TERM[1] is used to analyse the short term regional economic impact of an increase in industries’ transport costs when paying E-Tolls. Market-clearing and accounting equations allow regional economies to be represented as an integrated framework; labour adjusts to accommodate increasing transportation costs, and investments change to accommodate capital that is fixed.[2] We concluded that costs from levying E-Tolls on industries are relatively small in comparison to total transport costs, and the impact on economic aggregates and most industries are negligible: investments (-0.404%), GDP (-0.01), CPI (-0.10%). This is true even when considering costs and benefits on industries as well as consumers. Industries that experienced the greatest decline in output were transport, construction, and gold. Provinces which are closer to Gauteng, and have a greater share of severely impacted industries, experienced larger GDP and real income reductions. Mpumalanga’s decrease in GDP was 17% greater than Gauteng’s.
[1] “TERM” is an acronym for “The enormous regional model”, for simplicity we refer to the TERM model.
[2] TERM is a bottom-up CGE model designed for highly disaggregated regional data. “CGE” is an acronym for Computable General Equilibrium. TERM models originate from Horridge et al. (2005) which are better explained in Horridge (2011).
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