National Ports Bill: Department briefing

Meeting report

PUBLIC SERVICES SELECT COMMITTEE
10 March 2005
NATIONAL PORTS BILL: DEPARTMENT BRIEFING

Chairperson: Mr R Tau (ANC, Northern Cape)

Documents handed out
National Ports Bill (B5D – 2003)
National Ports Authority Bill (B5C – 2003)
PowerPoint presentation by the Department of Transport

Summary
The Department of Transport presented an overview of the main features of the National Ports Bill. The revised Bill was more flexible than its predecessor (the National Ports Authority Bill) and addressed a number of concerns. The Bill provided for the ‘corporatisation’ of the National Ports Authority (NPA) within Transnet and, at the discretion of the relevant Ministers, as a public company outside of Transnet. The functions of the regulator were seen as economic regulation of the ports system, promotion of equity of access to ports, and the monitoring of NPA activities.

The Committee requested the original Bill, and will continue with its consideration of the revised Bill in April.

MINUTES

Transport Department briefing
Mr L Montana (Department Deputy Director General) apologised for the absence of the Department Chief Director, Ms Msomi. His presentation addressed the key issues of the Bill. The National Ports Bill had been in Parliament for almost three year, and had led to a lot of debate within Government. Input had also been called for from major stakeholders. The Bill sought to give effect to the White Paper on Commercial Ports Policy and dealt with the strategic role of ports. Ports policy had a significant impact on the economy of the country as a whole. It had been found that ports were lagging behind the growth of manufactured exports, owing to inadequate infrastructure. There was also evidence of inefficiencies in the system, such as congestion. Government also recognised the need to introduce competition in ports operations.

The Bill had originally been introduced as the National Ports Authority Bill. The National Ports Authority (NPA) was a division of Transnet, and this had been both advantageous and problematic. The Transnet balance sheet reflected increased cross subsidisation of other Transnet business not relating to ports, and the Bill had sough to address this. In addition, the NPA was both landlord and regulator, and this was a cause of conflict.

The Bill had contained some very radical provisions when first introduced. No provision had been made for an interim phase; the NPA was simply removed from Transnet. The NPA was to be corporatised within three years and formed into a public company outside of Transnet. The revised Bill allowed flexibility for corporatisation and the formation of a public company. The Government did not want to constrain itself in establishing a transport sector regulator and wished to remain flexible on the corporatisation schedule. An important feature of the revised Bill was the strengthening of the regulator. It had been agreed that it should be an economic regulator, promote access to ports, ensure that there was no abuse of power and ensure efficient operation. Key objectives were increased investment in ports, improvement in port efficiencies, and the introduction of competition. When the Bill had been drafted, the view was that the State would not be involved in ports operations. It had been agreed that this policy would have to be updated as events unfolded. The ideal position would be to have the State as the controlling body, with independent operations.

Factors considered when allowing flexibility in the revised Bill included the backlog in infrastructure investments, minimising potential monopolistic behaviour, growth of the ports sector in light of the growth in import and export markets, socio-economic development aspects of ports, and the challenges posed to Transnet’s balance sheet. A complementary regulatory framework had now been proposed for the Port Regulator, NPA and the Competitions Commissions, with all three institutions having unique and specific areas of regulation. The revised Bill had restructured land use and non-market related rentals and had general application. It was now in line with the Constitution. The revised Bill also recognised existing licenses for off shore cargo handling facilities and provided that all future licenses were to be sanctioned by the NPA.

Mr R Khan (Department of Transport) said that there was under-performance in relation to other ports in developing countries, such as Tanzania. The reality was that unless something fundamental was done, there would be a constraint on the possibility of growth in all sectors of the economy. A University of Stellenbosch study had shown that congestion at Durban Container Terminal had reduced GDP by 0.43% in 2002, and the annuity of this had therefore been lost as well.

Discussion
Mr L van Rooyen (ANC, Free State) asked whether the Richards Bay Coal Terminal and Saldanha Iron Ore Terminals fell within the definition of a port as they were privately run.

Mr Khan replied that the Bill did not look at the terminal, but at the port, so the Richards Bay port would be the area of jurisdiction. The Iron Ore Terminal was a State terminal. The NPA would be the landlord for all the ports.

Mr van Rooyen asked whether the provision of Clause 66 included vessel-to-vessel transfers, particularly those from drilling platforms to ships.

Mr Khan replied that drilling rigs were not included. The Clause concerned cargo transferred from ship-to-shore or ship-to-ship, but without the ship having docked. Drilling rigs did not fall under the definition of a port in terms of the Bill.

Mr van Rooyen referred to clause 75 and said that he had always understood that certain sizes of vessels were excluded from pilotage. Did this clause also cover that? Mr khan replied in the affirmative.

Mr van Rooyen asked whether the Bill also addressed the aim of doing cheaper business in South Africa.

Mr Khan replied that one of the major concerns in the pricing regime was that the administered pricing regime was not always beneficial to the consumer. The tariff book would now have to be presented to the Regulator for approval, so there would be control over price increases.

Mr A Watson (DA, Mpumalanga) asked for an explanation of the various revisions of the Bill.

Mr H Smuts (State Law Advisor) replied that the first round of the Bill had been presented before the last elections. The Bill had been amended by the Portfolio Committee and that version was known as B5B-03. It still had to be approved by the NCOP when the second parliamentary term ended. All unfinished bills lapsed. With the start of the third parliamentary term, the Bill had been revived with the amendments included. However it was sent back to the National Assembly and not to the NCOP. The National Assembly had adopted some more amendments and these were contained in Bill 5C. The document B5D incorporated those amendments.

Mr M Mzizi (IFP, Gauteng) asked whether the original Bill had been before the NCOP.

The Chairperson pointed out that the Department had introduced the Bill to the Portfolio Committee. The Portfolio Committee had made amendments and it had been referred to the NCOP. The Select Committee had adopted it, and the Bill had been withdrawn. With the revival of the Bill, the National Assembly had introduced further amendments and it was now back with the Select Committee.

Mr Montana said that Parliament had adopted a resolution before the elections, that certain Bills might be revived after the elections. This Bill had been through that process, and because of its technical nature, it had been revived at National Assembly level.

Rev P Moatshe (ANC, North-West) asked why it had been withdrawn. Mr Montana replied that the Bill had been technically perfect and had not been withdrawn. The Ministers of Transport, Public Enterprises and Finance had realised that certain provisions could trigger other consequences, such as loan covenants. The Bill had thus been held back to ensure that it would not trigger anything when it was passed. Transnet had been concerned that some of its financial arrangements could be affected. The revised Bill captured some agreements and consensus and did not compromise Transnet’s financial position.

Mr Mzizi asked whether the flexibility of the Minister addressed the concerns of Transnet, as it appeared to conflict with Government’s desire to remain flexible.

Mr Watson asked why the title of the Bill had been changed. Mr Montana replied that it had originally been introduced as the National Ports Authority Bill, but it had been realised that the Bill dealt with matters beyond that, and it was deemed more appropriate to call it the National Ports Bill.

Rev Moatshe commented that the Committee should have visited the ports before considering the Bill, so that they were not discussing it theoretically. The Committee had been told that there were no financial implications to the Bill, and he asked for an explanation of this. Clause 28 allowed for funds to be raised in the markets.

Mr Khan replied that this was subject to National Treasury approval. There were stable revenue streams, but it might not be possible to fund capital expenditure from the cash streams, for example. This was a provision in the Public Finance Management Act (PFMA).

Mr Montana said that when the NPA was incorporated, it would have its own balance sheet and could go to the market, subject to State Approval. This was an enabling provision. The Bill as it stood did not require any additional funding or new guarantees.

Mr Watson asked whether this was also an attempt to ring fence the NPA as a cash cow of Transnet.

Mr Khan replied that there had been a fundamental shift in the Bill. Transnet required funding from the NPA on the basis of its company structure. Funders wanted to know that NPA revenues were in Transnet.

The Chairperson said that, with the history of the country, the issue of corporatisation was important and could have a negative impact on the socio-economic status of workers. What were the implications for workers and the economy and what were Government’s priorities in terms of growing the economy and strengthening the State?

Mr Montana replied that the issues had been dealt with in consultation with the trade unions. It was a key concern that corporatisation was the first step to privatisation. In this instance, the State’s position was consistent, and corporatisation would enable the NPA to unleash resources and potential. No jobs would be lost. The trade union movements had supported the Bill in its more radical form, and understood that the Government was encouraging competition within operations. The model was the key to modernisation of South African ports and the alternative would be to perpetuate the current state of affairs with inefficiencies. There had been concerns about the proposed concessioning of the Durban Container Terminal, and concessioning had thus been omitted.

Ms M Oliphant (ANC, Kwazulu-Natal) said that the issue was difficult for new members of the Committee, and asked to know what had been in the first Bill. She requested that the Members receive a copy of the first Bill as passed by the NCOP. She was supported by Mr Watson and Mr M Sulliman (ANC, Northern Cape).

Rev Moatshe asked why the omissions and insertions were not shown in the Bill. Mr Smuts replied that, since this was a new Bill, nothing came out. The Explanatory Note was to cover the change in clause 88.

Mr Montana agreed that it was important for Members to receive the original Bill, as it would give them an idea of the larger changes in the revised Bill.

The meeting was adjourned.