Breaking the regravelling trap: A fiscal-federalism contract for upgrading South Africa’s unpaved roads

Policy Paper 54 South Africa’s provincial and municipal road networks are dominated by low-volume gravel roads that are essential for service delivery and market access but are chronically under-upgraded. This paper argues that the persistence of repeated regravelling, reactive repairs, and post-disaster reinstatement is not primarily an engineering failure; it is an intergovernmental public investment problem. Responsibilities are decentralised across multiple principals and agents, benefits from upgrading are partly non-excludable and spill across jurisdictions, and budget holders face short-horizon fiscal constraints. The resulting wedge between national welfare and sub-national private incentives generates an underinvestment equilibrium in which economically justified upgrades are deferred and recurrent maintenance liabilities compound. Keywords: Public investment management, Intergovernmental fiscal relations, Conditional grants, Performance-based financing, Low-volume sealed roads