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Affordability and Subsidies in Urban Public Transport: Assessing the Impact of Public Transport Affordability on Subsidy Allocation in Cape Town

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Affordability and Subsidies in Urban Public Transport: Assessing the Impact of Public Transport Affordability on Subsidy Allocation in Cape Town Affordability and Subsidies in Urban Public Transport: Assessing the impact of public transport affordability on subsidy allocation in Cape Town by Jaco Piek Thesis presented in partial fulfilment of the requirements for the degree of MCom (Transport Economics) in the Faculty of Economic and Management Sciences at Stellenbosch University Supervisor: Mr. JA Van Rensburg December 2017 The financial assistance of the National Research Foundation (NRF) towards this research is hereby acknowledged. Opinions expressed and conclusions arrived at, are those of the author and are not necessarily to be attributed to the NRF Stellenbosch University https://scholar.sun.ac.za Declaration By submitting this thesis/dissertation electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. Date: December 2017 Copyright © 2017 Stellenbosch University All rights reserved i Stellenbosch University https://scholar.sun.ac.za ABSTRACT Cape Town is characterised by high commuting costs and high travel times due to a spatial mismatch between housing and jobs, as a result of apartheid planning policies. This dissertation investigated the use of an Intra-City Affordability Index to better understand this mismatch by analysing transport expenditure and potential travel patterns of public transport commuters in Cape Town. The results from the constructed affordability index analysed public transport affordability within this context. In turn, the potential subsidies needed to achieve the 10% policy affordability objective for public transport users in Cape Town, were estimated. One of the main research objectives was to determine the contextual public transport affordability for Cape Town through the construction of an Intra-City Affordability Index. This was done for two different income levels: low to low-medium income and average-income. One of the other main research objectives was to estimate the extent that improved affordability of low to low-medium income commuters affects subsidy requirements. The Intra-City Affordability Index was contextualised to Cape Town by incorporating household socio-demographics, the built environment and relevant policy conditions. Furthermore, the relationship between current public transport affordability levels and potential additional subsidies required to achieve the policy affordability objective was investigated. Lastly, a sensitivity analysis was done using bandwidths of income and affordability levels to test the robustness of the subsidy impact results. The main findings from the Intra-City Affordability Index showed that, overall, lower-income households spend well over 10% of their income on commuting, with some households potentially spending up to 42% of their income on public transport. It was also found that commuting to Cape Town CBD is more affordable than other employment centres, indicating that the transport system has not adapted to serve other employment centres since apartheid. Furthermore, the subsidies required to attain the 10% affordability benchmark were shown to be unfeasible and unrealistic. ii Stellenbosch University https://scholar.sun.ac.za ACKNOWLEDGEMENTS First and foremost, I would like to thank and honour God for His provision and faithfulness during my master’s study. Proverbs 19:21 reads, “Many are the plans in a man’s heart, but it is the Lord’s purpose that prevails”. This speaks of my master’s journey and the lessons I’ve learnt along the way. To my endearing wife, Marlies, who has been my main supporter from the start of my master’s study. Thank you for your unfailing love and unconditional support. Thank you for embracing and being a part of this journey. I would like to express my sincere gratitude to my thesis supervisor, Mr. Johann van Rensburg, for his continuous support. Thank you for your guidance, patience and input to the completion of this study. My sincere thanks also goes to Justin van Dijk. Thank you for your input, support and encouragement. Last but certainly not least, I would like to express my immense gratitude to my family and friends who have walked this journey with me. Your interest and continued support throughout has strengthened and encouraged me. iii Stellenbosch University https://scholar.sun.ac.za ABBREVIATIONS AND TERMINOLOGY BSOG Bus Service Operating Grant BRT Bus Rapid Transit CBA Cost-Benefit Analysis CBD Central Business District CDS Carruthers, Dick and Saurkar CITP Comprehensive Integrated Transport Plan CNT Centre for Neighbourhood Technology COGTA Cooperative Governance and Traditional Affairs CTOD Centre for Transit-Orientated Development DoT Department of Transport EC Employment Centre ECLAC Economic Commission for Latin America and the Caribbean FFC Financial and Fiscal Commission H+T Household and Transport IC Intra-City IPTN Integrated Public Transport Network IRT Integrated Rapid Transit LRT Light Rapid Transit MFMA Municipal Finance Management Fund Act 56 of 2003 MLTF Municipal Land Transport Fund MM Multimodal MRT Mass Rapid Transit NLTA National Land Transport Act (5 of 2009) NHTS National Household Travel Survey NLTSF National Land Strategic Framework of 2015 PRASA Passenger Rail Agency of South Africa PRE Provincial Regulating Entity iv Stellenbosch University https://scholar.sun.ac.za PTISG Public Transport Infrastructure and Systems Grant PTNG Public Transport Network Grant PTOG Public Transport Operations Grant RB Road-based SISBEN Sistema de Identificación y Clasificación de Potenciales Beneficiarios TAZ Transport Analysis Zone TDM Travel Demand Management TOD Transit Oriented Development UK United Kingdom WIMT WhereIsMyTransport v Stellenbosch University https://scholar.sun.ac.za TABLE OF CONTENTS DECLARATION .............................................................................................................................................. i ABSTRACT.................................................................................................................................................... ii ACKNOWLEDGEMENTS ........................................................................................................................... iii ABBREVIATIONS AND TERMINOLOGY ................................................................................................. iv LIST OF FIGURES ........................................................................................................................................x LIST OF TABLES ........................................................................................................................................ xii CHAPTER 1 INTRODUCTION .......................................................................................................................................... 1 2.1 Statement of purpose ............................................................................................ 1 2.2 Background and motivation ................................................................................... 2 2.3 Aims and objectives ............................................................................................... 3 2.4 Structure of this dissertation .................................................................................. 3 CHAPTER 2 LITERATURE REVIEW ............................................................................................................................... 6 2.1 Introduction ............................................................................................................ 6 2.2 Literature review process ....................................................................................... 6 2.3 Transport affordability overview ............................................................................. 7 2.3.1 Defining and measuring transport affordability ................................................... 7 2.4 Affordability indices ................................................................................................ 8 2.4.1 Single, arbitrary affordability indices ................................................................... 8 2.4.2 Vulnerabilities regarding the validity of a single, arbitrary affordability benchmark ………………………………………………………………………………………….10 2.4.3 Multi-criteria affordability indices ...................................................................... 11 2.4.4 Affordability index for this study ....................................................................... 21 2.5 Transport affordability and policy ......................................................................... 21 2.6 Public transport subsidies .................................................................................... 23 2.6.1 Theoretical framework of transport subsidies ................................................... 23 2.6.2 Role of transport subsidies .............................................................................. 24 2.6.3 Public transport subsidies in developing countries ........................................... 25 2.6.4 Public transport subsidies in South Africa ........................................................ 26 2.6.5 Types of transport subsidies ...........................................................................
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