Abstract

PIENAAR, W.J. (Wessel). Guidelines for the choice of road projects by government. Tydskr. geesteswet. [online]. 2019, vol.59, n.1, pp.126-141. ISSN 2224-7912.  http://dx.doi.org/10.17159/2224-7912/2019/v59n1a9.

This article explains why the supply of public roads may be subject to market failure; it also explains why public roads are supplied by government. The reasons are mainly economic and are explained from a sectoral, micro- and macroeconomic perspective. The article makes the point that 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. 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 the transport facilities that originally helped to stimulate economic activity. New and improved roads provide access to property, and facilitate mobility and interaction within and between areas that support economic growth and development potential, which can give rise to new economic land-use patterns and the acceleration of business activities. These factors increase financial returns to investors and fixed-property owners, which in turn boost land values. The increase in taxable-land values leads to an increase in the revenue of local authorities from property tax. As a result, local authorities may have more funds available to maintain the local road networks that stimulated the increase in tax revenue in their jurisdictions. The operational characteristics of road transport that are conducive to the stimulation of economic activity are identified and described. It was found that road transport infrastructure and services can serve as mechanisms to gain access to economic activities; trigger economic development; accelerate economic growth; and serve as a catalyst to equalise the distribution of wealth. The article explains how the achievement of sectoral and microeconomic benefits by economically justified roads leads to the attainment of macroeconomic goals. Government's obligation to supply public roads necessitates proper planning and budgeting for such roads. The article describes the situation where road authorities have to endeavour reactively to maximise the benefits of road provision when they are restricted by a rationed and fixed budget. Lastly, in order to mitigate the effects of government economic failure, it is proposed that road authorities act proactively, through judicious use of loan funds, to maximise the benefits of road provision by treating their road budgets as variable, but subject to a performance rule.

Keywords : macro-economy; micro-economy; mobility; independent projects; mutually exclusive projects; place utility; factors of production; social cost-benefit analysis; accessibility; benefit-cost ratio.

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