Premier Tank Solutions | Tank Container Investment Specialists

FAQs (Frequently Asked Questions)

Dear Client,

Here are some FAQs (frequently asked questions). Click the arrow [>>] at the end of each question to display the answer, or else click the Display All option below to view all the answers.

1. Who may invest in tank containers?

In terms of our Reserve Bank Approval, any South African Resident (or legal entity) or any Non-Resident may invest in tank containers.
A South African individual living overseas who has not officially emigrated is regarded as "a South African Resident living indefinitely abroad" and is permitted to invest in tank containers.
Only South African emigrants (those that have officially applied to the Reserve Bank and have been so designated) may not invest using their blocked Rands.

2. What is it that I am investing in?

You are investing in a foreign-income earning hard asset with intrinsic value internationally and readily marketable.
Through this asset and the underlying lease agreement, you are securing a Dollar-based income stream, with a known quarterly income for a known period with a known final sale price in Dollars.
The underlying income is based on the global bulk carriage of liquids, which has proved to be resilient even in severe economic downturns.
An unlimited means to convert your Rands in South Africa to Dollars and thereby increase the offshore portion of your overall wealth, and have these funds available to use offshore and without limitations of Exchange Controls

3. What are the benefits of an investment in tank containers through PTS?

You are purchasing an asset with high intrinsic Dollar-based value, recognized internationally, and for which a market exists in most developed countries for both new and used tanks.
Although it is an foreign income-generating asset, it is funded in Rands and therefore is not regarded as part of your foreign offshore investment allowance - in reality, it supplements this allowance and therefore can be used to increase the offshore portion of your investment portfolio without limitation.
Under PTS's unique operational structure, in exchange for your Rands invested, you will in reality be purchasing a known Dollar income stream for a known period of time, that equates to your original effective Dollar capital at the time of purchase, plus a market-related return.
Provided the tank containers are purchased in the name of an individual:

all foreign-earned income may be retained offshore indefinitely and these funds are not subject to Exchange Controls;
only the final sale price (normally $250-500) must be repatriated and converted to Rand.
This is a means of protecting against future Rand depreciation and legally externalizing your Rand wealth.
No tax clearance certificate or specific Reserve Bank approval is required.
No official emigration, no SARS and Reserve Bank reviews (and possible lifestyle audit).

Due to the wear and tear write-off allowances of 100% over 5 years, it is tax efficient.
The Government has backed this offshore investment structure, in order to secure the ultimate beneficiation of our natural resources, the establishment of local manufacture of a high quality, high value product which serves an international market and thereby creates valuable skilled and semi-skilled employment.

4. Is this whole tank container investment structure legal?

Yes, indeed it is entirely legal and has the full endorsement of Government, in particular, the South African Reserve Bank, the Department of Trade and Industry, and the South African Revenue Services.
PTS operates under a specific approval granted by Exchange Control Department of the Reserve Bank which was first obtained in July 1993 and in terms of which we are required to provide comprehensive audited reports to Excon in order to obtain the renewal of this mandatory licence annually.

5. Is the SA tank container investment industry monitored by the Financial Services Board?

No, it is not, because it is strictly monitored by the Exchange Control Department of the South African Reserve Bank, who stipulates the terms of control under which Managers, like PTS, are required to operate and thereby through these specific Authorities under which we and other managers operate all tank container investments are closely controlled and these operations, like PTS, are closely monitored.

6. Do I need a tax clearance certificate from SARS or specific Reserve Bank approval?

No specific authorization from any Authorities is required to invest
No SARS tax clearance certificate is required, as this does not form part of your offshore allowance,
PTS's approval from the Reserve Bank to manage tank containers offshore requires no additional approvals

7. Will I have to pay VAT on the purchase price?

No VAT is payable on the purchase price nor on our fees – we have obtained a zero-rating ruling from SARS in these respects.

8. Can I obtain local bank finance in order to gear my investment?

Yes, instalment sale financing is available, subject to the finance house's normal credit requirements.

9. Who is responsible for maintaining the tank and for the operational costs?

In terms of our lease agreements, lessees are responsible for all operating costs.
In addition, lessees are responsible (require the lessee) to maintain the tank containers to acceptable international standards and to bear the costs of maintenance, repairs and mandatory periodic tests.

10. Are there any additional costs in respect of shipping the tanks?

The lessee's circumstances at the time could mean that it is beneficial to both parties that the investor bears the additional cost of shipping the tanks on the initial outward trip - a known cost upfront - and that the daily rental rate is increased accordingly for the whole term of the lease.
The shipping cost is deductible for tax purposes in the first tax year.

11. What happens if a tank container is damaged or destroyed?

In terms of our lease agreements, if a tank is destroyed or lost, the lessee is required to replace the tank with a locally-manufactured one of equivalent specification at the lessee's cost.
In terms of our lease agreements, this tank container takes the place of the other in all regards and the lease also stipulates that there will be no interruption of rentals during this substitution period.

We have had two such incidents in our experience since 1994, in both instances the lessee replaced the tank containers with newbuild units, with no loss of rental income to the investor.

12. Are my tank containers insured?

In terms of our lease agreements, lessees are responsible to maintain adequate loss and damage insurance on all tank containers in their fleet including leased units.
Furthermore, the lessee is also required to maintain adequate public liability cover in the event of damage to third party property or death.
The lessee is responsible to bear the costs associated with these insurance policies and to ensure that PTS is provided with documentary evidence that this cover is in place annually, and that premiums have been paid.

13. Would this form part of my foreign investment allowance?

No, it does not form part of your foreign investment allowance - you are investing in a local asset in Rands, which is then placed offshore (not exported) to earn foreign income.
An investment in tank containers is over and above the investment allowance, and is therefore unlimited

14. What is the expected life of a tank container?

Normally 15-20 years

15. How do I know that my tank containers actually exist?

Each tank container is inspected by and registered with an international certification agency such as Bureau Veritas on completion of manufacture and before it is sold to PTS
An Initial Inspection Certificate is issued by the on-site Certification Agent on completion of manufacture, permitting it to be used for international carriage of liquids for specified regulatory authorities.
PTS will provide you with a copy of this Initial Inspection Certificate for each tank container, which reflects two unique numbers:

The Manufacturer's Serial Number, which is stamped on various parts of the tank container at the time of manufacture.
The Lessee Serial Number (also called the Auto Control Number or Operational Number), which is made up of 4 letters followed by 6 digits and a check digit e.g. PTSU 024 001.3 This number appears on all 6 sides of the tank container and is used by the lessee and for control and monitoring by shipping, rail and road authorities internationally.

PTS will provide you with a photograph of your tanks at the time of their final inspection at the manufacturer's premises.
PTS also allocates a unique PTS Control Number (e.g. T 001) to each tank container for investment management purposes.
PTS will provide you with a certified copy of the Certificate of Ownership for each tank container. The original is required to be lodged by us with our bankers as agents for the Exchange Control Department of the South African Reserve Bank, who retain it in Safe Custody until termination of your investment.

This Certificate of Ownership, issued in investor's name, reflects the PTS Control Number, Manufacturer's Serial Number and Lessee Serial Number (Auto Control Number).

16. How regulated is the tank container industry internationally?

Recognizing the wide range of liquid cargo transported in tank containers, ranging from hazardous substances to those that require special precautions for health and environmental reasons, the tank container industry is highly regulated.
The tank industry is regulated by various bodies functioning under the umbrella of the United Nations, in particular the International Maritime Organisation (IMO).
Tank containers are manufactured to strict international specifications and thereafter are maintained in accordance with strict international regulations.
Tank containers may not be operated unless they have been certified by one of the international Certification Agencies (such as Bureau Veritas or Lloyds Register of Shipping) from date of manufacture, as well as every 2½ years thereafter, in terms of IMO mandatory requirements.
There is a standard ACC (acceptable container condition) repair standard which is used by the industry to maintain tank containers at an acceptable operating standard.
No tank containers may be loaded with product without evidence of an independent cleanliness certifcate or be shipped without a valid mandatory test certificate.

17. Who regulates the South African tank container investment industry?

It is regulated by the Exchange Control Department of the South African Reserve Bank.
Each tank container investment management operation is required to comply with the terms of the Excon Authority granted to each, and to submit an Annual Report to Excon Head Office evidencing that the strict reporting requirements (that need to be met in order to have this licence renewed) have in fact been met, thereupon an annual Authority is granted for another 12 months.

18. What is the price of a tank container?

At present, a guideline price is around R225 000.
That said, the price would be market-related, but would depend on the specification required by the lessee, and the manufacturer's cost of materials at any point in time, especially the high percent of stainless steel required, which price is affected by the international market price of nickel, chrome and molybdenum.
We would be able to provide firm pricing for tank containers being marketed at the time of request.

19. Is there a danger that the market can become saturated?

No, certainly not. Drums are still predominantly used as the traditional means of transporting liquids and it is estimated that only around 25% of the global drum market has been replaced by tank containers.
Due to increased environmental awareness, global competitiveness and government enforced regulations, stainless steel containers are steadily replacing drums due to the benefits they offer:
- Increased payload - Drums are limited to 14,400 litres per dry container (72 x 200 litres). With tank containers, depending on the density of the product, up to 25,220 litres can be carried (assuming 97% filling of 26,000 litre tank), an improvement of 75% per 20ft container!
- Improved efficiency - Tank containers eliminate direct and indirect costs of using drums (e.g. cost of drums and liners, sealing, packing, unpacking, storage, discharge, disposal)
- Improved quality - Better temparuture and quality control, therefore reduced chance of product contamination
- Increased safety - Tank containers are designed to withstand harsh operating conditions and provide excellent protection of the product and the environment in the event of an accident compared with drums.
- Reduced wastage - Drums provide considerable problems with wastage, while tank containers guarantee minimal wastage.
There is therefore still huge potential for further growth, especially in developing countries and there is therefore very little danger of the market becoming saturated in the foreseeable future.

20. What legal agreements would I need to enter into?

You would sign a Sale Agreement with PTS for the purchase of your tank containers.
Concurrently, you would sign a Management Agreement in order for us to manage in toto the investment on your behalf.
If you purchase the tank containers with bank finance, you would also be required to sign an Instalment Sale Agreement.
You would receive copies of all the above Agreements (we retain the originals on file at our offices, as required by the Reserve Bank)

21. What documentation can I expect to receive during the investment period?

Initial documentation - copies of the following:

Management Agreement
Sales Agreement
Instalment Sale Agrrement
Tank Invoices
Certificate of Ownership
Initial Inspection Certificate
Photograph on completion of manufacture
Acceptance Receipt, countersigned by Welfit Oddy (the manufacturer)

Delivery Notification, evidencing delivery to the lessee on your behalf

Quarterly Documentation

Quarterly Report letter
Quarterly Income Statement
Quarterly Invoice for expenses (management & insurance fees, etc)
Remittance advice (whether paid in Dollars or Rand)

Other Documentation

Tax Certificate issued after tax yearend
Newsletters updating you as to various subjects affecting the tank and investment industry
Email communications from time to time with present offerings

22. What income and return can I expect to receive?

The lease agreement stipulates a daily Dollar rental which is payable by the lessee irrespective of utilisation or operating costs.
This daily rental rate is computed to give you a return equal to your initial capital plus a competitive return over the period.
This will be payable to you on a quarterly basis every mid-quarter, after deduction of our management and contingency insurance fee

23. How often is income distributed?

We distribute the income via electronic transfer quarterly in arrears (45 days after quarterend):

January to March - distributed mid-May
April to June - distributed mid-August
July to September - distributed mid-November
October to December - distributed mid-February

24. Who actually manages my tank containers for me?

In terms of the Management Agreement, PTS is appointed as Managing Agent to manage the investment on your behalf.
Under the Lease Agreement with the lessee (overseas logistics company), they will manage the operation of the tank containers on a day-to-day basis.

25. What do I pay for the management of my tank containers?

We charge a management fee of 4% of the gross rental income received from the lessee which, together with the 2.5% contingency insurance fee, is deducuted from your quarterly remittance.

26. What expenses and deductions will there be from my gross income?

A management fee of 4% of the gross rental income received from the lessee
A contingency insurance fee of 2.5% to cover credit and public liability cover, etc
A small bank charge if the remittance is in Dollars
In the event of some extraordinary task undertaken on behalf of investors, there could be some additional legal or administration fee.

27. What does the 2.5% contingency insurance fee cover on my behalf?

We hold Credit Insurance Cover through Coface which provides up to 120 days cover in the event of non-payment or insolvency.
We also hold Contingency Liability Cover of $10 million for PTS and investors in the event of a claim for death or damage to property as a result of an accident involving your tank.
The fee also provides a small fund to pay for miscellaneous costs that could occur when issues rise from time to time (e.g. legal/repairs/inspections/storage)

28. What if the lessee defaults, fails or goes insolvent?

In the event of default, there is a procedure for the lessee to remedy that default, failing which the lease agreement can be cancelled and the tanks required to be returned in acceptable condition.
In the event of default and/or insolvency, our credit insurers Coface would provide cover for unpaid rentals up to 120 days, assist in applying pressure on the lessee and in recovery of debt, involving legal action if necessary.
Where necessary, PTS would locate and repossess the equipment and find an alternative lessee for these tanks that would provide investors with an acceptable overall return on investment, and which could even improve the return initially expected.

We have had several defaults, lessee failures and return of equipment over the years, but we have in all cases located and recovered the equipment and found an alternative lessee, with no additional operating costs to investors.
Overall, despite the above events, our investors have achieved a positive return on the original Dollar investment costs.

29. What are the risks and unknowns in the investment?

We have attempted to reduce the unknowns and risks to a minimum with our unique arrangement (compared with the normal best-effort investment basis), with the result that the risks are limited to the following:

Rand exchange rate fluctuations -
It must be understood that periodic fluctuations in exchange rates have and will occur. That being so, the wisest time to invest is when the Rand is relatively strong (around R7.00), so that your conversion of your Rand capital to foreign currency is maximised, with minimal downside risk.
We have undertaken and maintain a full study into the Rand to determine its inherent value from a fundamental perspective, which is freely available, and also provide a Rand forecasting service through a sister company Dynamic Outcomes to provide you with the best tools to analyze the Rand exchange rate risk. See here for more info.
Lessee failure -
It is important to understand, firstly, that our lease arrangement, providing the lessee with a conditional purchase option, has the effect that the lessee will protect its increasing “equity” in the tanks during the lease years and therefore will readily fulfil the responsibility of the abovementioned obligations, to your benefit, until the conclusion of the rental stream and ownership passes thereafter.
If a lessee defaults during the lease period, and this is not remedied timeously, the lease purchase agreement can be terminated and the tank containers repossessed (since the investor retains ownership and thus PTS maintains control) and leased to a substituting tank operator. Whereas there could be an interruption in rental flows for a quarter or so, should this occur, the USD income stream from the substituting lease purchase would very likely secure you an incremental total income stream compared with the initial lease purchase.
Management business failure -
   As your manager, we sign up lease agreements as your agent, so that the agreement is between the lessee and the tank owners, with us managing that lease on your behalf.
   PTS operates under the specific approval and monitoring of the Exchange Control Department of the South African Reserve Bank, which requires us to periodically report to them in order to have our annual licence renewed.
   As a result, should PTS fail for any reason, the legal agreements would not be affected, and the Reserve Bank would step in and appoint another manager to manage the tanks and the leases.
Collapse of the Dollar -
The Dollar is still the currency of choice in the shipping and tank container industry, and while there has been fears of a Dollar collapse in the event of a further global meltdown, this is not likely at all, as the majority of debt is Dollar-denominated and a liquidation of debt will increase demand for Dollars, which will strengthen the currency, not weaken it.
Whereas there could well be a change in the Dollar being a reserve currency, this is something that will take many years to bring about, and not before we have seen substantial Dollar strength and massive liquidation of global debt.

30. Am I required to repatriate my income to South Africa?

This used to be so, but as a result of Exchange Control relaxations in 1997, an individual may elect to retain offshore any foreign income earned from 1 July 1997.
At present, Excon has stipulated that this is only applicable to individuals and not to companies, trusts, close corporations or partnerships.
We can make payment in Dollars to your bank account anywhere in the world, upon receiving full written instructions from yourself.
We will charge a small fee for the wire transfer - all other transfer and conversion costs charged by the local and foreign banks will be for your account.

31. Can I elect to receive my income in Rand or Dollars each quarter during the investment period?

Yes, we permit you to elect to receive your quarerly remittance in Rands or Dollars, subject to this written instruction being received by us no later than 30 days after Quarterend.

32. If I receive my income in Rand, what exchange rate is used to convert my income to Rands?

A competitive exchange rate is negotiated with the banks following receipt of the funds from the lessees.

33. If I have received my income in Rands (after July 1997), may I retransfer it offshore?

Yes, you are permitted to do reconvert the Rand value of your foreign-earned income back into foreign currency and retransfer these funds offshore.
This would not form part of your foreign investment as this is still identified as foreign-earned income.
Upon retransmission, we would need to interface with the bank in order to provide all the necessary documentary proof required and would charge a fee for doing so.

34. What happens if there is no business for my tank containers?

In terms of the lease purchase agreement, the lessee is committed to pay the rentals and maintain the tanks irrespective of utilization.
Because the lessee has a purchase option that depends on them meeting their lease payments, these lessees regard their payments as increasing equity in the tanks (as if they were purchasing them through bank finance) and they are therefore regarded as their core fleet. Therefore, if there was a downturn in business, they would offhire tanks that have been leased in short-term, not the tanks under lease purchase.
We target those logistics companies that are solid and are requiring tanks for specific long term needs, and in sectors of the market that are unlikely to be affected in the event of a severe global downturn.

35. Will tank containers retain their intrinsic value during a recession/depression?

Yes, firstly, a tank container is a high-spec quality asset recognized internationally as being of intrinsic value, with high-grade 316 stainless steel making up about 60% of its value.
Tank containers have proved to be resilient in a severe recession. In the 2008-2009 recession, there were sectors of the market that were more affected than others, but there was not the total collapse like we saw in some other industries. The most affected sector was the chemical industry, some slightly affected (food industry), and some not affected at all (wines & spirits).
Our target market for lessees is those that primarily deal in the food sector, and more so those that specialize in the wines and spirits sector. When the global downturn hit the tank industry, this sector experienced a change in the quality of product being carried, but not the quantity! One of our lessees experienced his best growth ever in the period 2008-2010.
Recognizing the expected life of a tank container is 15 years plus, if your tank has been placed on a say 7 year lease purchase, your net capital in that tank (capital invested less income received) will be less than the actual intrinsic amortized value of the tank after the first 18 months or so.

36. How disposable are my tanks if I need cash in a hurry? Is there a ready market?

Being under a lease purchase, the market value of the tank at any time would be the present value of the outstanding rentals payments and final sale price still due, discounted at an acceptable return. There would be investors willing to purchase your tanks on this basis.

37. Is PTS an approved member of the South African Tank Container Association (SATCA)?

No, we are not. We were approached to be one of the founding members, and while we saw the benefits of such a body (most notably, for manufacturers and local material & component suppliers to achieve standardization and reduce input costs), we declined due to our personal principles not permitting us to join any such association.
As our Company motto says, we have always strived to "Provide Management Excellence and Unique Investor Tank Solutions" and this is backed up by a long track record of and commitment to integrity, reliability, quality, safety and accuracy in every aspect of our operation, with the result that our clients have received a service unequalled in the South African tank container investment industry.
We would be willing to provide references of investors who would be willing to share their experiences.

38. What happens at the end of the lease purchase period?

If the lease agreement is structured to provide the lessee with a purchase option, he will have the option to purchase the tank containers at a pre-determined price (of say $250-$500) on condition that all rentals payable in terms of the agreement have been received by the termination date.
On exercising his option through payment, we will be required to process the necessary documentation in order to transfer title and ownership, including a full report to Exchange Control.
The sale proceeds will be converted to Rand and remitted to your local bank account.
We will provide you with all documentation confirming transfer of title.

39. What deductions do I get for tax purposes?

You are permitted to write off the tank purchase price over 5 years for wear and tear purposes, which will commence from the date of purchase.
However, in terms of current South African Income Tax practice, the amount of the annual wear and tear allowance in respect of tank containers will be limited, for tax purposes, to the amount of taxable rental income received by investors.
All other costs, whether positioning, interest payable, management fees, insurances fees, etc may all be deducted in full in the year incurred.
A tax certificate dated end February, reflecting rental income earned and the above deductions, will be issued each year and mailed to you in April/May.

40. What are the tax implications if I sell my tanks during or at the end of the lease period?

You would have a tax recoupment of the wear and tear allowance you have deducted up to the date you sell the container, this recoupment being limited to the original purchase price.
This recoupment would appear on your tax certificate in the year in which the sale is concluded
As the lease purchase is structured with a relatively low sale price, the effect on your tax liability will be minimal.

41. If I elect to receive my rental income offshore, where will I be taxed?

Most countries, including South Africa, enforce a residence-based tax, so irrespective of where the funds are paid, you will be taxed where you actually reside at that time.
Our tax certificates will reflect all income earned in Rands at the exchange rate for that quarter's payout, whether remitted to you in Dollars offshore, or locally in Rands.

42. Is there any limit to the amount I can invest or the amount of income I may keep offshore?

No, there is no limit to the investment nor the retention of rental funds offshore:-

the purchase of tank containers is incremental to the foreign investment allowance and is therefore unlimited
the rental earned offshore is foreign earned income and may be all retained offshore indefinitely, and are not subject to Exchange Controls

43. If I sell my tank containers, can the proceeds be paid offshore?

For South African Residents: No, in terms of Exchange Control Regulations, PTS is required to repatriate the funds and remit it in Rands to your local bank account.
For foreign investors: Yes, this is permitted

44. If I have emigrated, may I use my blocked funds to invest in tank containers?

In terms of current rulings, blocked funds may not be used to invest in tank containers without specific Exchange Control Approval.

45. If I officially emigrate after investing, may I keep my tanks & receive my income offshore?

Yes, you may keep your investment - these will form part of your blocked funds.
You will continue to be entitled to receive your rental income anywhere in the world.

46. If I have emigrated, and my tank containers are sold, can I receive the proceeds offshore?

In terms of current Exchange Control Regulations (to Sep 2010), PTS is required to repatriate these funds and remit them to your Rand account - these funds will form part of your blocked assets.
However, since 2003, emigrants can apply to the Reserve Bank to take out more than their foreign capital allowance, but will be charged a 10% levy on the funds transferred offshore.

If you have any other questions, please feel free to contact us.