TNPA’s REQUEST FOR INCREASE SCUPPERED
WORDS AND PICTURES: SHIRLEY LE GUERN
The Ports Regulator of South Africa has denied the Transnet National Ports Authority (TNPA) request for a 19.74% tariff increase for the period 01 April 2021 to 31 March 2022.
In addition to restricting port charge increases to zero, the Ports Regulator adjusted some tariffs downward, pointing out that the SOE had under-performed when it came to capital expenditure and needed to play its part in South Africa’s economic recovery.
In a statement issued by Tshisikhawe Victor Munyama, chairperson of the Regulatory Committee of the Ports Regulator of South Africa, TNPA received a strong warning that it needed to help to reduce the cost of doing business in South Africa as well as re-ignite its capex programme which has been largely put on the back burner in light of investigations into tender irregularities at the state owned entity.
“The Ports Regulator remains committed to reducing the cost of living and 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 2021/22 tariffs period under the extraordinary circumstances we find ourselves in,” the statement concluded.
The decision was based on submissions by various stakeholders and the latest available data and included further tariff adjustments such as a 5% increase in both marine services and related tariffs, coal export cargo dues and magnetite export cargo dues as well as a 10% decrease in container cargo export dues and a 3% drop in container import cargo dues.
All other tariffs were to remain unchanged, the port regulator stipulated.
This decision was based on a number of cargo volume and market-related factors, including the inflation outlook and the cost of debt and the overall economic climate in the country in light of the underlying structural challenges facing the country and the impact of the COVID-19 pandemic on the port system.
The decision was therefore taken in line with the call by President Ramaphosa for all role-players to contribute to the recovery of the South African economy as a matter of urgency. In this regard, the Ports Regulator is of the opinion that an overall 0% tariff increase as well as an export biased lowering of container cargo dues would be in the best interests of stimulating local manufacturing, beneficiation and employment creation.”
For the tariff year 2020/21, the Ports Regulator approved revenue of R11.970 billion against the R13.569 billion applied for by TNPA.
The statement noted that systems were in place to ensure the sustainability of TNPA and provide the financial space to ensure that the capital program (totalling R3.147 billion in the application made for this latest increase) was fully implemented, despite previous under-expenditure on capex by the state-owned body.
“Concerning the under-expenditure on capex, it is evident that, in spite of a clear regulatory incentive to increase capex spending, TNPA has consistently failed to execute the full capex program as allowed for by the Regulator. The Ports Regulator, however, determines that capital expenditure is a key component to the development and sustainability of our port system. In this context, it would not be prudent to cut back on capital expenditure as, in a downturn, spending on infrastructure also contributes to the country’s gross fixed capital formation and allows the port system to be ready for the eventual economic upswing,” the regulator’s response stated.
In light of this, the Regulator said it was committed to a continued and increased focus on TNPA’s capex under expenditure and would carry out capital works-in-progress assessments to closely monitor its expenditure improvement program going forward.
REDUCTION IN LICENCING FEES
The Port Regulator added that, in addition to the 0% tariff change allowed for during the 2021/2022 tariff year, the incentive for South African flagged vessels (in its final year) would be retained and would be revisited in the next tariff application process.
“However, specific to the 2021/22 tariff year, and aimed at reducing the cost of doing business for entrants to the port system, all licence fees will be reduced by 30%. All licence fees applicable per port for the tariff year 2021/22 can be paid in equal instalments on an annual basis over the period of the license. Whilst the Regulator requires the TNPA to develop and introduce a system to target and support the SMME licence holders, especially historically disadvantaged individuals (HDI) and women owned and/or managed businesses, this ROD on the license fees shall, hopefully, benefit small businesses that remain a key to sustainable job creation,” the report said.
A further reduction in the existing discounts to non-cargo working vessels for the 2021/22 tariff year was also included in the tariff adjustment for the coming year with short stay vessels taking on bunkers, water or stores receiving a 60% discount. Other vessels not engaged in cargo, including vessels not engaged in cargo working for the first 30 days, bona fide coasters, passenger vessels and some small vessels, will receive an increased discount of 35% from the 25% allowed previously.
BUSINESS RESPONDS POSITIVELY TO DECISION
Nigel Ward, president of the Durban Chamber of Commerce and Industry welcomed the SA Port Regulator’s decision.
“We believe the decision to reject TNPA’s 19.74% tariff increase request will improve South Africa’s competitiveness and help reduce the cost of doing business in South Africa. The loss of income over the lockdown period has left many businesses unable to service their operating costs. Now, more than before, policies and decisions need to be made in the greater interests of business recovery and be beneficial to inclusive and sustainable economic growth.
Small business owners who had started making inroads into the export market will benefit from this decision. It will also provide relief to the manufacturing sector which desperately needs to stimulate exports. The current economic climate requires all parties involved in the export value chain to contribute to a more conducive environment for business and to act with due consideration of the economic outlook of South Africa.”
Against this backdrop, he said the Chamber agreed that this decision was in line with government’s COVID-19 economic recovery plan. As organised business, he noted that port were important economic assets and were key to facilitating local economic development and supporting businesses strategies and plans.
He said there needed to be a commitment to continuing to support South Africa’s ports in favour of competing ports in neighbouring countries.
Master Mariner and director at Norton Rose Fulbright, Malcolm Hartwell, noted that despite the multiple players and complex economic, political and social issues raised by access to Durban harbour in particular (including road blockages and torching of trucks transporting goods to Gauteng), the reality was that all of these issues were linked to market forces driven by price and efficiency.
“At the risk of stating the obvious, world trade is driven by pure economics of supply and demand. This is why logistics, investment and efficiency has a greater effect on a country’s GDP than any other single investment,” he pointed out.
Warning that ports in Mozambique and Namibia were making inroads into South African ports’ business, he noted that issues that needed to be addressed by TNPA also included upping efficiencies in order to attract investment to further develop the country’s port infrastructure.
“TNPA has invested heavily in infrastructure and improved terminals at many of the ports in South Africa. Their efficiencies however remain amongst the lowest in the world which means private investment is hard to attract. The state, burdened with huge social and patronage demands on the fiscus will, it seems, have to rely on attracting private partners to develop infrastructure. Those partners’ decisions will be driven by economics,” he said.