Western Cape Business News

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SHIPPING: The High Costs Of Our Ports


Recent Western Cape Business News

SOUTH AFRICAN ports have an international reputation for “high costs and low performance” and it is time something was done to change this, says the Cape Chamber of Commerce.

According to a study by Mihalis Chasomeris for the National Ports Regulator, port tariffs for container vessels in Durban are twice as high as an average for 12 international ports, but Gordon Metter, deputy president of the chamber, says the situation is actually worse than that.

If you look at the graph in Chasomeris’s report you will see that our port charges are about six times as high as those for Antwerp, five times as high as New York tariffs and four times as high as Rotterdam. These are all ports in the developed world where labour costs are high, but they do reflect the real costs of docking ships and handling containers.”

He pointed out that port tariffs were often used to make imports more expensive in a bid to get round international trade regulations which limit import taxes. “South Africa used this device when the old government was trying to promote import substitution. Instead of taxing the imports they simply increased port tariffs for cargo being unloaded in our harbours.”

In the US, for instance, port tariffs in the west coast ports of Los Angeles and Long Beach were between three and four times as high as those for New York. “This puzzled us until we realised that all the US imports from China, Korea, Japan and other Asian countries were being landed at these ports. Instead of an import tax, the port tariffs were bulked up to give some protection to local industry.”

The New Jersey ports on the east coast handled cargo from Europe which had similar manufacturing costs so no non-tariff barrier was necessary.

Metter said this meant that port tariffs in Los Angeles and Long Beach, the only ones where tariffs were comparable to those for Durban, were inflated and did not represent the true costs of handling imported containers. “If you take Los Angeles and Long Beach out of the graph then our port tariffs are three times as high as the average for international ports and that is a shocking situation.”

From this it was quite clear that either South African port tariffs were loaded with hidden taxes or the port operations were amazingly inefficient.

In either case it is clear that the time has come for a radical review of port costs and operations,” Metter said. “We need to strip out the extraneous costs and determine the real costs of port operations. If there is a case to load the tariffs for strategic reasons it must be justified in a transparent process. If revenue is being used to subsidise other services we want to know the details.”

A further concern was the way in which the ports included an amount for a ‘return on capital’ in their accounts. This would be in order for a private-sector business built with borrowed capital, but in the case of the ports, the infrastructure was paid for by the taxpayer and there could be no justification for a ‘return on capital’ on investments by previous generations of tax payers.

Metter said port costs were a vital factor in the economy because there was no way of avoiding them.

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