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Africa|Environment|Financial|Freight|rail|Safety|Sustainable|System|Transnet
Africa|Environment|Financial|Freight|rail|Safety|Sustainable|System|Transnet
africa|environment|financial|freight|rail|safety|sustainable|system|transnet

Rail Safety Regulator seeks revisions to current revenue model

4th October 2013

By: Sashnee Moodley

Senior Deputy Editor Polity and Multimedia

  

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During the fourth leg of its national campaign, the South African Railway Safety Regulator (RSR) engaged with stakeholders in Gauteng last month on proposed revisions to its railway safety permit fee model.

The RSR is exploring opportunities to gain sufficient and sustainable revenue to support the implementation of its mandate to promote safety and efficiently regulate the national rail industry.

The RSR is currently funded by a government grant and nonexchange and exchange trans- actions, the last mentioned consisting of permit issuing and application fees.

RSR CEO Nkululeko Poya presented the proposed model to stakeholders and highlighted the weakness of the current operator cost-based distribution model.

The other proposed options include an operator revenue-based distribution and an activity and rate adjustment-based approach.

He noted that the initiation of the current permit fee model was premised on a very low base and did not allow for the equitable distribution of charge-out rates, which resulted in an exponential distribution curve for cost, which was regarded as unfair.

Further, the operator class or category definition is too broad and predictability and forecasting for the operators are difficult.

“The new permit fee model should take into account the National Railway Safety Regulator Act’s mandate, the stipulations of which enable sufficient revenue collection and the equitable distribution of contributions from operators. They also enhance revenue assurance. The new model should also consider exposure to safety risks and have a scientific basis for predictability and accountability, such as independently verifiable parameters. The model should also recognise and reward operator adherence to safety rules,” Poya stated.

He also stressed that the model should be affordable and sustainable.

The RSR’s current revenue pattern shows a total revenue demand increase of 32% from 2012 to 2013 and the regulator expects a further increase over the next five years of an average of 10% to 20% a year.

Revenue from the government grant has increased by only 5%, in line with the target inflation rate, and the revenue from permit issuing and application fees increased by 86.5% from R20.6-milion in the 2011/12 financial year to R38.4-million for the 2012/13 financial year.

Transnet Freight Rail and the Passenger Rail Association of South Africa are the biggest revenue contributors and they collectively contributed 82% in the 2011/12 financial year and 73% in the 2012/13 financial year.

“The danger in such a situation is that an unexpected and significant drop in either of the companies’ contribution would have a devastating impact on the RSR. A new permit fee model will ensure effective revenue collection. On the balance of strengths over weaknesses, the recommended option is to adopt the activity and rate adjustment-based approach with its strengths and shortcomings,” Poya said.

In this option, the levy is calculated or distributed on the basis of throughput according to cents per tonne kilometre or cents per passenger kilometre.

A four-class system can be used and differentiated by rates defined as a normal-goods rate, a dangerous-goods rate, a passenger rate or a tourist rate.

Permit application fees should remain constant across the board, since the effort to proces applications remains the same.

The government grant can be reviewed only when the RSR has reached the point of having a sufficiently stable revenue regime and any attempt to prematurely remove the government grant completely will prove disastrous for the RSR.

The revenue collection system must be improved – for example, all licensed operators must be billed and an incentive system must be developed to reward those operators who improve their safety environment.

The RSR plans to implement the revised-fee model by April 1, 2014, and urges operators to submit written submissions by October 16, 2013, to allow for the publication of the new fee structure in the government gazette before December.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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