National Ports Authority Bill: hearings

Meeting report

TRANSPORT PORTFOLIO COMMITTEE
3 November 2004
NATIONAL PORTS AUTHORITY BILL: HEARINGS

Chairperson: Mr J Cronin (ANC)

Documents handed out:
National Ports Authority Bill [B5B – 2003]
Committee Amendments to National Ports Authority Bill
Transtel submission on the National Ports Authority Bill
National Ports Authority comments on the Revised National Ports Authority Bill

SUMMARY
Transnet, Transtel and the National Ports Authority (NPA) briefed the Committee on their proposed amendments to the National Ports Authority Bill. Transnet argued that Clause 4(1)(b) should be deleted as the NPA would remain part of the Transnet Group. The Committee agreed. Transtel argued that Clause 30(3)(k) was in conflict with the Telecommunications Act, 1996. The Committee agreed. The NPA’s submission informed discussion on the appropriate role of the Regulator in relation to the Authority, mediation / arbitration in disputes between the Authority and private operators, land use and land lease requirements and responsibility for security, environmental, safety and health issues in ports.

MINUTES
The Chairperson noted the Bill would not make it to the House before Parliament adjourned. However, it was important that the Bill be completed at the Committee level. He commented on a letter from Mr H Smuts (State Law Advisor) that explained why draft amendments needed to be a document separate from a Bill. He mentioned that the Committee would write a report on their visit to the Cape Town Port. Overall, the Committee was impressed with the port. Nevertheless, there were still problems with the co-ordination of strategic planning and valuable commercial ports occupied by arrested vessels.

Mr S Farrow (DA) reminded the Committee of the spatial issues relating to Spoornet, container harbours, and road haulers.

Transnet briefing
Ms M Ramos (Chief Executive Officer) introduced the members of her delegation. She stated that the Bill and the proposed amendments addressed concerns previously raised by Transnet and supported Transnet’s strategy of focusing on freight transportation and infrastructure. It was important to focus on these issues in order to fulfil Transnet’s mandate, stipulated by Government, and to lower business costs within the country.

Petronet, Spoornet, the NPA, and the South African Ports Operation (SAPO) would be "corporatised," while remaining within the Transnet Group framework.

Transnet fully supported the amendment to Clause 4(1)(a), as it kept the NPA within the Transnet framework. It was acknowledged that, after corporatising the NPA, it might be recommendable to convert the NPA from a (Pty) Ltd to a Limited company. Regardless, the NPA would always remain within Transnet, which was a state-owned entity. Clause 4(1)(b), however, was problematic since the NPA fell under Transnet. Therefore, the clause needed to be deleted. Removing the clause would eliminate some of Transnet’s major challenges and allow it to pursue the strategy approved by Cabinet.

Mr R Khan (Chief Director, Department of Transport) noted that the elimination of Clause 4(1)(b) would necessitate rewording Clause 4(2) for additional clarity.

Discussion
Mr Farrow mentioned that the original Clause 3(5)(a) had included timeframes. He asked how this would be affected by removing Clause 4(1)(b). He asked if it was necessary to create timeframes for budgeting and investment purposes.

Ms Ramos said that the original Bill anticipated that the NPA would leave the Transnet framework within a three-year period. However, the strategy had changed dramatically and it was now understood that the NPA was integral to Transnet and, therefore, would remain within the Transnet framework. When appropriate, the NPA would become a corporate entity under Transnet. Although the NPA could easily be corporatised within the next three years, setting timeframes would potentially cause problems for Transnet’s relationship with bondholders. Mr Khan added that the Bill allowed the Minister to obtain the necessary permission from bondholders to convert the NPA into a public entity.

Mr Farrow asked if there was a plan for using money generated from the ports towards infrastructure development.

Ms Ramos said that Transnet would ask the Department of Public Enterprises to distribute the detailed five-year investment strategy. This strategy outlined spending within Petronet, Spoornet, the NPA, and the SAPO and the amount of funds allocated to individual corridors and ports. Transnet was committed to focusing on the core entities within its framework and corporatising these entities within the next three to five years.

The Chairperson summarised the DA’s perspective, which expressed concern that corporatisation would be delayed without established timeframes and this, in turn, would delay privatisation. He argued that the ANC was not concerned with corporatisation and privatisation for their own sake. Rather, the ANC wanted to see significant investment in infrastructure in order to lower business costs within the country. It also wanted Transnet to increase coherence, financial sustainability, and specialisation.

Mr Farrow argued that Spoornet and the SAPO needed better co-ordination of logistical issues. He referred to the Minister’s statement that concessions needed to be created at the Durban Container Facility in order to increase efficiency. He asked if the current legislation proposed postponing such plans. He argued that congestion at the ports was primarily an issue of removing containers from the ports.

The Chairperson mentioned that moving towards concessioning was an important issue. It was important to focus on whether the elimination of timeframes would in any way affect the corporatisation process.

Ms Ramos said that Transnet would willingly address the Committee on their strategy. She mentioned that, until recently, Transnet’s core entities were not well co-ordinated, as there was no imperative for co-operation. The problems associated with this situation were exacerbated by the belief that these entities would eventually leave the Transnet framework. The current strategy focused on the core entities and creating a synergistic relationship between them. Spoornet had a small share of the country’s public transportation sector, as most goods were transported by road. This issue needed to be addressed due to environmental and safety concerns. Congestion at the ports was primarily caused by poor co-ordination of the different transportation sectors. The congestion at the Durban Container Facility was only partially due to lack of investment in infrastructure. It was also caused by issues surrounding the business culture, the employee profile, and the development, skills, and training of key personnel. Concessioning was one model and public-private partnerships offered an alternative option. Transnet would determine which model best suited their needs and those of the economy.

The Chairperson said that the Committee would engage such issues in detail next year. He summarised Transnet’s argument that Clause 4(1)(b) be removed from the Bill.

Mr L Montana (Department of Transport, Chief Director for Parliamentary Services) commented that the amendment, as proposed, was consistent with Transnet’s strategy. The Bill and the amendments did not adequately reflect the submissions made by the Department. The Bill should be sufficiently flexible to allow Transnet to pursue its strategy during the current transitional period. Therefore, the Department supported the removal of Clause 4(1)(b), given the amendment to Clause 4(1)(a), which dealt with whether the NPA would remain within the Transnet framework.

The Chairperson summarised Mr Montana’s argument that the clause be deleted from the Bill with the understanding that there was still some disagreement as to the final status of the NPA.

The Chairperson reiterated there was agreement about removing Clause 4(1)(b) from the Bill. He asked about the status of Clause 4(2), as it pre-empted that the NPA would leave the Transnet framework.

Mr Montana agreed with Transnet that Clause 4(2) needed to be revised in relation to Clause 4(1)(a), given the understanding that the NPA would remain under Transnet.

Mr Khan argued that the existence of Clause 4(1)(b) was a legal oversight. He stressed that the Bill be reviewed and revised to ensure consistent agreement with Clause 4(1)(a) throughout the legislation.

Ms Ramos reiterated that the Minister had mandated that the NPA would remain part of Transnet (Pty) Ltd and, thus, Clause 4(1)(b) needed to be removed from the Bill and subsequent amendments would need to be made. Transnet was proceeding with the understanding that the NPA was integral to its core strategy and would, therefore, remain within Transnet.

Mr Farrow argued the Committee needed to revise the Bill starting with its objectives.
Mr Montana agreed with Mr Farrow, saying that the Committee was starting in the middle of the revision process. He mentioned that Transnet’s financial position was of concern to the Department. He stressed that the Bill should not deal with whether or not the NPA would remain within the Transnet framework. Although the Department agreed on deleting Clause 4(1)(b), it was necessary to ensure that the reason for deleting the clause was clear.

The Chairperson noted it would be preferable if the Ministers agreed on the issues. Regardless, the Committee would make its own decisions on the clauses under discussion. He urged the Committee to focus on legislation that would increase investment in the ports, as a means of increasing competition. He confirmed there was agreement on the deletion of Clause 4(1)(b) and that this may require rewording other clauses in the Bill.

Transtel briefing
The Chairperson summarised Transtel’s written submission, which inquired about the meaning of Clause 30(3)(k), as amended. Transtel argued that the clause might be in conflict with Section 45(2)(b) of the Telecommunications Act, 1996 and, therefore, suggested a possible amendment to the clause.

Discussion
The Chairperson noted that the Committee agreed with Transtel’s recommendation.

National Ports Authority briefing
Mr G Penfold (Partner of Webber, Wentzel, Bowens) outlined the NPA’s written submission. The NPA agreed an independent ports regulator was necessary, but cautioned that it not be so "cumbersome" and "draconian" as to compromise the Authority’s role as the landlord port authority. The primary role of the Authority was to administer, control, manage, and own ports in order to ensure their effectiveness, efficiency, and safety. Thus, it was important that the functions and powers of the Regulator be clearly defined to avoid confusion and redundancy with the functions and powers of the Authority. While it was inappropriate to confer wide reaching powers to the Regulator, it was acceptable that the Regulator would hear appeals and complaints pertaining to the Authority and that the Regulator be involved in the approval of tariffs. Issues were raised with Clause 11(c), which dealt with the functions of the Authority; Clause 30, which dealt with the functions of the Regulator; Clause 72(1), which dealt with the Authority’s tariff book; and Clause 80, which dealt with port regulations. (Please see attached document for additional information).

Discussion
Mr Farrow stressed separating the issue of land use from the issue of leasing land. He felt the Regulator was an essential component in ensuring equity in land leasing practices. Therefore, he cautioned against accepting the NPA’s proposed amendment to Clause 11(c).

Mr Penfold noted that Mr Farrow’s concern would be adequately resolved were the Regulator allowed to hear appeals in relation to the Authority’s decisions. He argued it would be more efficient for the Authority to continue specifying the terms under which it leased land.

The Chairperson agreed and called for an active Authority and a strengthened Regulator.

Mr L Mashile (ANC) noted that the amendment encouraged co-operation between the Authority and the Regulator.

Mr Farrow said that the Authority should have some autonomy to determine land leases and usage. However, he was concerned with situations in which the Authority might charge less than market value for a land lease.

The Chairperson felt it was unlikely the Authority would charge too little for a land lease. He reminded the Committee that the focus was on determining the functions of the Authority. He argued the phrase, "under such conditions" (Clause 11(c)), referred to the conditions under which land was leased and how leased land was used. He thought it was inappropriate to use "Regulator" in the context of Clause 11(c).

Mr Mashile stated that, once the regulations of the Regulator were drafted, there should be specific debates on these regulations.

Mr Farrow asked how much liaison had occurred between the NPA and the Department of Public Enterprises (DPE).

Ms N Msomi (DPE Deputy Director General, Transport Regulation and Public Entity Oversight) confirmed that the NPA had been consulted on the issues addressed in Clause 30.

The Chairperson noted the NPA’s amendment to Clause 72(1) suggesting that the Regulator would serve as a review mechanism, in addition to hearing appeals and complaints.

Mr Mashile asked what would happen if the Regulator did not approve the Authority’s proposed tariffs.

Mr Penfold said that the Authority could not impose a tariff not approved by the Regulator. The Authority would have to revise the tariff until it was acceptable to the Regulator.

Mr Farrow referred to the NPA’s comments on Clause 30(2)(m) and questioned whether it would be easier to use mediation-arbitration, rather that going through the courts as suggested by the NPA.

Mr Penfold stated that the problem with Clause 30(2)(m) was that it could be construed to mean that all parties were obligated to engage in mediation-arbitration, regardless of what was specified in their contracts with one another. Such an interpretation may infringe upon parties’ constitutional right to settle their disputes in court. For these reasons, disputes should be settled under normal rules of civil procedure, as outlined by the parties’ contracts.

Mr Farrow was under the impression that only unresolved litigation would go to mediation-arbitration.

Mr Penfold maintained that Clause 30(2)(m) created confusion and was unsure as to whether mediation-arbitration was a necessary alternative.

The Chairperson noted it was necessary to determine whether the Regulator regulated ports or the Authority. The original Act implied that the Regulator was responsible for regulating the Authority. He stressed the need to clarify this issue.

Mr Mashile argued that the Regulator should not be involved in settling disputes between the NPA and service providers.

The Chairperson summarised the NPA’s submission, noting that they agreed on the need for a Regulator but were concerned with the Regulator’s broad, poorly defined functions that made excessive intervention possible. He asked if would be desirable for the Regulator to regulate activities between two private entities, such as a container operator and a shipping line.

Mr Penfold noted that the Authority already performed control and management functions at the ports. If there was abuse by private operators, it should be addressed by the Authority. A "failure-to-act" clause could be included so as to involve the Regulator if the Authority did not address abuse. He cautioned against the direct intervention of the Regulator in cases of misconduct by private entities.

Ms Msomi observed that most of the NPA’s comments dealt with the Regulator’s potential to create inefficiencies. She stated that Government needed to accurately define the regulatory function of the Regulator and conceded there were ambiguities in some of the Bill’s language. She argued it was necessary to strengthen the role of the Regulator, thereby creating an active Regulator that defined and guided market structures. Therefore, she did not agree with the NPA’s comments about Clause 30(2)(g) Clause 11(c) was intended to give the Regulator the power to determine pricing. In regard to Clause 30, it was intended to create an economic Regulator that would take environmental and security issues into account, although these issues would be secondary to economic ones and would only be considered in regards to their impact on economic issues. The Regulator needed some powers of direct oversight and the specifics would be outlined in the regulations. It was necessary to clearly determine who defined the tariff structure, as this structure would drive the Regulator’s agenda. The Regulator was essential to ensuring that the tariff structure responded to market changes and made investment in South Africa an attractive option for foreign investment. She noted that Clause 30(2)(m) was not intended to usurp the parties’ individual contracts or the court system. Rather, it was intended to provide an alternative for those parties who wanted to bring closure to disputes quickly. In reference to Clause 80, she noted that safety and security in the ports was ultimately the responsibility of the relevant Minister.

The Chairperson summarised the meeting’s outcomes. Clause 4(1)(b) would be deleted from the Bill and no assumptions would be made about the long-term position of the NPA. He reiterated there was agreement to accept Transtel’s amendment to Clause 30(3)(k). In relation to Clause 30, there was a need for a strong Regulator that dealt with complaints and reviewed tariffs. However, some of the clause’s wording was overly ambitious.

The meeting was adjourned.