Former trade, industry & competition minister Ebrahim Patel, who has closed the door on returning to government after May’s election, has thrown SA’s ailing port and rail network a lifeline in proposals that would see industry players enter into agreements that are otherwise prohibited under the country’s competition regime.
Patel, in a Government Gazette dated June 18, a day before his term of office officially ended, outlined exemptions that the department has put forward to help reduce costs, among other considerations.
The draft regulations will exempt certain categories of agreements from the application of sections 4 and 5 of the Competition Act to enable collaboration between firms that would otherwise contravene the act.
Some of the practices section 4 prohibits include competing firms colluding to fix a purchasing or selling price or other trading condition. That section also prohibits competing entities from collusive tendering, and dividing markets by allocating customers, suppliers, territories or specific types of goods and services.
Section 5 prohibits agreements between parties in a vertical relationship that may have the effect of substantially preventing or lessening competition in a market.
The gazette says the sole purpose of the exemptions is to reduce costs and minimise losses caused by “operational inefficiencies and infrastructure shortages”.
The department also said the exemptions would help in resolving the country’s rail and port challenges.
The department said entities that participate in agreements falling within the scope of the regulations must alert the Competition Commission and it within seven days of having come to an agreement.
“Firms who participate in any agreements or practices falling within the scope of these exemptions must keep accurate written records of meetings held, correspondence related to the exempted agreements and practices, exchanges of competitively sensitive information strictly necessary for the purposes of the conclusion and implementation of the agreements or practices ... entered into in terms of these regulations,” the gazette says.
“The commission may, at any time, request the record of the minutes of the meetings held, correspondence related to the exempted agreements and practices, exchanges of competitively sensitive information from the conclusion and implementation of the agreements and practices.”
Some of the exempted co-ordination at the ports includes:
- Co-ordinating in accepting new cargo and diverting cargo between ports;
- Co-ordinating in the maintenance, upgrades and management of port facilities; and
- Working together on night runs to ease congestion during peak hours.
When it comes to rail, the exemptions open the door to collaborations in sharing capacity on locomotives and partnering in the repair and maintenance of the rail line.
The department warned that the proposed exemptions do not entail fixing selling prices, resale price maintenance and collusive tendering.
The public has until July 4 to give input, with the unusually short commentary period indicating the exemption’s imminent implementation.
“Transnet is currently reviewing the Government Gazette on the invitation for public comments on the Draft Block Exemption for Ports and Rail, and will be making its inputs accordingly,” said the company, which is responsible for the country’s rail network and ports.
The poor performance of SA’s ports and rail network has been a drag on economic growth, hurting the mining sector the most. Congestion at the ports has given SA a bad reputation across the globe, with the ports ranked as some of the worst in the world.
The country’s largest iron ore producer, Kumba, has had to refine its production strategy as Transnet falters, opting for producing higher-quality iron ore that fetches premium prices rather than attempting to match previous years’ volumes of lower-grade material.
The mining industry has lowered its production outlook for the next three years to between 35-million tonnes and 37-million tonnes (Mt), down from 37Mt-38Mt it had previously planned for 2024 and 39Mt-41Mt in 2025.
The coal industry has stepped in to provide financial assistance to cash-strapped Transnet to procure locomotive spare parts. The lack of parts has hamstrung the performance of the rail, ports and pipelines operator over the past few years, costing the economy billions of rand and thousands of jobs.
Since 2019, Transnet has been struggling to get a service provider that can assist in supplying spare parts for some of the trains it bought in a controversial deal for 1,064 locomotives. It has about 200 locomotives that remain idle and cannot be returned to the railway lines as the China Railway Rolling Stock Corporation refuses to provide it with spare parts.
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