STRATEGIC PLAN AND ANNUAL PERFORMANCE PLAN

STRATEGIC PLAN AND ANNUAL PERFORMANCE PLAN Portfolio Committee on Transport 14 April 2015

Index • Overview: Vision, Mission, Mandate • The Ports Regulator Organisational Structure • Strategic Goals • Strategic Objectives • Annual Performance Plan • Strategic Plan • Budget • Funding Model • Strategic Challenges www.portsregulator.org

Vision, Mission & Mandate • Vision: The Ports Regulator will be regarded nationally and internationally as a world class institution which sets the standards for economic regulation in maritime ports. • Mission: exercise economic regulation of the South African ports system consistent with the government’s strategic objectives; • support the development of the ports industry and system; • promote equity of access to ports and to facilities and services provided in ports; and, • monitor the activities of the National Ports Authority to ensure that it performs its functions in accordance with the National Ports Act, 2005.” • Mandate: has aprimary mandate of economic regulation of the ports industry, it has to regulate the activities of the ports industry in accordance with the policy and regulatory environment generally and more specifically, the National Ports Act. www.portsregulator.org

ORGANISATIONAL STRUCTURE www.portsregulator.org

Ports Regulator PRSA Organogram 6 Board Secretary Internal Audit (outsourced) Chief Executive Officer Personal Assistant 1 21 2 22 Personal Assistant Chief Financial Officer Executive Manager : Legal & B/Secr. Executive Manager : PSR Executive Manager : Ind. Dev. 5 4 3 7 Manager : Corporate Services 8 Manager : Reg, Compl. & Tribunal Manager : PSR 9 10 Manager : Ind. Dev. Specialist : HR, IT, & SCM Specialist : Tribunal & Compliance Specialist: Monitoring & Compliance Specialist : Econ. Regulation Specialist : Ind. Dev. 12 14 11 13 15 17 Paralegal 18 Research Analyst: PSR Research Analyst: PSR 19 20 Processor : Ind. Dev. Admin Assistant: Finance 16 General Corporate Services. Assistant 23 Intern (Junior Researcher): Ind. Dev, Intern: PSR 24 25 26 General Assistant Receptionist 27

Programmes of the Ports Regulator • The organisation is established along 5 programmes that are responsible for delivering on the key aspects and objectives of its mandate. • Administration The development, implementation, maintenance and management of systems for effective operation of the Regulator as well as appropriate enhancement and management of all its resources in accordance with the regulatory compliance frameworks. • Economic Regulation The development of policy, strategy, research and implementation instruments with respect to economic regulation of ports. Included under this programme is: • tariff setting and • tariff research,. • regulatory development processes for economic regulation of the ports system, including industry reform, institutional architecture implementation and market rules development. www.portsregulator.org

Tribunal and Compliance The establishment and operation of a tribunal to hear and adjudicate complaints and appeals under the National Ports Act (2005), as well as the establishment and operation of a compliance team to ensure compliance of the National Ports Authority with the National Ports Act, but also ensuring the compliance of the organisation with its own regulatory and legislative framework. • Monitoring Monitoring and enforcement of economic regulation precepts, including economic transformation, access, tariffs and compliance with the Ports Act and the development of monitoring instruments across the sector. • Industry Development Research and development of strategies and implementation approaches that enhance the effectiveness of the industry and its efficiency, as well as engaging all stakeholders and interested parties across the industry and the State. This programme includes planning, economic transformation initiatives, and benchmarking of the SA port system with respect to efficiency and effectiveness in comparison to other similar environments. www.portsregulator.org

Economic Impact of the Regulator • Rationalised Tariffs • R1 bn rebate • Significantly lower approved tariffs • Continued sustainability of NPA • Proactive and risk mitigating • Excessive Tariff Increase Margin Credit • R2.39 bn available to offset future increases • Looking forward • Fair tariff incidence • More accurate investment signals www.portsregulator.org

Tariff determinations www.portsregulator.org

STRATEGIC GOALS www.portsregulator.org

STRATEGIC GOALS cont... www.portsregulator.org

STRATEGIC OBJECTIVES www.portsregulator.org

STRATEGIC OBJECTIVES cont.... www.portsregulator.org

Annual Performance Plan (APP)

APP cont.

Strategic Plan

Strat Cont.

MTEF Budget (2015/16 -2017/18)

PROPOSEDFUNDING MODEL www.portsregulator.org

Funding Proposal for PRSA: Introduction • The proposal is in response to the Minister’s request to PRSA for a sustainable funding model for the Regulator. • The independence and security of funding is important in order to ensure a degree of autonomy of the activities and responsibilities of any regulator. Without secure funding, the ability of the Regulator to effectively execute its mandate may be constrained from year to year. • The funding of the Ports Regulator of South Africa (PRSA) is currently dependent on the fiscus as an allocation from a government department (DoT) • This was necessary to establish the PRSA, and set up the institution from inception. Now alternative funding models that better reflect the cost of regulation and a more effective allocation of these costs to the receivers or beneficiaries of regulation, should be utilised. • The funding of regulators must ensure in the minimum that the funding model reinforces its independence from all stakeholders (including, industry and government) and ensures sufficient funding for the effective execution of its mandate. • This proposal in line with regulatory academics, who suggest that funding autonomy for a regulator is best achieved through an annual levy by the Regulator on the regulated entities. www.portsregulator.org

Regulatory Funding Models General regulatory charge • The overall level of funding is derived from determining the regulator’s revenue requirement for the fiscal year, and then either using a formula (e.g. a percentage of regulated revenues) for obtaining the funds, or a precise amount to be levied. • This, the most common method for funding regulation, and perhaps the most logical, is the assessment of the “costs of regulation” to the regulated entities, and then allows them to pass those costs directly. • It internalises regulatory costs to the regulated sector, treats costs related to regulatory assessments, including tariff setting, price increases and other monitoring roles as fees for services rather than taxes. • This is a stable, reliable source of funds, is easy to administer, is consistent with regulatory independence, and is transparent. General tax revenues • The second most popular method is through an appropriation from general tax revenues, e.g. the appropriation through the DoT to the PRSA is a current case in point. • Internationally, this is less common because it facilitates, even though it does not always attract, political interference in the operation of the Regulator and may not be as reliable or stable as direct ring-fenced cost recovery. • It does not internalise regulatory costs into the sector. Specific fees • The third, and least common model, is specific fees for services/activities. This model has the highest transaction costs, and may yield less stability and reliability in a revenue stream. • Fees, however, can be a very useful mechanism for providing supplementary funds for regulators when required for specific purposes (e.g. when lodging a complaint or appeal with the regulator). www.portsregulator.org

The Hybrid Approach • Most regulators use a hybrid of one or more models depending on the prevailing financial management legislation in the country, as well as the founding legislation of the particular regulator. • An ICASA research report on funding models in 2013 stated that according to the International Telecommunications Union (ITU's) World Telecommunication Regulatory Database 2005, of the 119 countries that provided information on the breakdown of their regulatory authority's financing sources, 66% indicate that they rely on a combination of sources for their funding, whilst only 33% rely on a single source of funding. • By retaining elements of the PFMA budgeting processes, the inherent transparency and credibility of the system as a whole, as well as that of the regulator, will remain intact, and any incentive to inappropriately increase budgets will largely be removed, whilst allowing some flexibility in funding the activities of the regulator without impacting on the fiscus directly. www.portsregulator.org

Proposal for PRSA • The introduction of a hybrid funding model that retains the current budgetary approval processes with oversight by the Department of Transport as well as the National Treasury but removes the direct financial burden of regulation from the national budget, seems to be the best option. • This will retain the credibility of national budgetary processes and lend transparency to the price setting process, as the impact on users of the ports system will ultimately pay for regulation. • Based on expected 2014/15 volumes for the South African port system, the average percentage regulatory charge to be added to the tariff book in order to raise the PRSA’s current budget is 0.19% or R15.9 million. • In order to fund the establishment of the full PRSA organogram, the average increase in the tariff book tariffs will be 0.3% or approximately R25.3 million. www.portsregulator.org

Collection Process Options Option 1: (Preferred option) • Collection will be facilitated through the normal invoicing process by the NPA and transferred monthly to the PRSA on the 15th of every month. The amount will be determined as 12 equal instalments prior to the start of the financial year and in line with the approved budget. • Advantage: Low administrative costs; • Disadvantages: Reduced oversight, possible undue control over Regulatory funds by the regulated entity Option 2: • Collection would be through the normal invoicing process by the NPA, monthly transfers to the National Treasury, and quarterly transfers to the PRSA as per current arrangement. • Advantages: Increased oversight from the National treasury; • Disadvantage: Higher administrative costs with possible delays in transfers Over or under recovery of revenue • In the instance where expected volumes do not realise, the NPA may end up with a shortfall on the transfers to the PRSA. A fallback clause, in case the regulatory charges collected do not cover the regulator’s costs, would therefore be required. • The fallback clause should allow the PRSA to approach the Department of Transport, the National Treasury and/or Parliament in order to address expected shortfalls in the budget. www.portsregulator.org

Proposed amendment to the National Ports Act that would be required Section 42 of the Act currently states as follows: “(1) The funds of the Regulator consist of – (a) Money appropriated by Parliament; (b) Interest on investments; (c) Fees charged for the filing of complaints or appeals with the Regulator. (2) The Regulator must utilise its funds to defray expenses in connection with the performance of its functions in terms of this Act.” The following amendment to the Act is proposed: “Funding of the Regulator (1) For the purpose of regulation of the NPA, the funds of the Regulator consist of – (a) Money appropriated by Parliament; (b) Regulatory charges imposed as a percentage of the approved overall revenue allowed to the regulated entity by the regulator; (c) Interest on investments; and (d) Charges for complaints and appeals (Tribunal processes) and other services rendered in terms of the Act.” www.portsregulator.org

Recommendation It is recommended that: • The proposed funding model for the Ports Regulator be approved: • based on an annually determined percentage regulatory charge on overall NPA tariff revenue, • with a collection system in line with Option 1, • an average increase in the tariff book tariffs of 0.3% for the funding of the Regulator (to be reviewed annually), and • the retention of the parliamentary appropriation for the first year of implementation as a reserve. • The Portfolio committee on transport support and implement the legislative changes that will facilitate the new funding model. www.portsregulator.org

STRATEGIC CHALLENGES • Budgetary constraints to expand mandate. Additional funding is required as a once off then to revise the annual allocations in order to implement all other programmes successfully • Capacity – 17/27 organogram posts filled • Policy gaps – Ports Act amendments required • The reach of the Regulator with regards to private sector participation in the ports sector • Change with regard to the regulatory architecture of the transport sector - STER www.portsregulator.org

Thank You www.portsregulator.org

STRATEGIC PLAN AND ANNUAL PERFORMANCE PLAN