Compounding the problem

The National Ports Authority (NPA) plans to invest huge amounts of money into South Africa’s ports, but stakeholders fear that they will recoup costs by increasing tariffs, which will have a negative impact on port traffic.

According to Dr Brian Gowans, a consulting engineer with Marine Technology, the shipping industry is already depressed because of the economic downturn. A large investment by the NPA could affect tariffs and compound the problem.

“Maputo and Walvis Bay are growing their capabilities quite significantly,” said Gowans.

“We could be driving away business if our prices are too high compared with theirs.”

Transnet manages and acts as landlord to South Africa’s commercial ports, providing port infrastructure and services through two of its divisions, the NPA and Transnet Port Terminals.

In 2008 Transnet outlined an R80,5-billion five-year investment plan encompassing all its operating divisions. Of this, R16,4-billion was allocated to the NPA and R9,6-billion to Transnet Port Terminals.

When Transnet released its financial results earlier this year, acting group chief executive Chris Wells said that, despite the economic crisis, “there is significant headroom for capital expenditure during the fourth and fifth years of our five-year plan” and confirmed that the company would proceed with its infrastructure investment programme as planned.

“What they’re doing is spending money now that they should have been spending progressively over the past 14 years,” said Peter Newton, a fresh-produce exporter and member of the South African Shippers’ Council.
“What are we going to be doing about optimising what we have right now?”

Questions have been raised about where the NPA will source the skilled workers required to run larger ports.

According to Newton, South Africa’s combined terminal handling charges and cargo dues are already “arguably the most expensive in the world”; an independent study recently showed that fruit export logistics charges are twice as expensive as New Zealand and 55% more costly than in Chile.

But Riad Khan, chief executive of the Ports Regulator of South Africa, said it’s difficult to get a full picture of port tariffs based on just one commodity. He said direct comparison between ports tariffs in different countries are not always accurate because the systems for calculating tariffs are complex and differ from country to country.

“There’s a sense that our tariffs are too high, but nobody can say whether they are out by 1% or 50%,” he said. According to Khan, there are no definitive comparative costing studies available at the moment.

As part of its mandate, the regulator has undertaken an economic review of the ports environment, which will evaluate efficiencies and institutional structures and allow it to “benchmark” tariffs. Khan said once the analysis—which is expected to take about two years—is completed, there will be a rationalisation of tariffs, but he warned that this will not mean an automatic decrease.

“In some cases our tariffs are higher than other countries and they may be justified. In other cases they are higher and may not be justified,” said Khan. “Everybody assumes that when a regulator comes in, tariffs will go down, but in the long term you don’t know.”

Khan said that although there will be an aggregate downward pressure on tariffs overall, individual tariffs could go up. The regulator will conduct a parallel review of how tariffs at South Africa’s ports compare with other entities around the world, he said.

About 98% of South Africa’s exports are conveyed by sea. Despite the global economic downturn, Transnet’s revenue for the year ending March 31 was up 11,6% to R33,5-billion and earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 3% to R13,2-billion. The NPA saw a 3,5% increase in revenue to R7,1-billion, which it attributed to “an average tariff increase of 4.3% offset by negative growth on cargo volumes across all major cargo types” and an EBITDA increase of 1,2% to R5,2-billion.

Faranaaz Parker

Faranaaz Parker

Faranaaz Parker is a reporter for the Mail & Guardian. She writes on everything from pop science to public health, and believes South Africa needs carbon taxes and more raging feminists. When she isn't instagramming pictures of her toddler or obsessively checking her Twitter, she plays third-person shooters on Xbox Live. Read more from Faranaaz Parker