South Africa: New Potential Regulation For South Africa's Transport Sector?

Last Updated: 31 May 2018
Article by Kate Pitman

Most Read Contributor in South Africa, September 2018

On 12 February 2018, the Economic Regulation of Transport Bill, 2018 was published for public comment.  The Bill aims, among other things, to enhance the effectiveness, efficiency and productivity of the transport sector by creating a Transport Economic Regulator (the "Regulator") and a Transport Economic Council (the "Council"), which, in conjunction with the Minister of Transport, will regulate the following parastatals in the transport sector, including:

  • Transnet National Ports Authority;
  • Transnet Port Terminals;
  • Transnet Freight Rail;
  • Airports Company of South Africa;
  • The Air Traffic and Navigation Services Company;
  • The Passenger Rail Agency;
  • The South African National Roads Agency Limited ("SANRAL"); as well as
  • concessionaires of SANRAL, to the extent that the concession agreement provides for such regulation; and
  • any other market, entity, facility or service, irrespective of whether privately or state owned, that has been declared by the minister to be subject to such regulation. The circumstances in which a market, entity or service would be declared by the Minister to be subject to regulation, could include if it is provided by a single operator or is not functioning competitively, and if the minster believes that economic regulation would adequately address the economic consequences resulting from the non-competitive nature of the market. In addition, the minister may make this decision based on an opinion by the Competition Commission or independent expert.

The Bill envisions providing for regulation by way of :

  • price control (by imposing tariffs, limit of revenue, limit on return, or any other appropriate pricing method) with or without conditions such as service standards;
  • the provision of information, forecasts and plans to the Regulator along with accounting and disclosure requirements;
  • appointment of inspectors, the provision of powers of search and seizure and the establishment of various offices and penalties;
  • the hearing of appeals or reviews by the Council brought by the Minister of Transport or a person affected by any decision of the Regulator in respect of a determination of price control, a complaint, or a directed price control reduction; and
  • the hearing of complaints in circumstances where the regulated party:
  • has unreasonably or improperly refused to issue a licence or amended licence to the complainant;
  • has unreasonably or improperly taken a decision that adversely affects the rights of the complainant;
  • has failed to provide access to transport facilities or services in a nondiscriminatory, fair and transparent manner;
  • treats its own operations, or those of its subsidiary, more favourably than, and derives an unfair competitive advantage over, other providers of services;
  • has failed to meet the service standards attached to a price control;
  • has impeded the efficiency of inter-modal transport operations; or
  • has engaged in prohibited conduct.

In addressing complaints, the Regulator may:

  • issue a notice of non-referral if found to be frivolous or vexatious or to have no grounds for a remedy;
  • refer to another regulatory authority with jurisdiction; or
  • direct an inspector to investigate and:
    • refer the matter to the national prosecuting authority if it is considered an offence;
    • propose a draft consent order which, if agreed, may be made an order by the Council and may include a price control reduction and an award of damages;
    • issue a compliance notice setting out the non-compliance, the steps to be taken to comply and any penalty that may be imposed, which may be appealed to the Council; or
    • direct a price control reduction, the financial cost of which is not more than 10% of annual turnover.

Alternatively, the Regulator may refer the complaint to the Transport Economic Council if it does not raise issues of general economic or public policy. The Council will then consider the complaint as an appeal against the decision concerned of the relevant regulated entity and may confirm, vary or set it aside. If set aside, the entity may abandon it or reconsider the matter afresh.

The costs of the Regulator and Council will be met by an annual fee paid for by regulated entities, and will be determined by the Minister of Transport in consultation with the Minister of Finance.

The transport sector has long complained that there is little point in regulating one division of Transnet (SOC) Limited, that is, the Transnet National Ports Authority, while its other divisions remain unregulated. If the Bill is enacted in its current form, it will go some way to addressing this complaint.

Given the substantially increased jurisdiction of the Regulator in comparison to the Ports Regulator (which currently regulates the Transnet National Ports Authority), the capacity of the Regulator should be similarly substantially increased which should lead to more effective regulation.

There will, however, be some concern in the sector regarding the potential declaration of private entities or facilities, services or markets in which they operate, as being subject to regulation in terms of the Bill. However, should normal market principles operate, there should be no need for such concerns.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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