Fears of loopholes in export pricing reduction allayed

A report sent to FTW by the Cape Chamber of Commerce and Industry suggested that the Transnet National Ports Authority (TNPA) might have found a loophole to by-pass the restrictions laid down by the SA Ports Regulator, but the regulator has doubts that this tactic will be adopted. The Chamber expressed fears that the TNPA’s new pricing strategy may actually leave exporters who ship out their products in containers no better off that they were before the plan to reduce export cargo dues by 43%. This reduction is contained in the TNPA’s submission of its desired 2013/14 tariffs. It has proposed a 43.21% reduction in tariffs for containerised exports, of 14.3% for containerised imports and of 15.71% for motor vehicle exports. But it may have found a means of compensating for this loss of income, according to Michael Bagraim, president of the Cape Chamber. What it may be planning is to increase charges in other areas of its business which do not fall under the control of the Ports Regulator, he added. He noted that, at present, cargo dues produced 61% of the revenue for the ports. But, in terms of the new application to the Ports Regulator, that will be reduced to 41%. To compensate for this, Bagraim added, the share of revenue from shipping lines will be increased from the present 20% to 21%. But the big adjustment will be an increase in rental charges to “tenants” – who will then provide 33% of the revenue for the ports instead of the present 19%. Given this, Mike Walwyn, chairman of Cape Town’s Port Liaison Forum, said it was likely that Transnet Port Terminals (TPT), the main tenant, would have to pass on the increases to cargo owners in the form of higher terminal handling charges – and the cargo owners may be no better off than they are now. “As the Ports Regulator has no say on what the TNPA can charge its subsidiary company, TPT,” said Bagraim, “its authority could effectively be by-passed.” This, he added, would maintain its high profit cash-flow. The Chamber is adamant that port tariffs in SA are among the highest in the world, and that there is evidence that Transnet has used the ports as a cash cow to subsidise other lossmaking operations. A tidy case, but not one that has absolutely convinced the Ports Regulator. Riad Khan, CEO of the Ports Regulator, told FTW that while he agreed that it might be “possible”, he thought it was not as “probable” as the Chamber’s report suggested. Countering it, he pointed to the responsible corporate citizenship that has been manifested by Transnet in the recent past. This, he added, may extend throughout the organisation and prevent such an occurrence. “I believe that TPT will no doubt wish to extract the maximum amount of revenue they believe achievable,” Khan told FTW. “But a sustained pattern of increases beyond inflation will ensure a negative regulatory response against the TNPA, as it has an obligation to manage the ports in an efficient and cost-effective manner. “This includes ensuring that the tariffs of its concessionaires do not get out of reach of what is reasonable.” Based on these arguments, Khan felt the case weighed more heavily against such a devious tactic being adopted by the TNPA than being employed, and rejected the Chamber’s supposition.