Assessing measures to improve South Africa's port doctrine : pricing and governance reform.

Abstract

South Africa’s ports sector does not have a clearly defined port doctrine and has some elements resembling the Anglo-Saxon doctrine, other elements the Continental doctrine and others still the Asian port doctrine. This leads to South Africa battling with conflicting objectives for its ports and it has, for decades, run a complementary system of ports where costs incurred were not reflected by the prices charged for different services and the revenues and costs allocated to various commodity types have remained largely unjustified. All of this is against the backdrop of intra-port, inter-port and multimodal cross subsidization which found justification in developmental objectives of the country during its tenure but has lately been viewed as unjustifiable with regard to the prevailing macroeconomic objectives and policies; giving rise to many dissatisfactions submitted by various port stakeholders regarding Transnet and TNPA’s practices that have not been adequately addressed. This study assesses measures to improve South Africa’s port doctrine, governance and pricing reforms. Content analysis was used to assess 18 various stakeholders’ submissions regarding the 2013-2014 TNPA tariff increase application, 15 stakeholders’ submissions regarding the multi-year tariff application for the tariff years 2013/14-2014/15 and 16 further submissions regarding the 2014-2015 tariff increase application were analysed. The Required Revenue (RR) methodology was recalculated using the recommendations from stakeholder submissions. Recommendations regarding the tariff methodology, tariff structure and port governance for the improvement of South Africa’s port doctrine were made. After recalculating the RR model it was found that an MRP of 4.9, inclusion of a debt beta and a gearing of 36% may contribute to reasonable tariff increase at 3.96% for 2014-2015. Also the allocation of more costs to shipping lines and less to cargo owners is achievable without compromising the profitability of TNPA. Regarding port governance, the Asian port doctrine aligns well with the country’s developmental objectives which means adherence to it would be beneficial and it should be granted until all South Africa’s ports reach a level where they can stand as good competitors in the global environment with regard to pricing and tariff structure. TNPA is in need of reform according to Section 27 of the National Ports Act which puts forward that TNPA should be corporatized. Corporatization is recommended as the next step after the Asian port doctrine phase has run its course and fulfilled government’s developmental objectives with respect to ports.