Address by Advocate Menzi Simelane,

Commissioner of the Competition Commission to

The Portfolio Committee on Transport at the

Hearings on the National Commercial Ports Policy Draft White Paper

Cape Town, 14 November 2001

 

 

Chairperson, Honorable Members of Parliament, thank you for affording me this opportunity to address the Committee at these hearings.

The Commission welcomes the initiative by the Department of Transport to clarify a policy on commercial ports in the White Paper under discussion. The importance of ports in our national economy cannot be underestimated nor their impact on promoting the international competitiveness of South African business and South Africa as an investment destination. One of the objectives of the Competition Act is to "expand opportunities for South African participation in world markets and to recognize the role of foreign competition in the Republic". In our view, ports play a very important role in promoting international competitiveness. This is not currently the case, as SA port fees are high by international comparison, while the productivity of ports is low.

In view of the above, the Commission therefore welcomes the White Paper and supports the broad principles outlined in it. In particular, the Commission embraces the goals and objectives of the policy. We also appreciate the explicit recognition of the Competition Act in the paper. However, we also have some concerns, which I would like to outline to you in greater detail.

  1. Goals and Objectives of the National Commercial Ports Policy
  2. While the Commission supports the emphasis placed on creating an affordable, effective, efficient, productive and internationally competitive port industry, we must caution that the achievement of these objectives simultaneously will be difficult. Given the significant need for investment to upgrade port infrastructure, it may be more appropriate to indicate a phased approach, with different objectives that pre-dominate at different times. An action plan outlining broad objectives and broad timelines would give industry and regulators more certainty and direction about government policy.

    Furthermore, the Commission views ports as an "essential facility". An essential facility, as defined in the Competition Act is "an infrastructure or resource that cannot reasonably be duplicated, and without access to which competitors cannot reasonably provide goods or services to their customers". Recognition of the status of ports as an essential facility in the policy would be an important step and would enhance the need for equal access.

     

     

  3. Institutional Arrangements and Governance
  4. The Commission’s primary concerns center on the institutional arrangements. While we welcome the separation of service provision and regulation, a number of issues arise. If the Port Regulatory Body is to be the sector regulator, its technical regulation functions should be clearly spelt out in the policy so as to avoid any possible confusion. While mention is made of consultation with the Competition Commission in the policy document, it would appear that some functions relating to competition regulation may be allocated to the Ports Regulatory Body. The Commission has also seen over the past two years since its establishment that once sector regulators have acquired some degree of control over competition issues (including market access), it becomes very difficult for a competition authority to operate alongside it, despite provisions for Memoranda of Agreement between the Commission and the sector regulators. This can become dangerous, as sector regulators are more prone to regulatory capture than an economy-wide regulator such as the Competition Commission. The result is that industry can either use regulatory arbitrage to try to play regulators off against each other, or alternatively that sector regulators argue for the special nature and consequent treatment of their particular industry. From the perspective of the Competition authorities, it would therefore be preferable if the role and function of each regulator is clearly defined and separated. This would create a simpler institutional structure that is less costly and more effective.

    Let me outline briefly which issues the Competition authorities are empowered to deal with in terms of the Competition Act: The Competition authorities could regulate for example equal access to ports, excessive pricing issues, discriminatory practices or predatory pricing conduct under the abuse of dominance provisions of the Competition Act. While it is important that these principles be reiterated in the policy document, it would be preferable if responsibility for these issues resided with the Competition authorities.

  5. Other comments

Another concern for the Commission is that policy does not address some key issues. These include the role of the private sector in port operations, whether the state would grant monopolies for the rendering of certain services, who will control the port function, how the monopoly aspects of the port system would be regulated and what regulatory mechanisms will be implemented to prevent monopoly providers from exploiting their power against customers who have few alternatives. Furthermore, no indication is given as to whether a system of price control will be implemented or whether the sector regulator will have only a monitoring function. It is our view that some of these issues should at least be touched on in the policy document.

Conclusion

In conclusion, therefore, while the Commission supports the White Paper in its broad strokes, it is our view that certain key issues should be addressed to give both business and regulators clarity and certainty. I thank you again for the opportunity to address you on this very important issue.