Road fund to study impact of more rail freight

Greater use of public transport could lower contributions to the RAF. Image: Deyan Georgiev Fotolia

The fund is insolvent and has an uncovered liability of R82.2bn and its primary source of funding is tax the South African Revenue Service levies on every litre of fuel sold in SA. "At the moment it receives 94c/l and a drop in fuel sales could hurt the fund," Watson said.

"We need to know what the impact of the government's plans to increase the use of rail will be," he said. Last year the fund received R17.6bn - 98% of it from fuel levies - which was a slight increase on the R17.1bn received last year," he said.

On Thursday (28 November), the fund revealed the findings from two studies it commissioned to investigate the appropriateness of its funding model.

The research by consulting firm EY and Stellenbosch University's Bureau for Economic Research (BER) confirmed that a reliance on the fuel levy was viable.

Speaking at the release of the bureau study's findings, economist Cobus Venter said while the BER was forecasting a slowdown in growth rates for vehicle and fuel sales over the next two years, the current funding model was still the most appropriate for the fund.

BER and EY findings

The BER has modelled seven factors that would be likely to influence the fund's revenue. These include growth in real gross domestic product (GDP), disposable income, gross fixed capital formation, consumer price inflation, interest rates, the petrol price and the rand-dollar exchange rate.

Venter said GDP was expected to grow 2.8% next year and 3.5% in 2015. Disposable income is forecast to grow 3.4% next year and 4.1% the year after. Petrol prices are expected to rise 0.6% next year and 2.5% in 2015, while inflation is expected to be at 5.7% next year, falling to 5.5% in 2015, he said.

"Alternatives to fuel levies such as licence fees and compulsory vehicle insurance would be difficult to implement," Venter said. "A surcharge on fuel was the most appropriate mechanism in a developing country such as SA because of the high number of unlicensed and uninsured vehicles," he added.

Venter said that measures such as e-tolls, which could lead people to choose not to use their private vehicles but use public transport such as the Gautrain or buses, could have a negative effect on the fund in future.

The EY study found that globally most funds with a mandate similar to the Road Accident Fund's operated on a "no-fault" basis, which removed the matter of car accidents from a costly and lengthy court process.

Watson said the fund was pushing for an amendment to the Road Accident Fund Act that would create a no-fault base system. He said he hoped this would go before Parliament next year, which would pave the way for the fund to start operating more sustainably and ensure that the money it paid out went to the intended recipients.

Source: Business Day via I-Net Bridge