Regulator introduces KPIs as port productivity incentive

Incentivising ports to increase
productivity is at the heart of
the Weighted Efficiency Gains
from Operations (Wego)
introduced in the latest Ports
Regulator of South Africa
(PRSA) tariff methodology.
One of the biggest industry
gripes with the port system
has been terminal operation
– and whereas Transnet
National Ports Authority
(TNPA) is regulated, Transnet
Port Terminals (TPT) is not.
While TNPA has Operator
Performance Standards in
place to improve terminal
efficiency, the current
Revenue Requirement
formula and particularly
the claw back procedure
in the methodology does
not necessarily incentivise
productivity.
“We have introduced
Wego in an effort to address
this very challenge,” says a
spokesman for the PRSA.
He says through the port
consultative committee
various KPIs have been
identified in each port, while
TNPA has also been asked to
draw up KPIs for the various
ports based on the particulars
of each port, including
revenue and operational
output.
“The Regulator will now
publish an appropriate KPI
for every port and it will be
measured on a terminal basis
and calculated in a specific
way.”
Best described as an
indirect regulatory incentive,
Wego allows TNPA to
earn additional revenue if
the performance at ports
improves. Alternatively, it
loses revenue if ports underperform,
says the regulator.
“If the performance in a port
goes up by 10%, TNPA will
earn about R130 million rand
more per annum, but if the
performance drops by 10% or
more, the PRSA will take R130
million out of their profit.”
He says discussions with
various port users have revealed
that productivity remains a
contentious issue.
“There are various
role-players who in their
engagement with us have stated
they are willing to pay more on
tariffs if efficiencies increase,”
he says.
The South African
Association of Freight
Forwarders, in its submission
to the PRSA on the annual
TNPA tariff increase, voiced
some concerns about assessing
improved efficiency based on
volume growth.
According to Saaff, with
importers and exporters
having very limited choice
in port selection and being
largely confined to TNPA
ports, improved efficiency
though impacting positively
on port users may not have
any significant effect on
volumes. The organisation
is also concerned that when
volume increases or decreases
do occur it will be difficult
to access whether they have
resulted from improved trading
conditions or from the effects of
efficiency.
The SA Association of Ship
Operators and Agents (Saasoa)
has also expressed concern. The
organisation, while welcoming
the introduction of an
efficiency measure, says while
the efficiency incentive may
promote increased volumes, it
is not clear that it will do so at
lower prices
According to the spokesman
Wego is still in its infancy and
as an efficiency measure will
develop and be refined over
time. “At this stage we have
set it at 5% of the return on
equity – about R130 million
for 2018/19. We believe that if
TNPA is able to address some
of the most pressing problems
in the ports they can earn
substantial additional revenue
and port users will immediately
see improved efficiency.”