South Africa Transportation Projects Funding

CE
392U TRANSPORTATION SYSTEMS MANAGEMENT
ASSIGNMENT #4
Abhishek Agarwal
Submitted on: 10/15/2016
0
CE 392U Transportation Systems Management Abhishek Agarwal
Introduction
Development of adequate and efficient transport infrastructure is one of the immediate
priorities for any country, especially the developing ones. Such infrastructure is key to
facilitating the realisation of the aspirations for rapid economic and social development
necessary for uplifting the standards of living of the citizens and, hence, eradication of
poverty. This report is an effort to analyse how various transportation projects are funded in
South Africa and compare it with that of the United States.
Funding Transportation Projects in South Africa

2011/12 2012/13 2013/14
R Billion Outcomes
Energy 67.1 75.1 69.5
Water and Sanitation 19.2 22.6 26.2
Transportation and logistics 70.1 69.5 76.4
Other economic services 11.5 8.9 11.8
Health 7.7 9.7 10.6
Education 7.8 9.8 12.3
Other social services 15.7 10.7 10.3
Justice and protection services 2.8 4.4 4.0
Central government, administration services and financial
6.5 6.9 5.8
services
TOTAL 208.3 217.7 226.9
National departments 6.6 9.6 10.6
Provincial departments 43.4 36.4 39.5
Local government 33.2 41.7 47.1
Public entities 15.4 14.1 13.0
Public Private Partnerships 10.7 2.6 3.0
State-owned companies 98.9 113.4 113.7
TOTAL 208.3 217.7 226.9
Table 1: Public-sector infrastructure spending and their sources
Above table illustrates expenditure towards public-sector infrastructure in South Africa for 3
consecutive years. In the bottom half, the table shows the various sources of these funds. As
we can notice, almost all funds have been provided by the government entities with little
participation of the private sector. The state-owned companies (SOCs) are the biggest
contributors of the fund. These SOCs are financed from a combination of own revenue,
borrowings and private funding. One of such SOCs is the South African National Roads Agency
SOC Limited (SANRAL).

SANRAL is in charge of all matters concerning the national road network. These include the
financing, management, control, planning, development, maintenance, and rehabilitation of
national roads. SANRAL is owned by the South African government.

Page 1 of 4

Some of sources of funds for SANRAL are:

1. Capital Investments
2. Fuel Taxes
3. Loans
4. Interest from cash balances or investments
5. Revenues from:
a. Sale of assets
b. Tolls
c. Fines
d. Managing assets
e. Grants
6. Parliamentary appropriations

SANRAL manages toll and non-toll operations as two separate business areas for the purpose
of management and cash-flow obligations.

Non-Toll Roads
At present, 81% of the road network consists of non-toll roads most of which are funded by
tax revenue generated by the national government. A breakdown for the same has been given
below:

Category Year Fund source Amount in $ % of Total
Non-Toll Roads 2012-13 Government Appropriations 682 Million 96.5%
Other Income 24.9 Million 3.5%
Table 2:Sources of funds for building non-toll roads
Toll Roads
Currently, 19% of South Africa’s national road network consists of toll roads. Out of this 19%,
11% are SANRAL funded toll roads and the remaining 8% are privately funded toll roads. The
way SANRAL raises funds for toll roads is by a mix of toll revenues and capital market
borrowings which may include government backed bonds and foreign direct investment. The
total budget for toll-road development and management for 2012-13 was $329 Million.

The following table depicts South Africa’s Department of Transportation’s expenditure on
various programs for the year 2012/13:

Programme Amount in $ (TOTAL: $2.7 Billion)
Administration 22.2 million
Integrated Transport Planning 6.2 million
Rail Transport 722.5 million
Road Transport 1.25 billion
Civil Aviation 4.9 million
Maritime Transport 9.7 million
Public Transport 700 million
Table 3:DoT's expenditure on various transportation programs
Page 2 of 4

Comparison of Funding Sources

Both South Africa & the United States of America (USA) have similar framework as to how
their transportation ministries are funded. The USA government uses Federal taxing authority
to levy taxes through trust fund. South Africa levies taxes which go directly to it’s national
treasury. Both countries then transfer funds to various government entities responsible for
carrying out various transportation projects throughout the country.

The following table gives us a glance over the major sources of USA’s Highway Trust Fund in
the year 2012:

Sr. Source Amount % Contribution to
No. Trust Fund
1 Gasoline $21,539,982,663 57.22%
2 Diesel and special motor fuels $8,646,034,959 22.97%
3 Tires $420,130,907 1.12%
4 Trucks and Trailers $3,855,111,065 10.24%
5 Federal use tax $1,719,066,679 4.57%
6 Transfer from leaking underground
$2,400,000,000 6.38%
storage tank trust fund
Table 4: Sources of revenue for the Highway Trust Fund
In the case of South Africa, there is no such dedicated “Trust Fund” and instead there are
direct transfers from the national treasury. The national treasury collects taxes in the form of
personal taxes, corporate taxes, value added tax (VAT) on the sale of goods and products, and
various other sources. The following table, for the year 2012-2013, gives us a glance over
some of the sources of revenue for South Africa’s National Treasury which are relevant to
transportation:

Sr. Source Amount As a % of Transportation Projects
No. Spending
1 Fuel levy $2,834,138,712 58.1%
2 CO2 emission tax $109,000,000 2.25%
Table 5: Sources of revenue for the National Treasury relevant to transportation
South Africa has other avenues for revenue generation for transportation purposes such as
vehicle sales tax and annual vehicle use tax which contribute towards it’s national treasury.
The table below gives a side by side comparison of various major sources in both Unites States
of America and South Africa:

Sr. No. Source USA South Africa
1 Gasoline tax 18.4 cents per gallon 75 cents a gallon
2 Diesel tax 24.4 cents per gallon 71 cents a gallon
3 Vehicle sales tax State managed 14% VAT + ad valorem excise duty
4 Annual vehicle tax State managed Provincial
Table 6: Side-by-side comparison of transportation funding sources in both countries
Page 3 of 4

References
1. South Africa fuel levy http://www.shell.co.za/motorists/shell-fuels/petrol-price.html
2. Taxes levied on road transport in Southern African countries
http://www.homepages.ucl.ac.uk/~uctpa15/gauteng_roadtax090804.pdf
3. South Africa’s DoT’s annual report
http://www.transport.gov.za/Portals/0/Annual%20Reports/DoT%20Annual%20Repo
rt%20WEB.pdf
4. National funding of road infrastructure in South Africa
http://www.loc.gov/law/help/infrastructure-funding/southafrica.php#_ftnref27
5. South Africa’s public sector infrastructure spending
http://www.treasury.gov.za/documents/national%20budget/2015/review/Annexure
%20b.pdf
6. South Africa’s Tax Statistics http://www.sars.gov.za/About/SATaxSystem/Pages/Tax-
Statistics.aspx
7. US highway trust fund revenue sources
http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/government_tr
ansportation_financial_statistics/2014/table_1c.html
8. US DOT budget and performance
https://www.transportation.gov/mission/budget/dot-budget-and-performance-
documents#BudgetHighlights

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CE

392U TRANSPORTATION SYSTEMS MANAGEMENT

Funding Transportation Projects in South Africa

Some of sources of funds for SANRAL are:

Comparison of Funding Sources

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