Port tariff hikes will hurt exports, job growth

Transnet is forging ahead with its decision to implement an 18,06% port tariff increase for the 2012/13 financial year. It has defended the proposed stiff hike, saying it’s necessary to tackle an infrastructure backlog in rail, ports and pipelines.

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The increase will, however, have serious repercussions for farmers and comes on the back of soaring electricity and fuel prices. SA’s ports, and especially the container terminals, are already among the most expensive in the world despite their poor productivity record.

A study by Mihalis Chasomeris, of the University of KwaZulu-Natal’s Graduate School of Business, highlights Durban as the most expensive out of a pool of 12 global ports. According to the study, total marine and infrastructure costs for a single container vessel in April 2010 were about three times higher than Rotterdam, four times higher than New York and more than five times higher than Antwerp.

The Cape Chamber of Commerce is vigorously opposing the hike. Chamber president Michael Bagraim said while many countries had frozen port tariffs due to the current difficult economic climate, South Africa is bucking the trend. Transnet is using its ports monopoly as a “cash cow” to “cross-subsidise” its other, inefficient operations, he said. Aggressive and unjustified pricing by state monopolies must be exposed because this undermines the competitiveness of our export industries, he added.

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“Port charges affect the price of every box of fruit or wine we export and we have to compete with other countries that aren’t using their ports as cash cows.” While Transnet hasn’t yet indicated an implementation date for the hike, Bagraim said it could be the middle of this year. The hike is pending a decision by the Port Regulater as to how big an increase Transnet will be allowed.

“Tariff increases are normal in a free market and are usually reflective of the competitive environment and inflation,” said fruit exporter Capespan’s Angelo Petersen. As Transnet has no competition, this is not the case, he added.

The inefficiency of SA’s harbours is well known and one would do well to remember National Planning Commission Minister Trevor Manuel’s words about Transnet – that its poor state is due to a lack of competition, suggested Peterson. “So if this increase implies we cannot compete on price – we will lose the sale,” he added.

The tariff will add costs directly to the growers’ supply chain. And this will impact negatively on their ability to compete in a depressed and highly competitive world, as well as to keep their farming business afloat and continue providing jobs. The tariff hike comes on top of a relatively strong rand, which has meant lower foreign earnings for agricultural exporters.

Business Cost
Purchasing power is relatively low, especially for high value goods, and world agricultural trade is expected to be poor in 2012, said Lindie Stroebel, economist at the Agricultural Business Chamber. “The cost of doing business in SA is currently the most significant challenge and reflects directly on the bottom line of business and at national level.”

Administered prices and the cost of using national infrastructure, such as toll fees and port tariffs, are simply too high, she continued. “The economy is in dire need of infrastructure development. However, if the cost of using it is too high, the longer term effect is destructive.”