Hon Speaker, administered prices are set by a regulated framework instead of being determined by regular market forces of supply and demand.
The general principles and objectives of pricing policy require the relevant regulators, when setting prices and tariffs, firstly, to enable an efficient operation to recover the full cost of its licensed activities, including a reasonable margin of return; secondly, to provide for or prescribe incentives for continued improvement of the technical and economic efficiency with which services are to be provided; thirdly, to give end users proper information regarding the cost that their consumption imposes on the business; and, finally, to avoid undue discrimination between customer categories. This may permit the cross subsidy of tariffs to certain categories of customers, as well as managing inflationary pressures in the economy.
The various transport modes, namely airports, rail, roads and pipelines, vary considerably with respect to the extent of the economic regulation and the regulatory framework that are in place.
With respect to rail, there is no formal economic regulator. In this regard the Department of Public Enterprises acts as a quasi regulator through the Transnet shareholder compact.
With respect to ports, the Ports Regulator provides economic regulation for the ports system in terms of the National Ports Act, Act 12 of 2005.
The National Energy Regulator of South Africa, Nersa, provides economic regulation for the piped gas and petroleum pipeline industries in terms of the Gas Act, Act 48 of 2001 and the Petroleum Pipelines Act, Act 60 of 2003.
Electricity prices are regulated in terms of the Electricity Regulation Act, Act 4 of 2006, which is administered by Nersa. In regulating the electricity prices, Nersa has to consider the Electricity Pricing Policy of 2008, which was approved by the Cabinet. Eskom charges tariffs as approved by Nersa in line with the Electricity Regulation Act and the Electricity Pricing Policy. The tariffs applied must avoid undue discrimination, unless approved by Nersa. Therefore, Eskom does not have favourable tariffs for exported goods, except for the special agreement with BHP Billiton which is currently being reviewed by Nersa.
In the past, due to historical legacy issues, prices for export commodities were lower than those of manufactured goods. Prices were determined on the basis of the value of the goods. Transnet's current pricing strategy is being reviewed to address exactly those anomalies and they include pricing on the basis of the cost of providing the total service for a particular commodity, rather than pricing on the basis of its value. This was based on the import substitution policy that the government had adopted. Hence the economy could not accrue beneficiation from its mineral resources.
In 2012-13, Transnet established a port rebate of R1 billion for exporters ... [Time expired.]