GREENLIGHT FOR PORT TARIFF INCREASE
Despite questions about The National Port Authority’s (NPA) under spending on infrastructure development at South Africa’s Ports, failure to supply audited financial statements in time and productivity issues at port terminals, the Ports Regulator of South Africa has still given the green light for tariff increases for the 2021/22 financial year.
Speaking during an online meeting to disclose the Tariff Record of Decision on 15 December 2021, Dr Tshisikhawe Victor Munyama, acting chairperson of the Ports Regulator, noted that the NPA had requested a postponement of the submission of the 2022/23 Tariff application due to delays caused by the cyber-attack on Transnet in July.
On 16 August 2021, the NPA asked for an increase of 23.96% for the period 01 April 2022 to 31 March 2023, together with indicative tariffs of 1.81% for the period 01 April 2023 to 31 March 2024 and 2.45% for 01 April 2024 to 31 March 2025.
This amounted to revenue collection of R14,733bn.
Munyama said the Ports Authority had used some of the Excessive Tariffs Increase Margin Credit (ETIMC) to bring the tariff application to 9.4%. Considering input from various stakeholders, the impact of Covid on the
economy and other mitigating factors, it had concluded that an appropriate overall increase in average tariffs for the financial year 2021/22 was 4.8%.
With the use of the ETIMC, this translates into revenue of R14,815 billion and even exceeded the targets set by the NPA in its original application.
Broken down still further, it emerged that marine services and related tariffs would increase by 12%, all container cargo dues were to remain unchanged and dry bulk coal export cargo dues would increase by 11%.
Dry bulk magnetite export cargo dues would go up by 15% while RoRo export cargo dues and all liquid bulk cargo dues would remain unchanged. All other tariffs would increase by 4.2% in line with expected inflation, he announced.
Munyama noted that the Ports Regulator had considered cargo volumes, market related factors, the inflation outlook and the cost of debt, the operational and cash flow requirements of the National Ports Authority, as well as the implementation of the published Tariff Strategy that aims to rebalance the tariff structure to closely reflect the underlying cost and benefit to specific users of port infrastructure into account when making its decision.
“The Ports Regulator takes its decisions still cognisant of the economic challenges facing the country, both from the underlying structural challenges facing us, but also more pressing the continued impact of the
The Ports Regulator is of the opinion that an overall 4.8% tariff increase and the trade and export biased differentiation, together with a meaningful move towards cost reflective tariffs would be in the best interest of stimulating local manufactures, beneficiation, and employment creation in South Africa.” Dr Tshisikhawe Victor Munyama, acting chairperson of the Ports Regulator
COVID-19 pandemic on the port system…. The decision was therefore taken with due consideration to balancing the sustainability of the Authority with the need to keep thee administered prices increase low as far as possible,” he added..
DROPPING THE CAPEX BALL
It emerged that not only was the Ports Regulator confident that the application of ETIMC (a facility put in place to smooth future tariff spikes) would ensure the sustainability of the NPA but would also enable the R2.454 billion capital program included in its application to be fully implemented. This is despite previous under-expenditure on CAPEX, including a very poor capex rollout of only R684 million over the previous tariff year.
“The Regulator remains particularly concerned regarding the under expenditure on CAPEX. It is evident that, in spite of a clear regulatory incentive to increase CAPEX spending, the NPA has consistently failed to execute the full CAPEX program as allowed for by the Regulator. The Ports Regulator is cognisant that capital expenditure is a key component to the development and sustainability of our port system, not to mention the multiplier impact of the program on the recovery of the economy. In this context it would not be prudent to cut back on capital expenditure in an economic downturn as spending on infrastructure also contributes to the country’s gross capital formation and allows the port system to be ready for the eventual upswing in economic growth,” Munyama explained.
Though there is still a long journey ahead, the Ports Regulator remains committed to reducing the cost of doing business through fair pricing within the South African ports system, and this balanced tariff decision is considered the most prudent course of action for the 2022/23 financial year under the (still) extraordinary circumstances we find ourselves in.” Dr. Tshisikhawe Victor Munyama, acting chairperson of the Ports Regulator
He warned that the Port Regulator would place a continued and increased focus on the Authority’s CAPEX under expenditure and would carry out capital works-in-progress assessments, closely monitor the expenditure improvement program and periodically conduct meetings at respective ports. The NPA would also be required to submit reports on technical skills and capacity, planning and supply chain processes impacting CAPEX implementation.
In response to Munyama’s statement that the Regulator was disappointed that the NPA was not able to provide the Regulator with its audited financial statements as well as responses to “requests for
clarity” regarding some 2020/21 operational expenditure items in the application, NPA CEO, Pepi Silinga, said that the cyber-attack on the port had not only made it impossible for the NPA to provide the required figures in time but that the NPA continued to be afflicted by the impact of this attack which meant that critical data was still not available and that some transactions now had to be reconstructed.
He reassured both the Port Regulator and port users that infrastructure development would begin to be implemented in 2022.
Due to the low tariff increase and the discounts available under government’s broader response to the impact of the Covid-19 pandemic on the economy, the meeting agreed that cost increases on imports would be contained and should not be passed on to consumers.