Opinion: It is #etolls Tuesday 1

In case you have been really far away, today sees the implementation of the #etolls system on Gauteng freeways and it is all over the news and social media. On this blog I thought that we should also chip in with an Economics perspective (albeit from the untolled safety of Potchefstroom).

We have posted about this twice before, saying things like the poor should rise up and support congestion charging. This week economist Dawie Roodt made some good points as well: Eye Witness News reports on the Good, the Bad and the Ugly of etolls. Our stories at the school blog were:

The point is that free market types and socialists should actually love etolls.

Free-marketeers would agree that resources are efficiently allocated when demand equals supply. If people receive benefits from nice freeways (like lower vehicle maintenance costs and shorter commuting times), they should pay for them. There ain’t no such thing as a free lunch.

As it turns out though, very few of those who receive these benefits, want to pay for them. That is why the market does not really provide public goods. Enter the government and SANRAL. They can set a price that equates the “pseudo demand curve” and supply and keep the socialists happy by using exemptions to mitigate some of the impacts of the user pays principle on the poor (recall the exemption of public transport and the R450 cap).

It is at this implementation level where the battles should be fought. We need more information about the costs of the project, how prices are set and about who will be making money from this (since it is a public good, costs should be low and no-one should be making large profits). But there has not been enough transparency in this regard. With good governance, everyone should happily be paying their bit.

All other opposition out there is a dangerous blend of economics and politics. On Twitter this morning the DA, Agang and VF+ opposed etolls. But they don’t really go into the details of what they propose as alternatives. Cosatu and OUTA have argued for an increase in the fuel levy. But this would actually be deeply unfair to the poor. Not only is everyone paying – also people who are not using the Gauteng freeways – the levy is regressive. For example, 14c/l is a large increase in tax if your income is low and it is a small increase if you income is high. Increasing the fuel levy would hurt the poor all over the country so that the rich can drive on nice freeways in Gauteng. Now that would be cause for protest. PS. If you own a car and drive on freeways in Gauteng, you are not “the poor”.

But maybe today’s upheaval goes beyond alternatives, efficiency and fairness. Maybe this is simply a tax revolt. Right or wrong, people are simply tired of paying more and then seeing wasteful expenditure (insert picture of Nkandla here).  Here is one such view:

#ANC-govt is charging you FIVE TIMES to use GP freeways: 1) Fuel Levy 2) #eTolls 3) 14% VAT on eTolls 4) Car Registration 5) Income Tax

— Sihle Ngobese (@SihleDLK) December 2, 2013

And they are taking their frustration out on congestion charging, which is actually a very good idea.

One comment

  1. Pingback: E-tolls consultations start today (and academic economists also have an opinion) « Skool vir Ekonomie

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