Transnet, the state-owned ports and rail operator, was considering a review of the structure of its port charges, currently skewed in favour of bulk commodity exporters, with container traffic subsidising port investments, group CEO Brian Molefe said yesterday.

Transnet’s ports have previously been identified as some of the most expensive in the world by users and by a study conducted by the ports regulator, which sets tariffs for the company.

However, comparing South African port charges with tariffs from other ports presented a problem because, unlike elsewhere in the world, South African facilities were not subsidised. Even though they are state-owned, they are obliged to operate commercially, making them more costly to users.

Subsidies to ports that compete with Transnet’s facilities – which are sometimes owned by municipalities or regional governments – are made through a combination of direct investments.

These are often made by the owners with no need to recover the cost of the investment through an increase in tariffs and sometimes through tax exemptions, Mr Molefe said. Transnet pays tax.

Mr Molefe said Transnet wanted to review how container tariffs related to bulk commodity tariffs. He said bulk commodity export tariffs were “probably some of the lowest in the world” and Transnet’s tariffs “are dirt cheap, too cheap”, Mr Molefe said.

This was largely related to a historical reluctance to raise tariffs on bulk commodities, which for decades had been the primary export earner for the country at a time when container traffic had largely been a proxy for the country’s imports, Mr Molefe said.

As a result of the relatively low levels of manufactured goods exported from SA, containers that brought in imports were sent back empty, he said. Increasingly, as South Africa industrialised and manufacturing shifted towards export markets, the dynamic shifted.

Tariffs on container traffic had steadily increased but, at the same time, to encourage exports, there was reluctance to increase tariffs on bulk commodities in line with increases on containers. “That needs to be reviewed,” he said.

Bulk commodities such as iron ore, coal and manganese rely on Transnet to provide rail haulage to terminals at Port Elizabeth, Saldanha and Richards Bay. Transnet has been criticised by bulk commodity exporters because of a lack of rail capacity that limited export capacity.

Transnet is undertaking a R300bn capital expenditure programme to tackle the investment backlogs and raise capacity through its logistics system to stimulate volumes, largely from mines.

However, Mr Molefe did not say that bulk exporters would face larger tariff increases than they had in the past.

However, Dick Kruger, an economic adviser to the Chamber of Mines, said yesterday the chamber would oppose any “unilateral” increases in tariffs.

“We certainly would object to a unilateral increase in port charges; bulk commodities still remain strategic to the country and form a massive part of gross domestic product,” he said. “A review is fine, but any increases must be justified economically and take the total value chain into account,” Mr Kruger said

“We have seen improvements in services but our bulk commodity transport costs are still very high when compared to the rest of the world ,” he said. “These (tariffs) have a great influence on your competitiveness as a miner,” he said.

Source: http://www.businessday.co.za/articles/Content.aspx?id=175233