The financing of a nonpure public good : the case of roads

Abstract

This dissertation is concerned with the financing of roads in terms of public finance economic theory. The theory of public goods is applied to the case of roads and it is concluded that roads possess significant elements of privateness and are therefore nonpure public goods. Given that roads are nonpure public goods, and that the market for roads has natural monopoly characteristics, it is proposed that user charges have a role to play in the financing of roads. Road user charging techniques such as licence fees, fuel levies, tolls, area licensing, parking charges and weight-distance charges are evaluated. The advantages of user charging versus tax earmarking and general fund financing are examined. A road financing system for South Africa is proposed, whereby National roads are financed by user charges, and Provincial and Local roads are financed partly by user charges and partly by general taxes.