. The next stall is Peregrine on the southern side of the road next to the Viljoenshoop Road. Finally, the Houw Hoek Farm Stall is situated on the southern side of the road near the start of the Bot River pass opposite the Houw Hoek Inn. All of these businesses would be affected by the toll road to varying degrees as their customers react to more cumbersome yet safer access from the N2, changed visibility from the road and changes in road user cost and benefits.

6.4 Impact on public transport

It was shown above that road user benefits would be greater than road user costs for nearly all sections of the N1 and N2. In those cases where road user costs exceeded benefits, toll tariff discounts were calculated as mitigation measures. In consequence the conclusion must be drawn that the upgrading and tolling of the N1 and N2 would be to the benefit of motorised public transport because the cost of public transport would be even higher if the roads are not upgraded.

However, in drawing such a conclusion we must again recognise the issue pointed out in several times above: that vehicle-operating costs are not discrete over time. In consequence there are potential cash flow and affordability issues that could create negative impacts. Affordability is an important issue in assessing the impact on public transport because of the relatively lower levels of income of people who use public transport.

In assessing the possible impact of the proposed toll roads on public transport an assumption was made that any cost increases would be passed directly onto commuters and bus and taxi owners would not bear any cost increase. This assumption is based on the fact that the demand for public transport is highly price inelastic because of the lack of alternatives.

It is also not clear that public transport providers would recognise cost savings and pass these on to their passengers in the form of lower fares. What might happen in the early years of the toll road is that bus and taxi operators would continue to charge the same fare as they do currently and simply add the toll charge to this. In consequence the user of public transport may experience increased road users costs equal to the value of the toll.

A simulation exercise was conducted to determine the toll tariff charges to commuters using public transport under various options. These toll tariff charges were then compared to the average income of the area in order to determine the potential degree of impact. This exercise was done only for the toll plaza option and not for ORT.

The simulation exercise is based on people travelling in taxis and buses. The toll tariffs used are those as given in Figure 1 for the N1 and N2 and the calculations did not take potential frequent user discounts into account. The assumptions underlying the calculations were that taxis would have ten passengers on average and busses would have thirty (these assumptions are deliberately conservative). Taxis paid class I vehicle tolls while busses paid class II. Finally the calculations were made for twenty-two monthly return trips and fifteen monthly return trips. In the former case this would be the impact on a regular commuter and in the latter case a frequent but


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not regular traveller. In this regard it should be noted that some of the longer regular commutes that are given are probably very rare – for example, a daily commuter from Hermanus to Cape Town travelling by taxi or bus.

Figure 96 reports the results to the simulation exercise for the N1/N2.

The tables are interpreted by way of the following example. Commuters travelling between Kraaifontein and Cape Town by taxi would pay an extra R2.08 per trip at the high tariff and 73 cents per trip at the low tariff. If that commuter makes twenty-two monthly return trips this is the annual equivalent of R1,098 at the high tariff and R384 at the low tariff. As a percentage of the average household income in the Kraaifontein area, the annual high tariff is 1.7% of average annual income and the low tariff is 0.6%. For travellers who make fifteen monthly return trips their annual toll charge is equal to 1.2% at the high tariff and 0.4% at the low tariff.

The interpretation of these tables must balance the relative weight of toll tariffs on income against the likelihood of particular trips being a regular occurrence. For example, at the high toll tariff commuting by taxi or bus between Kraaifontein and Cape Town could cost over one percent of average incomes. As such trips are likely to occur some people are going to be vulnerable to tolling. On the other hand, while the trip between Hermanus and Cape Town could equal seven percent of average income, the chances are small that this would be a regular occurrence.

On the N1 the most likely journeys are between Kraaifontein and Cape Town and, to a more limited extent, between Paarl and Cape Town. At the high toll tariff this represents 1.7% of average income, or R2.08 per trip extra in a taxi. It can be expected that the increased cost of a regular taxi or bus commute would be felt by poorer people.

On the N2 the most likely journeys are between Khayelitsha and Somerset West, Elgin/Grabouw and Somerset West, and Elgin/Grabouw and Hermanus. At the high toll tariff a taxi journey would cost R4.16, R6.24 and R8.32 more respectively. This is likely to prove expensive for those people for whom this is a regular commute.


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Figure 96: Toll charges per passenger for public transport on the N1 and N2 for toll plaza collection

Toll charges per passenger for public transport

Twenty two monthly trips Fifteen monthly tripsToll per trip Percent of average income Percent of average income

From To Mode High toll Low toll Annual high toll Annual low toll High toll Low toll

Annual high toll

Annual low toll High toll Low toll

Kraaifontein Cape Town Taxi 2.08 0.73 1,098 384 1.7% 0.6% 749 262 1.2% 0.4%Bus 1.76 0.61 927 325 1.4% 0.5% 632 221 1.0% 0.3%

Paarl Cape Town Taxi 2.08 0.73 1,098 384 1.5% 0.5% 749 262 1.1% 0.4%Bus 1.76 0.61 927 325 1.3% 0.5% 632 221 0.9% 0.3%

Khayelitsha Somerset West Taxi 4.16 1.46 1,098 384 3.2% 1.1% 749 262 2.2% 0.8%Bus 3.51 1.23 927 325 2.7% 0.9% 632 221 1.8% 0.6%

Helderberg Cape Town Taxi 4.16 1.46 1,098 384 1.0% 0.4% 749 262 0.7% 0.2%Bus 3.51 1.23 927 325 0.9% 0.3% 632 221 0.6% 0.2%

Elgin/Grabouw Somerset West Taxi 6.24 1.46 1,647 384 4.0% 0.9% 1,123 562 2.7% 1.4%Bus 3.51 1.23 927 325 2.2% 0.8% 948 474 2.3% 1.1%

Elgin/Grabouw Hermanus Taxi 8.32 4.16 2,196 1,098 5.3% 2.6% 749 374 1.8% 0.9%Bus 7.03 3.51 1,855 927 4.5% 2.2% 632 316 1.5% 0.8%

Hermanus Somerset West Taxi 14.56 6.24 3,844 1,647 5.7% 2.4% 1,747 749 2.6% 1.1%Bus 12.30 6.15 3,246 1,623 4.8% 2.4% 1,475 738 2.2% 1.1%

Hermanus Cape Town Taxi 18.72 8.74 4,942 2,306 7.3% 3.4% 3,370 1,572 5.0% 2.3%Bus 15.81 7.38 4,173 1,948 6.1% 2.9% 2,845 1,328 4.2% 2.0%


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Given the conclusions drawn above there is the need to allow for some mitigation measures to address any impact on very poor people using motorised public transport. In taking into account the mitigation measures proposed below two factors must be considered.

First, there are poorer communities who are vulnerable to increases in the cost of living irrespective of whether or not the proposed project reduces cost in the long run. Further, there are a few drivers of private vehicles who are vulnerable to increased costs.

Second, there is a policy imperative to move more to public transport and an efficient used of the transport infrastructure. Currently two branches of public transport are subsidised in order to achieve this – urban rail and buses. The major public transport mover of people - taxis – is not. A taxi subsidy would encourage more people into public transport.

It is proposed that a mitigation measure be adopted where taxis toll tariffs on the proposed project are fully or partially subsidised by the fiscus. Such a subsidy would achieve a number of simultaneous objectives.

• First, it would help vulnerable communities and travellers.

• Second, it would help achieve the policy objective of moving more commuters to public transport.

• Third, it would subsidise the taxi industry without the need for an administrative infrastructure and reduces the potential for corruption compared to alternative form of subsidy.


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7 MACROECONOMIC IMPACTS

Macroeconomic studies are marked by both what they can and what they cannot achieve. The latter usually occurs because an impact cannot be quantified in any rigorous way. In consequence the detailed reporting on the overall macroeconomic impact must be considered in the light of other, non-quantifiable, changes.

It is useful, in this regard, to recognise that a macroeconomic impact is triggered by an increase in demand. As demand for some product increases – clothing, food, etc – so production increases, incomes increase, expenditure increases and a multiplier process is set in motion. The overall change in income is measured as contribution to Gross Domestic Product (GDP).

Further, it is important to appreciate that a macroeconomic impact analysis is not the same as a cost benefit analysis. This has several implications. For example, changes in property values are very real in themselves. They might or might not result in changes in demand and therefore have macroeconomic impacts. A second example of this is the impact of traffic diversions and their potential impacts on accidents, pollution and road maintenance. This could cause increases in demand if accidents result in more panel beating, pollution results in more medical care and there is more spending on road maintenance. In consequence while traffic diversions are a clear cost they could result in increases in measured GDP.

In this study four sources of demand have been included. First is the impact of road construction. Second is the ongoing maintenance and operation of the proposed roads. Third are the road user benefits that would be generated. Fourth are the network savings that would be generated. The impacts that are reported here are only for the toll plaza option and not for electronic toll collection.

A number of economic impacts could not be taken into account.

• First, changes in property values and environmental impacts are not taken into account in these estimates.

• Second, the cost of traffic diversion was not included in this part of the study. This was the result of both technical and quantitative constraints. Technically the cost of traffic diversion would add to GDP when the secondary roads are repaired because this is an increase in demand for road repair services. This would be offset of course because the increased expenditure must either be financed by increased taxes/rates (which would result in a fall in demand) or by expenditure switching (which would also cause a fall in demand). Hence the overall macroeconomic impact of road repair as a result of traffic diversions would be the difference, if any, between the increased demand and decreased demand of the above choices. Other costs of diversion cannot be accounted for as macroeconomic impacts. Pollution and increased noise as a result of diversion clearly have social and economic effects but their macroeconomic effects must be reduced to changes in demand.

• Third, the macroeconomic impact of potential structural economic changes was not and could not be included in the macroeconomic estimates. It is very likely that the proposed toll roads would bring about a variety of structural economic changes. The proposed tolling may lead to positive economic benefits in the form of structural changes or the removal of economic


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constraints. The roads may, for example, promote trade if they reduce the time costs and vehicle operating costs for trucking and transport companies. In contrast, the proposed toll road could have localised negative effects on specific communities, business or sectors. If there is an industrial area that is, for example, ‘captive’ to the toll road, then it is likely that certain businesses may close and some would relocate. For those that close there is clearly a negative impact on GDP. For those that relocate there are relocation costs and falling productivity in the intervening period. Similarly, tolling may cause a shift of freight from road to rail shifting costs and benefits between road and rail carriers. While we recognise these issues they have not been included in the macroeconomic estimates.

7.1 General description of macroeconomic effects

While there are a number of different types of macroeconomic effects, the two most important are contribution to GDP and creation of jobs. The importance of job creation is obvious. Increases in GDP are synonymous with increases in peoples’ economic standards of living. Increased GDP – i.e. increased production – is experienced in the form of more jobs, higher wages and reduced economic hardship. It is clearly an important measure.

The actual task of calculating the macroeconomic impact of the proposed toll roads demanded a detailed and multifaceted approach not least because of the so-called multiplier effects. It is well recognised that the simple act of spending – construction a road, for example, - leads to other economic effects. Demand for steel and cement can lead to increased production in those industries. Increased demand for steel and cement, in turn, leads to increased demand for mining output which uses wood, water, electricity and so on. These are the, so-called, multiplier effects.

While this process unfolds, each industry employs people and pays wages. Employees, in turn, spend their wages and cause a further multiplier effects through the economy. Measuring this is further complicated by the fact that different industries demand different types of skills. This leads to different wages structures across the various industries. People earning different wages have different spending patterns. Thus, the change in overall spending patterns is dependent on which industries are affected.

7.1.1 Construction and operation

Input-output analysis was used for the measurement of the macroeconomic impact of the construction and operation of the proposed toll roads. This approach demands that all expenditure in and around the toll roads be identified and estimated. This expenditure, in turn, needs to be linked to the Standard Industrial Classification of all Economic Activity (SIC codes). In addition, if employment is part of the expenditure then estimates must be made of the likely items of expenditure as a result of wage payments. Allowances must also be made for the fact that workers at different income levels have different spending patterns.

The expenditure areas that were identified are:

• Constructing and upgrading the N1 and N2, the mainline and ramp plazas and installing the electronic tolling equipment.

• Ongoing capital expenditures such as upgrading of the roads and facilities.


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• Operating and maintaining the toll roads and plazas. This includes patrolling the roads and providing emergency services.

• Concession company costs, such as legal and technical advice, administration of contracts, monitoring of the toll plazas, etc.

Five steps are required to measure the overall economic impact of the construction and upgrade phase of the toll roads and the associated plazas.

• First, to identify an appropriate bill of materials. The standard composition of a Bill of Quantities for a road construction project was used, with the proportion and allocation of costs for the different roads and subsections verified by the estimators for the proposed project.

• Second, to determine the relative proportions of profit, labour, plant and material for each line item in the bill of materials.

• Third, to assign each item of material and plant in the bill of quantities to the appropriate SIC code.

• Fourth, to decompose labour and profit into income categories and apportion the total wages and profits to each income category. Following this, estimates of expenditure patterns by income category are used to determine total spending patterns.

• Finally, all the items in the SIC coded bill of materials are brought together. The total multiplier effect of the construction phase is calculated as the aggregate product SIC coded spending on plant and material, as well as SIC coded spending by workers multiplied through the national multipliers. The national multipliers are known through the South African input output tables (CSS 1993)

The overall economic impact operation and maintenance was undertaken in a manner similar to that outlined for capital expenditure. The operation and maintenance of the toll roads is divided into:

• management costs, • plaza personnel and vehicle costs, • plaza maintenance costs, • road maintenance personnel and vehicle costs, • road maintenance material costs, • patrol response personnel and vehicle costs and, finally, • general maintenance expenses.

For the purpose of determining multiplier effects each category of expenditure was consolidated into a single financial model. Following from this all expenditure was decomposed and classified according to its appropriate SIC classification.

7.1.2 Network work capacity and road user benefits

The following steps were taken to calculate the contribution to GDP of changes in network capacity and the saving in business time.

• The immediate savings to road users and the immediate savings to users of the road network were calculated in Section 3.2.2 above.


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• The business time savings were then isolated from the road user savings. All other savings are either non-financial savings (e.g. leisure time) or the savings would merely be spent elsewhere in the economy (e.g. savings in petrol would be spent on other consumer goods). The only saving that could be quantified and spent more productively elsewhere is therefore business time savings.

• The savings in business time was then distributed into the economy according to typical business sector spending patterns and the multiplied impact calculated.

7.2 Contribution to Gross Domestic Product

Gross Domestic Product is the total value of all final goods and services produced in the country. It is clearly fundamental to the economic quality of life of people in the country. It is also the most important and all encompassing measure of the macroeconomic effect of the proposed toll road. Figure 97 and Figure 98 report on the contribution to GDP and the composition of this change.

The proposed project has the capacity to make a contribution to GDP of between R931.8m and R1.51bn during the first three years of construction, with a cumulative contribution of over R4bn during that period. By the end of the concession period the contribution to GDP could be as high as R557m with a large part of the stimulus coming from business time savings. The proposed project has the capacity to make a cumulative contribution to GDP of over R14bn by the end of the contract period. Construction makes most of its contribution to GDP during the first three years of the proposed project. From year 3 onwards, the operating costs contribute constantly to GDP while the capital costs vary due to periodic maintenance and upgrades. With only a few exceptions, operating costs exceed ongoing capital costs after the initial construction period.

Figure 97: Contribution to GDP

Contribution to Gross Domestic Product - South AfricaRand million, 2007 pricesFinancial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 1,514.0 1,305.1 931.8 0.0 102.9 158.1 101.4 121.4Operating & Maintenance Costs 35.5 49.5 87.1 84.3 87.0 88.4 92.4 94.5Concession Company Costs 32.1 33.1 34.2 27.5 54.0 49.2 29.7 137.5Business Time Savings 33.2 82.5 107.9 149.4 203.6Total Contribution 1,581.5 1,387.7 1,053.1 145.0 326.4 403.6 373.0 557.1Cumulative Contribution 1,581.5 2,969.2 4,022.3 4,167.3 5,206.8 7,241.4 11,247 14,087

The magnitude of the relative contributions to GDP is indicated in Figure 98. It can be clearly seen how the initial construction costs are the largest contributor to GDP, and how over time the business time savings increase to become the major contributor.


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Figure 98: Contribution to Gross Domestic Product

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7.3 Job creation

The proposed toll roads would result in changes to three types of jobs. The first are the direct jobs that would be created over the 30-year concession period. These are jobs directly on construction and operation of the toll roads. The second are the, so-called, indirect jobs that are due to multiplier effects. The third type of change in jobs results from the structural economic changes attributable to the proposed toll roads. There can be job increases because the upgrading of the N2, for example, results in greater business and commercial opportunities and more employment. There can be job losses or job relocations as a toll road impacts, for example, on a captive industrial area and reduces the customer base.

As with the estimates of contribution to GDP above, only the first two types of job affects – direct and indirect - are reported in this section. Figure 99 reports on the total number of direct jobs that would be generated by the proposed project of which the overwhelming number would naturally be in the Western Cape. There is the potential to generate between 1,154 and 1,323 jobs annually during the initial construction phase. Subsequent maintenance and occasional increases in road capacity would continue to generate a limited number of direct jobs in construction. After construction and upgrading are complete about 600 direct and sustainable jobs would created in the concession company and in operation and maintenance. The increased productivity due to business time savings could generate as much as 148 direct jobs by the end of the concession period.

Figure 99: Total Direct Jobs

Contribution to Direct Jobs - Western Cape

Financial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 1,044 900 642 0 71 109 70 84Operating & Maintenance Costs 154 215 378 366 377 383 401 410Concession Company Costs 126 130 134 108 211 193 116 538Business Time Savings 24 60 78 109 148Total Contribution 1,323 1,244 1,154 498 720 764 696 1,180


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Just as there are multiplied impacts on GDP, so too are there multiplied impacts on jobs. These are the so-called indirect jobs. The indirect jobs are reported in Figure 100. There is the potential to generate between 1,298 and 2,109 indirect jobs during the initial construction period. In 2011 an additional 230 indirect jobs are created due to operating & maintenance and concession company costs. These job numbers increase to 477 at the end of the concession period in 2037.

As with the contribution to GDP, the major contributor to jobs after construction and the potential savings in road user costs and their resultant impact on demand. These in turn lead to increased spending and the generation of indirect jobs. These jobs, along with other direct and indirect jobs could generate total sustainable jobs of up to 60 by the end of the concession period.

Figure 100: Total Indirect jobs

Contribution to Indirect Jobs - South Africa

Financial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 2,109 1,818 1,298 0 143 220 141 169Operating & Maintenance Costs 73 102 179 173 179 182 190 194Concession Company Costs 66 68 70 57 111 101 61 283Business Time Savings 57 142 186 257 350Total Contribution 2,248 1,987 1,547 287 575 689 649 997

Total direct and indirect job numbers are presented in Figure 101. During the construction period the proposed project has the potential to create up to 3,571 direct and indirect jobs. Thereafter it is anticipated that total job numbers would oscillate between 735 and 2,177.

Figure 101: Total number of direct and indirect jobs

Contribution to Total Jobs - South Africa

Financial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 3,152 2,717 1,940 0 214 329 211 253Operating & Maintenance Costs 227 317 557 539 556 565 591 604Concession Company Costs 192 198 204 164 323 294 178 821Business Time Savings 81 202 264 366 498Total Contribution 3,571 3,232 2,701 785 1,295 1,452 1,345 2,177

One of the most pressing problems in the Western Cape is unemployment and poverty. As demonstrated above, the proposed toll roads have the capacity to contribute to job creation. They also have the capacity to contribute to poverty alleviation because of the significant number of jobs created at the low income level. Figure 102 outlines the distribution of jobs between three different income categories for the construction phase.

Figure 102: Distribution of jobs between different income categories

Construction Jobs 2008 2009 2010High 228 196 140Medium 60 52 37Low 756 652 465Total 1,044 900 642

During construction over 72% of the total direct jobs would go to workers at the lower end of the income spectrum. This is clearly the area where job creation is the most important.


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7.4 Contribution to Gross Geographic Product

Gross Geographic Product (GGP) is the provincial equivalent of national GDP. While many of the direct benefits would be felt within the province there would be indirect effects on other provinces. When people spend their wages, they buy materials from all over the country and from other countries. Although the Western Cape can boast about producing the best wine and some of the best food in the country, other products such as paper tissues, toilet soaps and cleaning materials are often brought in from other provinces. Hence a project’s contribution to provincial GGP, in the province that the project is located, can often be much less than its contribution to GDP. The contribution to provincial GGP is reported in Figure 103 below.

Figure 103: Contribution to Western Cape GGP

Contribution to Gross Geographic Product - GautengRand million, 2007 pricesFinancial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 179.1 154.4 110.3 0.0 12.2 18.7 12.0 14.4Operating & Maintenance Costs 7.4 10.3 18.1 17.5 18.0 18.3 19.2 19.6Concession Company Costs 6.0 6.2 6.4 5.1 10.1 9.2 5.6 25.7Business Time Savings 6.1 15.1 19.8 27.4 37.3Total Contribution 192.5 170.9 134.7 28.7 55.4 66.0 64.1 96.9Cumulative Contribution 192.5 363.4 498.1 526.8 720.0 1,051.7 1,743.3 2,230.5

After taking account of all multiplier effects it is estimated that the proposed project would make an annual contribution to GGP of between R134.7m and R192.5m for the three years they are under construction. This contribution is expected to continue such that the contribution is R55m by 2016, over R64m by 20315 and nearly R97m by 2037. GGP is important not just because it is income but also because income has the capacity to add to wealth. Based on these projections, the toll roads would add over R2.2bn to provincial GGP by the end of the contract period.

7.5 Other macroeconomic effects

Apart from the key macroeconomic effects discussed above, there are many other macroeconomic effects that would flow from the construction and operation of the proposed toll roads. These include the generation of income tax, company tax, other capital expenditure and indirect household income. Figure 104 reports on total income tax that would be generated and Figure 105 on the indirect generation of household income.

Figure 104: Contribution to Income Tax

Contribution to Taxes - South AfricaRand million, 2007 pricesFinancial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 101.5 87.5 62.5 0.0 6.9 10.6 6.8 8.1Operating & Maintenance Costs 6.4 8.9 15.7 15.2 15.7 15.9 16.6 17.0Concession Company Costs 3.8 3.9 4.1 3.3 6.4 5.9 3.5 16.4Business Time Savings 3.7 9.2 12.0 16.6 22.7Total Contribution 111.7 100.4 82.3 22.2 38.2 44.4 43.6 64.2Cumulative Contribution 111.7 212.1 294.4 316.5 457.4 680.6 1,149.0 1,474.6

Between R82.3m and R111.7m in income taxes would be generated annually during the initial construction and upgrading of the proposed project. As the contribution of construction tapers off so the contribution of operations & maintenance costs, concession company costs and savings to business time make their presence felt. By 2021 over R44m in income tax would be generated and in 2037 this amount totals R64.2m. The cumulative contribution to taxes would total nearly R1.5bn by 2037.


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Figure 105: Indirect contribution to household income

Contribution to Indirect Household Income - South AfricaRand million, 2007 pricesFinancial Year 2008 2009 2010 2011 2016 2021 2031 2037Construction, Expansion & Rehabilitation Costs 474.8 409.3 292.2 0.0 32.3 49.6 31.8 38.1Operating & Maintenance Costs 19.8 27.6 48.6 47.1 48.5 49.3 51.6 52.7Concession Company Costs 17.9 18.4 19.0 15.3 30.0 27.4 16.6 76.5Business Time Savings 16.2 40.3 52.7 72.9 99.4Total Contribution 512.5 455.3 359.9 78.5 151.1 179.0 172.8 266.7Cumulative Contribution 512.5 967.8 1,327.6 1,406.2 1,934.1 2,836.5 4,724.3 6,051.2

Similarly, there is between R360m and R513m annual contribution to indirect household income during the initial construction phase. After this time the indirect contribution to household income drops off to R78.5m in 2011. This increases again to R266.7m by 2037. Overall the proposed project has the capacity to add a cumulative total of over R6bn by 2037.

7.6 Comparative Macroeconomic effect

This final section provides some comparative data on the overall macroeconomic effect of the proposed toll roads. Here we are interested in the overall contribution of the toll roads to South African. Figure 106 illustrates these comparative measures.

Figure 106: Comparative macroeconomic effect

The Contribution of the Proposed Toll Roads to GDPExcludes Road User Cost Savings

2006 2007 2008 2009 2010 2011 2016 2021 2031 2037South African GDP (R bn) 1,727 1,899 2,013 2,134 2,262 2,398 3,209 4,294 7,690 11,563Toll Road Contribution to GDP (R bn) 1.6 1.4 1.1 0.1 0.3 0.4 0.4 0.6Percentage Contribution by Toll Roads 0.08% 0.07% 0.05% 0.01% 0.01% 0.01% 0.00% 0.00%

Assumptions:1. South African GDP (2006): Source - SA Reserve Bank Quarterly Bulletin2. Nominal increase in GDP between 2006 and 2007 10%3. South African Real GDP Growth from 2007 onwards 6%

It will be appreciated that while the proposed toll roads would make a macroeconomic contribution at a national level, the effect relative to the entire economy is modest. Nevertheless there is an effect and the effect is quantifiable. The contribution to South African GDP is 0.08% in 2008, dropping slightly to 0.07% in 2009 and 0.05% in 2010. During the later years when the ongoing capital expenditure amounts reduce and the toll roads are in full operation the contribution to GDP is in the order of about 0.01%.


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8 CONCLUSION

The study found that many of the relevant road sections of the N1 and N2 are approaching the end of their design life. The left-hand lane of the N1 and parts of the N2 are already showing signs of deterioration with uneven surfaces and road cracking. In addition to this, current traffic volumes are congesting certain sections of the roads, leading to slower travelling time and greater risks of accidents. This problem is further compounded as forecasts in traffic growth indicate serious congestion along most sections of the roads. This indicates that the N1 and N2 need serious rehabilitation and capacity upgrades within the very near future.

There is also an apparent need for urgency. It is well known that roads do not deteriorate steadily over time. Rather, road damage and the cost of reconstruction accelerate as a road nears the end of its design life. Hence, given the fact that the roads are nearing the end of their design the urgency is due to the fact that the longer the rehabilitation is left the more it would cost.

The key issue is how to pay for the rehabilitation and upgrading. The most cost-effective way to pay for this rehabilitation and upgrading is through a combination of fuel levies and special levies for heavy vehicles. The special levies are necessary because, while heavy vehicles do the most damage to roads, these damages are not fully recovered in the fuel levy. The major constraint on the effective implementation of such a scheme is the financial policy on the part of government that fiscal integrity means that there should be no earmarking of funds. Hence all revenues raised, including the fuel levy, go into a common revenue fund and expenditures are made from this fund.

The political reality of extensive poverty and hardship in the country, as well as the need to address these issues, have resulted in budgetary allocations in favour of poverty alleviation, etc, and at the expense of other areas of expenditure – like road maintenance. In consequence while tolling is a second best way of paying for roads, political realities suggest that it is the only likely option.

There could be certain losses in efficiency as a result of this choice but there is also the potential for gains in economic efficiency. The efficiency losses are the possibility of higher financing costs, the profit made on revenue collection, the cost of running the toll plazas and concession company, and the cost of traffic diversions. Potential efficiency gains are the imposition of the user pay system, and the potential for differential toll tariffs. The first differential toll could see heavy vehicles paying for their fair share of road damage. The second is the opportunity to introduce congestion tolling.

Clearly there is a trade off between equity and efficiency. The least cost way of funding any road project is through a fuel levy. This avoids all of the costs associated with tolling. It is however not necessarily equitable because all users of fuel would be paying for the project and might not necessarily benefit from the project. In the study an estimate was made of the cost of tolling. The cost of tolling is not just the physical cost of the toll plazas but would include higher financing costs, profits and the cost of diversion because of tolling. The cost of tolling was estimated by comparing the costs and benefits of upgrading the N1 and N2 and not tolling the roads to the identical upgrade with traditional toll plaza tolling, on the one hand, and open road tolling, on the other. It was found that the financial cost of tolling using toll plazas has a net


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present value (NPV) of R6bn and an economic NPV of R5.9bn. The financial cost of ORT has an NPV of R2.1bn and an economic NPV of R1.6bn.

In order to put the above results into perspective some calculations were made with regard to the vehicle kilometre cost of tolling. This is reported for both toll plaza collection and ORT. In both cases two sets of results are reported. The first set is for the full cost of tolling. These costs include the changing costs to all drivers. In the absence of tolling more vehicles would be attracted the roads and off the existing network. This in turn alters the costs and benefits of other people who would have been on the N1 and N2 in any case as well as other drivers on the existing network. The second set of results is just for the cost of toll collection itself without taking into account any changes in road user costs. It was found that:





It should be recognised that if the roads are upgraded and tolled it would cost more to drive on the roads than it does currently. It should also be recognised that it would cost more if the roads are not rehabilitated because of the increased costs of poorer quality, more dangerous and more congested roads. Two key issues emerge from this. The first is which of the alternatives costs less. The second is to identify vulnerable communities and road users with the intention of developing mitigation measures against any cost increases.

A cost benefit analysis was undertaken in order to address the first issue. It was found that:

• In all configurations of the analysis both the financial and economic analysis indicate that upgrading and tolling the N1 and N2 is both financially and economically positive. In other words the cost increases of upgrading and tolling the roads are less than the cost increases not upgrading the roads. This follows because the reduction in road user costs is greater than the cost of upgrading the roads.

• The financial NPV of the do nothing option is R17bn more than upgrading and tolling using tradition toll plazas. The difference in the economic NPV is R14bn. Upgrading and tolling is therefore preferable to the do nothing option.

• The financial NPV of the do nothing option is R20.9.bn more than upgrading and tolling using open road tolling. The difference in the economic NPV is R18.7bn.


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• Open road tolling is financially and economically more efficient that using plazas. The difference in the financial NPV between using plazas and ORT is R3.9bn while the economic NPV is R4.4bn.

It was found that, apart from a few important exceptions, most users of the proposed toll roads would have positive road user benefits from the proposed project. It was also found that, in aggregate, the proposed toll roads would generate overall road user benefits that are greater than road user costs. Simply put this means that road user benefits would be greater by driving on the upgraded toll roads than on the existing roads. This is due in earlier years to rapid deterioration in the existing road quality as the roads near the end of their design life and in latter years due to increased congestion and slower travelling times if the roads are not upgraded.

There are a number of key exceptions to these general conclusions.


• The second, and more important, exception is that certain categories of road users would face increased costs for considerable periods of time at the proposed toll tariffs. There are three specific cases. On the N1 these are for journeys between De Doorns/Touws River and Cape Town. This is felt most acutely for journeys between De Doorns/Touws River and Worcester. On the N2 these are for journeys between Grabouw and Somerset West at the high tariff during peak traffic and at both medium and high tolls during off peak times.

• It was found that, given the exceptions above, the road user benefits accrue more than proportionately to heavy vehicles rather than light vehicles.

There are two groups of road users who are potentially vulnerable to tolling. First are a number of less affluent vehicle owners who make intensive use of the roads. Second, because of their precarious financial position, are the fruit export industries of the Western Cape. It must however be recognised that in the absence of upgrading and tolling the road user costs of these vulnerable groups would increase by even more than for the proposed project and there would be considerably less opportunity for mitigation measures. Other industries or businesses that may be vulnerable to tolling include some businesses in Joostenbergvlakte and Kraaifontein Industria; Tygerberg Zoo; Firlands Service Station; and the three ‘farm stalls’ on the N2.

In addition the potential exists to encourage a move to motorised public transport by introducing government subsidies for tolling of taxis and buses. Such subsidies would further help to protect the poor and marginalised from the inevitable impact of higher transport costs.

The proposed project would make a substantial contribution to gross domestic product and the creation of direct and indirect jobs.

• The proposed project has the capacity to make a contribution to GDP of between R931.8m and R1.51bn during the first three years of construction, with a cumulative contribution of over R4bn during that period. By the end of the concession period the contribution to GDP could be as high as R557m with a large part of the stimulus coming from business time savings. The


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proposed project has the capacity to make a cumulative contribution to GDP of over R14bn by the end of the contract period.

• The proposed toll roads would result in the creation of direct and indirect jobs. There is the potential to generate between 1,154 and 1,323 jobs annually during the initial construction phase. Subsequent maintenance and occasional increases in road capacity would continue to generate a limited number of direct jobs in construction. After construction and upgrading are complete about 600 direct and sustainable jobs would created in the concession company and in operation and maintenance. The increased productivity due to business time savings could generate as much as 148 direct jobs by the end of the concession period.

• Just as there are multiplied impacts on GDP, so too are there multiplied impacts on jobs. These are the so-called indirect jobs. There is the potential to generate between 1,298 and 2,109 indirect jobs during the initial construction period. In 2011 an additional 230 indirect jobs would be created due to operating & maintenance and concession company costs. These job numbers increase to 477 at the end of the concession period in 2037.

• During construction over 72% of the total direct jobs would go to workers at the lower end of the income spectrum. This is clearly the area where job creation is the most important.


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