Call for comment on 8% port tariff increase

The Port Regulator of
South Africa has called
on industry to submit its
comments on the recently
submitted port tariff
application by Transnet
National Port Authority
(TNPA) for 2017/18.
TNPA has applied for
an average 8% port tariff
increase allocated as
13.25% on marine services,
5% for containers, 5% on
automotives and 8.30% on
all bulk.
TNPA also applied for
a 25.11% tariff increase
for 2018/2019 and 9.54%
for 2019/2020. This is in
accordance with the multiyear
tariff methodology
currently being used in
the country, although the
port authority still has to
re-apply each year.
Port users and
interested parties
have until September
30 to submit written
commentary and proposals
on the tariff application,
according to the office of
the Port Regulator. The
Regulator will hold public
hearings during September
it said.
At the time of going to
press no dates or times
were yet available.
The 8% hike request,
however, has not received
favourable response,
with many industry roleplayers
saying it is high
for the current economic
environment. This has
been a consistent approach
by industry which has
challenged TNPA tariff
requests through the Port
Regulator in the past few
years.
And the Regulator has
been in agreement. In
March this year it
declined TNPA’s 2016/2017
tariff increase request
of 5.9% granting them
no increase at all. In
2014/2015 TNPA requested
9.5% but was only given a
4.8% tariff increase.
Transport economist
Andrew Marsay said there
was no doubt industry
would challenge the
request again.
“The high tariff
increases are only
justified on the basis of
protecting Transnet’s
unsustainable investment
programme. This cannot
be an adequate reason and
should be challenged,” he
told FTW.
The critical point, said
Marsay, was the Market
Demand Strategy (MDS).
“Transnet’s ability to
fund this is critically
dependent on maintaining
high levels of profit in the
ports sector. Without this
they could not raise the
necessary funding,” he
said. “The reason that they
couldn’t is that much of the
MDS investment is going
into the general freight/
container sector which is
not intrinsically viable in
the rail business. This is
a very serious concern to
Transnet itself but also
should be to the national
economy as a whole. For,
under the guise of the
MDS, billions are being
spent on non-viable
projects. The rationale
for the MDS is that, in
theory, mega investment
should lead in the longterm
to freight forwarders
increasingly choosing to
use real transport. The
reality is that liabilities,
not assets, are being
created, with insufficient
revenue to cover growing
future maintenance costs.”
Mike Walwyn of the
South African Association
of Freight Forwarders
(Saaff) agreed saying
Transnet was known for
basing its tariff application
request on its capital
spend.
Which is why a new
methodology for
determining tariff
increases is so important.
“We hopefully will have a
new methodology in place
by next year which makes
their requests for 2018 to
2020 meaningless,” he
said. “Our expectation for
this current increase is that
industry will challenge it as
an 8% increase is too high
and there is no valid reason
for it.”
Marsay said in reality
slower national economic
growth was causing cracks
to emerge in the whole
MDS approach. Hence
pressure to keep raising
port tariffs.
Asked how South African
ports compared to the rest
of the world, Marsay said
container and automotive
port tariffs were still much
higher than international
benchmarks. Bulk tariffs
are said to be a bit lower.
TNPA did not respond to
requests for comment.