The Ports Regulator of South Africa had some good news for the shipping industry on Monday, but bad news for the Transnet National Ports Authority (TNPA) related to its latest tariff application.
TNPA’s application for an overall average tariff increase of 19.74% was rejected.
The Durban-based regulator announced that “cargo dues” on export and import containers would decrease by 10% and 3% respectively for the next financial year (2020/2022). However, marine services and related tariffs (excluding container cargo dues) will increase by 5%. Coal (bulk) and magnetite export cargo dues will also increase by 5%, while all other tariffs are to remain unchanged.
This means the overall average tariff increase equates to 0%, with most income from ports coming from container cargo.
The overall move, which was welcomed by the South African Association of Shipping Operators and Agents (Saasoa), is aimed at boosting the country’s competitiveness and lowering the cost of doing business.
While TNPA had applied for an average 19.74% increase in tariffs for the period April 2021 to March 2022, it also presented indicative tariffs of -0.29% for 2022/2023 and -7.86% for 2023/2024.
TNPA manages the country’s major ports, including Durban and Cape Town (and should not be confused with Transnet Port Terminals, which operates the terminals around the ports).
“After considering the application and the submissions made by all of the stakeholders during the consultation period, and based on latest available data, the Ports Regulator has concluded that an appropriate overall increase in average tariffs for the financial year 2021/22 is 0%,” regulatory committee chair Tshisikhawe Munyama said in a briefing on Monday.
He noted that several factors are considered when making the decision, including cargo volumes, TNPA’s operational and cash flow requirements, and market-related factors such as the inflation outlook and the cost of debt.
Decision in line with country’s post-pandemic recovery
“The Ports Regulator was cognisant of the poor economic climate in the country, both from the underlying structural challenges facing us, but also more pressing the impact of the Covid-19 pandemic on the port system. The decision was therefore taken in line with the call by President Ramaphosa for all role-players to contribute to the recovery of the South African economy as a matter of urgency,” he added.
“The Ports Regulator is of the opinion that an overall 0% tariff increase as well as an export biased lowering of container cargo dues would be in the best interest of stimulating local manufacturing, beneficiation, and employment creation,” said Munyama.
He pointed out that for the 2020/21 tariff year, the Ports Regulator has approved revenue of R11.970 billion against the R13.569 billion applied for by TNPA.
Despite the more R1.5 billion ‘shortfall’, he said the regulator is confident about TNPA’s sustainability, adding that it still has the “financial space” to fully implement its capex programme, totalling R3.147 billion.
Munyama noted that TNPA had in fact previously not fully spent its capex budget.
“Concerning the under-expenditure on capex, it is evident that in spite of a clear regulatory incentive to increase capex spending, [TNPA] has consistently failed to execute the full capex programme as allowed for by the regulator,” he said.
“The Ports Regulator, however, determines that capital expenditure is a key component to the development and sustainability of our port system. In this context it would not be prudent to cut back on capital expenditure in a downturn as spending on infrastructure also contributes to the country’s gross fixed capital formation and allows the port system to be ready for the eventual economic upswing.”
Speaking to Moneyweb, Saasoa chair Malte Kersten said he was happy and relieved that overall tariffs were kept down to 0%.
“Marine services [excluding container cargo fees] has increased by 5%, which will affect international shipping lines. However, the decline in cargo dues is welcome and something that [was] called for some 10 years ago,” he said.
“TNPA’s 19.74% overall tariff application was outrageous,” said Kersten.
“We can live with a 0% increase, but costs must come down further and we need to get the requisite level of service.
“Port-related delays and other issues need to be addressed if South Africa wants to really become more competitive.”