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ROAD FUNDING DEMANDS AND PRACTICES

This document provides an overview of the funding demands and practices for the South African road network, including information on toll roads, road backlogs, budget requirements, and funding sources.

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ROAD FUNDING DEMANDS AND PRACTICES

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  1. ROAD FUNDING DEMANDS AND PRACTICES March 2018 Louw Kannemeyer

  2. South African Road Network - 2017 Un-Proclaimed Roads = Public roads not formally gazetted by any Authority SANRAL - 2,952 km of 22,203 km network tolled, representing 13 % of SANRAL network, 0% of the total and 2.0 % of the surfaced network of South Africa

  3. South Africa has the 10th Longest Total and 18th Longest Paved Road Network in the World Roads Represents one of the largest public infrastructure investments in most countries RSA Road Replacement Cost >R2 Trillion

  4. Paved Provincial – 2013 Visual Condition Index

  5. Gravel – Provincial VGI 2013

  6. Road Backlogs ? • Which Backlog: • Routine Maintenance – Potholes, Crack Sealing, Grass Cutting, Drainage ? • Periodic Maintenance – Reseal/Overlays • Rehabilitation/Strengthening – Reworking existing layers + new base • Capacity Expansion – Additional Lanes • Upgrading – Gravel to Surface Standard • New – Brown/Green Fields construction • How do you Quantify the Backlog: • Roads in poor to very poor condition ? • Using what criteria - VCI, IRI, Rut, Combination ? • Using which limits – Is IRI > 4.21 not acceptable on surface road carrying < 250 vehicles per day ? Need to carefully look at numbers As you might be comparing Appels to Sharks

  7. Strengthening/Regravel Backlog Scenario 2013 Estimate (VCI) Notes: Based on actual visual condition data for 2013 for SANRAL and Provinces, and 2009 for Metros and Municipalities. Based on length of roads in Poor to Very Poor Condition base on Visual Condition Index. The above backlog excludes backlogs related to periodic resurfacing of the network, upgrade of gravel roads to surfaced standard, addition of additional lanes to alleviate congestion and construction of new roads. Also assumes that each road in poor to very poor condition will be economically viable to strengthen / regravel (Traffic).

  8. Budget Requirement versus Allocation 2013 Estimate (VCI) • Notes: • The estimated funding requirement to sustain the South African Road Network is R65,8 bn (R2013) – R86 bn (R2018) per annum. • To address the identified backlogs as follow: • strengthening for paved roads over 5 year period, • re-gravel roads over 10 year period, • gravel road surfacing over 10 year period, • capacity expansion over 10 year period • Will require an additional R23.3 billion (R2013) per annum. • Total Budget Requirement = R89,1 billion (R2013) – R116.1bn (R2018) • Allocation for Roads in 2017/18 = R52 billion (44.5%) • WHAT CAN WE AFFORD AND HOW DO WE PRIORITISE ?

  9. BUDGET FOR ROADS Notes: Current Fuel Levy R3.15 (R3.37)/l for petrol (77.5%) and R3.0 (R3.22)/l for diesel (22.5%) * To be confirmed by treasury, no growth allowed due to vehicle technology impact. ** Income collected by provinces and not ring fenced for roads only. *** Excludes indirect allocations made from DORA allocations by authorities or raised through rates and taxes at municipal level. Currently no additional budget available from Fuel Levy – Are we spending available budgets efficiently Sustain – R86 billion (2018) will require an additional R 1.51 per litre of fuel = R4.88 Total – R116.1 billion (2018) will require an additional R 2.84 per litre of fuel = R6.21

  10. Fuel Price Comparison (2017 Bloomberg) Affordability - Percentage of a day’s wages needed to buy a litre of fuel. Income Spent - Percentage of personal income spent each year filling up. Fuel consumption are based on UN data for motor gasoline by road in 2013 Just comparing the price of fuel in South Africa to rest of world, ranked 18th highest, result in the view that room to increase exist, but when you consider the affordability 56th and income spent 60th ranking that view changes !

  11. Total Life Cycle Transportation Costs Very Good Very Poor Road User Cost is up to 90% of Total Life Cycle Transportation Cost

  12. Economic Development Follows Road Investment Alandale 2016

  13. SANRAL FUNDING TOLL - 2,952 km (13%) SANRAL Toll Section 33(2) of SANRAL Act Not for profit Funded through bonds & loans – capital market Government Guaranteed – SZ and HWAY bonds Non-guarantee - NRA bonds, EIB loan, ECA loan Borrowing limit set by Treasury Receive toll income (CPI Adjustment) TO REPAY LOANS and Future Operational and Maintenance Costs Concession Agreements (PPP) Off Balance Sheet (1,271 km) 30 Year Period Receive toll income (CPI Adjustment) TO REPAY LOANS and Future Operational and Maintenance Costs NON-TOLL - 19,251 km (87%) Receive Government Grant (Vote 35 - DOT) No borrowing allowed Co-funded projects where appropriate

  14. SANRAL Toll Funding Benefits Enabled delivery of much needed infrastructure sooner and faster with associated Economic and Road User Benefits

  15. SANRAL Major Expansion Projects Note: These capacity expansion projects was previously planned to occur through Tolls (high traffic volumes), if no longer possible, then SANRAL will require an additional R12bn per year for the next 10 years from ANOTHER funding source (R0.53 per litre).

  16. ROADS FUNDING INSUFFICIENT ? Current sources of funding – Fiscus (Fuel Levy/License Fees/?) Old (11 L/100km), New (6 L/100km), Hybrid (2 L/100km), Electric (0 L/100km) ? Old (R34.6/100km), New (R18.9/100km), Hybrid (R6.3/100km), Electric (R0/100km) yet they all use the same Road space at a time Older vehicles (Poor) subsidising New vehicles (Rich) Current sources of funding – Tolls Resistance to e-Tolls How do you fairly charge for road use going forward ?

  17. COST OF ROAD CRASHES REDUCING ROAD CRASHES CAN MAKE SAVINGS AVAILABILE FROM OTHER ENTITIES (RAF) OR DEPARTMENTS (HEALTH) FOR TRANSPORT INFRASTRUCE

  18. COST OF ROAD CRASHES REDUCING ROAD CRASHES CAN MAKE SAVINGS AVAILABILE FROM OTHER ENTITIES (RAF) OR DEPARTMENTS (HEALTH) FOR TRANSPORT INFRASTRUCE

  19. LAND USE DENSIFICATION Gauteng versus London NEED TO LIMIT LOW DENSITY URBAN SPRAWL

  20. FUTURE TECHNOLOGY IMPACTS Autonomous Vehicles / Mobility as a Service (Maas) Autonomous Vehicles • 2025 – Level 4 • Benefits: • Accident Reduction • Closer following distances - increasing capacity of existing roadways • Intersection Efficiency • No road signs / lane markings /safety barriers - Dynamic lanes that can shift direction • Significant parking reduction (23 hours) • Mobility for All (No Driver Licence) • Distance to work - Increase Mobility as a Service (Maas) • The provision of transport as a flexible, personalised on-demand service that integrates all types of mobility opportunities and presents them to the user in a completely integrated manner to enable them to get from A to B as easily as possible. • Already now (Uber, Google Waze) but real change with autonomous vehicles ! • Benefits: • Private Vehicle Ownership Reduction • Significant parking reduction • Tracking user demand in real time and optimising demand dynamically with available capacity • Dynamic pricing to encourage users to avoid peak time services and spread demand 1. BIG REALTIME DATA !!! 2. Consumer Rewards Mindset

  21. FUTURE TECHNOLOGY IMPACTS Could reduce the FUTURE demand for road/rail transport along certain corridors !!! • Hyperloop - Hyperloop is a new way to move people and things at airline speeds for the price of a bus ticket. It's on-demand, energy-efficient and safe. Think: broadband for transportation.

  22. Questions That Need to be Answered • What road network length can we sustain and at what condition level ? • How do we balance mobility/access/development needs ? • Road Crashes – Transfer of savings ? • Land Use Management - Densification • Private versus Public Transport – Provide Alternatives ? • Charging for road use in a manner that is equitable and transparent ? • How do we incorporate impact of future technologies ? • Getting policies with buy-in from all that can be implemented ? • ???

  23. THANK YOU www.sanral.co.za 25

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