National Commercial Ports Policy: hearings

TRANSPORT PORTFOLIO COMMITTEE
7 November 2001
NATIONAL COMMERCIAL PORTS POLICY: PUBLIC HEARINGS

Chairperson: Mr J P Cronin (ANC)

Documents handed out:
A P Moller Group (Safmarine and Maersk South Africa) [see Appendix]
Unit for Maritime Studies (University of Stellenbosch) [see Appendix]

SUMMARY
It was agreed that there was need to revisit the draft White Paper, which was short of details although clear on principles. The emphasis should be on the logistic perspective that needs to be strengthened.

The Department agreed to revisit the draft White Paper, saying they recognise the existence of the primary users of the ports and take note of the concerns that they have raised.

Prior to the introduction of the revised draft White Paper in Parliament early next year, the Department would distribute the draft to key stakeholders and hope also to have bilateral discussions with them in the process about the issues or concerns raised in the revised draft White Paper.

MINUTES
Southern Africa Transport Investments (SATI)
Mr Brett Gray: Managing Director, SATI, said that the White Paper spells out issues of principles but does not get into details, as they would have expected in terms of a policy document.

Whilst there are a number of conceptual statements there are no details as to how that would be achieved. He referred to Dr de Monie's report that goes into the details of the White Paper. He recommended that Members familiarise themselves with that report as the views of SATI are mirrored in much of that report.

Policy Goals and Objectives
The White Paper does not spell out which of the current government functions are going to be moved to the private sector and how that was going to happen. Privatisation is not a favourable word, particularly with the labour sector, and SATI thinks that it is probably a misnomer when used in respect of ports. Concessioning is more a case of leasing out assets to an entity for a period. The White Paper does not go into those details, which is an important aspect. What is going to be concessioned and how will it be done?

The White Paper does not address the needs of the users as opposed to government's needs, which is a key issue.

Governance and Institutional Arrangements
SATI is concerned with the amount and the number of different government departments that are involved in the management of the ports and which are spelled out in the White Paper. It is not clear to them who bears the responsibilities and who is accountable, which could slow down the reform process.

Ideally what they would like is one government institution to be responsible and accountable for all port reforms, which is not the case.

Whilst the White Paper goes into a lot of details in terms of the National Port Authority's (NPA's) functions, it does not go into a lot of detail in terms of port operations, and which port operations are going to be shifted to private enterprise.

There needs to be more clarity in terms of the regulatory powers of the port authority board and how that is going to work. In other words, who is going to be represented on that board? What are its responsibilities? How much authority will it have? The only thing that is stipulated is that the board is subject to the Minister and in essence they are concerned that at the end of the day the Minister will be able to determine the authority of that board, which will be rendered a paper board. They would like to see the authority and those responsibilities set out in more detail and who would be represented on that board particularly from the point of view of the users of the port.

Land duties - the NPA
One of the major concerns of the shipping lines is that there is no overall national port development plan. Whilst the Department is talking about concessioning there is no plan for how and when the ports development will take place.

From the user perspective they would like to be represented on the NPA board, to be clearly spelled out to reduce the Ministers and government's involvement. Policy should clearly spell out how the activities of the NPA would be funded after government funding has been withdrawn. Their concern is that the concessioning costs, which is revenue from the point of the NPA, and the land rental rates will be not market related in order to fund the NPA.

Complimentarity and Subsidiarity
As private enterprise they would to see as much competition as possible, both intra port and inter port competition. They believe that the ports are in the position to compete with each other effectively. The concern is that if you have complimentarity then you have central management behind the scenes. They do not favour complimentarity but would rather like to see the promotion of inter port competition.

Financial elements
The policy does not spell out the principles on which user charges would be based they do say in general terms that user pay principle would be present but they don't spell out in detail how those charges are going to be obtained.

Service level contracts/service level agreements
It is a common practice throughout the world, particularly as regards terminals usage, that the users enter into service level agreements with the operator of the terminal. These agreements would spell out in detail what the service level and the prices would be what needs to be implemented.

Human Resource Development
There is nothing about the manner in which the existing labour force and staff levels would be dealt with as the concessioning takes place and would like to see something there covering how labour would be treated and what the terms and conditions would be.

P&O Nedloyd
Mr Nigel Pusey, Managing Director, said many of their own issues have been covered by Mr Gray. There has been general consensus among the shipping operators that the policy document concentrated more or less on NPA's relationship with the Department of Transport rather than determining what is the policy towards existing ports and how they are actually operated. The other was the subsidiarity issue of how one allows ports to compete inter as well as intra.

Stellenbosch University
Dr van Niekerk, University of Stellenbosch, is an independent consultant and has done a lot of work on ports, in South Africa specifically and ports worldwide. She was also involved with the drafting of the initial ports policy with Portnet.

The biggest concern with respect to the White Paper is obviously the need, the role and the functions of the National Ports Authority, which are not clearly identified. With the introduction of the port regulator, commercialisation and potential private participation, one needs to know what the functions of the port regulator are going to be in the interim stage.

With respect to the competition board normally with the bidding process you cannot allow the operator or the participant to have any links those issuing the leases or the concessioning. In this case the relationship between the newly formed National Ports Authority (NPA) and the Port Operations Division (POD).

In the end what role will POD play? Are they going to be private participants competing with the private investors? This relationship between NPA and POD needs to be clarified and put into the ports policy.

User Pay Principle
With the whole question of certain investments and assets with no opportunity cost, for example, Breakwater and channels, it is not feasible to allocate prices in line with the user-based principle.

How is the NPA and POD going to price that? The whole split needs to be allocated properly and transparently because it is difficult to do that. In other words, the user pay policy is not feasible.

There was a maritime policy document drafted in 1993 so-called Flora Port, in there they are dealing extensively with the way how to price in the case of ports. One can't accept that it is a user pay principle throughout.

With the whole issue of the NPA and infrastructure development one needs to see where is the income going to come from for the NPA in order to provide for basic infrastructure.

POD should be based on business principles but the issue is where is the NPA going to get its money?

She gets scared when she sees the word returns on investments because with the NPA serving and facilitating trade they need to define what the reasonable returns means. They need to have money to invest in future infrastructure but can't allow profit. Therefore, the reasonable return needs to be identified here and all the policies in terms of how one can deal with that and what would be the replacement costs and how one can invest in that.

This leads to the issue of how the development of new ports will be financed. It boils down to the NPA functions, the role, the pricing, what it should be and what it is there for.

The role of Spoornet
This is also very important because the whole relationship between Spoornet and the NPA can equalise railways which can put certain ports into a competitive advantage or disadvantage and that needs to be resolved. If it is not resolved or there is no policy towards that it would also skew the whole policy principles.

Private Operation of Common User Terminals
Will container terminals become common user facilities or will they dedicated facilities? How will pricing be regulated? How will they identify it as inter port competition, intra port competition or inter terminal competition?

The Department needs to identify different business units to see what is feasible. It is important to examine government policy, especially whether they are going to give different ports to different shipping lines. Will they give it to a consortium, are they going to give it to third party operators, are they going to give it to individual ports? This policy decision is cardinal to the whole privatisation process.

Certain issues have not been stipulated in the policy, such as operations within the ports like dry docks, ship repair facilities, the responsibility of the marine services, navigational channels and so forth.

Other points involve cross-subsidisation for infrastructure development, for instance, which should not come from the taxpayers' money. Portnet has yielded profits over the years of around R1,2 billion out of which their basic infrastructure was always justified.

With the concept of the complementary national port system it means to look into the coordination of developments to ensure that one does not duplicate scarce resources. More so than having a system of ports where you have uniform tariffs, regulating them on the same basis.

Discussion
Mr A Ainslie (ANC) noted that in SATI's document they say that they want wharfage container handling tariffs eliminated. He said there has been a review of all tariffs over several years and that the wharfage tariffs would be disperse of in December. He asked for clarity.

Mr B Gray (SATI) replied that Portnet has reviewed the tariff issues and the traditional wharfage charge is being phased out. However, there is reference in documents to a wharfage charge, which they are not sure how it would be rendered, levied, and what it would entail, and how it changes from the existing one.

Secondly, in SATI's document on page 3 point 8 they talk about "declining levels of services." He asked to what they would ascribe the declining services. He thought that by transferring port operations from Portnet to the shipping lines, the situation could be improved. What would the shipping lines do that Portnet is not doing and how would result in increase levels of services?"

They have stated that wharfage is to be phased out but they have not stated what is going to take its place. So it comes back to the question of how is the NPA going to be funded?

Dr van Niekerk said that what is important about wharfage is that what is being charged is the weight. Wharfage is a tax that is based on the value of the imports and the exports. There is no relation between the tax being paid and the service that is being provided. The intention of wharfage was the majority of the income of Portnet was from wharfage and the NPA got that income and they distributed that income to investing in infrastructure and did not have business units where every business unit is generating its own income. It was basically subsidising business units within each other that the NPA gave to that business unit that needed the income.

With the whole notion of commercialising one needs to identify one's business units and every business unit needs to take into account costs that need to be allocated to it 100% which has not been done over the years.

For example, the container terminal never paid for the construction of an entrance channel now one needs to allocate some of that build to the container terminal. That is the way they need to appropriate all the costs to each and every individual business unit.

When they say they are doing away with wharfage it is really to re-charge and get a new base on which to charge - to identify your business units, to identify the costs related to the business units and in terms of that charge.

If one raised the port operation charge by 40% then one needs to reduce the wharfage with 40% otherwise one is going to increase the total market price.

Mr Cronin (ANC) asked whether has the principle source of revenue for Portnet been wharfage? The presenters responded that it was overwhelmingly so.

Mr Cronin said that the shipping lines use the port and they are basically getting tax on the value of the goods that they are bringing through. Now the point being made is that that is a very cumbersome system because it does not reflect service first of all - there is no pressure on the port to provide better service but the value of goods moving through would be taxed the same amount.

Second problem is that port involves many different functions and different entities and that has not been adequately reflected. As we commercialise and break the port up into business entities you have to stop pricing in ways that encourage better service but also reflect the benefits at a container depot in a port - benefits due to another entity in the port keeping the channel clear so that boats can get in and out.

In the pricing and so forth one needs to reflect that. The Chair asked whether was that right?

Mr Gray (SATI) gave an example of why wharfage has been prejudiced in South Africa. It is because wharfage is based on value. For example, instead of exporting parts to make up a TV set, you actually have to make the TV set here and then export it. The value of sending the parts out is much less than the value of sending out the TV set. If one had to make the TV set here and send it across, the exporter, not the shipping line, is paying much higher tax / wharfage than if he just made the parts. So it acts as a disincentive because it was a tax based on value, not the tax based on the work that was done in order to export those goods.

Another example, if one were exporting a big shipload worth of iron ore at low value, one would pay a low tax. But if that same ship were filled with TV sets, which produced more jobs because it was a benefit, paying a much higher tax would penalise one. That was a problem with wharfage in that it is not a service-based or worked-based tax.

Mr Pusey added that the position presently was as follows: the NPA and POD have indicated that they want to change the tariffs as from 1 April 2002. There was a consultation process that took place up to June this year but is presently in suspension because there are various issues that have come up. They have not yet got back together to determine new tariffs.

This is due to the split between the NPA and the POD - they have both indicated that they are going to negotiate separately. If wharfage goes down, the physical lift rates have to go up so that the costs of the exporter overall is neutral. The danger, which they have reflected to NPA and POD is, is that there will be two separate negotiations. There is a danger of one saying 'this is what I need for my costs,' and the other one saying, 'this is what I need to cover my costs.'

Ultimately the exporter ends up paying more or less, depending on what the outcome is. From what they have seen it is likely to be more if it is left to two separate negotiations. This is what they brought to the attention of Transnet - telling them not to leave this until it was too late, that is, the movement from wharfage to unit rates.

They are saying that there is cross subsidisation between wharfage and terminal rates which are 40% less than what they should be. The reality is that if one does not reduce the wharfage and one increases the lift rate the exporter is going to end up paying much more and thus effectively taxing the export of SA goods.

Mr Cronin observed that what they were asking for was a coherent and strategic system of pricing which has to work for the country and the economy because it is an irrational system that we have right now which is a shared concern. It is not very transparent and above all it is irrational.

Clearly the Ports' White Paper would not go into detail but should clearly indicate a strategic approach to this that should be developed and improved in the White Paper. It should provide a better and more coherent route into the whole pricing policy within the port system.

Dr van Niekerk added that she would go further and lay down the principles of the pricing in that policy.

Mr J H Slabbert (IFP) referred the Committee to page 3 point 8 - and asked why would the private sector perform more efficiently than Portnet?

Mr Gray said that their particular view was that productivity levels in the South African ports have not been up to standard. Container shipping lines go to any number of ports in the world and P&O Nedloyd is number two or three in the world. Between SATI and P&O Nedloyd they go to five or six hundred ports in the world and have a very good idea about the productivity levels in the different ports.

One simplistic way of monitoring productivity in the ports is by the number of container moves or how many cranes work for a particular ship. If one ship has one crane then it is not productive as having two or three. The shipping lines monitor this and there is no doubt that the productivity is not as good as they see around the rest of the world.

P&O and SATI are in partnership on the South African-European trade where they have decided to put an extra ship in which would cost the partners $10 million (R120 million) per annum in additional costs simply to be able to make the schedule. There is no doubt that it is not productive and it is costing the shipping line a lot of money and in fact costing the importers and exporters lost opportunities. From that point of view it is a serious problem.

The logistic chain between a manufacturer say in Munich, Germany, and bringing it Bloemfontein, in South Africa, is a large logistic chain. There are many facets to that chain. However, there is one place where it bottles, and that is at the port. Because there is only one place to get it in. Once it gets out of the port one can take it out by rail or by road, but you can only get it into the port by one way, which is a bottleneck. If that aspect of the chain is not productive then importer and exporter, and the shipping line are bearing the costs. The shipping lines have threatened at times to implement a congesting surcharge, which would effectively mean that the price for exports would be increased.

Why is it happening? There are three main issues - firstly equipment; there is old equipment and there is insufficient equipment and not well maintained either. There are a lot of breakages, and equipment is out of operation at any time, and the reason for that is that profits were used to subsidize other aspects of government totally unrelated to ports and as the result of that there is a backlog in terms of catching up.

The second issue is labour. In the past Portnet and Spoornet were regarded as 'white' entities in terms of management whereas labour was predominantly 'black' and the whole change that is happening in South Africa has an effect on that.

In line with this, labour is bureaucratic. For instance, when shipping lines wanted crane drivers' remuneration to increase, as they are key in the industry, the response was that they could not because he is in the category with train, truck and other drivers and therefore if his increases the rest should as well. Due to such bureaucracy they could not address the issue.

The third one is the relationship between Portnet and Spoornet, which are under the same entity: Transnet and yet there are significant communication problems between the two. So much so that it was the shipping lines, which called for a meeting not only with Portnet but also with the representatives of Spoornet to try and address as users within the Transnet organisation itself.

Mr Pusey added that in September they were experiencing delays of between 80 to 100 hours for every vessel going into Durban. They calculated that for a period of June to September the shipping lines incurred around R50 million extra costs in terms of those vessels waiting to get into the port.

The solutions when they sat down with Portnet Operations were to buy the machines that take the boxes from the ground to put them to the crane and get them onto the vessels and the last time Portnet bought those machines was ten years ago. The first new ones are arriving in January next year and Mr Pusey said they would see an improvement there.

The other issue was how management dealt with crisis or problems at the port. As soon as a crisis develops at a port there is insufficient management capability to deal with those problems on the ground that concerns the shipping lines. They are about to enter another period of labour disruption in Durban in a couple of days and in three weeks time they would have significant delays at terminals as the result of that.

The decline in services can be attributed to under investment and poor management over a period of time and it takes significant time to stop it and move forward. The feeling is that these issues are not dissimilar from any other countries in the world. The UK, Netherlands, America, have all been through the very same issues because of the way the used to be managed. Without exception all of them have chosen to use private enterprise with a different focus to achieve the investments and management skills one needs to bring ports up to the desired standards.

Mr T Qukulu (SATI) added that the private sector always finds sources of funding to equip ports whereas parastatals, even if they had money, would find other uses for it. For as long as Portnet is a parastatal, there would always be problems with functions at the ports.

Mr SB Farrow (DP) observed that after listening to the presenters there was clearly some need to increase efficiency at the terminals. This can be done with the involvement of the private sector but the question is how can that work within a competitive environment particularly in regard to the White Paper which the presenters said had a lot of anomalies. He asked the presenters how they see the competing companies operating at terminals either on communal or dedicated basis?

Mr Gray responded that the trend internationally was to outsource from the private enterprises, particularly container terminals and to take cognisance of what was happening in the rest of the world in terms of how it is approached in South Africa. Government should decide whether it is going down the concessioning route or one does not and one of the concerns they had with the White Paper was that it was a little bit of both.

On the issue of the White Paper he asked when the public was brought into the drafting of the White paper? He understood that it was drafted by the IMCC from DTI, DoT, DPE, and the Department of Finance (DoF) and in that committee they could have used user involvement which could have brought in international and user perspective as opposed to just the governmental one.

Mr Cronin told the presenters that the White Paper was a draft paper and as the Committee they are using every available resources to help facilitate inputs from a range of stakeholders in this process and they hope to overcome any limitations that may be on the way in trying to get those inputs.

As a Chair he was also anxious not to turn this into an ideological warfare. He called for unifying experience between different government departments, the trade unions, Spoornet and Transnet management and the private sector to try and find the international best practice if they can, modeling different approaches, and finding particular solutions.

The committee hoped to influence the Department in terms of re-drafting the White Paper for early next year. He felt the emphasis should be on the logistical perspective, a policy and strategic perspective that needs to be strengthened in the draft White Paper that is coming through from different sides and from different interest groups. He said SATI and P&O want to see a strategic and transport logistic approach to the NPA and not a public enterprises' approach. The White Paper should be much clearer than it is at the moment.

Mr Qukulu asked how the Committee was going to ensure that the concerns that they have raised would be embodied in the White Paper?

Mr Cronin responded that he would like to ensure them that they take this very seriously and invited them to keep the pressure on the process by using Parliament and theirr access to the Department and so forth.

Mr J Makokoane (Transport Department) said that they recognise the existence of the primary users of the port and the Department takes note of the concerns that they have raised. He assured them that the Department would have bilateral discussions with them to clarify issues and prior to coming to Parliament the Department would definitely have a draft distributed to key stakeholders and would discuss it with them.

The meeting was adjourned.

Appendix 1:
A.P. MOLLER GROUP (SAFMARINE AND MAERSK SOUTH AFRICA) COMMENTS ON THE WHITE PAPER ON NATIONAL COMMERCIAL PORTS POLICY

POLICY FRAMEWORK:

Should clearly distinguish between containerised cargo facilities, bulk cargoes, passenger facilities, fishing boats, pleasure craft, coast guard, navy, sea rescue and environmental protection as the underlying economic principles governing these activities are different.

The re-structuring policy and objectives of the DPE should recognise the diversity of the underlying economic principles of the different port users. In particular ports handling containerised cargoes should be treated differently from ports handling bulk cargoes for re-structuring purposes.

Policy should specify a mechanism for evaluating and transferring existing assets, e.g., equipment, labour and systems to new operators.

POLICY GOALS AND OBJECTIVES:

Policy should define how privatisation will occur in terms of process and corporate structures involved.

The users needs, particularly the needs of liner shipping operators, should be the primary consideration as national needs are covered in the constitution.

Policy should define the roles and responsibilities of a port operator in regard to existing port facilities.

Container handling charges should be based on the level of service provided in order to improve productivity and encourage competition.

Wharfage should be completely eliminated from container handling tariffs as it artificially increases transport costs.

Policy should define the level and conditions of participation by foreign-based companies in privatised ports in South Africa.

GOVERNANCE AND INSTITUTIONAL ARRANGEMENTS:

Continued involvement by different government departments in the management of South African ports has the potential of clouding responsibilities and accountabilities and slows down implementation of port reform. Ideally one government institution should be responsible and accountable for all port related reform processes to avoid overlap.

Whilst the National Port Authority function has been separated from port operations, policy does not clarify the roles and responsibilities of port operations as these are more important to the users. Furthermore, the end state of port operations given the envisaged privatisation of container terminals, should be clearly defined.

Policy should clearly spell out the areas of port operations where government will continue to be involved.

Policy should clearly confer oversight regulatory powers on the Port Authority Board as policy gives NPA the role of referee and player in its current form.

Policy should define the end state of Transnet after the envisaged restructuring as this will determine the nature and level of government involvement in port management.

LAND-OWNER DUTIES OF THE NPA:

The national port development strategy should be based on user needs and in the case of container terminals should be determined by input from the shipping lines. In particular the shipping lines should provide input on the extent and timing of capacity expansion required in existing ports, as well as the need and location of new ports to be developed to meet future demand.

Port development should not be pushed by government but should be justified on the basis of natural market forces and port user needs.

In regard to the provision of rail access, a seamless rail/port interface is not achievable in the absence of a restructured containerised freight rail transport. The shipping lines wish to control all key elements of the transport supply chain in order to improve service to importers and exporters.

In regard to licensing/concessioning of terminal operations, the policy should spell out clearly how this will be done and which container terminals will be affected.

Policy should state how many concessions will be issued per port taking into account existing and future volumes.

Representation on the envisaged consultative committees should be dominated by the shipping lines in the case of container terminals.

The shipping lines should be represented in the proposed Port Authority Board. The roles, responsibilities and authority levels of the proposed NPA Board should be spelt out to reduce the Minister's and government's involvement in port administration.

Policy should clearly spell out how the activities of the NPA will be funded after government funding has been withdrawn.

Withdrawal of government subsidy to NPA should not result in operating leases that cover all of NPA costs.

NATIONAL DEVELOPMENT STRATEGY FOR COMMERCIAL PORTS:

Policy should promote inter-port competition as the basis for ports operation when the ports are privatised. This will facilitate improvement in port service levels and customer service.

Intra-port competition should only be encouraged when a port has more than one operating license.

FINANCIAL ELEMENTS OF PORT USAGE:

Policy should spell out the fundamental principles on which usage charges will be based and how these will be regulated.

Also, policy should clearly state how and when service level contracts between the NPA and the operators will be introduced as this has a critical bearing on improving existing low levels of productivity.

HUMAN RESOURCE DEVELOPMENT:

Policy should clearly state the future of existing port staff after the ports have been privatised.

IMPLEMENTATION:

The shipping lines are concerned about declining levels of service in container terminals and propose that the process of transferring port operations from Portnet to the shipping lines be speeded up

The shipping lines should be allowed to operate privatised terminals because their primary focus is customer service and profit is a secondary objective.

In privatising ports the NPA should guard against replacement of a public monopoly with a private monopoly.

The shipping lines should be given details of ports to be privatised and a schedule for the port privatisation process so that they can plan and prepare properly for the tendering process.

The National Port Authority Board should be composed of port users, i.e., the shipping lines as government will reduce its involvement in port operations.

Representatives of the Port Regulatory Body should also be drawn from the port user community, i.e., from the shipping lines.

Implementation of policy objectives and the envisaged privatisation should recognise and focus on the different port user groups, e.g. container shipping lines, bulk shipping lines, fishing trawlers, passenger vessels, the SA Navy, leisure boats and offshore activities.

The issue of labour is crucial for the privatisation process and policy should state government's views in this regard.

More details are also required from the policy in regard to broadening participation in port management and promotion of the socio-economic objectives of government. Policy should provide guidance as to how these objectives should be achieved by the different categories of port users.

Appendix 2:
COMMENTS ON THE DRAFT WHITE PAPER ON NATIONAL COMEMRCIAL PORTS POLICY dated OCTOBER 2001

The draft white paper on National Commercial Ports Policy dated October 2001 (hereinafter referred to as the Policy), does not define the need, role and functions of a National Ports Authority (NPA) in a landlord management model. It also does not deal with the implications of the changes in responsibilities of the NPA from the current comprehensive management model to the landlord management model in line with the recently established Port Authority Division (PAD) and Port Operations Division (POD). The need, role and functions of an interim ports regulator as well as the requirements and the procedures for its appointment can only be identified when that has been done.

Relationship between PAD and POD
The historic development of Portnet and the relationship between the current PAD and POD are currently of concern among potential private participants/investors in the eventual bidding process for businesses supplying port services. That relationship and the manner in which it will be dealt with needs to be addressed in the policy as well as the process for private participation, taking cognisance of the role and functions of the National Competitions Board.

Other important topics

There are also two topics which are of fundamental concern in the function and admini stration of South African ports and which must be addressed if the formulation of the Ports Policy is to achieve any practical purpose.

Pricing Policy

Firstly, the pricing policy and especially the manner in which wharfage is to figure in port charges in the future must be declared. The notion that port tariffs can reflect user costs is theoretically and practically untenable in view of the extensive port infrastructure to which little or no opportunity costs can be attached. For the principles which should underlie the pricing policy see Annexure C: The Pricing Principles applicable to Port Authorities and the Statutory Provision needed to ensure compliance, in the Report of the Committee of Inquiry into a National Policy for the Republic of South Africa, Department of Transport, 1993.

Spoornet

Secondly, the relationship of Spoornet to the NPA and port operators and the extent to which rail tariffs can be applied to influence the hinterlands of the ports are also of concern to potential investors in cargo handling terminals and port services. The relationship must be dealt with if the Ports Policy is to contribute to the proper development of the ports.

Other issues

There are also several notable omissions in the draft of topics which should be dealt with if the Ports Policy is to be comprehensive. These are:
The source of the income of the NPA and the provision of funds for infrastructural development.
The merging of the Ports Regulator and the NPA once the latter is divorced from Transnet Ltd.
The functions of the Ports Regulator, which should include oversight or regulation of pricing in the ports and the quality of service as well as standards of performance.
The policy towards the private operation of common user terminals including the manner of regulation of the pricing of cargo handling in the terminals and inter-terminal competition.
The policy towards the accommodation of fishing harbours, naval facilities and yacht basins in the commercial ports and the extent of the responsibility of the NPA for non-core business in the ports.
The policy towards the provision and operation of dry docks, sincrolifts and other shiprepair facilities in the commercial ports and the policy towards the promotion of shipbuilding and repair.
The responsibility of the NPA for marine services.
The responsibility of the NPA to maintain navigation channels. (This is an important topic in virtually all port policies in other countries).

Specific Comments

Port infrastructure development has previously been financed mainly from the net income/profit yielded by the ports (which on average over the past 15 years was approximately R1,2bn annually), and not from the fiscus. In fact, the costs of port operation and the development of the infrastructure have always been borne by port users in the past and not by taxpayers.

In Section 1: Background and Context:

This history of the development of the railways and harbours in South Africa should be explained in order to understand the national complementary system of ports and the importance of the institutional arrangements with the railways. Mention should also be made of the Report on the Investigation on a Maritime Policy for South Africa dated 1993, which deals inter alia with ports policy.

The general corporate characteristics of the envisaged NPA should eventually be in line with the functions and role of the future NPA as a Statutory Autonomous body. These characteristics can initially be limited to accommodate the NPA's function within Transnet. The notion of a State-owned corporate entity functioning in terms of the Companies Act creates the same confusion which has confounded the function of Transnet since its establishment.

The responsibilities of the NPA as controlling body and quasi-regulator seem to involve a duplication of functions and the port utility functions seem to impinge on port operations, which according to the policy should be separated from the port authority function.

The existing commercial ports of South Africa do not include Port Nolloth and Ngqura.
Confusion is raised by the meaning of a "national commercial port system basis". The national system of commercial ports in South Africa complementing each other should no doubt remain. Whether inter- or intra-port, or inter-or intra-terminal competition should be allowed or not, must be necessarily based on the commercial viability of business units within each port.

The policy should ensure that monopolistic powers are not given to a specific entity to the detriment of the economy. Port development should be on a national basis to avoid duplication of scarce resources and detrimental inter-port competition.

The policy states in the beginning that the port should be self-sufficient while the policy recommends in section 4 that the Government should guarantee financing for social projects.

If the NPA is the only entity that may build cargo handling facilities etc, how will concessions such as build-own-operate (BOT) be granted?
Worldwide, the primary role of ports is to facilitate trade through interport competition, where competition exists. In South Africa, in which the ports have a captive hinterland, it will be extremely difficult for the ports to act as stimulators of trade, except by ensuring the efficient and effective flow of cargo at the lowest possible charges.

3. Section 2: Policy goals and objectives

The vision and mission of the NPA should be defined by the NPA while the vision and mission of the commercial ports policy should be confined to policy issues and the governance of the NPA through a sound regulatory framework.
One of the stated goals of the National Commercial Ports Policy is to invest in the port infrastructure, superstructure, equipment and systems in ways which satisfy social, financial, economic or strategic investment criteria. In most circumstances, the pursuance of economic, financial or strategic investment criteria is in conflict with social investment criteria.

With reference to the objectives of the National Commercial Ports Policy, is it really the role of a ports policy to promote production. Should the policy not focus on distribution?
In regard to the basic principles for a National Commercial Ports Policy, appropriate returns need to be defined. As a National Port Authority with the goal of facilitation of trade and the task of watchdog for monopolistic charges, the notion of earning appropriate returns raises concern.

4. Section 3:

The incorporation of the port authority into a transport company has not resulted in skewed pricing. The existing tariff structure is rather the outcome of the manner in which tariffs have developed haphazardly over the years.
The lack of distinction in the functions of a port authority and port operator obscures the scope of the regulation with respect to the integration of port services and facilities.

By Dr HC van Niekerk
Unit for Maritime Studies
University of Stellenbosch
Tel: 021 8082252
Fax: 021 8871914
General Comments
National Ports Authority and Ports Regulation