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TRANSPORT PORTFOLIO COMMITTEE
26 February 2003
NATIONAL PORTS AUTHORITY BILL: PUBLIC HEARINGS
Documents handed out:
National Ports Authority Bill [B5-2003] (.pdf file)
Transnet (Ltd) submission
National Port Users' Forum submission (.pdf file)
The Committee commenced hearings on the Ports Authority Bill, with submissions from Transnet and CSIR and National Port Users' Forum. The Bill seeks to establish a national ports authority and establish the functions of this authority. Its objectives are to promote and improve the efficiency and performance of the management and operation of ports as well as to strengthen the State's capacity to separate operations from the "landlord" function within ports.
The Committee was informed by Transnet that it relied on the National Ports Authority (NPA) profit to cross-subsidise its required developmental role. At least ten years should be given to allow the phasing in of an independent port authority, due the drastic effect on Transnet's own viability. The National Port Users' Forum supported the concept of the Bill, but had numerous reservations and suggestions regarding the effects of some of the provisions and wording of the Bill. The CSIR had various suggestions to improve the Bill from strategic planning and environmental aspects.
The Chairperson Mr J Cronin (ANC) noted that the Chairperson and some Members of the Public Enterprises Committee were present at the meeting due to the dual nature of the Bill.
The Ports Authority Bill seeks to establish a national ports authority and establish the functions of this authority. Its objectives are to promote and improve the efficiency and performance of the management and operation of ports. It is also to strengthen the State's capacity to separate operations from the "landlord" function within ports.
The Transnet Chairman, Dr B Khumalo, introduced Mr M Mkwanazi: Group Chief Executive, who presented their submission. By way of introduction to their submission, he emphasised the size of Transnet, which had 82000 employees last year. This was expected to increase. For example, Spoornet was planning to increase from 35000 employees to 48000 over the next ten to fifteen years with its strategic plans to put freight back on the rails. Transnet planned to increase the value of its assets by R51 billion over the next ten years, even its three pension funds at present controlled R30 billion assets. Its turnover last year was R45 billion, which formed a significant part of the countries GDP.
Transnet had a dual mandate - profitability and socio economic development. It was planning massive infrastructure development, which was not always profitable, but was required to develop the South African economy. Projects included Coega harbour, Eastern Cape rail support, container expansion at Durban and most of the other ports, pipeline renewal and a huge rolling stock replacement programme together with the revitalization of the passenger rail system. Transnet intended to be an integrated transport and logistic services company - the biggest and best in Africa. However, it needed to be able to cross subsidise from the national ports authority (NPA) to achieve this.
If the NPA was taken out of Transnet, it would render Transnet insolvent overnight. Its operating profit would drop by 59% while its R33 billion debt would create an interest cover problem and lower its credit rating. The immediate transfer of port land would be a problem. As proposed in the White Paper, but omitted in the Bill, an interim changeover period is needed. A unified Transnet would be a great advantage with projects in other parts of Africa. The aim was to develop an integrated transport system, which would improve the quality of life in those countries, increase employment and also incidentally improve Transnet's own profit.
In conclusion, he stated that Transnet would be able to accept NPA corporatisation within the Transnet structure, but that privatisation would need at least ten years for Transnet to absorb the present socio economic projects. Timing was crucial for Transnet. He suggested that the scenario would change and further socio economic projects could come to light in that time span.
Mr Cronin (ANC) suggested that Transnet wanted option A or option B. Option A being no transfer at all; B being a very long period beyond our lifetimes.
Ms S Mnumzana (ANC) asked for more clarity on the effects on Transnet of an NPA removal.
Mr Mkwanazi replied that Transnet did participate in the White Paper process, which included a transitional period. The Bill itself is quiet on the subject. Regarding the various models he pointed out that corporatisation in Transnet was not a problem, as shown by SAA.
During restructuring some of the proceeds would go back to the fiscus while some would be kept in the entity. This division would require negotiations with the shareholder.
Mr S Farrow (DP) was perturbed that Transnet had been part of the process, but was now not keen on the Bill. He suggested that Transnet should not be concerned by a transfer of assets, as these took place inside their system.
Ms P De Lille (PAC) noted that in other countries ports were part of local or national government. She was concerned about people who had worked in the ports for 25 years and where they would be put after a changeover. She also asked how South Africa itself would benefit from the NEPAD process.
A Member asked what the NPA process entailed and what would be the end state of the process.
Mr Mkhwanazi pointed out that, globally, the operation of ports included various models covering cities, regional or national control. Labour would require an element of protection, but he was not concerned as the growing national economy, together with Spoornet and port growth, would give the workers protection.
As regards Nepad he quoted the case of DRC copper now being processed in SA, while timber was also imported from the DRC. A considerable trade had developed with regional countries where traders would buy goods in SA for resale in their home countries. This was either an air or rail operation.
He said that the Transnet master plan process was generated primarily at Board level to separate for example the core and non-core processes. The recommendations were passed on to Public Enterprises before final acceptance by the shareholders.
Mr Farrow (DP) mentioned the cross subsidisation taking place, and asked which branches of Transnet could be hived off? He also asked what percentage of Transnet's income is generated by Portnet?
A Member noted that Transnet's investment was from other entities rather than the government. How much reliance did Transnet place on the government?
Mr Cronin (ANC) pointed out that the Bill had a history. Government was concerned that insufficient investment had taken place. Concessioning and private sector involvement was important but they were not the total answer. The Bill was, however, driven by the need for private sector involvement.
Mr Mkwanazi replied that for the next financial year, Transnet projected an operating profit of R4.5 billion. If the NPA was taken out of Transnet this would become R1.9 billion. A net profit before dividends of R805 million was projected. Without the NPA this would become a loss of R1.3 billion. Similarly the assets of R53 billion would fall to R41 billion.
He suggested that cross subsidisation of Spoornet was no different to the cross subsidisation used by SA Breweries with regard to certain products. Over the next fifteen years Spoornet projected a shortfall of R22 billion with the object of bringing short and long range passengers back to rail transport. Transnet asks that government allow all the Transnet proceeds to come back, so that there would be no obligation on government to fund the Spoornet development. This was not the same as cross subsidisation applied by Spoornet before 1990, where the objective was not profit but rather wealth to some.
As regards a Regulator, Transnet assumed that a Regulator would be part of the process.
Mr Farrow (DP) asked how the R50 billion fixed asset figure was derived?
Mr Mkwanazi replied it was calculated on book value from 1990, plus the Net Fixed Assets from Transnet's investment, minus depreciation. As regards infrastructure ownership all parties need to be involved. For example the NPA would not have the skills or interest to handle shunting yards in a port.
Mr Cronin asked that Transnet supply more statistics and text, including their proposed amendments to cover a corporatised NPA within Transnet. If possible this should be done in the next week.
National Port Users' Forum Submission
The Forum was represented by Mr A Norton, Ms C Nel and Mr F Scheder-Bieschin.
Mr Norton referred Members to their detailed submission. (please see document attached) The history of this situation has gone back through numerous meetings and investigations from 1990. It had been a long frustrating process.
Their original concerns were mainly:
-Concerns regarding the Legal Succession Act, which meant that public land became Transnet land with absolute control as regards access, rent or sale.
-Portnet was a business concern with a profit motive. They thus had no interest in the expense of keeping maritime infrastructure going such as lighthouses and navigation aids.
-The monopolistic position of Transnet was of concern to harbour users.
Mr Norton listed the items in their submission. Many were semantic problems but the following issues were noted:
-The Forum was concerned that the members of the NPA Board would be appointed by Public Enterprises alone. They considered that Transport should still be involved in these appointments and that those appointed should have experience of shipping and forwarding to provide a common base for discussion.
-Clauses 35 and 45 concerned the rights of present leaseholders, for example, at Maydon Wharf. The NPUF recognized that problems existed there, but also pointed out that successive tenants had paid market related prices for the leases. Thus, restructuring was not needed, but value would have to be paid for these leases.
-With cross subsidization the Forum suggested the problem was how to lay down the rules in advance.
-The case of the Stella Tingis (Annexure C of submission) showed that the pilotage concession holder must take out insurance protection.
Mr F Scheder-Bieschin concluded that unresolved issues over the last fifteen years had caused confusion and instability. This must be resolved and fairly soon, to bring the matter to a close.
Mr Farrow said it appeared that some stakeholders are not involved in the process. He said that major changes to the Bill are required and either the Department of Transport or the Minister must give input to Parliament.
Mr Cronin commented that from the negative side this was a complicated process with diverging perspectives. On the positive side it showed that different stakeholders were taking Parliament seriously.
Mr J Slabbert (IFP) said that this was a Mafia bill and it must go back to the Department for correction.
A Member stated that the object was to improve efficiency and empower disadvantaged communities. These efforts were being negated by those against it but the situation cannot be left as is.
Mr Cronin pointed out that the architecture of the Department of Transport was such that the Minister was a shareholding Minister and also the Minister who imposed regulation on the industry. Maybe the Competition Commission should be involved, or perhaps the Minister of Public Enterprises should be the shareholding Minister. The appointment of the Board was also part of the structure.
A representative from the Department of Transport stated that the two Departments, Transport and Public Enterprises, worked well together.
As regards Maydon Wharf Mr Cronin said that it is a mess to be sorted out but he was encouraged that the port users also saw the problem.
He was opposed to having different tariffs for different ports but recognized there was a good reason for doing so. This was because South Africa operates a national port system and its economic heartland is inland. A "correction to geography" was necessary with differential tariffs.
Mr Norton replied that the Forum was involved with the Department of Transport but were unaware that the national hearings had not taken place. They were in favour of the Bill going forward as their concerns were basically drafting problems.
Ms De Lille was concerned about the Maydon Wharf leases as those facilities were needed.
Mr Cronin suggested that the ACSA (Airports Company of SA) model should be applied to ports.
Council for Scientific and Industrial Research (CSIR) submission
Mr S Heather-Clark presented the CSIR submission. (Please see attached document) The issues they addressed were essentially that the Port Authority's responsibilities must include:
-Sustainability of the port and its surrounds.
-Environmental management of the port as a whole and including the port operators.
Mr Farrow pointed out that the National Disaster Bill was introduced last year. This required that where there are oil spills or other such events, the ports have a large part to play.
The meeting was adjourned.
National Department of Transport
PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRANSPORT
Object of the Act
-promote and improve efficiency and performance in the management and operation of ports; and
-strengthen the State's capacity to:-
-to separate operations from the landlord function within ports;
National Ports Authority Bill Chapters
1. Definitions and objects of act
2. Establishment and incorporation of authority
3. Declaration of ports and functions of Authority
4 Board, staff and assets of authority
5 Ports regulator
6. Provision of port services and port facilities and use of land
7. Development, environment and closure of ports
8. Commercial aspects
9. Safety aspects
10. Ministerial directions and port regulations
1 Minister" means Minister of Transport or a duly appointed representative
2 Shareholding Minister" means the Minister of Public Enterprises or a duly elected representative
Establishment and incorporation of the Authority
1 Incorporation of authority
2 Authority's memorandum and articles of association
3 Non application of provisions of Companies Act
4 Certain provisions of Companies Act may be declared in applicable to the Authority
5 Authority's financial year
6 Judicial management and liquidation Act
Declaration of Ports and functions of the Authorities
1 Ports under jurisdiction of Authority
2 Functions of authority
3 Aim of Authority
4 Co-operative governance
Board and staff
1 Functions of the chief executive officer
2 Vacation of and removal from office of chief executive officer
3 Acting chief executive officer
4 Appointment and transfer of staff
3 Transfer of ports, land and other rights and obligations to authority
5 State guarantees
Provision of port services and port facilities and use of land
1 Agreements and partnerships in terminal operations and services
2 Licenses regarding port services and facilities
3 Conditions of licence
4 Restriction on transfer of licence
5 Suspension or cancellation of licence
6 Directives affecting licensed operators and other persons
7 Duties of licensed operators
Board and Staff
1 Composition of board
2 Nomination and appointment of members
3 Functions of board
4 Persons disqualified from membership of board
5 Terms of office of members
6 Disclosure of interest by members
7 Meetings of board
8 Delegations and assignment
9 Appointment of chief executive officer
1 Establishment of Regulator
2 Functions of Regulator
3 Members of the Regulator
4 Funding of the Regulator
5 Secretariat of the Regulator
Provision of port services and port facilities and use of land
1 Operations existing on commencement of Act
2 Off-shore cargo handling facilities
3 Restructuring and reform in Maydon Wharf Area
Development, Environment And Closure Of Ports
1 construction, development and maintenance of ports
2 Protection of environment
3 closure of port
Safety And Aspects
1 Safety of navigation and shipping in ports
2 Safety on land Within ports
4 Liability of pilot
5 Licensing of pilot
6 Lighthouses and other navigational aids
1 Port consultative committee
2 Port access
3 Co-operation with authorities
5 Amendment of law
6 Repeal of law and saving
7 Short title and commencement
1 Commercial functions of Authority
2 Authority's Tariff book
3 Fees payable to Authority
Ministerial directions and port regulations
Public consultation was conducted during 2002 through information sessions held in Durban, Cape Town, East London & Johannesburg The following organisations are among those who participated and submitted inputs:
ASABOSA; Garlikce & Bousfield; Isiand View
Shipping; NPA; Transuet; NPUF, Gcvt nepts.;
SAPREF;SAPO; Unicorn Lines; R~CT;
SATAWUIW. Cape) and many other individuals
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