TNPA Corporatisation impact on tariffs uncertain

A shift to corporate tax status could still move the needle on port charges, whenever it eventually happens

SOUTH AFRICA: The implications of corporatisation on port users were explored during the recent Port Tariff Roadshow hosted by the Ports Regulator of South Africa (PRSA).

Speaking during the roadshow this week, Sarah Truen, the Regulator's Executive Manager for Policy, Strategy and Research, confirmed that the corporatisation of Transnet National Ports Authority (TNPA) would force a revision of tariffs already approved, should the corporatisation take place during the course of a tariff year.

“At this point, it's probably a fairly low chance that that incorporation will occur by the 1st of April, 2027, but it's not a zero,” said Truen who explained that corporatisation of the TNPA triggers a significant tax implication.

“The tariff methodology specifically allows the regulator discretion to revise the methodology as needed to address unexpected issues that may be associated with incorporation,” she said.

An incorporated authority that is profitable will be subject to a 27% company tax rate which will feed through to the tariff. Suggesting that this would likely see a need to increase tariffs, Truen noted that a resulting reduction in the cost of capital could help to offset this amount to some degree.

Truen explained that Transnet would have to restructure its debt during the corporatisation process and highlighted that changes to the cost of debt would into the cost of capital.

Noting that uncertainties still remain, she acknowledged that the impact of corporatisation could be material for port users, but could not predict with certainty whether tariffs would increase or decrease.

“At the moment, from the information that we have, it might be positive or negative. As details become available, we may need to revise the tariff methodology,” she concluded.