The case for scrapping the highest SAMSA LeVies increase

1. The case for scrapping the highest SAMSA LeVies increase Sello Rasethaba

2. introduction • SAMSA Levies • In 2009 SAMSA increased its levies by 318.95%. • The “consultation” process that SAMSA embarked upon left much to be desired and run against the South African government’s commitment to work with all stakeholders including labour, non-governmental organisations and business. • The lack of regulatory guidelines to SAMSA levy determinations. Until now SAMSA levies have been determined on the basis of short term considerations that fail to recognisetheir long term implications. • This presentation: • investigates and analyses SAMSA levies, and • develops acceptable funding mechanisms for SAMSA in line with global trends,

3. The approach • An investigation of SAMSA levies • The 318.95% SAMSA levy increase and the related “consulation process” • Legislation governing the existence of SAMSA and oversight management of State Owned Enterprises • The failure of SAMSA to comply with legislation governing the existence of SAMSA and oversight management of State Owned Enterprises • Analysis of Global trends in the funding of SAMSA related activities and institutions • Development of acceptable funding mechanisms for SAMSA • Discussion and approval of a strategy for the future funding of SAMSA by SASOOA • Consultation with all stakeholders • Implementation of the strategy for the future funding of SAMSA

4. An investigation of SAMSA levies The 318.95% SAMSA levy increase and the related “consulation process” Source: http://www.i

5. SAMSA Levy Determination Regulations • The Levy is • payable at a determined amount per 100 tons or part thereof upon first entry into the territorial waters of the Republic after a voyage from a port or place outside the Republic, except in the case of a ship engaged solely in victualling or changing crew beyond port limits. • Payable to the National Ports Authority in the case of a ship calling at a commercial port, or to the Authority in any other case unless proof of prior payment to the National Ports Authority is produced. Source: http://www.samsa.org.za/sites/samsa.org.za/files/Determination_of_Levies_2009.pdf

6. THE determination led to a 319% increase in the SAMSA LEVY R22.00 to R92.17

7. SAMSA Levy – The ACT

8. THE effect of the SAMSA LEVY SAMSA revenue increased by R80 343 000 SAMSA revenue increased by 173.33% Questions: In 2010 the Shipping Industry contributed more than 80% to SAMSA Revenue. What is the justification for these levies?

9. Servicesprovidedwithinaport AidstoNavigationalongthecoast VesselTrackingSystem ,safetyof Otherservicestothecargo Otherservicestoships : : •Warehousing/cargostorage •Cargorepairs •Equipmentrental •Cartage(road/rail) •Cargoinspection,storage andgrouping Otherservicesintheport •Busservices •Baggagehandlers •Firefighting •Fireprotection •Security •Powerandwatersupply •Labourprovision •Pollutioncontrol •Clearing/forwarding IMPORTCARGO environment,portcontrol Provisionofbasicportinfrastructureand aidstonavigationwithinports Dredging Pilotage TugServices Berthing/Unberthingservices Stevedoring(Cargohandlingonboard) Cargohandlingonquay Othercargohandlingcargoservices Transportto/fromstorage Storage Delivery/Receivingviaroad/rail •Shipbuildingandrepairs •Shipsurveyors •Bunkers •Shipchandlers •Hullcleaning •Propshining •Pestcontrolandfumigation •Firefighting •Security •Wastedisposal •Floatingcrane •Radio/radar •Vesselsearchers •Shipsagents THEAUTHORITY‟SSERVICES OTHERSERVICEPROVIDERS CARGOFLOW EXPORTCARGO SecurityAccessControl SecurityAccessControl : AdaptedfromtheUnitedNationsConferenceonTradeandDevelopment 3

10. TNPA Tariffs are paid at the same time with the samsa levy but determined by the ports regulator • In terms of Section 72 (1)(a) of the National Ports Act, 2005 (Act No. 12 of 2005) (”the Act”), Transnet National Ports Authority (“the Authority”) is required, with the approval of the Ports Regulator (“the Regulator”), to determine tariffs for services and facilities offered by the Authority and to annually publish a tariff book containing those tariffs. The tariff application for the Authority‟s 2011/12 financial year is in accordance with the directives, which were approved on the 13th July 2009 (gazetted on the 6th August 2009) and amended on 29 January 2010. In terms of these directives when considering the proposed tariffs for the Authority, the Regulator must ensure that such tariffs allow the Authority to: • Recover its investment in owning, managing, controlling and administering ports and its investment in port services and facilities; • Recover its costs in maintaining, operating, managing, controlling and administering Ports and its costs in providing port services and facilities; and • Make a profit commensurate with the risk of owning, managing, controlling and administering ports and of providing port services and facilities. • The Authority is applying for a single year tariff adjustment, across all its published and regulated tariffs • The Authority applies for a single year tariff adjustment, across all its published and regulated tariffs.

11. Tariffs in perspectiveTNPA • The Authority, like any other port authority, needs to generate revenue by charging tariffs for the services that it renders. The Authority may charge fees, in accordance with tariffs approved by the Regulator in order to fulfil the functions it must perform in terms of the Act. • As a landlord port authority, the Authority‟s core services, as specified in the Act, result in a number of revenue streams, which are utilised by the Authority to fulfil its responsibility for the safe, efficient and effective economic functioning of the national ports system.

12. Unlike tnpaTariffs SAMSA levies are not related to services renderED • Long Range Ship Identification and Tracking System (LRIT) • SAMSA was mandated by the government to install and implement a shipping traffic monitoring and surveillance systems, LRIT in compliance with the requirements of the International Convention on the Safety of Life at Sea ( SOLAS).The compliance date for full compliance was 1 July 2009. The system is meant to improve the tracking of ships for enforcement of security, safety of navigation and protection of marine environment, as well as the enhancement of the search and rescue capacity. • Maritime Rescue Co-ordination Centre (MRCC) • SAMSA has, since 2003, been mandated with the running the MRCC which provides the Maritime Search and Rescue services. The national MRCC mandate was expanded to a Regional Center in 2007. • Safety Regulation of Boating and Small Vessel Activities • SAMSA was mandated since 2008 with safety regulation of the boating and small vessel activities in all the navigable 400 inland dams, 23 large rivers and the almost 3000 km long coast line. No funds have been allocated to SAMSA for the execution of this expansive mandate of conducting exams, certification of skippers’ competence and seaworthiness of boats, investigation of incidents and accidents and the general promotion of safety in all the 9 provinces and the coast. • Professional Maritime Services • SAMSA is providing professional maritime services nationally and internationally to and on behalf of the government, which have not been adequately funded. The funds being allocated from the government are less that the cost of providing those services, undermining the capacity of the entity to sustain and improve upon quality of the vital services so provided. • Training • The shortage of skills and capacity in the maritime industry is a huge problem and impacts on SAMSA and hinders its ability to adequately service the industry .

13. LONG RANGE IDENTIFICATION AND TRACKING OF SHIPS (LRIT) • The International Maritime Organization (IMO) established the LRIT • The LRIT is a used for the global identification and tracking of ships • The LRIT forms part of the international maritime community’s wide-ranging response to the growing threat from terrorism world-wide • Contracting Governments pay a small charge, reflecting largely the costs of data collection and storage • The IMO has decided that ships themselves shall not be charged for the transmission or other costs of participation in the LRIT system. • The LRIT system has been designed so that the capabilities of many existing satellite communication terminals (eg Inmarsat C), mandatorily fitted in most ships, will be sufficient for LRIT purposes. As a result, it should not be necessary for the majority of ships to incur any significant cost in implementing the new LRIT reporting requirements. Source: http://www.imso.org/LRIT.asp

14. SAASOA Minutes 28 September 2009SAMSA Levy Increase In terms of funding for LRIT, the Maritime Safety Committee resolution MSC.202(81) of 19th May 2006, clause 11.1 states “Contracting Governments shall bear all costs associated with any long-range identification and tracking information they request and receive. Nothwithstanding the provisions of paragraph 11.2, Contracting Governments shall not impose any charges on ships in relation to the long-range identification and tracking information they may seek to receive.” Government was a member of the IMO and therefore, in terms of the resolution, could not impose any costs of this project onto ship-owners. SAMSA would then be levying users to obtain funds, contrary to this resolution. He further added that AIS currently in operation at our ports cost R12000 a month to run and had cost under half a million to setup. The company doing this operation had indicated it would cost, at the most, an additional R15000 a lighthouse to setup a complete coastwise service. This was based on using the 43 lighthouses on our coast. What added benefits would there be for the increased levies?

15. Basic dues and tariffs

16. Basic dues and tariffs

17. Tariff Adjustment: Justification(SAMSA Annual Report 2010) • One of the major challenges faced by SAMSA when I joined in 2008 was an unsustainable funding model, resulting in year-on-year deficit budgeting.This was compounded by the mismatch between the vast and diverse maritime interests and mandate, and the configuration of the entity. Since its formation in 1998, SAMSA has reviewed its user charges only three times, even then considering only the year-on-year inflation adjustments. • The unsustainable funding undermined the ability of the institution to function properly and discharge its full mandate, thus exposing it to enormous business risks. SAMSA therefore embarked on an exercise which revealed that the entity had been under-recovering and undercharging, and that its charges were below global peer charges by about 740%. In the light of this outcome and the risks inherent in the continued use of the direct user charge base, SAMSA made a modest tariff adjustment to move the organisation to a more sustainable balance between revenue and expenditure. On behalf of SAMSA, • I wish to thank the industry for allowing us to recover our direct input costs for the services we render on a day-to-day basis and to make us financially viable and sustainable. Questions: What are the global peer charges referred to here?Is 318.95% a modest tariff adjustment?

18. Industry Thrust(SAMSA ANNUAL REPOrT) • Whilst good corporate governance and compliance have been and continue to be areas of focus, the industr y focus also remains key to the performance of SAMSA.With the sole objective of constantly having industry issues on the Board’s radar screen, SAMSA’s Board took a decision during the year to re-establish an industry-focused Sub-committee, i.e. the Maritime Industry Committee. • The focus of this committee will be to ensure that SAMSA’s role in the industry remains relevant and up-to-date, and that SAMSA draws on the experience and expertise of the captains of industry in sharpening its role and carrying out its mandate effectively. • Through this Board Sub-committee, SAMSA intends to elevate issues high on the national agenda, such as the Maritime Skills Plan. Questions: What work has this committee done with the industry to date?

19. Cash and surplusAre they Justified?

20. An investigation of SAMSA levies Legislation governing the existence of SAMSA Source: http://www.i

21. OVERSIGHT MANAGEMENT OF STATE OWNED ENTERPRISES – TREASURY VIEW National Assembly Oversight Role through Committee structure SCOPA: Financial Management Portfolio Committee: Service Delivery National Treasury Financial oversight Executive / Cabinet Macro Regulator Independent tariff regulation Executive Authority Policy Implementation and Shareholder Shareholder Oversight and Management Accounting Authority Carries ultimate responsibility for SOE i.t.o. PFMA Line Department Responsible for Operational and Financial Oversight Policy Department Responsible for Policy implementation frail interaction State Owned Enterprise (SOE) currentreportingpractice

22. OVERSIGHT MANAGEMENT OF SAMSA National Assembly Oversight Role through Committee structure SCOPA: Financial Management Portfolio Committee: Service Delivery National Treasury Financial oversight Executive / Cabinet Macro Regulator Independent tariff regulation Executive Authority Minister of Transport Line Department Department of Transport Accounting Authority Board of Directors of SAMSA Policy Department Department of Transport frail interaction Public Entity SAMSA currentreportingpractice

23. THE NATIONAL ASSEMBLY One of Parliament’s most important roles is to approve the government’s budget for providing services to the people of South Africa. The budget is introduced in the National Assembly by the Minister of Finance, whereafter the Houses proceed to discuss the money to be allocated for each separate government department. At the end of this process, Parliament approves the budget. Its duty is to ensure that public funds are spent on improving the quality of life of all South Africans.

24. THE NATIONAL ASSEMBLYCORE OBJECTIVES • pass legislation (laws), • scrutinise and oversee executive action (keep oversight of the executive and organs of state), • facilitate public participation and involvement in the legislative and other processes, • facilitate co-operative government and • facilitate international participation (participate in regional, continental and international bodies).

25. THE NATIONAL ASSEMBLYTHE OUTPUTS FOR THE CORE OBJECTIVES • Bills passed, • questions put to the executive, • annual reports tabled and scrutinised, • public participation facilitated, • participation in international forums and organisations, • approve international agreements, • appoint public office bearers, and • discharge statutory functions.

26. THE PUBLIC ENTITY SAMSA ACT, 5 OF 1998 • ..

27. LEGISLATIONPFMA • Provides financial framework • Affords operational and managerial autonomy • Reporting/oversight mechanisms • Shareholder compact • Corporate Plan • Quarterly reports • Regulates Borrowing Powers/Guarantees • Affords National Treasury Powers to request information

28. What does the PFMA seek to achieve? • Mainly: Good financial governance in the public sector • Modernises the system of financial management • Enables public sector managers to manage, but be more accountable • Ensures timely provision of quality information • Aims to eliminate inefficiencies and corruption in the use of public assets

29. LEGISLATIONTREASURY REGULATIONS • Builds on legislation – i.e. details content of Corporate Plan

30. LEGISLATIONCOMPANIES ACT • Legislation governing company law • Establish legal status of companies • Appointment and outline of responsibilities of Directors and Auditors • Accounting and disclosures

31. Protocol on CORPORATE GOVERNANCE • Encapsulates King II Code on Corporate Governance and PFMA • Not legislation - best practice code • Government’s relationship to itsSOE’s • Guiding principles on management of ownership • Directors responsibilities • Role of the Board • Establishment of committees

32. PARLIAMENT OVERSIGHTCONSTITUTION • The Constitution of South Africa empowers the National Assembly and Provincial Legislators with and oversight role over their respective Executives. • Section 55(2): • Executive organs of state are accountable to Parliament. • Parliament must maintain oversight over the Executive Cabinet. • Section 92(3)(b): • Members of Cabinet must provide Parliament with full and regular reports concerning matters under their control. • Impossible for Parliament to exercise proper oversight over 35 National Departments and + 250 public entities. • Parliamentary Committees established to facilitate oversight role • Standing Committee on Public Accounts (SCOPA) • Portfolio Committee

33. PARLIAMENT OVERSIGHTSCOPA • Primarily responsible for financial oversight through addressing: • Issues raised in the General Report of the Auditor-General on Audit outcomes • Issues of financial probity as highlighted in the audit report or disclosed in the management report or notes to the financial statements • Compliance with the PFMA, Treasury Regulations, the Audit Committee and the management report of the accounting officer • Interrogation and evaluation of instances of over-expenditure and instances of unauthorisedexpenditure • Interrogation of instances relating to irregular, fruitless and wasteful expenditure • The functioning of risk management systems • Corporate governance of departments, public entities and constitutional institutions

34. PARLIAMENT OVERSIGHTPORTFOLIO COMMITTEE • Primarily responsible for sectoralservice delivery through: • Monitoring the economic, efficiency and effectiveness of service delivery as measuredbyperformance indicators presented in the annual reports of Departments • management’s explanation as to why the entity’s service delivery performancedidnot attain the targets set in the corporate plans • Equity of service delivery • Investigating the circumstances that led to financial underperformance and the impact this had on service delivery and the measures taken by management to rectify the situation

35. THE COMPLETEGOVERNMENT OVERSIGHT • Finances • Systems • Complaince • Human Resources • Service Delivery • Mandates

36. THE cabinet/EXECUTIVE • Provide overall strategic/policy direction: • Economic growth • Service delivery • Addressing imbalances in the economy • Adjudicating Board appointments • Policy Minister • Issues policy directive to SOE • Monitors delivery against directive

37. The Policy MandateThe 1996 National Transport Policy • Assisting in the creation and fostering of a competitive environment for the Maritime Transport industry; • Contributing to the release of the full potential of the maritime industry in South Africa; • Modernisation of the South African administration; and • Ensure maritime awareness.

38. THE EXECUTIVESHAREHOLDER OVERSIGHT • Reporting to Parliament • Appointing Board Members • Shareholder’s Compacts • Agreements on outputs (KPI’s) • Instructions on public projects • Execution of mandate • Review of Corporate Plans

39. THE EXECUTIVE3-YEAR CORPORATE PLANS • Strategic objectives and outcomes identified and agreed on by the executive authority in the shareholder’ compact • Strategic and business initiatives as embodied in business function strategies • Key performance measures and indicators for assessing the entity’s performance in delivering the desired outcomes and objectives • A risk management plan • A fraud prevention plan • A materiality/significant framework, referred to in Treasury Regulation 28.3.1 • A financial plan addressing– • Projections of revenue, expenditure and borrowings • Asset and Liability Management • Cash flow projections • Capital expenditure programmes • Dividend policies

40. THE EXECUTIVENATIONAL TREASURY • Protector of the National Revenue Fund/Sovereign Rating • Ensure exercising of financial oversight through • Setting reporting guidelines to promote and enforce transparency in respect of revenue, expenditure, assets and liabilities ofSOE’s • Oversight over the funding/borrowing programmes of SOE’s • Controlling the utilisation of contingent liabilities • Effective treasury management models • Issue co-ordination between Policy Minister, Executive Authority and National Treasury

41. THE BOARD OF DIRECTORS • Is the governing body • Its mission is to fulfill the mandate • Is fully accountable for performance • Has responsibility to broader stakeholders

42. THE BOARD OF DIRECTORSPOWERS AND DUTIES contained in • The PFMA, • Company’s Act, • Enabling Legislation and • Protocol on Corporate Governance

43. THE BOARD OF DIRECTORSPOWERS AND DUTIES contained in • Ensure that the executive management implements the SOE’s strategy as established from time to time • Ensure that the SOE has effective, efficient and transparent systems of operational, risk management and financial internal controls • Monitor the activities of the executive management • Provide information on the activities of the SOE to those entitled to it • Ensure the succession, and approve the appointment, of senior executives • Ensure that the SOE operates ethically • Address the adequacy of retirement and health care benefits and the funding thereof • Ensure that the SOE has and maintains a system of internal audit under the control and direction of an audit committee complying with an operating in accordance with regulations and instructions prescribed in terms of sections 76 and 77 of the PFMA • Ensure that the SOE has and maintains an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective • Ensure that all applicable black economic empowerment legislative frameworks and requirements are complied with • Ensure that the SOE has and maintains a system for properly evaluating all major capital projects prior to a final decision on the project

44. NEDLACTrade & Industry Chamber • Scope of Work • The Trade and Industry Chamber seeks to reach consensus and make agreements on matters pertaining to the economic and social dimensions of trade, as well as industrial, mining, agricultural and services policies, and the associated institutions of delivery. • Chambers Modus Operandi • Most of the substantive work of the Chamber is done in Task Teams comprising of representatives of stakeholders that have specific knowledge of the relevant subject matter. The work of the Task Team is governed by Terms of Reference, which are developed by the Chamber. The outcome of work done in the Task Teams is submitted to the Chamber for consideration and ratification. Once the Task Team report is signed off by the Chamber, it is then tabled at the Management Committee for final consideration and sign off. • Meeting Targets • The Chamber is required to meet at least six (6) times in each financial year. Representation in the Chamber is made up of six (6) mandated representatives from OrganisedLabour, Business and Government. • The Chamber has several substructures, including: • The Fund for Research into Industrial Development, Growth and Equity subcommittee (Fridge), which is funded by the Department of Trade and Industry, and aims to enhance competitiveness by South African industry, through research projects proposed and guided by the constituencies. • The technical sectoral liaison committee (Teselico) which aims to enhance trade-related social dialogue, including in the negotiation of trade agreements and interactions with the World Trade Organisation.

45. PUBLIC INSTITUTIONS LISTED IN PFMA SCHEDULE 1, 2, 3A, 3B, 3C AND 3DAS AT 1 APRIL 2011 Schedule 1 - Constitutional Institutions Schedule 2 – Major Public Entities Schedule 3 – Other Public Entities Part A: National Public Entities Schedule 3 – Other Public Entities Part B: National Government Business Enterprises Schedule 3 – Other Public Entities Part C: Provincial Public Entities

46. The department of transport AND its ASSOCIATED PUBLIC ENTITIES PFMA SCHEDULE 2, 3A AND 3B AS AT 1 APRIL 2011

47. Statutory duties Role of the Board • Duties mostly delegated by Board • Duties i.t.o PFMA are “mostly” financial • Main topics • Internal control & corporate management • Budgeting & Planning • Management of REAL • Reporting • Borrowing • Investments • Legal Compliance • Financial Misconduct (if non-compliant)

48. Role of the BoardInternal control & corporate management • Risk management section 51(1)(a)(i) and TR 27.2.1 • Assessment by AA to identify emerging risks • Converted into strategy: • Internal audit plan • Staff allocation • Management • Internal audit section 51(1)(a)(ii) and TR 27.2.2-11 • Under direction of audit committee, reporting to AA • Audit committee section 77 and TR 27

49. Role of the BoardBudgeting and planning • Annual budgets section 53 • Within 1 month of FY (or other arrangement with NT) • To EA and NT • Projection of R, E of Borrowings • 3 year “corporate” plan including business of subsidiaries • Strategic plan TR 30 • 3 years • Includes specific requirements of topics to cover (see TR30.1.1)

50. Role of the BoardManagement of REAL • Procurement section 51(1)(a)(iii) • Capital projects section 51(1)(a)(iii) • Revenue collection section 51(1)(b)(i) • Prevention of non-regular expenditure section 51(1)(b)(ii) • (Links to discipline in s51(1)(e)) • Manage working capital E&E section 51(1)(b)(iii) • Comply with “financial” legislation, PFMA and other legislation section 51(1)(d)&(h)