SA Maritime Industry opportunities & challenges: briefing by SA Maritime Safety Authority

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08 May 2012
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

This meeting between the South African Maritime Safety Authority and the three Portfolio Committees on Transport, Public Enterprise and Trade and Industry was in order to gain a better understanding of how to grow the maritime industry in South Africa. In spite of its strategic position, South Africa did not have any merchant ships compared to Brazil (172 vessels), Russia (1 891 vessels), India (534 vessels), and China (2 044) vessels. Approximately 95% of South Africa’s total import and export trade by volume and 80% by value, was carried by foreign ships employing 240,000 foreign seafarers. South Africa paid over R36bn in 2007 to foreign owners and operators for maritime transport services.

The need for South Africa to have its own fleet of ships was key and would boost South Africa’s international trade and generate huge revenue for the country, providing many direct and indirect job opportunities. The out dated and unsafe fishing fleet was also discussed. SAMSA said South Africa need to have its own cabotage policy and it advanced many reasons for South Africa reviving and bolstering its maritime industry.

Members wanted to know why South Africa had not acquired its own merchant fleet. The Chairperson pointed out that the pre-1994 government had got rid of its fleet of ships in 1993 and this was a politically based decision. A member asked why seafarers were employed on a temporary basis and why their working conditions were deplorable. It was suggested that South Africa’s potential as a maritime country ought to be incorporated into the National Development Plan. The need for SAMSA to ensure that maritime studies were offered in schools was noted. SAMSA’s role in assisting disadvantaged students was questioned. The Chairperson mentioned that the Department of Transport was presently working on the Green Paper on Maritime Transport.

Meeting report

The Chairperson commented that the Committee had called in the South African Maritime Safety Authority (SAMSA) so it could be briefed on the state of the maritime industry in South Africa as well as the challenges and opportunities which existed in the industry. The meeting was based on a directive from the Speaker that the Chairpersons of the Portfolio Committees on Transport, Public Enterprise and Trade and Industry engage with SAMSA so that a better understanding could be gained about the maritime industry in South Africa.

It had been agreed by the three chairpersons that the Portfolio Committee on Transport spearhead the engagement with SAMSA at a joint meeting of the three Portfolio Committees. A joint report based on the meeting would then be presented to the Speaker.

She stated that one of the aims of the meeting was to inquire about how the maritime industry could create job opportunities. The second aim was to ascertain if the maritime industry could enable South Africa to participate in the manufacturing of ships. The third aim was to establish if there were disadvantages arising from the actions of the government in 1993 which got rid of the fleet of ships owned by the country.

South African Maritime Safety Authority briefing
Mr Tsietsi Mokhele, SAMSA Chief Executive Officer, started the presentation by giving an overview of the South African maritime industry. South Africa had a
3,000 km coastline in three oceans on a major strategic shipping route and had eight established commercial ports. South Africa’s trade accounted for over 50% of the Gross Domestic Product and this translated into the fact that 98% of the country’s trade was carried on ships. South Africa’s trade also accounted for 3.5% of the global sea borne trade and the country was in the top 15 countries based on sea trade by distance.

South Africa’s continental shelf claim increased the sea land to 2.8 times the land mass of the country and extensive off shore interests of the country included islands, the Antarctic, marine and offshore oil and gas resources. South Africa led Africa’s intra-regional and international trade. In Africa, the country accounted for 25% of the exports within African countries while it accounted for 16% of the exports of African countries to the rest of the world. All these trade activities were carried out on sea. In respect of imports within Africa, South Africa accounted for 10% of such imports while the country accounted for 25% of the imports of African countries from the rest of the world.

The South African
maritime industry was divided into seven key components. These components were the maritime logistics infrastructure; shipping transport; ports, coastal and marine services; fisheries, pharmaceuticals and aquaculture; off shore energy and mining; boating and cruising; sports and recreation. The key focus areas of SAMSA were shipping, ports and logistics, vessel construction and repairs, marine leisure and tourism, offshore energy and minerals, fishing and aquaculture, boat building and repairs, national shipping law, marine skills development, infrastructure development, ship registry and maritime business support services.

Mr Mokhele turned his attention to strategic challenges facing the South African maritime industry. In respect of cargo movement, approximately 95% of South Africa’s total import and export trade by volume and 80% by value, was carried by foreign ships employing 240,000 foreign seafarers. South Africa had no ships on its Merchant Ship Register and paid over R36bn in 2007 to foreign owners and operators for maritime transport services. In contrast to the position in South Africa, Brazil had 172 vessels on its register, Russia 1 891 vessels, India 534 vessels, while China had about 2 044 vessels. India through its state owned national carrier, SCI, had gone on a shopping spree for ships [a block purchase of 29 bulk and tanker carriers] to secure its interests in the growing shipping trade. China had already become one of the world's top ship owning and operating nations. Nigeria not only had an indigenous shipping company and exercised cabotage in its waters, it was also out shopping for ships ($106.5m allocated to support its coastal transportation and had raised $1.8bn to acquire a tanker fleet of 29). Countries such as Australia, Brazil, Russia were all ahead of South Africa and a radical solution to the situation was needed.

Mr Mokhele said t
he establishment of a national carrier or multiple carriers on the country's key trades was a feasible strategic pursuit. Transport was after all a significant industrial production input element. Currently due to the misguided policy of exporting goods on Free on Board (FOB), South Africa was losing on the affreightment benefits running into billions of rands on both imports and exports, not to mention the loss of revenues, direct and indirect job opportunities and business opportunities. It was more advisable for the country to opt for Cost Insurance and Freight (CIF) which would ensure that all the benefits in respect of the affreightment of goods would accrue to the country.

In respect of the strategic actions to be taken, it was important to consider spearheading the establishment of both a domestic and African Regional coastal shipping trade regime; the African Maritime Charter had already created a policy framework for it. The consideration of bringing in a cabotage policy together with the coastal shipping system was recommended as a policy choice. The 200 metric tonnes (MT) of cargo constituting the country’s seaborne trade, which was expected to rise in the bulk commodity and some value added trades, would create economies of scale to support South Africa’s re-entry into blue-sea merchant shipping transport. If the bulk trades were to implement the government policy on the Maritime BEE Charter and move 25% of the trade [50MT] on national carriers, the iron ore and coal bulk trades alone would support a fleet of vessels. The implementation of the UN Commission on Trade and Development through its World Trade Organisation (WTO) which accepted a 40-40-20 rule and which allowed for cargo reservation of 40% exports, 40% imports to be reserved for national carriers [adding up to 80MT in South Africa’s case], would support a national fleet of vessels.

In the area of fishing,
fishing vessels made up the largest portion of the South African ships registry. It currently employed over 20 000 people from very poor communities along South African coastline and generated over R40 billion rand per annum. However, there was an aging fleet of 1 750 fishing vessels and 900 of these fishing vessels were out dated, old, unsafe and require recapitalisation which led to an unacceptable level of fatalities. Another issue was that the social impact of fishers on their communities included the burdens of high alcoholism and other substance abuse.

Mr Makhele looked at transport logistics, noting that the coal export corridor carries 62 to 68 million tonnes instead of 98 to 110 million tonnes. Likewise, the iron ore corridor carries 33 million tonnes instead of 48 million tonnes.

In respect of maritime infrastructure, there was a need for
a dedicated focus on the development of commercial ports and their related infrastructure (e.g. Cargo and passenger terminals, Dry Docks) marine and cargo handling operations and equipment maintenance, Inland ports development and performance. Maritime railway corridor linkages/connectivity was critical to the performance of the South African Port System and long term neglect had robbed South Africa of macro maritime supply chain efficiencies that enable global competitiveness. This had led to a lagging and poorly serviced oil and gas sub sector and a nonexistent cruise tourism subsector. There was a need for South Africa to embrace boat building and repairs as well as component manufacturing which had the capacity to create long term sustainable jobs ranging from unskilled, through semi-skilled up to complex and sophisticated jobs.

In terms of maritime business support services, South Africa had pockets of excellence in providing world class maritime services such as consulting, legal services, surveys and bunkering. However, South Africa needed to more effectively leverage this history to position South Africa as the International Maritime and Shipping Services Centre wherein others from around the globe and the broader African continent could procure such services. This segment of the business could create many jobs, attract enterprise development opportunities and attract foreign direct investment to the country. South Africa’s marine tourism remained unexploited with potential for investments in
cruise tourism, coastal and inland waterways tourism, marinas and marine real estate development, leisure, water based sports and recreation.

In terms of maritime research development and innovation, t
he current and future energy and food security in the age of climate change debates presented an opportunity for investments in renewable energy sources such as wind, tidal and aquaculture. South Africa’s vast continental shelf and offshore land areas offered investment opportunities for deep sea mining and pharmaceuticals. The maritime sector was a high technology sector which was changing rapidly. It required investment in research and development, as well as continual process and technology innovation. It also had many international obligations towards marine environment, shipping safety and security yet the country had limited response capabilities and facilities.

The Chairperson commented that she did not have any knowledge about maritime affairs. The meeting was therefore important for lawmakers to have information to about the issues challenging the maritime industry. She observed that there were not any subjects being offered in the schools which could expose students to maritime matters. Efforts should be made to expose students to maritime studies from primary school.

Ms N Ndaka (ANC) asked what was stopping the government from buying its own ships.

Ms N Ngele (ANC) asked what was being done about students who were disadvantaged and who dropped out of school because they did not have any financial capacity to sponsor their education. She asked about SAMSA’s programme for such students. She asked if they would be abandoned because they did not have any qualifications.

Mr M Duma (ANC) commented that the fact that South Africa was a maritime country should be contained in the National Development Plan. South Africa saw itself more as a mining rather than a maritime country. This ought not to be so because there was always the likelihood that the mines could close down after the resources had been exhausted but that the sea would never close. It was essential that a lot of resources should be invested into the maritime industry.

Mr Duma agreed with the Chairperson’s comment about exposing students very early to maritime studies. He asked why students had to wait until university level to learn anything about maritime matters.

Mr N Magubana (ANC) asked why the seafarers working at ports were employed on a temporary basis. He had observed many of the seafarers were not well taken care of and worked under deplorable conditions.

Mr Magubana observed there were no vessels registered on the South African registry. He asked what was stopping the South African government from buying and developing its own its own fleet of ships instead of allowing foreign ships to dominate international trade.

Mr Magubana commented that South Africa was spending so much money on enlarging and developing its harbour. He wondered why shipowners who frequented the South African harbours could not be made to contribute to the money spent in developing these harbours.

The Chairperson requested SAMSA to refrain from responding to the question on the reason the government was not developing its own fleet of ships. The decision which led to the selling of the previous fleet of ships owned by the country was taken at the dawn of democracy and this decision was politically based. The question would be looked at when the Committee considered the Green Paper on Maritime Transport which the Department of Transport was presently working on. She said the other question could be responded to.

Mr Mokhele responded to the question about what SAMSA was doing to ensure maritime studies was introduced at primary schools. He said SAMSA was working in partnership with the Department of Basic Education (DBE) to ensure that some schools would be declared as maritime high schools which would offer maritime programmes. He stated that all other schools would benefit from maritime awareness.

Mr Mokhele said that SAMSA would ensure that the schools which were nominated by the DBE as maritime school would offer maritime programmes. Limpopo province had already nominated such a school and SAMSA had been there to commence the offering of maritime studies. Kwazulu Natal had also nominated four school and these schools were being worked upon.

On the working conditions of seafarers and the temporary nature of their employment, he said that there would be a joint hosting of a maritime job summit by SAMSA and the Department of Labour in September 2012 to discuss the working conditions of workers in the maritime industry.

Ms Sindiswa Nhlumayo, SAMSA executive in charge of capacity building, stated that it was clear that South Africans had been ignorant of the opportunities in the South African maritime sector. Maritime awareness on its own would not do much for the country and there was a need to develop skills if South Africa wanted to be competitive. One needed to strengthen maritime studies in tertiary education and source teachers who could teach these maritime studies.

Mr Mokhele replied to the question about SAMSA’s plans for school dropouts who could not complete their education. SAMSA had commenced a conversion programme to ensure that those people who had qualifications in other fields and those who had no qualifications would be converted to useful purposes in the maritime sector. The results were quite positive and graduates had already started to emerge from this conversion programme.

The Chairperson thanked the SAMSA delegation.

The meeting was adjourned.


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