Ports seek an 8.5% tariff increase

Port tariffs are likely to rise in order for Transnet to fund its capital expansion plans. Image: Urban Africa

"The regulator is expected to publish a tariff determination for ports before the end of next month," said acting chief executive Marissa Damons.

The determination is keenly awaited as it will have an impact on the cost of doing business in South Africa and on the competitiveness of South Africa's exports, as cargo dues and marine service tariffs are a critical part of total supply chain costs.

The tariffs will take effect from April, the start of the Transnet's financial year.

While Morwe could not predict the regulator's decision, he said that the TNPA had drawn up its tariff proposal for the first time on the basis of guidelines provided by the regulator.

He said he hoped the regulator would agree to a multi-year price determination, which would mean that the approved tariff would apply for each of the next three years.

Failure to receive the above-inflation increase requested would threaten the TNPA's development plans for Durban, Saldanha Bay and Coega, and its acquisition of new tugs and a dredger.

The tariffs reflect the new pricing strategy adopted by the TNPA, in which the charges on containers and cars will be reduced. The 8.5% was an average for all product lines, which would have differentiated tariffs.

"The regulator not only needs to take (into account) the impact of a price change on the owner of the ports (the TNPA) but is also required to consider the impact on the users of the ports and all other stakeholders," Damons said.

South Africa has revised its port tariffs in attempt to get them in line with world standards. Image: Wiki Images

"Critically, the regulator needs to weigh the need for the provision of these services and infrastructure over the long term, with the short-and medium-term economic impact of tariffs. The regulator must allow the TNPA to recover its investment in owning, managing, controlling and administering ports and its investment in port services and facilities; and make a profit commensurate with the risk of doing so.

"Within this mandate the regulator has, in the past, determined a suitable tariff level for the port system - sometimes differing greatly from the application, as the 0% increase last year testifies. As economic and financial realities change, so do the considerations and the trade-offs calculated," said Damons.

She said there were imbalances in the tariffs on different commodities. South Africa's tariffs on containers, for example, were much higher than global averages while others were more in line with, or even below, global averages - for example, charges for dry bulk commodities.

She said the publication of the regulator's final determination before the end of February will allow the TNPA sufficient time to adjust the tariffs in line with the approved adjustment". The regulator conducted road shows and other forms of public engagement across the country to get input on the TNPA's application.

The 8.5% is below the 14.4% the TNPA requires. The difference will be made up by the excessive tariff increase margin credit (ETIMC)‚ a mechanism based on retained earnings designed to prevent excessive yearly tariff increases that would be a shock to the economy. The facility has about R900m.

The TNPA has projected a cash revenue from its marine business of R8.4bn for 2014/15, which would require R454m from the ETIMC. Revenue from the property business is forecast to be R2bn for the next financial year.

Source: Business Day via I-Net Bridge