A summary of this committee meeting is not yet available.
TRANSPORT PORTFOLIO COMMITTEE
25 June 2003
NATIONAL PORTS AUTHORITY BILL: HEARINGS
Chairperson: Mr J Cronin (ANC)
National Port User' Forum Submission
Shell Southern Africa Presentation
Shell Southern Africa Oral Submission (Appendix 1)
Richards Bay Coal Terminal Company Limited Submission (Appendix 2)
National Ports Authority Bill with amendments (2nd draft)
National Ports Authority Bill [B5-2003]
There were three presentations made: by the National Port User's Forum, the Richards Bay Coal Terminal Company Limited, and Shell Southern Africa. Mr Dumisane Ntuli from the Department of Transport presented his queries on the Bill and facilitated a discussion as to which sections would be given further attention in August.
The Chair reminded the Committee of the work they had done so far. In the first term they had drafted the National Ports Authority Bill. Adjustments had been made and now they awaited a second round of inputs, including further inputs from the fishing industry. After the recess, the Committee would come back to the Bill in mid-August. This morning there would be three inputs, after which the Committee would assess what they had heard so far.
National Port Users Forum Submission
Mr Tony Norton, Director from Garlicke & Bouseveld Attorneys and Chairperson of the National Port Users Forum (NPUF), presented the submission together with his colleague, Ms Claire Nel. Mr Norton outlined the following five major issues of concern with the National Ports Authority Bill: - the excision of the National Ports Authority (NPA) from Transnet Limited,
- the role of the Regulator,
- termination of Leasehold Rights by Expropriation or Business Rights by Licence
- and inter and intra port competition
Mr Norton stated that pilotage was not included in the written submission, but a written submission would be made by next week. He felt that the NPA Bill's stance towards pilotage was inconsistent with its objectives such as:
- promoting efficiency in performance;
- effective Port service that would see South Africa being internationally competitive; and
- regulating and controlling navigation.
Mr Norton said that pilotage could be undertaken negligently without recompense for persons affected by negligent conduct. The port is not responsible for this, instead the responsibility falls to the owner of the boat. Thus the NPA claims that they are not liable for this, rather someone else is. He suggested that the responsible party be responsible for negligence; furthermore that pilots be properly trained.
With reference to other countries there are two different methods of employing pilots:
- a pool of pilots be made available whose services can be hired
- pilots are employed directly by the Port Authority.
Mr Norton argued that in the latter instance the Port Authority should be held accountable.
Ms Nel made the following additional points regarding licensing. In view of the vision of the Authority as an independent company that protects and oversees the infrastructure of the port and is involved in the concessioning process, the role of the authority in terms of licensing is problematic. She felt that other arms of government, that is, Customs, could provide licences. It is already providing licences and this would be adequate.
With regard to the Special Powers of Emergency, Ms Nel stated that it is not appropriate that the shareholding minister has the final say in compensation. Finally, she said that the National Ports Users' Forum supported that the Fishing Industry and Bidvest etc. should have separate hearings - seeing as they all had different and specialised interests.
The Chair outlined the three stage process of moving the NPA out of Transnet.
Mr S Farrow (DA) asked how Transnet will fund itself if the NPA separates from Transnet without any phasing out.
The Chair responded that Transnet's massive reliance on the NPA meant that it was difficult to excise it. While he believed that cross-subsidisation is needed, the second stage of the phasing process, as this more transparent. This cannot be done in one go, because of the financial implications for Transnet. Mr Norton felt that in this case, Transnet should go bust but the Chair pointed out that this will affect all the ports as well as the railroad systems they rely on.
Mr Norton stated that all that is needed to achieve transparency is one clause in the Bill. The division as the NPA could have a separate account from the rest of Transnet Ltd. He feared the time taken in restructuring could be used as a new excuse to delay results.
In terms of the financial implications he conceded that South Africa needs coherent transport investment. However, he argued that cross-subsidisation comes at a cost to the South African economy. If railways were denied cross-subsidisation they would become more efficient.
In regard to a long term view for Transnet everyone was already agreed that the NPA would move out of Transnet. Therefore he argued that giving them time would not help, instead it will perpetuate a reliance on the Port System. It was not just the railways that relied on the Port System, but other transport companies such as SAA. The way forward is to stop cross-subsidisation.
Mr Norton stated that elaborate structuring of the Bill was unnecessary. South Africa is bound by time constraints, as it is already competing with private operators in Maputo.
The Chair moved on to the question of the regulator. The NPA was not keen on a regulator, certainly not a permanent one. The Ports White Paper outlined an interim regulator, however this was not necessarily the Committee's position. The Committee was increasingly seeing the need for a regulator, and the Departments of Transport and Public Enterprises were also leaning in this direction.
Mr A Ainslie (ANC) asked why there was a need for a regulator when a Competition Commission already existed.
Mr Norton responded that the Competition Commission did not know how to deal with a State-sanctioned monopoly, as they were unable to break it down. Furthermore, some aspects of the Port System fall outside of the authority of the Competition Commission, such as the setting of tariffs. This is not done in a competitive environment.
The Chair suggested that the Committee is not viewing the NPA as a "monster", but instead as having the function of developing a coherent port system. The sector regulator should be formed with that understanding of its function in mind. The regulator should have an understanding of the port environment and the Committee should be careful not to create a "Mickey Mouse" institution.
The Chair decided to pass over questions regarding the Term of Leasehold Rights discussion until the Richards Bay Coal Terminal had made its submission, as this would also affect them.
On the issue of Inter/Intra Port Competitiveness the Chair said that Maputo model was conceived of as part of the Southern African commercial system. Therefore the transport plan needed coherence and, while it needed regional planning and the creation of niche markets, competition must not be too robust, as this must be balanced against national and strategic planning. This vision also conceives of the ports as a single system.
On the matter of pilotage the Chair felt that the reality of South Africa lay somewhere between the Portsmith and Panama situations and requested to be provided with further international examples. Other than these concerns, the Committee will wait for the written submission.
Mr Norton replied that it had not been clarified whether pilotage functions would be concessioned out or operated by the NPA itself. If the NPA were itself responsible for the operation of pilotage then it was a necessity that their liability be limited. However, if this function was concessioned out to a private company it would not be necessary to limit the liability.
The Chair asked Ms Nel to raise her point again, as it was not part of a written submission.
Ms Nel said that she feared that the role of licensing/concessioning was being confused, and that licensing belonged with Customs and that the Authority should not do both.
The Chair said that in the second stage the NPA was not a private entity in theory, but actually a parastatal. It was encouraged to enter into a variety of Public Private Partnerships (PPPs), and it is for this reason that a regulator is needed.
Ms Nel responded that there were two issues: firstly the attempt by the NPA to widen the scope of licensing and, secondly, whether there is an overlap in any way in issuing licences.
Mr Norton added that he envisaged the NPA as playing a hands-off role, and not functioning both as player and and someone with the power of allowing others to play.
The Chair said he saw the NPA not as "a passive landlord" but rather as an institution taking an active, strategic and intelligent interest in the ports. This could be done through the issuing of concessions, licences, partnerships with municipalities etc.
Mr Norton replied that he was disturbed to note at the last hearing that the NPA had two concessions in a particular country. It seemed to be operating as a parastatal in South Africa, yet was also active in other markets.
The Chair saw this as a good thing as it developed international exposure, but cautioned that external experience must not overwhelm the primary function of the NPA. This is where the shareholding Minister becomes important in terms of political accountability.
Mr Norton emphasised that monies must stay in South Africa. The worst case scenario would be if South African money was invested overseas in five years time. This is why he was surprised that it was the NPA and not the South African Ports operations unit that was engaged in overseas concessions.
Richards Bay Coal Terminal Submission
Mr Nigel Stevens, Managing Director: Richards Bay Coal Terminal, conducted the presentation which outlined leasehold rights, Section 67of the Bill and its licensing provisions.
The Chair pointed out that the original Bill had been dealing with the Maydon Wharf Issue. The Committee wanted to pass "cleaner" legislation, and thus made its ambit more general. He said that Members would look seriously at the fishing industries and seriously consider their point, as long-term stable investments are what ports are about. Black Economic Empowerment (BEE) is an important government political objective, but the government needs to find the appropriate instruments to see if this particular legislation is indeed the best way forward.
Mr Farrow sought clarity on possibly having an independent referee dictating the fair price of rentals. This seemed to be contradictory if the rentals were already market related.
Mr Stevens replied that the phrase was not "market related" but rather "market conditions", and queried what this meant. The phrase was unclear as it was not specifically restricted to rentals, and is thus open to interpretation.
The Chair suggested that the referee might be the regulator in this instance.
Mr Ainslie raised the point that in terms of leases and the R56m aggregate rights was just one type of lease. Surely there would be many different types of leases?
Mr Norton predicted that a myriad of financing structures could emerge. Whether this was the investments of pensioners or of banks, the Bill could put people at risk who have invested funds on the strength of property rights and sanctity of the contract.
The Chair pointed out that sanctity of property rights was constitutionally limited. He acknowledged that financing arrangements were complicated. The complexity of the challenge is "not to do people out of their money", but to create ports that are effective and efficient.
Mr Ainslie pointed out that primarily the Bill is trying to stop R1 per month leases that are a hangover from the previous dispensation. He also stated that Transnet owned some of the properties, and thus a whole range of players would be affected.
Mr Dorcky Mahohlo, from Shell South Africa's Legal Division, conducted the presentation (see document) and focused on:
- the legislative process,
- the vested rights doctrine
- the Bill's dispute resolution mechanism.
He stated that Shell fully supports the NPA Bill and aligns itself with BP on issues.
Mr Mike Scott also representing Shell South Africa, said that there seemed to be a great amount of regulatory legislation; and was concerned regarding overlapping jurisdictions. He felt that regulation was unnecessary in respect of private assets. However, in this matter he found this Bill more appropriate than the Pipelines Bill.
Input from Department of Transport
Mr Dumisani Ntuli, from the Department, noted that the aim of his input was to flag issues in the second draft of the Bill that needed to be further looked at in August. He suspected that there were at least a dozen areas that require clarification/further attention.
Mr Ntuli stated that given the further input from stakeholders the Department would revisit the Bill and propose amendments. The general overview of response received was very encouraging. The Department's proposals show that it is a department that listens to stakeholders. In terms of the Bill some of the proposed amendments had been confirmed, thus the old formulations disappeared and the Department's new proposals make up the Bill.
Mr Ntuli suggested that new issues that have emerged need to be indicated and further work needs to be done on these. New wording needs to be proposed, new sections introduced etc. As well as this the definition of "port facilities" needs to be clarified.
Mr Farrow said that he assumes that something had been done about the definition of "telecommunications" and was assured that this was so.
Mr Ntuli suggested a need to go back and revisit some of the provisions of the earlier draft in light of the South African Transport and Allied Workers Union (SATAWU) submission. The objects of the earlier draft might need to be changed. He said that the Committee's position on this was very clear.
The Chair felt that the NPA should work as part of the overall Growth and Development Strategy, rather than attempting to compete with places such as Hong Kong. The issue of the NPA doing business outside of South Africa needed to be handled carefully, as it is a national institution.
Mr Ntuli indicated that the solution in terms of NPA's phasing out from Transnet, drafted in Chapter II of the Bill, had been accepted by many stakeholders, although others were unhappy. He agreed with Chair's previous explanation of the status. The empowerment of the NPA throughout these three stages, must be focused upon. He felt that it would be in the best interests of this process if there was a clear timeframe.
The Chair said in terms of 3.1 the Private Company should be referred to as a Pty Limited in order to avoid confusion.
Mr Glenn Penfold, an attorney representing the NPA, suggested that the NPA should remain a "(Pty) Ltd" or limited company throughout.
The Chair said that the Bill should remain consistent along those lines. He was hesitant to tamper with a negotiated agreement on the three stage process. It is not advisable to cut across the negotiations process with legislation.
Mr Farrow said that there has to be a realistic target in terms of timing, and provisions have to be made if people do not meet that target. The Chair agreed.
Mr Ntuli noted that further clarification would be needed on the "(Pty) Ltd" issue.
Mr Ntuli noted that the Authority would inherit all ports and harbours which were the responsibility of Transnet.
Mr Ntuli stated stated categorically that the NPA is a landlord Port authority and not involved in the handling and provision of services best performed by private/public sector players. However, functions historically performed by NPA were problematic, such as pilotage. The Committee needs to think of a way of taking into account such operation issues.
Mr Penfold said that Marine Services implies that NPA does have authority to provide services. He also added that some services such as pilotage were not productive and attracted little private interest.
Mr Gasant Orrie, Transnet legal representative, found a conflict between these issues and Clause 11(3), which describes the NPA as an "operator of last resort".
The Chair thought that someone could read into this that the NPA really is an actual operator. Maybe it needed to be worded differently, something along the lines of "the authority has final responsibility for assuming that". He reiterated that he thought the NPA should have more than a "passive landlord" function.
Mr Ntuli drew attention to the functions issue raised by labour. Clause 11(1)(i) seemed to be talking not only of concessions but contracts broader than that.
The Chair mentioned that there was also concern, over the phrasing of the word "must", and that "may" should possibly be used instead. He suggested that Clause 11(1)(i) be subsumed under Clause 11(1)(h) as a way of clarifying the concession/contract issue.
Mr Ntuli pointed out that the aims of the Authority in Clause 12(f) could be misinterpreted as saying that the Authority must invest in securing this.
The Chair did not perceive that there was a significant problem there. For Clause 12(g) he suggested a rephrasing along the lines of "foster facilities elsewhere in the world, consistent with functions as a national authority".
Mr Ntuli noted that Clause 18(4)(d) dealt with the inclusion/exclusion of civil servants serving on the board. He felt that there was nothing wrong with officials serving on the board.
Mr Farrow thought that exclusion would be proper. There could be influence/bias depending on the person's position. It was normal procedure for ex-officio representation to occur in such instances.
The Chair thought that labour's concern was the manner in which this clause categorised civil servants amongst other criteria dealing with misconduct and poor performance. He did not think that labour had any problem with civil servants not being allowed to participate on the board as such.
Mr Orrie said that in the initial phase, which involves Transnet, there was no board of NPA as such; however there is a provision that allows for it to exist. He wanted to know whether the board referred to is the Transnet board or an interim NPA board.
The Chair wanted to know if there was a problem.
Mr Orrie pointed to Clause 3(1)(b) in the Bill, and wanted to know if the NPA as a division has a board?
Mr Ntuli stated that the NPA was still division of Transnet, but that the Provisional Board could be given powers.
The Chair felt that the Committee lacked clarity over the matter of the Board. He thought that they should ask for clarity from the Departments of Public Enterprises, Transport, Transnet and the NPA. He thought the idea of a division with a division board might be workable.
Mr Orrie stated that the agreement needs to be given legal effect.
The Chair admitted that he had not been clear on the issue. In the Bill there had been no reference to a division board. He felt they needed to obtain clarity on this issue.
Mr Ntuli the appointment of an Acting Chief Executive Officer (CEO) of the Board.
Mr Penfold said this was no longer a major issue. If a CEO is outside the country for a few days, it could still pursue duties, and an acting CEO would not need to be appointed.
Mr Ntuli stated that the appointment and transfer of staff of the NPA would happen during the first phase of the process.
Mr Penfold pointed out that this clause only provides for transfer from the subsidiary to private stages, which is the second phase. Yet the first transfer, from division to subsidiary, also needs to happen. This affects both Clauses 26 and 27.
Mr Ntuli and the Chair agreed that this matter was straightforward and the Committee must remember to draft it.
Mr Penfold wanted to know whether this clause referred to the transfer of business or the transfer of shares?
Mr Ntuli understood it to refer to a transfer of business.
The Chair acknowledged that this needed to be checked again, as it is a critical issue.
Mr Ntuli stated Government did not intend purchasing shares.
The Chair suggested flagging this as there were clearly different views and the Committee needed to achieve clarity on this issue.
Mr Ntuli reiterated that it was not the government's intention to purchase shares in the company. It was in the best interests of the state to own this business.
Mr Ntuli stated that the Regulator needed to be made stronger, and that this should be further investigated.
With regard to 30(1)(e), it was suggested that someone else, rather than the Regulator, develop broad guidelines.
Mr Ntuli stated that the directives under (f) need to be unpacked. In terms of (e) it should not be limited to the Competition Commission only, but other sector regulators need to be contacted. Regarding (k) approve and review tariffs set by the Authority - this function of Regulator needs to be clarified: is it one of approval or review?
The Chair stated that the original NPA position, had been to omit both approval and review functions. The Committee needed to come back to this issue - the NPA's role in setting tariffs.
Mr Ntuli stated that in terms of 2(a) regarding complaints, the Regulator must be accessible
Mr Penfold suggested that types of complaints be specified. A member of the Regulator could be allocated to see if there was any substance to any given complaint, as this would prevent the waste of money and time.
Mr Farrow suggested that this be left to the courts to regulate.
The Chair admitted that there would be whimsical complaints that would need to be sifted out. He suggested the Committee flag this matter.
Mr Penfold thought that the subject of complaints should be those set out in terms of the White Paper.
Mr Ntuli felt that 30(3)(e) access by the Regulator to confidential information of the Authority needs to be clarified in terms of access to general information.
Mr Ntuli pointed out that under 42(1)(b), donations could compromise the Regulator.
Mr Ntuli indicated that this clause on the winding up/resolution of Regulator would depend on whether it is an interim or long-term institution. At the moment it is decided that its functions do extend beyond the interim.
The Chair suggested the possibility of removing this section and said that the Committee would discuss this later.
Mr Penfold said that a cost-benefit analysis would have to be done in terms of making the Regulator a permanent body or not.
Mr Ntuli stated that this needed to be revisited in terms of previous definitions, and functions of the Authority, Clauses 56 and 57, and new development on existing lease agreements.
Mr Gasant Orrie raised a query regarding embarking on a PPP in terms of treasury regulations and this section of the Bill.
Mr Ntuli indicated that there was provision for this in the Public Finance Management Act (PMFA).
Mr Ntuli noted that COSATU had had problems with this Clause.
The Chair said that COSATU felt it could be subjected to abuse, as had happened recently the West Coast Strikes in the United States where George W. Bush had abused a similar clause. However, because ports are a strategic asset the Committee needs to find a balance between that and the labour issue and logistics in terms of economy.
Mr Ntuli drew the Committee's attention to a new measure which the International Maritime Organisation (IMO) introduced which may affect security of ports and which will be introduced on the 1 July 2004. This needs to be provided for.
Mr Ntuli stated that the Committee seemed to be happy with the present formation regarding the Maydon Wharf Issue.
The Chair said that when the Committee met again in August 2003 it would carefully consider this clause in terms of what it had heard this morning.
Mr Ntuli said that the issue of the safety of ports had been brought up by organised labour.
Mr Ntuli asked whether there was perhaps a need for benchmarking this issue.
Mr Ntuli proposed that this clause should be retained, and these functions should be separated.
Mr Penfold said there was a difficulty because if the training function in terms of pilotage was performed by South African Maritime Authority (SAMSA) the skills gained by the NPA in this area could be lost, and this would be a waste of time and money.
The Chair said that Mr Penfold's comments made sense, and he had not been aware of these facts previously.
Mr Ntuli suggested that perhaps the NPA could offer training, which could be accredited by SAMSA.
A Member said that the SAMSA Act would need to be amended.
Mr Penfold pointed out that there was a danger of limitless liability occurring and that the limitation of liability be provided for. Section 261 of Merchant Shipping Act was relevant in this regard.
The Chair suggested that this matter should be flagged, and looked into, and then a decision could be made.
Mr Farrow queried as to why municipalities were represented in this clause.
The Chair suggested that the capacity of SAMSA to play its role be built up.
Mr Ntuli said that at the moment SAMSA certifies all seafarers in South Africa.
The Chair said that this was a transitional phase. He pointed out that the Bill said that SAMSA must train. However, in the verbal account Mr Ntuli suggested accredited training. He suggested that the Committee redraft.
Mr Orrie wanted to know what proposals had been made regarding tax issues?
The Chair felt that this issue was bundled up with the issues of shares or tax exemptions.
Mr Penfold pointed out that the NPA was not exempt from paying tax but that this tax exemption was to do with the transfer. He stated the need to write exemptions into this legislation.
Mr Ntuli said that Transnet had not shared with the Department of Transport the negotiations between the Treasury and Transnet. He did not want to legislate something that had been refused.
Maputo Study Tour
The Chair briefly discussed arrangements for the Committee trip to Maputo, which would include eight members, five of them from the ANC. The visit would run from the August 3 - 7 2003.
In conclusion the Chair reminded the Committee that when they came back in August it would be Committee week, so they would have a lot of time for discussion and finalising of the Bill.
Appendix 1 : Shell Southern Africa Oral Submission
PRESENTATION BY DORCKY MOHOHLO -
SHELL SOUTHERN AFRICA
1. LEGISLATIVE PROCESS
1.1 It is a trite proposition that delegation of law-making competence to the Executive arm of Government serves a convenient function to govern in instances where the frame-work to govern and regulate any matter is created in the Principal legislation as it is unsavoury and undesirable to have same existing via a subsidiary legislation.
1.2 Licensing is such a regulatory frame- work and the corner stone for the envisaged regulation of the Ports in South Africa. Thus Licensing should not be delegated to the Executive arm of the Government where the legislative process deprives consultation and most significantly the debates that otherwise would ensue in the national assembly where principal legislation is conceived and developed into law.
1.3 Perhaps the concern expressed herein could be mitigated by an assurance that before any regulation as envisaged by the NPA Bill is proclaimed there would be consultation with all the stakeholders and the Port -Users.
2. VESTED RIGHTS DOCTRINE
2.1 This doctrine fosters certainty in law by bring about political expediency and commercial feasibility with the resultant climate which is conducive to attracting investments and encourage the generation of revenue that keep the wheels of economy in motion and the budget estimate of government being met.
2.2 The major premise of this doctrine is that all accrued rights whether arising from a contractual relationship or otherwise must be protected unless to do so would clearly frustrate the objectives of good governance and national economic objectives and thus not in the public interest. The power to take away the vested rights is enshrined in the constitution under section 25 where by operation the law of general application property rights could be expropriated. Property rights in this regard are not limited to land.
2.3 In the case of the Oil industry valid lease were concluded in 1999 with Transnet under the current democratic dispensation (unlike those leases concluded in the past and palpably lacked a demonstrative commercial sense). In pursuance of this leases huge capital investments were made in relation to the SBM to ensure adequate flow of crude oil in the Republic. In respect of the leases in the Port concluded on the earlier dates, similarly huge investments were made. Consequently section 66 of the NPA Bill should make it clears that the deemed licence should be for the full duration of Thirty (30) years (taking into account not only the initial period of ten (10) years but also four (4) options of Five (5) years each to renew).
2.4 The sanctity of contract is equally applicable to all other leases of land in the Ports in the Republic where similarly the industry has made substantial investments in storage and handling facilities. Accordingly we submit, with respect, that section 65 of the NPA Bill should oblige the National Port Authority to grant the licences for the full periods of those leases Additionally the provisions of section 67 of the NPA Bill which entitle the National Port Authority to cancel leases in certain instances or circumstances make serious inroads in the doctrine of sanctity of contracts and create a major uncertainty in respect of the existing rights and will inhibit future decisions
2.5 We would therefore implore the Government to respect these arrangements, particularly the lease periods under the licensing system. As the same time we have a concern as to the Fee Structure the envisaged licensing system would introduce precisely because this is the matter to be dealt with through a subsidiary legislation. Perhaps the consultative process alluded to at 1.3 (supra) should also be recommended here.
3. DISPUTE RESOLUTION MECHANISM
3.1 The envisaged Port Regulator would settle disputes arising between the National Port Authority and various Port Users by means of hearing appeals and investigation finalised in certain instances by the adjudication process
3.2 Preferably the Port Regulator should remain in place for as long as there is a National Port Authority and accordingly strongly recommend the deletion of section 55 from the NPA Bill.
Appendix 2 : Richards Bay Coal Terminal Company Limited Submission
TRANSPORT PORTFOLIO COMMITTEE
SUBMISSION IN CONNECTION WITH: NATIONAL PORTS AUTHORITY BILL
RICHARDS BAY COAL TERMINAL COMPANY LIMITED
1. Richards Bay Coal Terminal Company Limited (RBCT) is a member of the National Port Users Forum (NPUF). It is understood that NPUF has made broad-based submissions to the Committee on the Bill as a whole. RBCT wishes to make more detailed submissions in connection with specific aspects of the Bill as they affect RBCT.
2. RBCT occupies a position within the South African economy which may be described as unique:
- RBCT is wholly owned by mining companies;
- RBCT is the largest exporter (by volume) in the South African economy currently accounting for in excess of 50% of the total volume of goods exported through South African ports;
- RBCT is the principal terminal of its kind in the country, through which coal is exported to the international market;
- RBCT is the largest single coal export terminal in the world which, over 25 years, has earned an unrivalled reputation for efficient and reliable service; and
- Coal exports through RBCT are the third largest earner of foreign exchange in the South African economy.
3. The main issues raised by the Bill that RBCT wishes to address in this submission are those relating to the leasehold rights of RBCT (and others in a similar position) specifically in relation to Section 67 of the Bill, and the licensing of operators.
4. Leasehold rights
4.1 These rights are addressed in Section 67 (previously Section 45) of the Bill. At the briefing of the Committee on the amended Bill on 21st May 2003, the Department stated that the restructuring and reform provisions of the Bill (Sect. 67) had been made "less specific". This was stated to be necessary because of the "outcry over draconian legislation" that had been generated by the earlier draft of the Bill.
4.2 RBCT wishes to stress very strongly that making the Bill apply more broadly has not altered its draconian nature.
4.3 Section 67 needs to be considered against the background that certain of the leaseholders contemplated in this Section -
- have long term contractual rights to the use of leased property for purposes specified in the lease
- will have paid market related prices for these rights and continue to pay market related rentals
- have structured their businesses and made capital investments with a view to serving the economy of the country in reliance on these rights and the term of endurance thereof
- have ceded these rights as security for loan finance negotiated with third parties e.g. banks, insurance companies
- will have committed themselves to long term contractual obligations to their customers to handle and/or store goods and commodities on the leased property
- will have employed substantial numbers of staff and made various other long term commitments in reliance on the leasehold rights.
4.4 Comment on Section 67 (Restructuring and reform of ports)
4.4.1 The Section empowers the NPA, in effect, to invalidate and terminate, unilaterally, any long term lease, including that held by RBCT, by directing that the property must be put to a different use, or that the terms of the lease be renegotiated because -
- they are unrelated to "market conditions" (market condition provisions) or
- HDSAs are excluded from participating in port activities (HDSA provisions).
4.4.2 It was stated in previous hearings that the aim of the Section is to "level the playing fields". In RBCT's view, it introduces entirely new rules to the game, because the NPA is empowered to act as "referee", may make up the rules as the game evolves, and - worse still - may apply different rules to different players.
4.4.3 Such an approach is unconstitutional as elaborated on below and because it offends against the equality Section of the Bill of Rights.
4.4.4 With regard to the market conditions provision, the question needs to be asked "what are 'market conditions', and who decides what they are?" The Bill is silent on the point and there is no standard point of reference for determining "market conditions".
4.4.5 The change of use provision is also unconstitutional. Effectively, it confers on the NPA the power to implement its own town planning, whereas constitutionally, municipal planning is the prerogative of local government. There are also serious implications in terms of the National Environmental Management Act and related legislation on this score.
4.4.6 The HDSA provision is also, as currently drafted, in conflict with the Constitution because, given the lack of rules as outlined above, different criteria will apply in different ports. The deprivation of rights will therefore be arbitrary, not in terms of a law of general application, and in conflict with sections.25 (Property) and 36 (Limitation of rights) of the Constitution.
4.4.7 While RBCT acknowledges and accepts that black economic empowerment is, in principle, right and proper, the difficulties set out below in 4.4.10 (which of course are not confined to HDSA issues) demonstrate the truth of the old adage that some things are "easier said than done". It is submitted that the practicality of what is contemplated in the Section has not been properly considered.
4.4.8 While on the subject of empowerment measures, RBCT questions the need for the NPA (or indeed the Regulator) to be in any way the arbiter of what is acceptable progress. There are many other pieces of legislation, existing and in the pipeline, that will deal adequately with the matter and, it is respectfully suggested, with greater expertise than that which is likely to be available to the NPA. In this context, mention is made of the Competition Act, the Mining and Petroleum Resources Development Act which requires a more equitable distribution of economic interests (RBCT is wholly owned by mining companies, who are required to comply with the provisions of this legislation, including the ownership requirements detailed in the Mining Charter) the Employment Equity Act, and the proposed Broad Based Black Economic Empowerment legislation, amongst others.
4.4.9 In general, Section 67 is also offensive because it ignores the long-established principles of the sanctity of contract, reliance on which is the cornerstone of the scenario set out in 4.3 above. Business, especially major long term business of the kind transacted by RBCT (and no doubt by many other large organisations holding long term leases) simply cannot be done in an environment of uncertainty.
4.4.10 A directive contemplated in Sect. 67 (1) could in any event not be issued without affording a hearing to and a consideration of the positions of all other materially affected parties and stakeholders, including financial institutions that have lent money to the lessee (or its shareholders) for capital investment programmes; organised labour on behalf of the many employees who may find their employment jeopardized, and foreign customers.
4.4.11 RBCT's most critical concern is that the provisions of Section 67 allow for a declaration of invalidity of a lease. There is no clarity as to whether compensation will be payable in such circumstances. All that is said is that if the application of the Section "results" in an expropriation, section 25 of the Constitution will apply. Who determines whether expropriation is the "result"? What happens if there is no expropriation, but merely a deprivation? It is submitted that the Section is a recipe for litigation and crisis management in this regard. Furthermore is the invalidity a declaration that the lease is void ab initio or merely voidable? In either case, the common law takes the view that no compensation is payable. This conflicts with Sect. 67 (5) and offends against the constitutional protection of rights to property and the rights to conduct trade. The principle being proposed is dangerous to the concept of a democracy, the rule of law and the sanctity of contract. Effectively the section enables a relevant authority to enter into unfavourable contracts and subsequently renege on these by passing legislation to invalidate them. This can only lead to commercial uncertainty and places such authority above the constitution in that it can elect when to be bound and when not to be bound by agreements. This further allows authorities to be treated unequally, even when acting in a commercial capacity.
4.4.12 Should there ever be valid constitutional reasons for invoking the provisions of section 67(1)(a) or (c) it is submitted that, following negotiation, there should either be termination with compensation pursuant to the terms of the lease or expropriation as provided in the Expropriation Act, as read with the Constitution. Invalidation of a lease under these circumstances should not be an option.
4.4.13 With regard to the market condition provisions it is submitted that, since this is clearly aimed at uneconomic rentals, there should never be the sanction of having the lease invalidated merely because agreement cannot be reached. It would be far better and no more than reasonable to provide, where there are valid Constitutional grounds for doing so, for the appointment of an independent referee to determine what is reasonable and "market related".
5. Licensing provisions (Sections 56 and following)
5.1 It is submitted that the provisions of Section 57 are inconsistent with the concept of a long-term leaseholder. Refusal of a licence would cut directly across the leasehold rights. It is implicit in the grant of a lease that the lessee is "licensed" and entitled to operate its business without the risk of the grantor of the lease being in a position to unilaterally revoke the benefit of the lease using the mechanism of a license, whilst receiving rental under such lease. RBCT and its shareholders have expended significant amounts of capital constructing the terminal at RBCT and further expansions are under consideration. To allow the NPA the power to unilaterally change the terms under which RBCT and other port lessees are able to operate will have serious ramifications in respect of commercial certainty and the ability of companies to have sufficient confidence to invest in new capital projects.
5.2 As far as safety and environmental considerations are concerned there is adequate legislation to monitor and enforce these without the need for licensing by the NPA. Furthermore, if all leases are renegotiated on the basis of an economic rental, the need to generate additional revenue from licensing fees should not be a consideration.
5.3 There also seems to be no need for an agreement under Sect. 56 where a long-term lease is in operation. This is simply a duplication of effort and time. It is suggested that the situation is quite adequately catered for if the following additional wording is introduced into Sect. 56:
- Add a new sub-section (6) as follows:
"(6) A long term lease entered into between the Authority or any of its predecessors and a person contemplated in subsection (1) is regarded as a concession agreement."
There are other concerns of a more general nature which will either be addressed by the NPUF or which will be mentioned briefly in the oral presentation to be made by RBCT.
RBCT plays a key strategic role in the South African economy. It has, during the 27 years of its existence, established an internationally envied reputation as a reliable and efficient terminal facility. The intervention in the running of its business by the NPA as contemplated in Sections 57 and 67, and the negative impact this would have on potential expansion and ongoing use of the port, is accordingly a matter of significant concern.
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