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



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

Authors

W J Pienaar, Stellenbosch University, J Piek, Stellenbosch University

Description

This paper provides an outline of how the economic evaluation and selection of transport infrastructure projects can be complemented by social evaluation with a view to achieving a more equitable welfare distribution within a developing country.

Abstract

This paper provides an outline of how the economic evaluation of public 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. 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 of road 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 of the 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 calculated for 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.

KEY CONCEPTS: Mobility, effectiveness, opportunity cost, willingness to pay, Gini-coefficient, marginal utility, cost–benefit analysis, utility, social evaluation, accessibility, allocative efficiency, distributive effectiveness, value, welfare

Publisher

Association for European Transport