Transnet seeks 14.4% hike in port tariffs

South African port charges are among the highest in the world and have been blamed for eroding the competitiveness of exports.

A recent study published by the Port Regulator of SA found tariffs for the port of Durban to be 874% above the global average for containers. If the government's R1bn port tariff rebate is taken into consideration, that drops to 721%.

According to the NPA, the requested tariff increase, which is more than double the rate of inflation, would be used to fund its extensive capital investment plans. But a portion of the increase could come from a savings fund, potentially lessening the effect on business.

The excessive tariff increase margin credit (ETIMC), a mechanism designed to prevent excessive future yearly tariff increases, could come into play. Higher tariffs had been expected by both the NPA and the regulator because of Transnet's investment drive.

The ports authority has asked the regulator to release R454m of the ETIMC's provisions. This means that it is seeking an average overall tariff adjustment of 8.5%. The facility has a balance of R900m.

Hike of 5.4% rejected

Last years' application for a 5.4% increase was rejected by the regulator, which decided instead that tariffs should drop.

The regulator's decision was in line with government's commitment to providing rebates to exporters of manufactured goods. This includes car manufacturers that have previously complained about prohibitive port charges.

Container export tariffs were cut 43.2%, container imports 14.3%, and vehicle export tariffs 21.1%.

National Association of Automobile Manufacturers of SA (Naamsa) executive manager Norman Lamprecht said logistics was a major constraint for car manufacturers. The industry was responsible for 12.1% of SA's exports and 16.3% of its imports. But Lamprecht said Naamsa had established a good relationship with Transnet that had led to collaboration on a number of fronts.

Exports by the motor industry amounted to R86.9bn last year against imports of US$136.1bn. Car manufacturers are due to benefit from Transnet's move to restructure tariffs to favour value-added and agricultural goods.

Yet there is growing concern over implications of a tariff rise for exporters. A source in the steel export industry said the proposed increase joined a growing list of rocketing administered prices, making it increasingly difficult for local companies to compete abroad.

He also said South African firms could not pass price increases on to their customers if they still wanted to remain internationally competitive.

But the NPA said the 8.5% increase was consistent with what it had previously asked for. In its previous tariff application, it said that an 8.5% a year increase between next year and 2018 would sustain the organisation during its capital investment drive.

Source: Financial Mail via I-Net Bridge