NATIONAL PORTS AUTHORITY OF SOUTH AFRICA


COMMENTS TO THE PORTFOLIO COMMITTEE ON TRANSPORT ON THE REVISED NATIONAL PORTS AUTHORITY BILL fB5B -2004].

29 October 2004

Dear Mr Cronin


1. Introduction


1.1 The National Department of Transport recently proposed several amendments to the National Ports Authority Bill ("the Bill"), which has been reintroduced into Parliament The NPA and other interested parties have been invited to submit comments to the Portfolio Committee on Transport on the revised Bill.


1.2 The main thrust of the proposed amendments is to strengthen the role of the Ports Regulator ("the Regulator"), The NPA is in agreement that there should be installed a regulatory role. The role should however not be so draconian and cumbersome such as to render the running of the NPA impossible. There is a need to set out clearly the role of the regulator to exercise oversight over the NPA and its relationship with Transnet and its divisions, while at the same time recognising that the NPA is a landlord Port Authority and therefore its role as landlord should not be compromised. The NPA's comments will focus on the issues that would impede the NPA from running its business appropriately and seeks to clarify these issues


1.3 It is important to bear in mind that the primary role of the National Ports Authority ("the Authority"), both at present and under the Bill, is to own, manage, control and administer ports in order to ensure the safe, efficient and effective functioning of ports (see, in particular, clause 11 of the Bill). These functions of the Authority are control functions, which the Authority performs as the landlord port authority (which is a key component of the White Paper on National Commercial Ports Policy, 2002 ("the White Paper"). In creating the Ports Regulator, it is crucial that the powers and functions of the Regulator are clearly defined so as to avoid overlaps and confusion as to the proper roles of the Authority and the Regulator.


1.4 The NPA submits that the conferral of wide powers on a regulator over a landlord port authority is inappropriate and will only serve to increase the costs, and undermine the efficiency, of regulation within ports. The rationale for the establishment of an independent ports regulator as envisaged in the White Paper was solely to ensure that the NPA does not abuse its position, in favouring Transnet over other terminal operators. While the NPA accepts that the Regulator may have a broader role to play in monitoring the Authority's functions, it is important to balance this role against the need to ensure that the Authority's ability effectively and efficiently to manage South Africa's ports is not undermined.


1.5 The NPA thus accepts that the Regulator will be able to hear certain complaints and appeals relating to the actions of the Authority, and that the Regulator has a role to play in relation to the Authority's tariffs (see below). Nevertheless, the NPA submits that it is inappropriate to confer wide powers on the Regulator, On a manner that interferes directly on the day to day running of the NPA.


1.6 We now proceed to comment on specific clauses of the proposed amendments to the Bill.


2. Clause 11(c) - Functions of the Authority


2.1 The proposed amendment suggests that the word "Authority' be replaced with "Regulator" in clause 11(c). This clause would then read as follows:


"...the Authority must.. control land use within ports, and has the power to lease land under such conditions as the Regulator may determine".


2.2 It is fundamental to the proper functioning of the Authority as a landlord port authority that it is able to determine (like any other landlord) the conditions on which land within ports is leased. It is through this mechanism that the Authority is able effectively to control land use within ports, and to manage port operations efficiently.


2.3 The NPA therefore submits that the word "Authority" should not be amended to read "Regulator" in clause 11(c).

3. Clause 30 - Functions of Regulator


3.1 The suggested amendments to clause 30 are of particular concern to the NPA. These amendments confer a number of broad powers on the Regulator without specifying the manner in which those powers must be exercised (e.g. it is suggested that the Regulator should be tasked to "exercise economic, security and environmental regulatory functions" and "promote", "monitor" and "ensure" certain things, without guidance as to the manner in which this will take place). It is of particular concern that the provisions of clause 30 confer broad powers on the Regulator without specifying the manner in which these powers must be exercised.


3.2 The following sub-clauses of clause 30 are particularly problematic:


ub-clause (1)(a) provides that one of the main functions of the Regulator is to "exercise economic, security and environmental regulatory functions in ports". It is unclear what regulatory functions it is envisaged that the Regulator will perform. Such a broadly-phrased function will create considerable confusion between the roles of the Authority and the Regulator. Such confusion could impede the efficient operation of the Authority and thus the effective management of ports;


ii. it is unclear in what manner the Regulator will "monitor the Authority's performance of its functions", as contemplated in sub-clause (1)(c). In addition, the NPA submits that it is inappropriate for the Regulator to oversee all of the Authority's functions;


iii. for the reasons discussed below in paragraph 4, the phrase "consider proposed' in sub-clause (2)(e) should not be amended to read "determine"


iv. it is unclear what is meant by "monitor' in sub-clause (2)(f), and how the Regulator will perform this function;


v. the meaning of the phrase "define the market structure for port operations" in sub-clause (2)(g) is very unclear. In any event, the manner in which ports are structured within South Africa falls within the proper domain of the Authority as the landlord port authority;


vi. sub-clause 2(i) would create considerable confusion between the roles of the Authority and the Regulator. The Authority is charged with controlling and managing "the provision of adequate, affordable and efficient port services and facilities". It is thus inappropriate for the Regulator to broadly "regulate" in this area. In any event, no clarity is given as to the manner in which the Regulator will exercise this regulatory function;


vii. the NPA suggests that the Regulator should be complaint or appeals-driven (as envisaged in the current version of the Bill). Sub-clause(2)(i) should thus not provide that the Regulator can unilaterally investigate matters in the absence of a proper complaint or appeal. In addition, we note that the phrase "on any matter which affects competition and the regulation of ports" is extremely wide. This sub-clause effectively gives the Regulator the power to investigate any matter relating to the regulation of ports;


viii. sub-clause (2)(k) appears to contemplate that the Regulator may review the pricing of all port operators. This is unacceptable and may undermine investment in ports as port operators would not have certainty that prices agreed with their customers (and possibly approved by the Authority) will not subsequently be altered by the Regulator. Such uncertainty may undermine the Authority's ability to attract investment to ports and thus to promote efficient and effective port operations;


ix. sub-clause (2)(m) is unclear. In particular, it is unclear which entities would qualify as "parties" for purposes of this sub-clause. One interpretation is that this sub-clause obliges any parties engaged in a dispute relating to a port service or port facility to refer that dispute to mediation by the Regulator, and that the Regulator may then oblige the parties to go to arbitration. This would be a dramatic infringement of the parties' rights freely to regulate the manner in which disputes between them are settled. Such a provision may also infringe the parties' constitutional right of access to court (section 34). For example if the parties to a dispute had contractually agreed to have a matter resolved by the Magistrates' Court (or even a foreign or international tribunal), it would be unacceptable to oblige those parties to now resolve the matter through mediation and arbitration. The manner in which disputes are settled between parties operating in ports should be left to the normal rules of civil procedure as supplemented by any contracts between the relevant parties;


x. in light of our comments at 3.2.viii above, the NPA submits that sub-clause (3)(h) should be deleted;


xi. the proposed sub-clause (4) is particularly problematic. This provision confers very broad powers on the Regulator to declare a service within a port an "essential service", and then to comprehensively fix the prices that may be charged for the provision of that service. Given the definition in sub-clause (4)(b), the vast majority of services provided in South African ports would amount to "essential services". There is a real risk that this dramatic price-fixing power may undermine investment in ports Las an investor would face the threat that the fees it charges for port services may subsequently be fixed by the Regulator, notwithstanding a pre-existing agreement with the Authority). To the extent that there is a need to ensure that pricing of essential services is not excessive, this concern is adequately dealt with under the Competition Act, 1998, which prohibits, for example, an abuse of a dominant position. The proposed sub-clause (4) should thus not be included in the Bill.


3.3 We reiterate that the NPA's position in relation to the Regulator is that it should be complaints or appeals-driven and should not be empowered broadly to regulate activities relating to ports in an uncircumscribed manner. It is particularly important that the provisions of the Bill relating to appeals and complaints (sections 46 and 47) should identify the persons who may lodge appeals and bring complaints, as well as the subject-matter of appeals and complaints.


4. Clause 72(1) - Authority's tariff book


4.1 In keeping with the notion that the Regulator should not itself regulate the functioning of ports, but should rather ensure that the NPA does not abuse its position, it is submitted that the Regulator should not itself determine port tariffs but approve tariff increases as submitted to it by the NPA. The Regulator's powers should rather be to approve the tariffs determined by the NPA, as envisaged in the current version of clause 72(1).


4.2 In this regard, we note that port pricing cannot be dealt with in isolation, since pricing is a major factor in the implementation of a port's strategic plan. Pricing must be viewed as one element in a much broader port management concept. This concept has three elements. The first is the port's planning and development philosophy and the port's goals or objectives. The second is the port's investment criteria and policies, while the third is the port's pricing policies and techniques. These three elements are closely inter-related. Significant change in any one of these three elements affects the other two directly. This means that a port's pricing approach should be supportive of the port's overall objectives, be consistent with the port's development and planning philosophy, and be a logical extension of the port's investment criteria and policies. The Authority, as the port authority, is best placed to ensure that this objective is achieved. The Portfolio Committee could study for instance the manner and way in which the NER regulates ESKOM's tariffs and possible adopt a similar approach


5 Clause 80 - Port regulations


For the avoidance of doubt, it is suggested that the following paragraphs should be included in section 80(2):

· "the promotion of safety and security in ports";

· "the promotion of efficient and effective port operations".

The NPA also submits that it is more appropriate for the Authority to make rules relating to the control of ports (and particularly access to ports), which authority would be consistent with the Authority's role and obligations under various conventions. If this is accepted, section 80(1 )(a) should be moved to section 80(2).


Thank you for this opportunity to make representations to the Portfolio Committee. We trust in making these comments that it will assist in finalising the provisions of the Bill in a manner which best ensures the safe, efficient and effective operation of South Africa's ports. The NPA would appreciate the opportunity to be represented at the Portfolio Committee meeting scheduled for 3 November 2004 and, if necessary, to discuss any of the comments contained in this document.

Kind regards

SIYABONGA GAMA

CHIEF EXECUTIVE

NATIONAL PORTS AUTHORITY OF SOUTH AFRICA

(a division of TRANSNET LIMITED)