Tariff methodology appropriate – Regulator

The Ports Regulator of South
Africa (PRSA) is confident
that the methodology used
to determine tariff increases
in the country is the most
appropriate approach for
a developing economy as
significant decreases in tariffs
have been made in the past
few years.
The Regulator told FTW
a revised methodology was
published every three years.
“This is the third
methodology that we have
published and it is similar to
those used all over the world.
In our opinion it is the correct
approach for South Africa,”
he said. “There are various
reasons why we have opted for
this particular methodology.
Of course there are arguments
for and against it. That is the
nature of regulation. This
methodology was adopted
at the end of March this year
after serious consultation
with stakeholders resulting in
noteworthy changes from the
previous versions and will be
used for the next three years.”
He said looking at the
increases over the past eight
years the methodology had
also ensured real decreases in
tariff.
“During an eight-year
period inflation grew at
around 5.7%, while revenue
increased by 10.4% – and
that in turn allowed capacity
to increase. The South
African model is one where
the port has to pay for itself,
but tariffs during that time
only increased by 1.6% on an
annual basis,” he said.
Industry at large has,
however, continuously
questioned the methodology
used to determine Transnet
National Port Authority’s
(TNPA) annual tariff
increase, saying the process
by its very nature is flawed.
Whilst most stakeholders
would prefer an
approach where price is
capped, the PRSA uses
a revenue requirement
methodology for tariff hike
determinations.
“If one is operating in
a regulated environment
where there is no need
to add to capacity and
infrastructure, and efficient
productivity levels are in
place, then a price cap for
a number of years makes
sense. But in South Africa
it would not be optimal,”
said the Regulator. “Firstly,
tariffs have to be fixed for
longer periods and at the
end of that period there is
no incentive to invest in the
port.”
He said different incentives
were attached to different
methodologies but the
PRSA was working hard
to introduce certainty and
consistency into the South
African port landscape.
“We have engaged
extensively with industry on
the methodology and while
we accept there are differing
views and that the approach
may not always be optimal, it
is the best approach for South
Africa.”
He reiterated the
importance of transparency
and consistency in the entire
process.
“The forecast in June is
often very different from that
in December when the record
of decision is published. We
do refine interpretation of
the methodology as we go
along but ultimately the
calculation is the calculation,”
he said. “While we do refine
our interpretation, we should
not play around with the
methodology. That creates
uncertainty and impacts the
ability of Transnet to raise
debt to finance new capacity.
It also impacts negatively on
port users.”