SA port charges too high

The comments were made during a colloquium organised by Parliament's trade and industry committee on the effect of administered prices such as electricity and port charges on the manufacturing sector which has previously highlighted the devastating effect which high electricity prices have had on the capacity of businesses to continue operating profitably.

Department of trade and industry deputy director general Garth Strachan said that container and automotive cargo owners faced price premiums of between 710% and 874% above the global norm. These high tariffs were compounded by "significant" port inefficiencies‚ he said‚ and represented a "very significant constraint to exports of value-added‚ labour-intensive‚ manufactured goods."

The average cost per vessel call in Durban and Cape Town (including terminal handling chargers‚ cargo dues and sea side costs) were US$450‚000 compared with less than US$200‚000 in Singapore and about US$250‚000 for Le Havre (France) and Tilbury (England).

Strachan noted that there was an 874% tariff deviation of SA port tariffs from the global average for containers; 743.8% for automotive sector; 721% for containers with rebates; and 710% for automotive goods with a rebate. On the other hand export tariffs for commodities such as coal were 50% below the world average and iron ore was 10% lower.

Strachan said it appeared that manufacturers were subsidising the other operations of the Transnet National Ports Authority (TNPA).

"Tariffs for the export of bulk commodities are lower than the global averages. The export of primary commodities mainly coal and iron ore and to a lesser extent importers of manufactured goods are priced below those required for the export of locally made products‚" he said.

Foreign owned cargo trans-shipments through a South African port also benefited from lower prices.

Draft pricing strategy

"This administered pricing policy stands in direct contradiction with government policy to support the export of manufactured goods," he added.

Strachan said the TNPA's draft pricing strategy - which is being considered by stakeholders and government departments - was "a welcome break with the status quo" but said it remained problematic. The department of trade and industry has proposed that an alternative or independent asset valuation be undertaken as the basis of a cost recovery model for setting tariffs.

Also‚ an international benchmarking exercise should be undertaken for the proposed ports pricing strategy and ports efficiency. In addition‚ other value-adding‚ revenue-generating activities be included in the pricing model‚ for instance the huge opportunities offered by the development of the oil and gas industry.

The TNPA will host road shows this week with stakeholders to promote understanding of its proposed new pricing strategy.

TNPA chief executive Tau Morwe acknowledged the shortcomings of the existing pricing policy. He told MPs that the new pricing strategy was a "step in the right direction" to support the manufacturing sector and promote beneficiation and address the shortcomings of the current tariff principles.

Cost recovery under the proposed system would operate for the port system as a whole‚ not individual ports.

TNPA chief financial officer Mohammed Abdool said individual tariffs would be set to match the required revenue and expected volumes. The port users including shipping lines‚ terminal operators and cargo owners would each contribute to the use of port facilities and services.

Under the proposals‚ shipping lines would contribute 21% (now 20%) of the revenue‚ cargo owners 46% (61%) and tenants 33% (19%).

The result Abdool said would be that shipping lines would contribute 4% more to revenue‚ cargo owners 25% less and terminal operators 77% more‚ based on 2010/11 revenue. Container charges would fall from 52% of TNPA revenues to 30%.

Abdool told the committee that currently TNPA was clearly under-leveraging rental as a source of revenue. The authority also planned to promote beneficiation by offering discounted tariffs of up to 80% for beneficiated products. This would be compensated for by increasing tariffs on imported goods.