DIGEST 2006 - Sabita

elative
fluctuation by
increasing our
proportion of
gravel used,
at a point
where the
supply of
domestic
gravel is
facing new
constraints,
this can only
push up the
expected cost
of gravel.
Secondly –
and much
more
importantly –
basic
materials are far from the largest
cost component of either surfaced
or gravel roads. In the case of
bitumen roads, costs of labour,
plant, investigation, design, road
marking, signage and other inputs
make up a minimum of 75% of
total construction and
maintenance costs.
Labour intensive methods
With the exception of plant these
additional inputs are mainly
domestically produced – and to
the extent that we increase
emphasis on labour-intensive
methods, machinery can be
increasingly domestically sourced
as well. By contrast, the largest
cost component by far in
construction and maintenance of
gravel roads is haulage associated
with the replacement of lost
wearing course gravel. Gravel is
heavy. It is most often carried in
Figure 2 (Source StatsSA)
trucks. Trucks run on petroleum
(diesel) fuel. This expenditure,
unlike increased expenditure on
bitumen, occurs beyond the first
year of a road project. Thus the
proportional impact of rising fuel
prices on road construction costs
goes steadily upward for gravel
relative to bitumen as time
horizons are extended. To the
extent that rising fuel prices are
expected to be a negative external
shock on road budgets, their
proportionate impact is greater
than on surfaced road prices given
the use of the discount rate
employed for most public
investment purposes.
Third, because the proportion of
gravel road cost inflators (diesel
fuel and heavy machinery) that
must be imported are higher than
for surfaced roads, factoring
exchange rate risks into
comparative NPV calculations also
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