1. IPAP – 2012/8
-AAA
Transnet National Ports Authority Authority’s administered tariffs - Manufacturing Sector Trade and Industry Portfolio Committee 2nd Nov 2012 1

2. Contents IPAP – 2012/8 Strategic Focus – aligned to MDS Core Functions
Port Investment Planning
Transnet MDS Capital Program
Administered Pricing
Volume & Tariff Statistics
Tariff application
Pricing strategy
Proposed tariffs
Beneficiation Promotion Program (BPP)
Discount level for BPP
Way forward
Opportunities and Challenges 2 2 2 2 2

3. TNPA Strategic Focus – aligned to Transnet MDS
IPAP – 2012/8
TNPA Strategic Focus – aligned to Transnet MDS
Strategic Intent
“To enable the effective, efficient & economic functioning of an integrated port system to promote economic growth”
Driven by a 3-tier strategy and 6 goals
Capital Delivery + Service Levels +Integration = Increased Volumes, Revenue and contain Costs
Improve Port efficiencies
Efficient port system
Economic port system
NPA 3-tier strategy
NPA Strategic Objectives
Enhance the ports’ position as integrated gateways for trade
Integrated port system
Grow the market
Create & manage Infrastructure capacity ahead of demand
1. Effective port system
2. Economic port system
6. Organizational capacity / readiness
Create & manage Infrastructure capacity ahead of demand
Effective port system
Economic port system
Aligned to Transnet MDS strategy
Improve Port efficiencies (oversight role)
3. Efficient port system
2. Economic port system
Enhance the ports’ position as integrated gateways for trade
4. Integrated port system.
5. Grow the market 3 3 3 3 3

4. Core Functions (National Ports Act, Section 11)
IPAP – 2012/8
Core Functions (National Ports Act, Section 11)
Function
Detail
Landlord
Promote the use, improvement and development of ports land and has the power to lease port land.
Master planner
Plan, improve, develop and maintain port infrastructure.
Controller of ports navigation
Application of rules to control navigation within port limits.
Ensures protection of the environment, safety and security within port limits.
Controller of ports services and facilities
Ensure the provision of port services and facilities.
Marketer and administrator
Ensure that adequate, affordable, equitable and efficient port services and facilities are provided for port users.
Change agent
Ensure non-discriminatory, fair, transparent access to port services and facilities; advancement of previously disadvantaged people;
Promotion of representation and participation in terminal operations.
Enhanced transparency in port management
Co-ordinator with other State Agencies
Advise on all matters relating to the port sector, and liaise with all stakeholders. 4 4 4 4 4

5. Port Investment Planning
IPAP – 2012/8
Port Investment Planning
The main function of the Authority is to own, manage, control and administer ports to ensure their efficient and economic functioning, and in doing so the Authority must ―
plan, provide, maintain and improve port infrastructure;
prepare and periodically update a port development framework plan for each port, which must reflect the Authority’s policy for port development and land use within such port;
control land use within ports, and has the power to lease land under such conditions as the Authority may determine;
provide or arrange for road and rail access within ports;
arrange for such services such as water, light, power and sewerage and telecommunications within ports;
maintain the sustainability of the ports and their surroundings;’ 5 5 5 5 5

6. TNPA MDS Capital Program
IPAP – 2012/8
TNPA MDS Capital Program
9,038
1,750
2,376
5,326
5,434
6,392
8,134
10,167
Expansion vs. replacement (Rbn)
7.9
7.7
6.3
4.2
2.8
2.5
3.3
2.1
2.2
1.9
2.3
1.0
0.7
0.8
1.5
1.3
expansion
replacement
1212
1313
1414
1515
1616
1717
1818
1919
10,167
Province (Rbn)
Durban
9,038
R Bay
Western Cape
8,134
Eastern Cape
Other (LNS, DRS and HQ)
7-year total
TNPA
R 46.9 Bn
6,392
5,326
5,434
1,750
2,376
133
2,657
3,018
992
1,325
1,509
1,508
406
436
258
503 85
423
251 26 51 44
11/12
12/13 Bgt
13/14
14/15
15/16
16/17
17/18
18/19 6 6 6 6 6

7. In terms of National Ports Act, 2005 the TNPA is required:
IPAP – 2012/8
Administered Pricing
In terms of National Ports Act, 2005 the TNPA is required:
with the approval of the Ports Regulator to determine tariffs for services and facilities offered
annually publish a tariff book containing those tariffs
The Port Directives require the Ports Regulator to ensure that the TNPA’s tariffs allows it to:
recover its investment;
recover its costs;
make a profit commensurate with the risk. 7 7 7 7 7

8. Administered Pricing (Contd.)
IPAP – 2012/8
Administered Pricing (Contd.)
CPI vs. Tariff increase
104
Index CPI
111
112
106
Other tariffs
109
104
Automotive exports
R1bn
Discount
Programme
Container exports (6m)
Container exports (12m)
4.42%
4.49%
2.76%
April ’09
April ’10
April ’11
April ’12
Capital Expenditure
Terminal Capacity
Below CPI Tariff Adjustments are not sustainable for TNPA in relation to Investment drive 8 8 8 8 8

9. Volume and Tariff Statistics – Manufacturing Sector
IPAP – 2012/8
Volume and Tariff Statistics – Manufacturing Sector
 Commodity
CAGR FY 09/10-FY 12/13
Volume Growth
Tariff increase
Tariff increase after rebate
6m / 12m
Tariff increase after rebate Auto
Real Term Tariff Increase m / 12m
Real Term Tariff Auto
Container Full Imports (%) +9 +4 -  -
-4 / -4 - 
Container Full Exports (%)
-29 / -44
-70 / -85
Automotive Exports (%)
+14
-15
-48
Average Tariff increases under Regulation below inflation
In Real terms, tariff reductions for the manufacturing industry despite increased capacity provision
FY 2012/13 – once off R1bn export discount program
Manufacturing Sector 9 9 9 9 9

10. Tariff Application FY 13/14
IPAP – 2012/8
Tariff Application FY 13/14
TNPA Capex Programme
Tariff Application FY 13/14 – 5.4% with future smoothed increase of CPI + 3%
Tariff request considered reasonable given Capex Program
Revenue certainty will increase investor confidence and tariff stability
Creates environment for longer term planning in the manufacturing industry and wider economy
Tariff Adjustment – capped and smoothed CPI forecast

11. TNPA has been criticised over its tariff structure
IPAP – 2012/8
Pricing Strategy
TNPA has been criticised over its tariff structure
Key issues
Consequences
Lack of a clear set of principles and rules to be applied for individual tariffs
Lack of clarity and transparency regarding all operating costs, expenses and revenues
Lack of explanation for differential tariffs for different commodities using the same handling classification;
Lack of information detail with respect to services or facilities pricing and cost relationships
Lack of focus on promoting access to ports and efficient and effective management and operation of ports.
Very high tariff levels for cargo dues
Very high differentials in the levels of cargo dues
Relatively low tariff levels for maritime services,
Very low levels of revenue from the real estate business 11 11 11 11 11

12. Pricing Strategy (Contd.)
IPAP – 2012/8
Pricing Strategy (Contd.)
The Authority has recently finalised its Pricing Strategy.
Addresses shortcomings of the current tariff practises and complies with Port Directives.
Per the proposed tariff structure:
Terminal operators will pay higher rentals
cargo owners will pay lower cargo dues
Export tariffs lower than Import Tariffs
shipping lines will pay slightly higher tariffs
In addition the Pricing Strategy indicated:
import and export container and automotive cargo dues tariffs need to reduce
Cargo dues for bulk and break bulk commodities including coal and iron ore need to increase 12 12 12 12 12

13. Pricing Strategy Tariff Application FY 13/14 - Proposed tariffs
IPAP – 2012/8
Pricing Strategy Tariff Application FY 13/14 - Proposed tariffs
-43.2%
Description  
Tariff book tariff
12/13
R1bn Export Discount Programme
12/13 after discount
Proposed Tariff
13/14
Dev.
Tariff Book 12/13 vs Proposed tariff 13/14
Dev %
Container Full export:
6m/20' containers R
1 082
740
342
614
-43.2%
12m/40', 13m/45' containers R
2 163
1 820
343
1 228
Container Full import:
2 178 -
1 866
-14.3%
4 355
3 731
Automotive export:
Motor vehicle own wheels average tariff
430.00
200.00
230.00
315.12
-26.7%
-26.7%

14. National priorities with key policies
IPAP – 2012/8
Pricing Strategy – Consideration Beneficiation Promotion Programme (BPP) aligned with national priorities
National priorities with key policies 14 14 14 14 14

15. IPAP – 2012/8
BPP – Discount levels for export cargo derived from labour intensity and value add to economy
Steel sector value add and employment levels by beneficiation stage
Steel sector value add and employment levels by beneficiation stage
Discount level rationale
Discount level rationale
Beneficiation
Selling price/
Employment per
stage
ton steel (US$)
100 tons of steel •
no discount as no beneficiation
Iron ore 30
0.1 1 •
low discount as low
Iron
120
0.6
incremental value add 2
and job creation
Hot rolled
300
1.1
steel •
high increase in
discount level as
Cold rolled
500
1.6 Ø
stage 3 necessary 3
steel
precursor to stage 4 Ø
currently low level of
Pipe and
stage 3
ben'n
in SA
650
7.0
tube
Structural
1,000
75.0
steel •
high discount as high
potential for significant
White goods
5,000
100.0 4
increase in
incremental
value add and job
creation to SA economy
Mining
13,000
150.0
equipment 15
Source: Department of Trade and Industry : Metals Sector Strategy 15 15 15 15

16. Pricing Strategy Way forward
IPAP – 2012/8
Pricing Strategy Way forward
Pricing Strategy Engagement with:
Ports Regulator
Government Departments
Other Stakeholders
Discussion with DTI re beneficiation levels for various sector industries ie Textiles, Agriculture, Food, Furniture, Leather, etc.
Transnet Board Approval
Support from DTI for the TNPA’s Pricing Strategy inclusive of the BPP

17. Opportunities and Challenges
IPAP – 2012/8
Opportunities and Challenges
Opportunities
Transnet MDS to provide infrastructure ahead of demand
Pricing Strategy aligned to reducing costs for the manufacturing sector
Stimulating economic growth
Challenges
Regulatory Certainty
Tariff level to support MDS Capex Program
Implementation of Pricing Strategy particularly BPP

18. IPAP – 2012/8
Questions

19. IPAP – 2012/8
APPENDIX

20. Tariffs : Containers Imports
IPAP – 2012/8
Tariffs : Containers Imports
Tariffs : Containers Imports
April ’09
Real Term Tariffs
April’09
April ’10
April ’12
April ’11
-4%
Rand
Rand
+4%
April ’12
5,000
4,000
-4%
4,000
+4%
3,000
3,000
2,000
2,000
1,000
1,000
Full 6m
12m
Full 6m
Full
12m
Full
Volumes : Containers Imports
Teu’s
+9%
1,400,000
1,200,000
09/10
1,000,000
10/11
800,000
11/12
600,000
12/13 Le
400,000
200,000
Teu Imports
Full 20 20 20 20 20

21. Tariffs : Containers Exports
IPAP – 2012/8
Tariffs : Containers Exports
April’09
April ’09
April ’12
Tariffs : Containers Exports
Real Term Tariffs
April ’10
April ’12 Rebate
April ’11
April ’12
Rand
Rand
-4%
-85%
+4%
April ’12 Rebate
2,500
2,000
2,000
-4%
-70%
+4%
1,500
1,500
1,000
1,000
500
500
Full
Full 6m
12m
Full
Full 6m
12m
Full
Volumes : Container Exports
Teu’s
April- Sept 2011
Containers
-1%
April- Sept 2012
+4%
250,000
09/10
+9%
+7%
200,000
10/11
800,000
11/12
150,000
600,000
+42%
12/13 Le
100,000
400,000
50,000
200,000
6m Full
12m Full
6m MT
12m MT
Teu Exports
Full 21 21 21 21 21

22. Tariffs : Automotives Exports
IPAP – 2012/8
Tariffs : Automotives Exports
April’09
April ’12
Tariffs : Automotive Exports
April ’09
April ’12 Rebate
April ’10
Real Term Tariffs
April ’11
Rand
April ’12
Rand
-13%
-48%
April ’12 Rebate 0%
600
500
500
400
400
300
300
200
200
100
100
Average Revenue
Average Revenue per unit
Volumes : Automotive Exports
April- Sept 2011
April- Sept 2012
Units
Units
+3%
+14%
300,000
140,000
134,605
138,522
250,000
09/10
120,000
200,000
10/11
100,000
150,000
11/12
80,000
60,000
100,000
12/13 Le
40,000
50,000
20,000
Exports
Exports 22 22 22 22 22