Investor must be assured of
monopoly right to offer enough services
Ed Richardson
MORE NEEDS to be done to allow for competition between the different ports in South Africa, says Geoff Parr, chief economist for the Competition Commission.
In a submission to the Portfolio Committee on Transport, Parr says several forms of competition are possible within and between the various ports in South Africa, but the Draft Ports White Paper fails to explicitly recognise these types of competition.
The Commission is concerned that the Draft White Paper says very little about which port services are to be concessioned, or for how long.
“Since there is a desperate need for new investment in port infrastructure, and Government is unwilling to spend its own money on that investment, it would appear that a complete range of port services must be concessioned, and for a reasonably long period of time, so that there is an incentive for the successful bidder to invest in substantial infrastructure. To make an investment pay, the investor must be assured of the monopoly right to offer enough services, and to offer them for long enough,” says Parr.
Three forms of competition should be present; competition between SA ports (inter-port competition), within each port for providing certain port services (intra-port competition), and competition relative to South African ports’ international counterparts.
Inter-port competition would be facilitated by tariffs. Ports like Port Elizabeth and East London should compete by seeing which could offer consumers the best deal. This kind of competition would, however, be limited by geographic positioning, and physical infrastructure both within
the port and in the form of transport links.
Intra-port competition should, believes the Commission, take the form of bidding to provide services. “The way to introduce vigorous competition might be to have competition in advance (ex ante) for the market, rather than competition in the market,” says Parr.
In addition to the possibility of competition in and between SA ports, there is the matter of the overall level of competitiveness, efficiency and productivity of SA ports in comparison with world standards.
“There is a general feeling amongst stakeholders that SA ports are slow and expensive, and there have been calls for increased participation of the private sector, to reinvigorate investment and efficiency,” he says.
The Commission says the chief competitive concern currently is the existence of what might be called restrictive vertical practices, which come about because several competing service providers are vertically integrated to differing degrees.
““In the coming months, as part of the policy development process, the Competition Commission will continue to engage the Department of Transport and other stakeholders, in order to address some of the issues,” said Parr.
