Tag Archive | port charges

Port charges and inefficiencies leaving SA behind

Transnet port charges far too high…..

portsharboursEscalating administered prices in SA’s manufacturing system including port charges that were amongst the highest in the world were amongst the subjects discussed during a colloquiun called by Parliament’s portfolio committee on trade and industry.

The meeting was called by Joan Fubbs, the PC trade and industry’s chair and in responding director general of department of trade and industry (DTI) Lionel October said these high costs pointed at Transnet were undoubtedly coupled with “significant logistical inefficiencies” to form a major reason for the country’s inability to compete in global export markets.  Transnet’s tariffs were far too high, he said and were contributing to high import costs in most sectors.

The good and the bad

He said there were some successes recorded recently, such as South Africa being high on the list of best places to invest in automobile assembly plants, but decreased demand from traditional trading partners, coupled with the fact that “container and automotive cargo owners faced price premiums of between 710% and 874% above the global norm. “Such facts were leaving South Africa as an uncompetitive nation”, he said.

During a rigorous and frank debate on the multiple shocks facing manufacturing in South Africa, which were stated as ranging from rising electricity prices to the costs involved as a result of unstable labour-relations, a gathering of Eskom officials, Transnet executives, South African Local Government (SALGA) representatives, the electricity regulator NERSA, and the department of trade and industry (DTI) gathered to debate the current picture facing the SA manufacturing sector under the chairmanship of Parliament’s trade and industry portfolio committee.

Electricity charges vary from one to another

In addition to existing other and well established problems in the electricity transmission and generation area, DTI’s deputy director Garth Strachan, weighed in saying that there were complete anomalies in tariffs charged either to members of the same sector of industry and to manufacturing plants existing next door to each other.

Strachan said DTI had examples where one manufacturer was facing certain price increases in electricity and another factory “right across the street” was paying a tariff more than double.

He said that whilst global recession might have played a part in the current negative situation mostly arising from “bunched up” administrative prices from state utilities, some thinking “outside of the box” was now called for if South African manufacturing was to gain any traction and contribute to growth in a meaningful manner, thus creating more jobs.

Next to New York comes SA

marineReturning to the high port cost issue, Strachan said that Cape Town, Port Elizabeth and Durban port terminals had the dubious honour of following Charleston, Baltimore and New York, as the top high-cost terminals worldwide, mainly as a result of excessive cargo dues charged.

Returning to electricity charges, he concluded by saying that one of the biggest problems facing South African consumers was the considerable publicity given to the NERSA announcement that Eskom had been restricted to an 8% hike, which had given the impression to consumers that “this was the end of the story”.

Yet manufacturers still had to face up to municipal mark-ups, he said, both in the case of urban and peri-urban situations, a matter which had not been discussed on a national basis nor any guidelines established.

Dry bulk goods to be target

On the matter of port charges, Transnet’s Mohammed Abdool said Transnet was applying to the ports regulator for a complete re-structuring of tariffs applying to containers, dry bulk goods and manufactured and beneficiated goods.

He said a complete “rethink” on the objective of encouraging the export of beneficiated goods had taken place, coupled with the principle that Transnet would move from becoming one of the lowest rental charging landlords in the world by re-aligning its land based rentals by upwards of 46%.

Abdool said the new suggestions would result in up to 43% reductions in total port revenues for containers, whilst dry bulk exporters would go from a current 18% contribution to about 33%. All this from April next year which was given as a possible starting date.

NERSA will control municipal incenses

Still on price hikes and specifically on electricity mark-ups, NERSA responded to DTI comments and confirmed that it was obligatory for Eskom not go above the 8% allowed but that agreed limits would be allowed for each municipality or local authority as per agreement made or being made. No deviations would be tolerated and the case brought forward by DTI of two adjacent manufactures with vastly differing electricity rates would be investigated.

Touching up the recent decision to fix the Eskom price at 8% increase, NERSA said that in their view it was not correct for South African consumers to pay for massive reserves and financial safety margins on Eskom’s balance sheet and that Eskom should be run like any other state utility in an atmosphere of total adherence to the principle that where costs are concerned the interests of the consumer must be borne in mind.

SALGA must be committed

Joan Fubbs, chair of the committee, then sought a verbal pronouncement by SALGA to all present into Parliament, both stakeholders and members, that no deviations from the NERSA allowances to be agreed as reasonable mark-ups by their members would be accommodated by SALGA.

SALGA spokesperson, Mthobeli Kholisa, in charge of infrastructure development,  said there was no other system in place in most local authorities to pay for such items as street lighting, pumping of water services or handling of waste facilities. However, such an undertaking was  given by him.

Eskom chips in

Eskom presentations added little that was new to the situation, other than spokesperson for Eskom, Hillary Joffe, said that Eskom was “reserving its comments” on the situation until it had re-studied the entire financial situation but asked for an inter-governmental task team to be set up to align municipal tariffs and called for a plan to ensure that municipalities had sufficient fiscal support to maintain infrastructure and essential social services in the long term.

DOE warns on China

On the rising costs of fuel prices, department of energy’s deputy director general, Tseliso Maqubela, said  that oil and gas exploration would play a large part in South Africa’s energy future but that the unseen and hidden player in South Africa’s structural and economic future remained the economic giant China.

With vast reserves of cheap coal, China had not yet entered the market, he said, and when this occurred it would amount to a “game changer” in every respect, affecting not just the energy scenario for South Africa.

April looks better

On prices generally, he said that things were looking better for April but that oil and gas prices were long-term issues in general and current factors at play would not affect the situation in the short term.

He said exploration would probably would remain, by and large, in the hands of private ventures for years to come. He said that the costs of exploring for oil using one rig could amount to US$1m to 3m for one day alone and “that kind of money does not come easily to a state utility”. Maquebela said that the country owed the present private owned refineries much as they stabilized the chemical industry and saved much in imports but warned that they also faced enormous recapitalization costs in the near future.

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