Transnet CEO Brian Molefe has defended the high cost of South African ports, saying that charges by competitors are distorted by government subsidy.
“We are less competitive because of the distortions that are caused elsewhere by particular institutional arrangements,” Molefe said.
South Africa’s ports such as Durban are among the most expensive in the world, often costing more than competitors in the developed world. High port charges, coupled with a legacy of inefficiency, are seen as a contributing factor to the rising cost of doing business in South Africa.
But comparisons of port costs do not take into account the various institutional and financing arrangements that exist elsewhere in the world, said Molefe.
Local governments or municipalities owned many ports in other parts of the world and items such as their capital expenditure was budgeted and paid for at government level.
“The questions is are we also going to distort our prices through subsidisation by taking money essentially from the fiscus to subsidise the users of the port so that we can become more competitive,” said Molefe.
He was speaking at the annual meeting of the African Development Bank in Arusha, Tanzania.
Local ports received no subsidies from any sphere of government as they were owned, operated and paid for by Transnet, he argued.
“The costs that you see here reflect the cost of doing business,” said Molefe. “If we were to adjust for the subsidies received elsewhere you would see our costs are not as high as they are made out to be.”
Molefe said that in the long run, Transnet’s model would benefit South Africa because as soon subsidisation became unaffordable, the prices of competing ports would sky rocket.
South Africa is ranked 28th in the World Bank’s logistics performance index, out of 155 countries. It comes in right behind China and is ahead of fellow Brics counterparts, Brazil, Russia and India.
Transnet was investing R300-billion into rail, ports and pipelines in the coming years, two-thirds of which would be funded off Transnet’s balance sheet.
“This is a more sustainable model,” said Molefe.
The company was also positioning itself to become a supplier of locomotives to the rest of the continent, in a bid to boost local industry.
He stressed that Transnet wanted to “fix what is broken in South Africa first”, by improving efficiencies, and upgrading existing infrastructure before it considered expanding operations into other regions of Africa.
Lynley Donnelly is in Arusha, Tanzania to attend the Annual Meetings of the African Development Bank. She was flown there and accommodated by the AfDB.