Johannesburg: Transnet has defended its 18.06 percent proposed port tariff increase, which is three times the current inflation rate of 6 percent, saying yesterday that it was necessary to keep the company’s borrowing tight. The increase, which was applied for in July, has yet to be approved by the ports regulator, which in September concluded public hearings near all its ports around the country.
The logistics utility held discussions yesterday in Port Elizabeth with automotive sector customers, where it pronounced a plan to work with customers to find a tariff structure that would yield a mutual benefit for all parties. The group insisted that it did not want to endanger its balance sheet.
The automotive industry has continuously criticised Transnet for “uncompetitive” tariffs and some companies have threatened to take their export business to Mozambique’s Maputo port.
Transnet chief executive Brian Molefe said it made sense for Transnet to fund its capital expenditure from fees rather than relying on borrowing. However, Molefe assured customers that the company’s profit would be reinvested into the infrastructure to facilitate the movement of products.
“There is a zero dividend policy at Transnet. All the profit we make goes back to funding the infrastructure. If we have to borrow the entire capex, we would be running an unsustainable business.”
Molefe said Transnet would only borrow R33 billion of the R110bn it needed for its five-year investment plan, the rest would come from tariffs.
He said the utility was very aware that the National Association of Automobile Manufacturers of SA (Naamsa) was uncomfortable with its cargo dues, but he asked: “Where else would (Transnet) get the revenue required?”
He said the stakeholder engagements were aimed at finding a compromise on the matter and would hopefully a yield mutual understanding.
The Minister of Public Enterprises, Malusi Gigaba, said Transnet and his department understood that the sector had special needs and they also understood the negative impact of “seemingly” higher charges at South African ports.
For this reason Transnet and the department wanted to arrive at an agreement with port users that everybody would “have to contribute and take the pain of expanding infrastructure”.
“In South Africa the main challenge is that there is no other source of funding infrastructure development. We receive no subsidy from the fiscus and somebody has to pay for the investment we are making.”
Transnet said apart from the R110bn capex plan, it was keen on expanding its car terminals in Durban, East London and Port Elizabeth in the medium to long term.
Karl Socikwa, the chief executive of Transnet Port Terminals, said although there was still enough capacity at these terminals, they would have to expand to cater for the car manufacturers’ future plans.
“They’ve given us a magic figure of 1 million new car sales a year. So we are investing to make sure we can cater for that capacity. Our level of investment tracks the level of activity in each of the ports.”
The three car terminals handle close to 400 000 cars a year, and Port Elizabeth and Durban are operating at 85 percent of capacity.
The Durban terminal, which is the largest, has recently been expanded to 14 000 bays and Socikwa said vessels had been berthing smoothly on arrival.
Socikwa said the Port Elizabeth terminal, which is primarily used by Volkswagen and General Motors, reached record volumes in 2010. This terminal handles 150 000 cars a year, both exports and imports.
Socikwa said Mercedes Benz, which is primarily served by the East London terminal as it is located next to the manufacturing plant, had approached Transnet about other manufacturers using the terminal and occupying the capacity the company did not use.
He said Transnet was also in discussions with Grindrod, which has an agreement with the Maputo government to use that country’s car terminal, to collaborate in supporting expansion of the car terminals so that local car manufacturers would have four terminals.