By WJ (Wessel) Pienaar, Department of Industrial Engineering, Stellenbosch University

  1. General overview

Regional developmental economic benefits of road supply can be divided into once-off non-user benefits and recurring non-user benefits.  Once-off non-user benefits are represented by the multiplier effect triggered by the initial investment in a road facility.  Recurring non-user benefits emanate from the economic accelerator effect that usage of the facility is to have within its area of influence.  The once-off benefit is the consequence that government expenditure has on the regional economy as a result of the injection of funds.  The recurring benefit is the general regional economic consequence of the road fulfilling its role as supplier of accessibility and facilitator of mobility throughout its service life.

  1. Non-road-user beneficiaries

The following five classes of non-road-user beneficiaries can be distinguished:

  • The general public
  • Land owners and occupants
  • Roadside enterprises
  • Utility enterprises
  • Goods consignors and consignees.

The general public: It can be argued that everyone benefits from the existence and extension of a road system in that (because of increased accessibility) it enables society to function more effectively. Society needs access to economic resources (input-related) and to marketplaces (output-related), and would be denied a wide range of goods, services and revenue opportunities in the absence of a road network. Roads provide access to land (not just for the occupants, but also for the provision of social and emergency services and amenities); and they facilitate personal and commercial transportation, the administration of law and order, and the fulfilment of government duties and community services. A new road affords the various tiers of government an opportunity to spatially distribute community services more equitably, for example policing and protection services, law and order, health services (such as clinics) and education.

Land owners and occupants: The value of land or fixed property is inseparably linked to its accessibility. In rural areas, new or improved roads can increase the value of land considerably by bringing resources, amenities and markets closer.

Roadside enterprises: The survival of many businesses depends on the traffic of a nearby road. Service stations, fuel and food outlets, refreshment vendors, and hospitality and tourist attractions are cases in point.

Utility enterprises: These entities may enjoy a right of way in the reserve of a road, for example, water pipelines, electric and telecommunication cables, and cell-phone antennae.

Goods consignors and consignees: These parties may also enjoy benefits in their capacity as non-road users, for example manufacturers, wholesalers and retailers. These benefits can take the form of shorter order-delivery lead times attainable through shorter trip times, and more reliable goods-flow planning attainable through punctual delivery and improved goods security.

  1. Overview of the once-off non-user benefits stemming from implementing the N2 Wild Coast Toll Road

Expenditure on the road will inject funds into the private sector, which will stimulate transactions and promote production. This, together with the capacity to accommodate an associated increased demand for transport, should stimulate the provincial economies of the Eastern Cape and KwaZulu-Natal.  All the unskilled labour needed for construction will be recruited within the areas where the road will be located. The population within the service area of the road has a low savings propensity. Their income will be subject to a low tax rate. Their disposable income will, therefore, be spent relatively quickly within an expanding retail sector. The suppliers of timber, sand, stone and basic resources will similarly gain during the construction phase.

  1. Overview of the expected recurring non-user benefits stemming from operating the N2 Wild Coast Toll Road

As the improvements and new road sections are put into operation, road users will be attracted to the route, and may become involved in local transactions. This will give rise to new businesses and entrepreneurial opportunities in the area. In the long-term, goods consignors and consignees within various economic sub-sectors will be afforded improved business logistic service and accessibility throughout the service life of the new road. Due to the reduction of generalised travel costs, the generation of new business activity and additional land use development, the following economic sub-sectors in the Eastern Cape and KwaZulu-Natal will enjoy increased income: (1) agriculture, (2) forestry, (3) manufacturing, (4) construction (i.e. property development), (5) finance and real estate, and (6) trade, tourism and catering.

Due to an influx of construction workforce, and later also road users/tourists, it is expected that subsistence farming will start to give way to surplus/market oriented farming.  Due to new fuel delivery/distribution opportunities, the retail fuel price at Lusikisiki and Port St Johns is expected to drop. In addition to possible lower retail fuel prices, the 76 kilometre shortening of the N2 route will reduce the delivery cost of all goods that are delivered over a shorter distance.

The increased accessibility (and new destinations) that the new road will offer, will create round-trip opportunities on the different new road loops between Port Edward and Mthatha. These factors are expected to stimulate tourism, agriculture and retail businesses. The newly created accessibility to places of scenic splendour is the main factor that will promote tourism  – mainly eco-tourism, visits to coastal destinations and day-tripping on the newly created circular routes.

The probable drop in prices of goods and services in the study area is, however, expected to be of low intensity at a regional level in the long term, and will depend on the level of toll tariffs charged.

The proposed road will increase accessibility, mobility and business inter-action between the Eastern Cape and KwaZulu-Natal, thereby giving rise to more productive land use patterns, especially in the primary production sector.  Timber plantations and agricultural land (especially sugar-cane and tea plantations) are typical examples in the far Eastern Cape.  The survival of many businesses depends on the traffic of a nearby road. Service stations, fuel and food outlets, refreshment vendors and the hospitality industry are cases in point.

Traffic between the Eastern Cape and the Pietermaritzburg area will still use the existing N2 as first-choice route because the existing Mthatha-Kokstad-Pietemaritzburg link remains intact – neither its mobility nor its accessibility function will disappear. Although the new link between Mthatha and Port Edward will divert traffic from the existing N2 route, the newly generated traffic benefits on the proposed road will significantly exceed any reduction of business on the existing road section.

Economic impact

The economic impact that the proposed N2 Wild Coast Toll Road will have on five towns in this area was investigated.  These towns are:  Bizana, Flagstaff, Kokstad, Lusiki and Port St Johns. Bizana and Flagstaff are situated along the R61 route.  It is expected that after implementation of the new road traffic volumes at these towns will drop.  Kokstad is situated three kilometers off the present N2.  It is expected that traffic volumes at Kokstad will drop once the N2 route is relocated.  The proposed new N2 route will pass through the 50 km2 mesozone within which Port St Johns lies, and it will skirt Lusikisiki.  Traffic volumes at these two towns are expected to increase after implementation of the new N2 Wild Coast Toll Road.

The declines in the gross regional products of Bizana, Flagstaff and Kokstad can be regarded as negligible and of local impact only. The highly probable positive impact on the local economies of Lusikisiki and Port St Johns is judged to be of high intensity at a regional level in the long term.  The significance of the growths in income is rated as high.

The proposed road will not only stimulate economic development indirectly, it will also have a direct impact on the performance of primary-sector producers (e.g. agriculture), secondary-sector industries (e.g. manufacturing) and tertiary-sector businesses. In the latter class, the proximity of the road will be important to road-oriented retail enterprises such as vehicle service and fuel stations, food retailers, lodging and hospitality businesses catering for tourists.  Goods consignors may also enjoy benefits in their capacity as non-road-users.

These benefits can take the form of lower delivery cost, shorter trip times, more punctual delivery and improved goods security.  These benefits have a greater value in developing regions (such as the far Eastern Cape Area, especially in the greenfield area of the project) than in developed regions, mainly because of a more limited supply of capital.   Trip time savings and punctual goods delivery can be beneficial in two ways: (a) faster and more punctual deliveries mean lower storage costs and more effective business logistics service provision, and (b) highly perishable products can be distributed over a wider area.

Improved goods security

Improved goods security on paved roads resulting from less dust, vibration and knocks during the transport process enables the suppliers of agricultural, horticultural and dairy products to retain high product quality, while less physical damage with respect to fragile goods is suffered.  The preservation of the quality and quantity of freight improves the revenue of consignors.  These factors have the potential to help mitigate the rise of consumer prices in the service area of the road, especially in the far Eastern Cape.

The value of the above-mentioned general economic benefits can be measured in terms of how much consignors and consignees are willing to pay for faster and more punctual deliveries, increased goods security and more reliable distribution – in this respect also inter-city goods traffic by road between Durban and East London.  Commodity groups that will benefit most are:  (a) containerised general freight, (b) automotive components, (c) timber and paper, (d) chemicals, (e) fuel, and (f) over-night courier services and express freight consignments of break-bulk items.

Of the economic sub-sectors mentioned above, agriculture, industry and tourism in the study area will gain with a high probability gain at a medium intensity at a regional level in the long term.  This positive impact is thus rated as being of high significance.