Mr J Cronin

Chairperson

Portfolio Committee on Transport

18 June 2003

Dear Mr Cronin

• the NPA will initially continue as a division of Transnet (clause 3(1)). During this period, the NPA is defined in clause 1 as the "National Ports Authority of South Africa";
• the NPA will then be incorporated as a private company, wholly owned by Transnet (i.e. a Transnet subsidiary) (clauses 3(2), (3) and (4)); and
• finally, clause 4 of the Bill envisages the establishment of a separate state-owned enterprise, National Ports Authority Limited, on a date determined by the Shareholding Minister, which will be a public company wholly owned by the State, through the Shareholding Minister. It is only in this latter stage that the entity is "the Authority" as defined in clause 1 of the Bill.

1. It is of the utmost importance for the proper management of ports that the NPA has all the powers and responsibilities of the Authority under the Bill, during each of these phases.
2. As stated above, the definition of "Authority" in clause 1 is limited to the Final Authority. Nevertheless, the position in relation to both the Initial and Interim Authorities (i.e. the NPA in the "as is" and "interim" phases) is remedied, to some extent, by clauses 3(1) and (4) of the Bill. These provisions do not, however, go far enough, in that they only compel the Initial and Interim Authorities to perform all the functions of the Authority. They do not provide that the Initial and Interim Authorities will have all the powers of the Authority, nor that the Initial and Interim Authorities shall, for all intents and purposes, be the Authority for the relevant periods. The NPA, therefore, suggests that the Bill should stipulate that the Initial and Interim Authorities shall be deemed to be the Authority for the purposes of the Act.
3. In light of the above concerns, our comments on the detailed wording of clause 3 are as follows:

1. given the importance of the NPA's ability to function as the Authority during the "as is" and "interim" phases, the heading of this clause should be more specific. In this regard, we suggest that the clause heading read: "National Ports Authority of South Africa and National Ports Authority (Pty) Ltd deemed to be the Authority";
2. clause 3(1) should read as follows:

1. During the period referred to in paragraph (a), any reference in this Act to the Authority, the Board and any functionary of the Authority (including the chief executive officer) must be construed as a reference to National Ports Authority of South Africa and the board referred to in section [insert] and any functionary (including the chief executive officer) thereof, respectively, unless it is clearly inappropriate.
2. During the period referred to in paragraph (a), National Ports Authority of South Africa must perform the functions, and has all the powers, of the Authority, as if it were the Authority.
3. Any appointment to the board referred to in section [insert] or of any functionary of National Ports Authority of South Africa made after the commencement of this Act, must be made in terms of this Act".

1. in relation to clause 3(4)(a), we refer to our comments at paragraph 14.1 below.
2. for the reasons discussed above, clauses 3(4)(b) and (c) should be amended to read as follows:

1. During the period referred to in paragraph (a), any reference in this Act to the Authority, the Board and any functionary of the Authority (including the chief executive officer) must be construed as a reference to National Ports Authority (Pty) Ltd and the board and any functionary (including the chief executive officer) thereof, respectively, unless it is clearly inappropriate.
2. During the period referred to in paragraph (a), National Ports Authority (Pty) Ltd must perform the functions, and has all the powers, of the Authority, as if it were the Authority.
3. Any appointment to the board or of any functionary of National Ports Authority (Pty) Ltd must be made in terms of this Act".

1. The Bill only contemplates a transfer of assets and liabilities from the Initial Authority to the Interim Authority and then from the Interim Authority to the Final Authority (clauses 3(4)(a) and 27). The Bill does not provide for a direct transfer from the Initial Authority to the Final Authority. If clause 3(5)(a) is retained in its present form, it is therefore crucial that the Bill should provide for such a direct transfer;
2. we note that the time period within which the Interim Authority must be established is not, at this stage, specified in the Bill (although clause 3(2) does provide that the Interim Authority must be incorporated "as soon as possible" after the Bill comes into effect).

1. The Bill, as currently drafted, envisages that the Initial Authority will function as the Authority for a certain period. As stated above, it is particularly important that the Interim Authority is able effectively to operate as the Authority during this period, despite the fact that it will remain as a division of Transnet and will thus not be a separate legal person to Transnet.

1. Incorporation of Authority (clause 4)

1. The word "as" in the second line of clause 4(1) appears to be a typographical error.
2. We note that clause 4(1) envisages the establishment of a separate public company (National Ports Authority Limited) as the successor to the Interim Authority (National Ports Authority (Pty) Ltd). The Bill, therefore, envisages the transfer of the business of the port authority from the Interim Authority to the Final Authority. For the reasons set out below at paragraph 14.2, this transfer should rather be structured as a transfer of shares in the company. If this suggestion is accepted, it appears to be overly complicated to provide for the establishment of two different companies under two different names (one a private and the other a public company). This change of names may result in confusion and uncertainty amongst stakeholders and will necessitate an additional cost of altering, amongst other things, the NPA's contracts and stationery. Accordingly, it is suggested that both the Interim Authority and Final Authority should either be a public or private company. This position would be preferable for ensuring continuity between the "interim" phase and the "end" state of the Authority.

2. Ports under jurisdiction of Authority (clause 10)

1. As from the date determined by the Shareholding Minister in terms of section 27(1), all ports under the jurisdiction of National Ports Authority (Pty) Ltd immediately prior to that date, shall fall under the jurisdiction of the Authority."

1. Functions of Authority (clause 11)

1. The Authority should not be responsible for providing or arranging road and rail access to and from ports. The Authority should only be responsible for arranging road and rail access within the port limits (but not within terminal boundaries). Accordingly, clause 11(1)(d) should be amended to read:

"provide or arrange road and rail access, within ports, to and between port terminals and port facilities".

2. The functions of the Authority in relation to off-shore cargo handling facilities should be clarified. In this regard, the principle that the Authority is responsible for regulating the establishment and planning of such facilities, should be reflected. Accordingly, it is submitted that clause 11(1)(u) be amended to read as follows:

"licence and regulate the erection and operation of off-shore cargo-handling facilities and services related thereto".

3. The Authority’s responsibilities with regard to marine search and rescue flow from the South African Maritime and Aeronautical Search and Rescue Act, 2002. It is therefore unnecessary for clause 11(1)(x) to oblige the Authority to assist in search, rescue and salvage operations beyond the port limits. In addition, this obligation is particularly onerous as it is unlimited. This paragraph should accordingly be amended to read:

"assist in search, rescue and salvage within port limits".

4. The Bill imposes a large number of obligations on the Authority. It would be problematic if the Authority is held delictually liable (i.e. that it could face large damages claims) for a failure to comply with these obligations. In this regard, it is noted that the Authority would, in any event and where appropriate, be liable in law for failing to comply with its delictual obligations. Accordingly, it is submitted that the following sub-clause be inserted in clause 11:

"Nothing in this section or section 74 shall be interpreted as imposing on the Authority, directly or indirectly, any form of obligation or liability in law which it would not otherwise have".

2. Composition of Board (clause 14)

The position of the existing divisional board of the NPA requires clarification. Is it intended that the divisional board, as currently constituted, will function as the Board under the Bill? In this regard, we note that a number of members of the NPA's divisional board are also Transnet directors. It is noted that a person who has a financial interest in the business of ports is disqualified from membership of the Board (clause 17(f)).

3. Persons disqualified from membership of Board (clause 17)

We note that clause 18(4)(d) provides that the Shareholding Minister must remove a member of the Board if he or she becomes an employee of the State, but that clause 17 does not include State employment as a disqualification from membership of the Board. It is unclear why State employment should present a bar to membership of the Board.

4. Terms of office of members of Board (clause 18)

1. The appointment procedure for members of the Board is set out in both clauses 15(1) and (2). Clause 18(3)(b) should therefore refer to both sections "15(1)" and "15(2)".
2. Clause 18(4) should also include, as a ground for removal, if one of the events set out in clause 17 occurs.

5. Vacating of and removal from office of chief executive officer (clause 24)

The word "Chairperson" in clause 24(2)(b) should read "chairperson".

6. Acting chief executive officer (clause 25)

It would be impractical to require the Board to appoint an acting chief executive officer each and every time that the chief executive officer is absent from the country. In such a case, it will be preferable to re-insert clause 25(2) in the following form:

"Notwithstanding the provisions of subsection (1), the chief executive officer may in writing appoint any senior employee of the Authority to act as chief executive officer for any period that the chief executive officer is temporarily absent from the Republic."

7. Appointment and transfer of staff of Authority (clause 26)

1. Clause 26, as currently worded, only applies to the transfer of staff from the Interim Authority to the Final Authority. This provision should be supplemented to include provisions for the transfer of staff from the Initial Authority to the Interim Authority, following the incorporation of the Interim Authority. This can be achieved by inserting the following sub-clause:

"All persons who immediately prior to the date on which National Ports Authority (Pty) Ltd is incorporated, were in the employ of National Ports Authority of South Africa are deemed to be transferred to the service of National Ports Authority (Pty) on that date without any interruption in their service, on terms and benefits no less favourable than those enjoyed by them immediately prior to their transfer."

2. In addition, the existing clause 26(3) should be amended to read as follows:

"For the purpose of the application of the Income Tax Act, 1962 (Act No. 58 of 1962) to the transfer of employees contemplated in subsections (2) and (3), it is deemed that the Authority, National Ports Authority (Pty) Ltd and National Ports Authority of South Africa are the same employer."

8. Transfer of ports, land and other rights and obligations to Authority (clause 27)

1. Clause 27 generally provides for the transfer of assets, liabilities, rights and obligations from the Interim Authority to the Final Authority. Nevertheless, these provisions do not deal with such transfer from the Initial Authority to the Interim Authority. This should be rectified by providing for the transfer of all assets, liabilities, rights and obligations of Transnet relating to the NPA Division, following the incorporation of the Interim Authority. In this regard, we note that clause 3(4)(a) generally provides for the transfer of all assets, liabilities, rights and obligations to the Interim Authority. Nevertheless, this provision is not sufficiently specific. Accordingly, it is suggested that the Bill should include a provision, along the lines of clause 27, providing for the transfer of the assets, liabilities, rights and obligations from the Initial Authority to the Interim Authority.
2. We note that clause 27 currently provides for the transfer of the Interim Authority's assets, liabilities, rights and obligations to the Final Authority. In other words, the Interim Authority's business is transferred as a going concern to the Final Authority. It is submitted that this manner of transfer is problematic and that it would be preferable for the transfer from the Interim Authority to the Final Authority to be structured as a transfer of shares from Transnet to the Shareholding Minister on behalf of the State. The benefit of a transfer of shares, as opposed to a transfer of business, is that it removes any uncertainty as to the assets and liabilities that are to be transferred, it does not result in the formation of a different juristic person which will require the cession of existing contracts (including concession contracts) and it would be preferable from a tax perspective.
3. Should this suggestion not be accepted, clause 27 should simply provide that the entire business of the Interim Authority will be transferred as a going concern. Accordingly, for the purposes of such transfer, the phrase "as determined by the Shareholding Minister in the notice contemplated in subsection (1)" in clause 27(2)(b) would be unnecessary.
4. The references to "relating to ports" in clauses 27(4)(c) and (d), as well as the provisions of clause 27(5), are similarly unnecessary in relation to the transfer from the Interim Authority to the Final Authority. Nevertheless, these provisions are important for the initial transfer from the Initial Authority to the Interim Authority and should thus be made applicable to such transfer.
5. The NPA should be exempt from the payment of tax and other duties in relation of the transfer of assets from Transnet to the Interim Authority and then to the Final Authority (see section 7(12) of the Airports Company Acts). Accordingly, the NPA suggests the inclusion of the following sub-clause in clause 27:

"Despite any provision in any other law, the Authority, National Ports Authority (Pty) Ltd and National Ports Authority of South Africa are exempt from any value-added tax, capital gains tax, income tax or other tax, stamp duties, transfer duties or registration fees payable in terms of any law in relation to the transfer to National Ports Authority (Pty) Ltd or to the Authority, of assets or rights (including shares) in terms of this section."

9. Functions of Regulator (clause 30)

1. Chapter 5 of the Bill provides for the establishment of the Regulator and confers extremely wide powers on the Regulator. It is submitted that the conferral of such wide powers on a regulator over a landlord port authority is inappropriate and will only serve to increase the cost, and undermine the efficiency, of regulation within ports.
2. The rationale for the establishment of an independent ports regulator (over and above the NPA, as a landlord port authority), as envisaged in the White Paper on the National Commercial Ports Policy ("the White Paper"), is to ensure that the NPA does not abuse its position, or is not perceived to abuse its position, in favouring Transnet over other port operators, for so long as the NPA remains within Transnet. While recognising the importance of this legitimate rationale, it is important to balance it against the need to ensure that the NPA's ability effectively and efficiently to manage South Africa's ports is not undermined.
3. In this regard, the provisions of clause 30, which confer extremely broad powers on the Regulator without specifying the manner in which such powers must be exercised, are of serious concern (for example, the Regulator is tasked to "prevent", "monitor" and "ensure" certain things without any guidance as to the manner in which this will take place). We note that the remainder of Chapter 5 is somewhat more specific, and envisages that the Regulator will have two specific tasks, namely, the hearing of appeals and the investigation and adjudication of complaints.
4. It is of the utmost importance that the Bill should clearly set out the Regulator's powers and the manner in which these powers are to be exercised. In this regard, the NPA suggests that the Regulator should be complaints or appeals-driven and should not be empowered broadly to regulate activities relating to ports in an uncircumscribed manner. The Regulator should essentially be an adjudicative forum to decide disputes relating to the decisions and actions of the Authority.
5. In passing, we note that, in setting out the powers and functions of the Regulator, one should not draw too heavily on the empowering legislation of other regulatory authorities. The reason for this is that many other regulatory authorities (e.g. the Independent Communications Authority of South Africa) regulate an entire industry, while the Regulator is simply tasked with ensuring that the NPA does not abuse its position in managing ports.
6. In addition, we note that a number of the Regulator’s powers contemplated in the Bill, would overlap with the powers of the Competition Authorities (i.e. the Competition Commission and the Competition Tribunal) under the Competition Act, 1998 ("the Competition Act"). To the extent that the Competition Authorities may have certain broad powers, it is unnecessary to duplicate them in the Bill, as affected persons would already have the ability to approach the Competition Authorities to obtain a suitable remedy.
7. Accordingly, it is submitted that clause 30(1) should be deleted. Subject to the comments set out below, it is submitted that the remaining provisions of Chapter 5 adequately provide for the Regulator to function, i.e. to hear appeals and complaints.
8. In any event, and aside from the concerns set out above, the following provisions of clause 30(1) are particularly problematic:

• the Regulator should not be empowered to determine guidelines for entering into concession or public-private partnership ("PPP") agreements (clause 30(1)(e)). It is of the utmost importance that the NPA should be able to negotiate such agreements on commercial terms in order to encourage investment and to obtain the maximum benefit from such concessions and PPPs. In addition, the determination of such guidelines may delay the terminal concessioning process;
• paragraph (f) provides that the Regulator may "issue directives" to the Authority. No indication is given of the types of directives that can be issued and their subject-matter;
• it is submitted that the Regulator should not generally have jurisdiction over the Authority's tariffs (as envisaged in paragraph (k)), other than in circumstances where it is alleged that the Authority is abusing its position in preferring Transnet, though the imposition of discriminatory tariffs (see the comments at paragraph 40.1);
• a further difficulty with paragraph (k) is that the reference to "tariffs set by the Authority", could be read as meaning that the Regulator will approve and review not only the Authority's own tariffs, but those of the concessionaires or licensees, which may be regulated by the relevant concession agreement or licence and are thus arguably "set by" the Authority. It is submitted that the Regulator should not be empowered to review prices of services provided by concessionaires and licensees. The prices which a concessionaire or licensee may charge will be regulated by the concession or PPP agreement or the licence and the subsequent review of such prices may create uncertainty and, therefore, possibly undermine investment in South Africa's ports; and
• paragraphs (l) and (m) provide that the Regulator may hear appeals or reviews against "the decisions of the Authority". There are two difficulties with this provision. First, appeals and reviews are fundamentally different legal processes (with a review being confined to the lawfulness, reasonableness and procedural fairness of the decision, while an appeal examines the merits of the decision). Second, these provisions do not indicate which decisions of the Authority may be taken on review or appeal to the Regulator. These should not apply to all decisions of the Authority, particularly given the fact that the Authority will make a multitude of decisions on a daily basis relating to the management of ports (it would, for example, include decisions of the Authority relating to its landlord functions within ports).

1. Clauses 30(2)(b) and (3)(f) also confer overly broad powers on the Regulator and should thus be deleted.

1. Members of Regulator (clause 31)

1. It is assumed that the word "or" in the last line of clause 31(2) should read "and".
2. It is submitted that a person should be disqualified from membership of the Regulator if he or she has any financial interest in the business of the ports (as is the case for members of the Authority's Board (clause 17(f)).

2. Nomination and appointment of members of Regulator (clause 32)

For the sake of consistency, the words "business partner or associate" should be inserted after the phrase "family member" in clause 32(4)(b) (see clause 19(2), relating to the Board).

3. Vacation of office of members of Regulator (clause 33)

1. It appears to be inappropriate for clause 33(1) to require a recommendation of the Regulator prior to the Minister of Transport ("the Minister") being entitled to remove a member of the Regulator. For example, sub-clause (1)(b) contemplates the removal of a member of the Regulator where he or she tenders his resignation. The recommendation of the Regulator would seem to be irrelevant in such circumstances.
2. Clause 33(1)(d) should also refer to "section 31(4)".
3. The phrase "the Minister withdraws his or her appointment on the ground thereof that the member" should be deleted in clause 33(1)(e).

4. Appointment of Regulator's chief executive officer (clause 34)

We note that clause 34(3) provides that the chief executive officer is ex-officio a member of the Regulator. In such circumstances, the Bill should state that the chief executive officer must meet the legislative requirements for membership of the Regulator.

5. Delegation of powers (clause 45)

In light of the fact that the Bill envisages that the Regulator will perform a vital adjudicative function, it should not be empowered to delegate such powers. In particular, it should not be empowered to delegate the authority to conduct hearings (including deciding appeals) under the Bill. It is, therefore, submitted that clause 45 should be deleted.

6. Appeals (clause 46)

1. Clause 46(1) provides that any person whose rights are adversely affected by "a decision" of the Authority may appeal against that decision to the Regulator. It is submitted that this provision is too wide and is likely to undermine the efficiency of port management, with each and every decision of the Authority being susceptible to appeal.
2. It is of the utmost importance that this clause clearly sets out the categories of the Authority's decisions that may be appealed to the Regulator. In this regard, the NPA suggests that the decisions against which an appeal may lie should be limited to allegations that the Authority, in coming to a particular decision, has abused its position in:

• unfairly preferring Transnet, including South African Port Operations, over other port users; or
• unfairly discriminating against port users in relation to the provision of services by the Authority itself.

1. Clause 46(3)(b) should provide that the Regulator may only substitute the decision of the Authority for its own (or "vary" a decision in terms of clause 46(3)(a)), in exceptional circumstances. This is consistent with the principle in administrative law that a reviewing body will only substitute the decision, rather than set it aside and refer it back, in exceptional circumstances.

1. Complaint against Authority (clause 47)

1. Investigation of complaint (clause 48)

1. Clause 48(1) effectively provides that the Regulator "must" direct an investigation into any complaint lodged with the Regulator. This may prove unworkable in practice. It does not exclude the investigation of complaints that may be vexatious or unsubstantiated or which fall beyond the jurisdiction of the Regulator. The word "must" should therefore be amended to read "may".
2. The Bill should provide that the Authority must be timeously informed of a complaint lodged against it and must be given an opportunity to make representations relating to such complaint. This is consistent with the administrative law requirement of procedural fairness.
3. Clause 48(4) should be amended by the insertion of the words "and the Authority" after the word "complainant".

2. Hearings before Regulator (clause 49)

1. In light of the comments set out above, the words "any matter referred to it" in the first line of clause 49(1), should read "any complaint properly lodged with it".
2. Clause 49 should indicate the size of the panel of the Regulator that will conduct hearings.
3. The words "in a" should be inserted prior to the phrase "court of law" in clause 49(3)(c).
4. The word "must" in clause 49(4) should read "may". The effect of the provision as it currently stands is that the Regulator, at the conclusion of the hearing, must find against the Authority.

3. Right to participate in hearing (clause 50)

The reference to "any person appointed by the Regulator" in clause 50(a) appears to be inappropriate as a member of the Regulator would preside over the hearing.

4. Taking of evidence at hearing (clause 51)

1. Clauses 51(1)(a), (b) and (c) should only apply to any person "who is believed to be able to furnish any information on the subject of the hearing and/or to have possession of any book, document or item relating to the subject of the hearing" (see section 49A of the Competition Act).
2. It is submitted that a person who provides information during the course of a hearing of the Regulator should be protected by the rules of privilege. Accordingly, the following sub-clause should be inserted in clause 51:

"The law regarding a witness' privilege in a criminal case in a court of law applies equally to a person who provides information during a hearing of the Regulator".

(See section 56(2) of the Competition Act).

5. Rules of procedure (clause 52)

Clause 52 refers to "such rules of procedure as the Regulator may make". This portion of clause 52 should refer to rules of procedure made under existing clause 30(3).

6. Interim relief (clause 53)

The meaning of "the purposes of claim being frustrated" in clause 53(1)(a)(ii) is uncertain. In any event, it is submitted that interim orders should only be granted by the Regulator if it is necessary to prevent serious and irreparable damage to the complainant (clause 53(1)(a)(i)). Clause 53(1)(a)(ii) should therefore be deleted.

7. Orders of Regulator (clause 54)

1. The powers of the Regulator set out in clause 54(1)(a) are too wide and require careful consideration. In this regard, paragraphs (ii) and (iv) are particularly problematic as they suggest that the Regulator may interfere with contractual arrangements. This will create uncertainty for potential concessionaires and other investors and may therefore undermine investment in our ports. We note that these provisions appear to be based on section 58 of the Competition Act. To the extent that such powers are already conferred on the Competition Tribunal under that legislation, there is no need to include such powers in the Bill. Accordingly. paragraphs (ii) and (iv) should be deleted.
2. Clause 54(1)(a)(iii) should stipulate the maximum administrative fine that may be imposed by the Regulator and the circumstances in which such fine may be imposed.
3. The word "made" in clause 54(2)(b) should read "make".
4. The Regulator's power to make interim orders is provided for in clause 53. Clause 54(2)(b) then provides that if the Regulator adjourns the hearing, it may make such interim order "as it deems fit". This discretion is too wide. The Regulator's power to grant interim relief should be limited to that set out in clause 53.

8. Winding up and dissolution of Regulator (clause 55)

Clause 55(1) provides that the Minister may determine the date on which the Regulator will cease to operate. In order to ensure consistency with the White Paper, which envisages the existence of an independent ports regulator only for so long as the NPA remains within Transnet, this clause should provide that the date determined by the Minister may not be later than the date of the transfer from the Interim Authority to the Final Authority (i.e. the date contemplated in clause 27(1)).

9. Agreements and partnerships in port operations and services (clause 56)

1. The Authority should be empowered to concession out the design, construction, rehabilitation, development, financing, maintenance and/or operation of port facilities (which should be defined in the Bill as discussed above at paragraph 3.6). This power should be included in clause 56(1), through the insertion of the following paragraph:

"design, construct, rehabilitate, develop, finance, maintain and/or operate a port facility and provide services relating thereto".

In passing, we note that the reference to "terminal or facility" in sub-clause (2) indicates that both terminals and other port facilities may be the subject of a concession or PPP agreement.

2. For the sake of clarity, the word "and" in clause 56(1)(a) should read "and/or". This will ensure that the Authority is able to concession, for example, the design of a port terminal separately to the financing of such port terminal.
3. In order to ensure that the Authority is able to concession out, not only the provision of a port service, but, for example, the financing of equipment to provide such service, clause 56(1)(b) should be amended by the insertion of "and to do all things required or ancillary to the provision of that service" after the word "port".

10. Licences regarding port services and facilities (clause 57)

1. Clause 57(3) stipulates that an application for a licence must be lodged in accordance with an invitation issued by the Authority. In order to ensure sufficient flexibility, given the wide range of licences that may be applicable, the following sub-clause should be inserted in clause 57:

"The Authority may prescribe, by notice in the Gazette, categories of licences that may be lodged without an invitation issued by the Authority in terms of subsection (3)."

2. The period of 6 weeks for the adjudication of licence applications is too short, given the fact that, depending on the nature of a particular licence, a reasonable period for considering an application for such licence, may vary. Accordingly, it is suggested that the phrase "six weeks" be amended to read "a reasonable time" in clause 57(6). Such a flexible provision (or at least a provision allowing for the extension of the relevant period) would be in line with licensing provisions in other legislation.

11. Suspension or cancellation of licence (clause 60)

The Bill envisages that the Authority may issue directions (see clause 60(2)) and give directives (see clause 61(1)). The words "or directive" should, therefore, be inserted after the word "direction" in clause 60(1)(a).

12. Duties of licensed operators (clause 62)

The words "whichever occurs first" in clause 62(5) may be deleted, as the occurrence of an event would always precede its discovery.

13. Routine inspections (clause 63)

1. Clause 63 empowers the Authority to enter the premises of a licensed operator and conduct an inspection thereon "in order to determine whether licence conditions are being complied with". It is submitted that this power should be extended to circumstances where an inspection is required for the protection of safety of persons or property within ports. Accordingly, the following words should be inserted after "complied with" in the second line of clause 63(1):

"or where it is otherwise required for the protection of the safety of persons or property within a port".

2. Due to the nature of port operations, clause 63 should also empower the Authority to enter licensed operators' premises at reasonable times, including outside office hours.

14. Special powers in emergency (clause 64)

1. In the NPA's view, clause 64(1) should only apply in cases of emergencies. Accordingly, for the sake of clarity, a comma should be inserted after the word "event" in the second line of clause 64(1).
2. The reference to "port service" in clauses 64(1)(a) and (2) is not understood. It does not seem possible to possess a "service". In addition, for the reasons set out above at paragraph 3.6, the reference to "port repair facility", should rather read "port facility". Accordingly, the phrase "port service and port repair facility" in these sub-clauses should read "port facility or undertaking relating to a port service".

15. Operations existing on commencement of Act (clause 65)

1. The purpose of clause 65 is to safeguard the position of existing operators. In the absence of this provision, an existing operator would, for example, be committing an offence under clause 57 if it continues to provide a port service without a licence. This legislative purpose may be undermined if the whole of Chapter 6 is not brought into effect at the same time. Accordingly, the word "section" in sub-clauses (1), (4)(a) and (b) and (5) should be amended to read "Chapter" (as it did in the previous draft of the Bill).
2. We note that clauses 65(1) and (5) now provide that existing operators must make applications for licences within 6 months of a date determined by the Shareholding Minister.
3. For the sake of clarity, the phrase "or operate such facilities" should be included after the word "services" in the second last lines of sub-clauses (6) and (7).
4. Clause 50 should stipulate that existing operators are not subject to the requirement, contemplated in clause 57(3), that an invitation must be issued by the Authority prior to a licence application.

16. Off-shore cargo handling facilities (clause 66)

1. We note that the recent draft of the Petroleum Pipelines Bill [B22-2003] ("the Petroleum Bill") indicates that the Petroleum Pipelines Regulatory Authority ("the PPRA") will, amongst other things, licence the construction, conversion and operation of "loading facilities". In this regard, the Petroleum Bill defines a "loading facility" as "any marine facility that is or can be used to load or off-load petroleum and includes any auxiliary pipelines connected thereto but excludes bunkering facilities".
2. Accordingly, it appears that there may be some degree of overlap between the powers of the Authority under the Bill and the PPRA, insofar as loading facilities and storage facilities are used for petroleum products. This position may require clarification.
3. In relation to this issue, the NPA's position is that two authorisations (issued in tandem) should be required, namely:

• a licence from the PPRA to operate a petroleum loading facility and the associate pipelines; and
• a licence from the Authority as to the siting or location of such a facility.

1. In light of this concurrent jurisdiction, it is suggested that the Authority and the PPRA should be required to establish a memorandum of understanding that specifies how they will manage their overlapping competencies.
2. Clause 66(2)(b) provides that an application for a licence must be lodged after the expiry of the duration of the existing operator's agreement (note the word "whereafter"). It is submitted that this is inappropriate as it envisages a period after the expiry of the agreement, but before the operator holds a licence under the Bill. Clause 66(2)(b) should, therefore, be amended to read as follows:

1. Restructuring and reform of ports (clause 67)

1. The word "necessary" in the first line of clause 67(1)(a) may result in disputes as to the necessity of a particular land use alteration. This word should, therefore, be replaced with "desirable". In addition, this clause should empower the Authority to stipulate that any lease that is inconsistent with the new use shall be valid from a specific date (see clause 67(3) of the previous draft of the Bill).
2. Although the NPA recognises the concern to restrict the operation of clause 67(1)(b) to exceptional circumstances (such as those in Maydon Wharf), the phrase "so unrelated to market conditions as to result in the lessee being enriched at the expense of the Authority to an unjustifiable extent" may not capture all the circumstances in which it would be justifiable to direct the renegotiation of existing leases in the Maydon Wharf area. In addition, the reference to "enriched" may be read as only referring to a financial gain. This phrase should therefore be replaced with the following wording:

"substantially unrelated to current market conditions, including unreasonably low rentals, no restrictions on sub-letting and/or no provision confining the use of the property to a use relating to the relevant port".

3. The word "excluded" in clause 67(1)(c) is overly restrictive and should read "restricted".

2. Authority's tariff book (incorrectly numbered clause 73)

1. As discussed above, the Regulator’s powers should be limited to hearing complaints and appeals against certain actions and decisions of the Authority. This principle should apply equally to the Authority’s tariffs. The Regulator should not be required to approve the Authority’s tariffs, but should rather be empowered to adjudicate on complaints in which it is alleged that the effect of a tariff determined by the Authority is to unfairly prefer Transnet over other port users. If the Regulator has previously approved such tariffs it is not understood how it can subsequently hear complaints relating to such tariffs. Accordingly, the phrase "with the approval of the Ports Regulator" should be deleted in clause 73(1).
2. Given the fact that the Bill now provides for a National Port Consultative Committee ("NPCC") as well as Port Consultative Committees ("PCC") for each port, it is submitted that the appropriate forum for consultation on matters relating to the Authority’s tariffs, is the NPCC. An obligation to consult with each PCC on such issues would be impractical. Clause 73(3) should accordingly be amended to read as follows:

"The Authority must consult with the National Port Consultative Committee prior to making any substantial alteration to a published tariff."

3. This clause should provide that the Authority may, in exceptional circumstances, alter a tariff published in the tariff book, during the year to which that tariff book applies.
4. For the sake of clarity, the phrase "in respect of any tariff" in the third line of sub-clause (4) should read "varying any tariff".

3. Fees payable to Authority (clause 73)

1. It is submitted that the word "duties" in clause 73(d) should read "functions".
2. The descriptions of cargo dues and berth dues in clauses 73(1)(b)(iii) and (iv) are inaccurate. These paragraphs should be amended to read as follows:

1. berth dues for vessels occupying quays or repair quays while not engaging in the loading or unloading of cargo"

1. Liability of pilot (clause 77)

1. We note that the most recent version of the Bill removes the exclusion of the Authority’s liability for the acts or omissions of a pilot. The effect of this amendment is that, while the pilot who has caused the relevant damage may rely on the exclusion in clause 77, the Authority may not. This amendment may have devastating consequences for the NPA and, for the reasons set out below, is unacceptable.
2. The current exclusion of liability for the acts of a pilot is found in item 10(7) of Schedule 1 to the Legal Succession to the South African Transport Services Act, 1989. Prior to this, it was contained in section 29(5) of the South African Transport Services Act, 1981. This exclusion protects the NPA from the extensive liability that may result from a marine accident attributable to a pilot’s negligence.
3. It is submitted that an exclusion of liability for the Authority in relation to the acts or omissions of a pilot, should be retained. This is supported by the following considerations:

1. the exclusion of a port authority's liability for the acts of a pilot is consistent with international practice in numerous jurisdictions. In the limited time available, our research indicates that an exclusion or limitation of liability in favour of the port authority (or other relevant providers of pilotage services) is found in the following jurisdictions:

• the United Kingdom - section 22(3) of the Pilotage Act, 1987, which provides that a competent harbour authority's liability for loss or damage caused by a pilot in its employ is limited to a nominal amount of £1000 multiplied by the number of pilots employed by the authority at the time. We note that the United Kingdom position (like that in South Africa) provides for compulsory pilotage and employment of pilots by competent harbour authorities, in certain circumstances;
• Malaysia – section 29M(2) of the Ports (Privatisation) Act 422 of 1990 provides that the authority shall not be liable for any loss or damage occasioned by any act, omission or default of a pilot employed by it;
• Singapore - section 74 the Maritime and Port Authority of Singapore Act 7 of 1996 similarly provides that the authority shall not be liable for any loss or damage caused by any act, omission or default of a pilot;
• New Zealand - section 60B of the Maritime Transport Act, 1994 excludes the pilot and port company's liability for any neglect or want of skill of the pilot;
• New South Wales - section 86 of the Ports Corporatisation and Water Waste Management Act, 1995 provides that a pilotage service provider is not liable for any loss or damage attributable to the negligence of a pilot employed by that service provider;
• Western Australia – section 100 of the Port Authorities Act, 1999 provides that an employer of a pilot is not liable for any loss or damage resulting from an act or omission of the pilot;
• Mauritius - section 45 of the Ports Act 3 of 1998 provides that the port authority or its licensed operator shall not incur any liability for any loss or damage occasioned by any act or default of a pilot employed by the authority;
• Namibia – section 23(1)(h) of the Ports Authority Act 2 of 1994 provides that the port authority shall be exempt from liability for any loss or damage caused by the negligence of the pilot, which falls short of gross negligence;
• Samoa – section 49(3) of the Ports Authority Act 34 of 1998 states that the port authority shall not be liable for any actions of pilots in its employ;

1. the importance of exclusion or limitations of liability in favour of port authorities is reflected in the World Bank's Port Reform Toolkit (January 2002), which provides that:

"If a Port Authority carries out marine services such as pilotage, towage and other related activities (for example, Vessel Traffic (Radar) Services), liability for the effects of default, negligence or any other wrongful acts should be limited as much as possible" (our emphasis);

2. if the Authority's exclusion of liability is removed from the Bill, and the NPA is exposed to such significant risks of liability, it will have to insure against it. This will ultimately have the effect of increasing the cost of port operations and management, which would result in increased costs for port users. In circumstances where the risk of damage suffered while the vessel is under pilotage represents a comparatively small portion of the insurance premium payable by ship owners, this increase in port costs will increase the overall cost to ship owners. Accordingly, there is a sound commercial rationale for retaining the current exclusion of liability;
3. in the event that a ship causes damage as a result of a marine accident, the ship owner has the benefit of a comprehensive limitation of liability regime, which limits the ship owner's liability. In South Africa, this regime is primarily contained in section 261 of the Merchant Shipping Act 57 of 1951. The NPA does not enjoy the benefit of a similar limitation of liability. Accordingly, if the NPA is held liable for the acts of its pilots, its liability would be potentially limitless given the nature of marine services; and
4. an exclusion of liability in favour of the Authority is consistent with the fact that exclusions and limitations of liability and are often included in commercial contracts. In addition, such exclusions and limitations are contained in numerous South African statutes (see, for example, section 59 of the Marine Living Resources Act, 1998; section 157 of the National Water Act, 1998; section 52A of the Stock Exchanges Control Act, 1985; section 88 of the Banks Act, 1990; section 113 of the Electoral Act, 1998; section 40 of the Public Service Act, 1994; section 56 of the South African Police Services Act, 1995; section 40 of the Private Security Industry Regulation Act, 2001; section 76 of the Independent Broadcasting Authority Act, 1993; and section 19 of the South African Civil Aviation Act).

1. Accordingly, it is submitted that the retention of an exclusion of liability in favour of the Authority is appropriate. Nevertheless, if the Portfolio Committee does not accept the NPA's submission, it should at least include a limitation of the NPA's liability in the Bill.
2. We note that the National Port Users' Forum, in its submission to the Portfolio Committee dated 24 February 2003, referred to the Supreme Court of Appeal's decision in the Stella Tingas case, in arguing that the current exclusion of liability operates particularly harshly against a third party ship (in that case the stationary vessel) that may be involved in a collision with another ship under pilotage. It is submitted that this concern may be addressed, to some extent, by providing in the Bill that a ship owner may not rely on the fact that South Africa's ports are compulsory pilotage ports, in arguing that it is not liable for the acts of the pilot. In other words, the pilot is deemed to be the servant of the owner or master of the vessel and the owner or master is thus liable for the pilot’s acts or omissions. This is, in fact, the approach adopted in the majority of jurisdictions discussed in paragraph 42.3.1 above. For example:

1. section 16 of the UK Pilotage Act provides as follows:

"The fact that a ship is being navigated in an area and in circumstances in which pilotage is compulsory for it shall not affect any liability of the owner or master of the ship for any loss or damage caused by the ship or by the manner in which it is navigated.";

2. section 29M(2) of the Malaysian Ports Act states:

"Any authority pilot whilst engaged in any pilotage act shall, notwithstanding that he may be employed at a salary by the authority, be deemed to be the servant only of the master or owner of the vessel under pilotage and the authority shall not be liable for any loss or damage occasioned by any act, omission or default of such pilot."; and

3. section 45 of the Mauritian Ports Act provides that:

"(1) The owner or master of a vessel navigating under circumstances in which pilotage is compulsory shall be answerable for any loss or damage caused by the vessel or by any fault of the navigation of the vessel in the same manner as he would if pilotage were not compulsory.

(2) A pilot who is an employee [of the Authority] shall, while engaged in pilotage, be deemed to be the servant only of the owner or master of the vessel under pilotage and the Authority or its licensed operator shall not incur any liability for any loss or damage occasioned by any act or default of the pilot."

(see also section 71 of the Singapore Port Authority Act; section 60B of the New Zealand Maritime Act; section 85(2) of the New South Wales Ports Act; and section 99 of the Western Australia Ports Authorities Act).

3. Accordingly, the NPA suggests that clause 77 of the Bill should be amended to read:

1. Certification and licensing of pilots (clauses 78 and 87)

1. Clauses 78 and 87(2) contemplate that pilots will be trained and certified by the South African Maritime Safety Authority ("SAMSA") and licensed by the Authority. The NPA has the following difficulties with such an approach:

1. the NPA currently has in place a pilot training scheme which complies with the highest international standards. This training scheme is administered by the NPA itself. In this regard, we note that it is common practice internationally that training is administered by the pilotage service itself;
2. SAMSA's current statutory functions do not relate to the field of pilotage and this body therefore does not have specialised knowledge and experience in this field;
3. to transfer the relevant skills from the NPA to SAMSA would be a costly exercise, which could be avoided by the NPA retaining this function; and
4. it is overly burdensome to require pilots to be both certified and licensed by two separate authorities.

2. Accordingly, the NPA suggest that the phrase "and certified by the South African Maritime Safety Authority" should be deleted in clause 78(1). In addition, clause 87(2) should be deleted.

2. Lighthouses and other navigational aids (clause 79)

1. As discussed above at paragraph 3.3, the reference to "navigational aids" in this clause (including the heading), should read "aids to navigation".
2. It is important that the Authority should be empowered to remove, not only lights, but also other aids to navigation that may confuse a vessel. Accordingly, the phrase "or other aids to navigation" should be inserted after the word "light" in the first line of clause 79(5).
3. The need to obtain the consent of the South African Maritime Safety Authority is impractical. The phrase "the consent of" in clause 79(2) should therefore be amended to read "having notified" (as it did in the previous draft of the Bill).

3. Port regulations (clause 81)

1. It is vital that the NPA's liability is limited in relation to the extensive functions that it is required to perform under the Bill. A failure to provide for such a limitation of liability may have drastic consequences for the NPA if action is taken against it in relation to the performance of its functions (for example, vessel traffic services), particularly given the extensive damage that may result from marine accidents within ports. Such a limitation of liability is also consistent with the recommendation of the World Bank quoted at paragraph 42.3.2 above.
2. The precise manner in which the appropriate limitations or exclusions of liability are drafted may be fairly detailed, taking into account, for example, various international conventions relating to the limitation of shipping liability. It would, therefore, be preferable to include the detail of such limitations or exclusions in the regulations contemplated in clause 59 of the Bill.
3. Accordingly, the NPA suggests that the following paragraph be inserted in clause 81(1) or 81(2) of the Bill:

"the imposition of exclusions and limitations on the liability of the Authority, its employees and agents for loss or damage to any vessel, cargo or other thing on board a vessel".

4. In addition, for the sake of clarity, the following paragraph should be included in clause 81(2):

"requiring persons and vehicles entering ports, or parts thereof, to possess permits"

5. The NPA's further comments on this clause are as follows:

1. clause 81(1)(b) should be deleted as the provisions relating to appeals and complaints are set out in Chapter 5, dealing with the powers and functions of the Regulator;
2. we note that clause 81(1)(i) overlaps with clause 30(3)(d). One of these provisions should, therefore, be deleted; and
3. the reference to the "Railway Safety Regulator Act, 2002 (Act No. 16 of 2002)" in clause 81(2)(m) is not understood. It appears that this reference should perhaps have been included in paragraph (n).

4. Port Consultative Committee (clause 82)

In light of the fact that clause 83 envisages the establishment of the NPCC, and for the reasons discussed above at paragraph 40.2, it is submitted that clause 82(3)(b) should be deleted. This paragraph should rather be included in clause 83(2) of the Bill.

5. National Port Consultative Committee (clause 83)

The references to "relevant National Government Departments" in sub-clause (1)(b) and "Department" in sub-clause (3) should be clarified.

6. Offences (clause 86)

1. The phrase "safety of navigation or property in a port" in clause 86(1), should read "safety of navigation, persons or property in a port".
2. The reference to "section 59(1)" in clause 86(1)(d) should read "sections 57(1) or 66(1)".
3. The reference to "section 48 or 65(1)" in paragraph (e) should read "sections 48 or 63(1)".
4. The reference to "section 65(2)" in paragraph (f) should read "section 63(2)".
5. The reference to "section 75(3)" in paragraph (g), should read "section 74(3)".

 

 

6. In light of the highly sensitive and confidential information that the Regulator may, at times, deal with, the Bill should contain a provision protecting the confidentiality of such information, along the lines of section 69 of the Competition Act. This provision should provide as follows:

1. Amendment of laws (clause 88)

The Institution of Legal Proceedings Against Certain Organs of State Act, 2002 should not only apply to the Final Authority, but also to the Initial and Interim Authorities. The reference to paragraph (f) in clause 87(1) should therefore read:

"the National Ports Authority contemplated in section 4 of the National Ports Authority Act, 2003 and any entity deemed to be the National Ports Authority under section 3 of that Act".

2. Conclusion

1. We trust that the comments set out in this document will assist the Portfolio Committee in analysing the current draft of the Bill and in the further drafting process.

 

 

2. In light of the large number of issues raised in these comments and the complexity of some of these issues, the NPA requests the opportunity to make further oral submissions on the Bill to the Portfolio Committee.

Kind regards