Tydskrif vir Geesteswetenskappe
On-line version ISSN 2224-7912
PIENAAR, Wessel. The extension of cost-benefit analysis with social analysis in the planning of public road construction projects: Suggestion in support of the creation of a developmental state. Tydskr. geesteswet. [online]. 2014, vol.54, n.4, pp. 753-770. ISSN 2224-7912.
This article provides an outline of how the cost-benefit analysis of road construction projects can be complemented by social evaluation in the compilation of a road building programme with a view to achieving a more equitable welfare distribution within a developing country like South Africa. The article commences by elaborating on the general economic benefits that can arise from investment in economically justified road infrastructure. These are summarised as follows: expenditure on road construction projects injects funds into the private sector and promotes production. This, together with an increased demand for transport, can stimulate the economy. The stimulation of economic activities is associated with higher profits and personal incomes, and the resultant increase in taxes boosts government income. In this way, non-users also help to "repay" the capital amount invested in transport facilities that originally helped stimulate economic activity. New and improved roads supply access to property, and facilitate mobility and interaction within and between areas which might possess economic growth and development potential, thereby giving rise to more economical land-usepatterns and the acceleration ofbusiness activities. This increases financial returns to investors and fixed-property owners, which in turn boost land values. Through the increase of taxable land values, the revenue of local authorities from property tax can consequently also increase. Local authorities may as a result have more funds available to maintain the local road networks that stimulated the taxable revenue within their jurisdictions. The following five classes of non-road-user beneficiaries are distinguished and discussed: The general public Landowners and users Roadside enterprises and advertisers Utility enterprises Goods consignors and consignees. The operational characteristics ofroad transport that are conducive to the stimulation of economic activity are identified and described. The investigation found that road transport infrastructure and services can (a) serve as mechanisms to gain access to economic activities; (b) trigger economic development; (c) accelerate economic growth; and (d) serve as a catalyst to equalise the distribution of wealth in their areas of influence. The present inequality of wealth distribution in South Africa is dealt with. An outline is provided of how the cost-benefit analysis of road construction projects can be supplemented by the application of equity weighting in social evaluation, with a view to achieving a more equitable welfare distribution within the country. It is argued that the application of cost-benefit analysis should be coordinated with the use of social evaluation to inform decision makers in the selection process ofthe road projects that best demonstrate the potential to enhance both allocative efficiency and distributive effectiveness. This can be done by weighting the benefits of a proposed project according to weights calculatedfor specific consumer expenditure groups. In transport economic terms, the inclusion of equity in economic evaluation is geared towards creating, in terms of marginal utility of consumption, equal accessibility and increased mobility for lower-income groups. In general economic terms, it is geared towards allocating potential economic activities and returns to lower-income communities. The findings and recommendations with respect to both the analyses must be represented in the decision-making authority. If the decision maker is intent on paying due regard to both economic and social analysis in investment decisions, all independent projects within the limits of the available budget should go ahead if they are shown to be viable both with and without the application of equity weights. Although such weighting usually depends on political decision making, economically inefficient projects should go ahead only if their positive effects on welfare distribution are regarded as essential and cannot be achieved at lower cost through alternative forms of social grants or subsidies. The discussion is supplemented by an example that illustrates a ranking of road construction projects based on equitable welfare distribution consideration.
Keywords : Mobility; effectiveness; opportunity cost; willingness to pay; Gini-coefficient; marginal utility; cost-benefit analysis; utility; social evaluation; accessibility; allocative efficiency; distributive effectiveness; value; welfare.