Date: 16/09/2004
Source: Department of Public Enterprises
Title: E Mokeyane: National Ports Authority Customer Forum
STATEMENT BY DR M EUGENE MOKEYANE, DIRECTOR-GENERAL, DEPARTMENT OF PUBLIC ENTERPRISES, THE NATIONAL PORTS AUTHORITY CUSTOMER FORUM, Durban, 16 September 2004
Director Programs
CEOs
Officials from National and Provincial Government Departments
Customers of NPA
Members of the freight community
Distinguished Guests
Members of the Media
Ladies and Gentlemen.
Today we gather here to interact with one of the critical stakeholders in the business operation of the National Ports Authority. Without these stakeholders there is no NPA, Transnet or State Owned Enterprise (SOE). Without these customers there is no movement of goods, employment, growth in the economy, trade and prosperity.
Through our policy on restructuring of SOEs, we emphasise the need to make our SOEs efficient and competitive in the global environment. We also emphasise the need to work with the private sector to allocate the risks appropriately and invest together in our infrastructure to achieve the long-term gains. Critical to this is our unfolding logistics strategy and the need to reduce the cost of doing business in this country. It should be borne in mind that our export markets are geographically located far from our shores and therefore as a cost component, transport becomes an important area of focus for competitiveness of our exports.
NPA as per the Transport Policy document, "Moving SA" plays a special and important role in our economic infrastructure. The NPA, as a landlord, owns the infrastructure in all our ports, thus instrumental in solving our woes and the current congestions at our ports.
However, one needs to emphasise that this cannot be delivered by NPA in isolation of its sister companies in the Transnet stable such as Spoornet and SAPO. From inland, where our exports are manufactured, to the ports Spoornet plays a very critical role by providing rail services, and at the ports, SAPO as a ports operator plays also a critical role.
According to Wessel Pienaar - In South Africa the equal cost distance for carriage of standard intermodal containers by rail is approximately 520km. Therefore it should be economically efficient to use rail as a mode for any haulage above 520km. The selection of road transport even above 520km is as a result of service effectiveness offered by road freight carriers adding more value than the cost premium paid for utilising road transport. In short, road freight carries give a logistics solution rather than a transportation service.
Ms Mokgatle has since her appointment at Spoornet consistently stressed the need for this kind of approach at Spoornet and that the synergies with other companies within the Transnet group should be explored and harnessed.
Having stated the above, it is therefore crucial that NPA, SAPO and Spoornet explore opportunities to offer logistic solutions to their clientele. The White Paper on National Transport Policy in 1996 provided only a few, but profound policy guidelines with regard to Ports in South Africa. Notwithstanding these policy statements regarding ports, a number of other developments, locally and internationally, led to the need to review and reformulate the notion of port reform in South Africa.
Our Transport policy should be informed by the demands of the economy and in this regard there is a need to find policy options that would create an integrated platform from where our goods can be moved efficiently. This would require massive investments in our transport infrastructure. In his 2004 budget vote speech, DPE Minister Alec Erwin articulated the commitment of Government to bringing in private sector participation within the scope of SOEs operating agenda. This should be in various areas, planning, operations and financing.
We are entering a phase where SOE have to work with the private sector to operate and finance components of the overall infrastructure systems we seek to build. However, it will be a futile exercise if our SOEs were to embark on this programme without involving their clientele in the planning process. For us to be able to move in the right direction we must understand the needs of our clients and therefore of the overall economy.
As we bring in the private sector we need to briefly look at the question of competition within a regulated system. Clearly some degree of competitive pressure is useful as it provides an inducement toward efficiency and acts as a check on rent seeking behaviour. Private sector partnerships within the SOEs, and in ports, particularly, are being sought to finance infrastructure and improve efficiency in operations. Government can't finance the high levels of requisite infrastructure investment from public funds, nor can Government provide guarantees to financiers or private sector operators on behalf of SOEs. Private sector financing may have to take various forms such as Public Private Partnerships (PPP), joint ventures, concessions and debt. The SOEs therefore require more effective corporate structures to enter the capital markets and attract private sector partnerships to meet their financing needs.
Although, as indicated, a number of crucial decisions with respect to the port restructuring have as yet to be taken or to be announced, it is possible to present at this point some of the key underlying principles for the new ports structure incorporating private sector. As this structure is, however, still evolving caution is required when projecting its potential consequences.
Nevertheless, it is helpful to have an initial sketch of the planned structure because this will assist in the definition of a proposed action programme aimed at effectively approving and implementing the restructuring plans. The key guiding principles are:
* A National Port Authority will be established as stated in the Draft NPA Bill;
* The NPA will be the landlord of the South African ports and will own all the land and the port infrastructures within the port estates;
* The facilities or services licensed to the private sector will be managed and operated on a common user, non-discriminatory basis;
* The licensing will be for well-defined and ring-fenced facilities or services, or for sets of facilities or services to ensure their operational efficiency and financial viability. This will avoid that in the end the Port system remains burdened with operationally unworkable and financially non-viable facilities or services and becomes a permanent loss-making entity. The licensing process will be transparent and where appropriate open to competitive international bidding;
* The bidding process will be transparent and based on a set of clearly stated objectives/targets, criteria and measurable deliverables;
* The bidding process will first consider and evaluate the technical content of proposals and only subsequently the financial proposal;
* Land ownership will remain with the Government of South Africa but vested in the NPA;
* An independent regulator will exert any or all of the following types of oversight: economic, technical, environmental, social and or administrative. The level of this oversight still needs to be defined.
Government is attending to these issues to stimulate the port restructuring and tariff revision process. Furthermore, there is an urgent need to design a proper regulatory system. This should be a system that properly regulates the various possible areas singled out for regulation by the Government. At the same time it should not unnecessarily burden port development, management or operations. In short, the regulatory system should keep the ports cost-effective, responsive to changing demand and still provide for the necessary regulatory powers.
At present many entities in South Africa have expressed an interest in becoming or remaining directly involved in the management of the ports. Their reasons are varied and sometimes obscure or unrelated to the country's economic development interests. However, it can be expected that the proposed restructuring model for the South African ports will be put in question as long as it is not possible to quantitatively justify the choices made. Therefore, to avoid interminable polemics, the expected effects of alternative policy and strategy scenarios should be quantified in socio-economic terms.
Because of the establishment of the National Port Authority and urgent need to develop both a traditional and a strategic port master plan, starting bottom-up from the long-term development plans of the individual ports. These then need to be co-ordinated and combined into a coherent national master plan by the NPA taking into account policy and strategy decisions by the Government with respect to the overall economic development plans for South Africa. I expect that NPA will speak to some of these issues later on.
In conclusion, ladies and gentleman, it is known that Transnet's financial results for the year-end 2004 were not satisfactory. Under these circumstances, there is a need to find other mechanisms to finance the requisite infrastructure investments. Without these investments in new capacity, there will be increased bottlenecks and delays at port.
Thank you.
For more information, please contact: Andrew Aphane
Chief Director: Communications and External Liaison
Cell: 082 387 5615
Issued by: Department of Public Enterprises
16 September 2004
Source: Department of Public Enterprises
Title: E Mokeyane: National Ports Authority Customer Forum
STATEMENT BY DR M EUGENE MOKEYANE, DIRECTOR-GENERAL, DEPARTMENT OF PUBLIC ENTERPRISES, THE NATIONAL PORTS AUTHORITY CUSTOMER FORUM, Durban, 16 September 2004
Director Programs
CEOs
Officials from National and Provincial Government Departments
Customers of NPA
Members of the freight community
Distinguished Guests
Members of the Media
Ladies and Gentlemen.
Today we gather here to interact with one of the critical stakeholders in the business operation of the National Ports Authority. Without these stakeholders there is no NPA, Transnet or State Owned Enterprise (SOE). Without these customers there is no movement of goods, employment, growth in the economy, trade and prosperity.
Through our policy on restructuring of SOEs, we emphasise the need to make our SOEs efficient and competitive in the global environment. We also emphasise the need to work with the private sector to allocate the risks appropriately and invest together in our infrastructure to achieve the long-term gains. Critical to this is our unfolding logistics strategy and the need to reduce the cost of doing business in this country. It should be borne in mind that our export markets are geographically located far from our shores and therefore as a cost component, transport becomes an important area of focus for competitiveness of our exports.
NPA as per the Transport Policy document, "Moving SA" plays a special and important role in our economic infrastructure. The NPA, as a landlord, owns the infrastructure in all our ports, thus instrumental in solving our woes and the current congestions at our ports.
However, one needs to emphasise that this cannot be delivered by NPA in isolation of its sister companies in the Transnet stable such as Spoornet and SAPO. From inland, where our exports are manufactured, to the ports Spoornet plays a very critical role by providing rail services, and at the ports, SAPO as a ports operator plays also a critical role.
According to Wessel Pienaar - In South Africa the equal cost distance for carriage of standard intermodal containers by rail is approximately 520km. Therefore it should be economically efficient to use rail as a mode for any haulage above 520km. The selection of road transport even above 520km is as a result of service effectiveness offered by road freight carriers adding more value than the cost premium paid for utilising road transport. In short, road freight carries give a logistics solution rather than a transportation service.
Ms Mokgatle has since her appointment at Spoornet consistently stressed the need for this kind of approach at Spoornet and that the synergies with other companies within the Transnet group should be explored and harnessed.
Having stated the above, it is therefore crucial that NPA, SAPO and Spoornet explore opportunities to offer logistic solutions to their clientele. The White Paper on National Transport Policy in 1996 provided only a few, but profound policy guidelines with regard to Ports in South Africa. Notwithstanding these policy statements regarding ports, a number of other developments, locally and internationally, led to the need to review and reformulate the notion of port reform in South Africa.
Our Transport policy should be informed by the demands of the economy and in this regard there is a need to find policy options that would create an integrated platform from where our goods can be moved efficiently. This would require massive investments in our transport infrastructure. In his 2004 budget vote speech, DPE Minister Alec Erwin articulated the commitment of Government to bringing in private sector participation within the scope of SOEs operating agenda. This should be in various areas, planning, operations and financing.
We are entering a phase where SOE have to work with the private sector to operate and finance components of the overall infrastructure systems we seek to build. However, it will be a futile exercise if our SOEs were to embark on this programme without involving their clientele in the planning process. For us to be able to move in the right direction we must understand the needs of our clients and therefore of the overall economy.
As we bring in the private sector we need to briefly look at the question of competition within a regulated system. Clearly some degree of competitive pressure is useful as it provides an inducement toward efficiency and acts as a check on rent seeking behaviour. Private sector partnerships within the SOEs, and in ports, particularly, are being sought to finance infrastructure and improve efficiency in operations. Government can't finance the high levels of requisite infrastructure investment from public funds, nor can Government provide guarantees to financiers or private sector operators on behalf of SOEs. Private sector financing may have to take various forms such as Public Private Partnerships (PPP), joint ventures, concessions and debt. The SOEs therefore require more effective corporate structures to enter the capital markets and attract private sector partnerships to meet their financing needs.
Although, as indicated, a number of crucial decisions with respect to the port restructuring have as yet to be taken or to be announced, it is possible to present at this point some of the key underlying principles for the new ports structure incorporating private sector. As this structure is, however, still evolving caution is required when projecting its potential consequences.
Nevertheless, it is helpful to have an initial sketch of the planned structure because this will assist in the definition of a proposed action programme aimed at effectively approving and implementing the restructuring plans. The key guiding principles are:
* A National Port Authority will be established as stated in the Draft NPA Bill;
* The NPA will be the landlord of the South African ports and will own all the land and the port infrastructures within the port estates;
* The facilities or services licensed to the private sector will be managed and operated on a common user, non-discriminatory basis;
* The licensing will be for well-defined and ring-fenced facilities or services, or for sets of facilities or services to ensure their operational efficiency and financial viability. This will avoid that in the end the Port system remains burdened with operationally unworkable and financially non-viable facilities or services and becomes a permanent loss-making entity. The licensing process will be transparent and where appropriate open to competitive international bidding;
* The bidding process will be transparent and based on a set of clearly stated objectives/targets, criteria and measurable deliverables;
* The bidding process will first consider and evaluate the technical content of proposals and only subsequently the financial proposal;
* Land ownership will remain with the Government of South Africa but vested in the NPA;
* An independent regulator will exert any or all of the following types of oversight: economic, technical, environmental, social and or administrative. The level of this oversight still needs to be defined.
Government is attending to these issues to stimulate the port restructuring and tariff revision process. Furthermore, there is an urgent need to design a proper regulatory system. This should be a system that properly regulates the various possible areas singled out for regulation by the Government. At the same time it should not unnecessarily burden port development, management or operations. In short, the regulatory system should keep the ports cost-effective, responsive to changing demand and still provide for the necessary regulatory powers.
At present many entities in South Africa have expressed an interest in becoming or remaining directly involved in the management of the ports. Their reasons are varied and sometimes obscure or unrelated to the country's economic development interests. However, it can be expected that the proposed restructuring model for the South African ports will be put in question as long as it is not possible to quantitatively justify the choices made. Therefore, to avoid interminable polemics, the expected effects of alternative policy and strategy scenarios should be quantified in socio-economic terms.
Because of the establishment of the National Port Authority and urgent need to develop both a traditional and a strategic port master plan, starting bottom-up from the long-term development plans of the individual ports. These then need to be co-ordinated and combined into a coherent national master plan by the NPA taking into account policy and strategy decisions by the Government with respect to the overall economic development plans for South Africa. I expect that NPA will speak to some of these issues later on.
In conclusion, ladies and gentleman, it is known that Transnet's financial results for the year-end 2004 were not satisfactory. Under these circumstances, there is a need to find other mechanisms to finance the requisite infrastructure investments. Without these investments in new capacity, there will be increased bottlenecks and delays at port.
Thank you.
For more information, please contact: Andrew Aphane
Chief Director: Communications and External Liaison
Cell: 082 387 5615
Issued by: Department of Public Enterprises
16 September 2004
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