Africa (PRSA) will make a decision by December 1 on whether to approve the Transnet National Ports Authority’s (TNPA) port tariff application.
PRSA CEO Mahesh Fakir told FTW that with the deadline for comments on the tariff application now closed, the regulator would within the next few weeks examine all submissions. He said he was confident that the deadline would be met and PRSA would subsequently hold a press conference on the matter.
Industry has raised several objections to TNPA’s proposed weighted tariff increase of 4.21%, for varying reasons. One item of universal concern was the fact that the revised methodology – prescribed by the PRSA – for valuing the port authority’s Regulatory Asset Base (RAB) had not been used in the 2019/20 tariff application. Because of this, both the South African Association of Freight Forwarders (Saaff) and South African Association of Ship Operators and Agents (Saasoa) are contesting the application on the grounds that TNPA’s asset values have been inflated, resulting in increased tariffs and revenue.
“The regulator, in adjusting the RAB methodology, has tacitly acknowledged that port users have been overcharged, at least since the TNPA’s RAB estimates were estimated in the 2010/11 record of decision,” Saasoa CEO, Peter Besnard, wrote in his comment submission. “The TNPA has for close on a decade been able to reap super-nominal profits from the use of elderly capital stock that has been overvalued for the purposes of determining what constitutes its required normal profit.
“It has made minimal investments in new capital over the past few years, effectively paying the equivalent of massive dividends to the Transnet Group.” Saaff executive director, Mike Walwyn, asserted that these overvaluations needed to be corrected and called for a downward adjustment of revenue expectations in current and future tariff applications.
“It is clear from the authority’s tariff application document and subsequent information provided at the regulator’s roadshows that the current application which utilises the previous asset valuation methodology will be unacceptable and that further discussions will be necessary,” according to Saaff’s comment submission. Saasoa has put forth three choices it believes the ports regulator should make on the tariff application.
The first is to allow TNPA the chance to supplement the application so that it is compatible with the approved methodology. The second is for PRSA to render the application null and void as “no application for revision of tariffs” has been submitted. And lastly, Saasoa has suggested that the regulator correct the overvaluation of the RAB – resulting in a reduction in the nominal tariff – and make up the shortfall by passing credit to the Excessive Tariff Increase Margin Credit (ETIMC) which could be reversed over time to “maintain an extended period of real decreases in the weighted average tariff”.
However, Transnet has defended its use of the previous RAB methodology by claiming that the revised version would place the stateowned company in serious financial jeopardy. In its own comment to the ports regulator, Transnet raised concerns over what it alleged was a lack of consultation, and limited time frame, before approval of the new methodology.
“The ports regulator, in the final valuation of the RAB, stated that it held public consultations but Transnet is not aware of whether the ports regulator held roadshows or any other consultative process, except for written submissions, in its consideration and finalisation of the RAB methodology,” read the Transnet statement.
The TNPA has for close on a decade been able to reap super-nominal profits from the use of elderly capital stock. – Peter Besnard
