Transnet CEO
Brian Molefe
Cape Town, South Africa — 07 March 2013 – Transnet CEO Brian Molefe says he expects the mining sector to object to plans to hike cargo tariffs on dry bulk by more than two-thirds, and to reduce those on manufactured goods by almost half.

Fin24 reports that Molefe said the proposed tariff restructuring was imperative to encourage beneficiation and bring Transnet’s pricing strategy in line with the government’s economic policy and the National Development Plan. Under the plan, tariffs on manufactured goods will go down by 47% and those on dry bulk will go up by 68%.

“We expect them to complain. They will make those comments to the regulator,” Molefe said on the sidelines of a meeting of Parliament’s portfolio committee on trade and industry.

He claimed that the mining sector had been “hugely subsidised” by a tariff structure weighted in favour of raw exports, at the expense of the manufacturing and agricultural sectors.

Transnet’s tariff application for 2013/14 also proposes imposing a minimum export cargo tariff of R6/t on all dry bulk and break bulk shipments. Transnet National Ports Authority (TNPA) chief executive Tau Morwe said this would double the price of sending iron ore from Sishen to Saldanha.

Molefe said: “We send away our own God-given iron ore and then we have unemployment, but we can’t process anything with our own hands. We have seven trains that are each 4km long running between Sishen and Saldanha carrying iron ore, and then we import steel.”

Ports Regulator of SA CEO Riad Khan said the deadline for comments on the application was May 31, and a decision could be expected “a month or two later.”

Trade and Industry director-general Lionel October welcomed the planned tariff restructuring as “real progress”, and said it was the result of years of talks between the department and Transnet. “Restructuring is necessary because our economy has been subsidising the mining sector regarding below-cost transport.”

DA energy spokesman Lance Greyling questioned the wisdom of escalating costs for an embattled mining sector. “The question is whether the mineral sector can absorb these costs on dry bulk? I don’t know whether anybody has really asked that question. It has shrunk and now we’re putting more pressure on.”

Greyling said he believed the question was whether Transnet needed a profit margin as big as it currently enjoyed. He said the freight group was using the same argument as Eskom for tariff hikes, namely the need to strengthen the balance sheet to keep down the cost of borrowing to fund expansion projects. This, however, had damning consequences for the wider economy.

In September, the freight group posted a mid-year profit of R1.76 billion, a decrease of some 24.5%.

Source: Fin24. For more information, click here.