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Budgeting on a maritime economy

Budgeting on a maritime economy

Excerpts from Department Budget Votes

Given the number of Government departments that have direct and indirect input on maritime affairs in South Africa, Maritime Review’s editor, Colleen Jacka, looked at some of the relevant budget votes tabled by the respective ministers recently.


DEPARTMENT OF TRANSPORT

As the Department responsible for most of the maritime-related legislation and policy, it was once again disappointing to note the real lack of maritime substance in Minister Fikile Mbalula’s presentation on 25 May.

“Although the substantial share of the department’s expenditure is directed towards rail infrastructure, maintenance, operations and inventories, the balance of the budget is reserved for the South African National Roads Agency (SANRAL) for the upgrading and maintenance of the national road network; as well as provinces and municipalities for the construction, operations and maintenance of transport infrastructure and services,” he said before outlining some of the priorities that his department faces.

Predicting an annual increase of 8,1 percent in expenditure with the need for a budget of R72.5 billion in 2023/24 – it’s rather dismal to note the numbers he associates with maritime priorities. While the Fishing Fleet Recapitalisation Programme seems to have stalled, the department has revised the taxi recapitalisation programme and plans to scrap 63,000 taxis by 2024.

Noting the recent appointments of boards to the Ports Regulator and the South African Maritime Safety Authority (SAMSA), the Minister, however, fails to provide feedback on the plan to integrate all the regulators into one Transport Regulator – or for that matter to comment on the fact that SAMSA has not had a permanent CEO in place for over five years.

Turning his attention to the maritime sector, he reported that “more than R7billion has been invested in Marine Transport and Manufacturing”. The reality is though, that this has little to do with this Department’s budget and relates more to Public Enterprises under the guise of Transnet.

In fact, the need to work with the Department of Public Enterprises was emphasised in his Budget Vote.

“Amongst other interventions, is the corporatisation of the Transnet National Ports Authority (TNPA).  We are working closely with the Department of Public Enterprises to achieve this and ensure full compliance with the National Ports Act of 2005,” he said. This is another priority that should not be simply slipping from one year to the next.

Speaking of which – the plan to host “a round table discussion on how to create a conducive tax regime to grow South Africa’s ship registry” is almost an insult to the industry. Debates and discussions in this regard have been ongoing for at least a decade if not longer, but a lack of action now requires that the National Treasury, Department of Minerals and Energy, Department of Trade, Industry and Competition, Department of Public Enterprises, Academia and the private sector need to once again go through the motion of tabling what is surely a matter of public record already. (Pictured left: Cape Acacia - the latest vessel to be added to the South African Registry)

With a nod in the direction of Singapore and their acceptance of digital travel passes, something could have been mentioned about the plight of the seafarers that fall within the scope of his department and what is being done to prioritise their ability to join and leave ships within South African ports.

Indeed, The Netherlands has recently announced that seafarers joining vessels will not be subjected to the mandatory quarantine that other international travellers face.

It is time that the Department of Transport – logically considered the pinnacle of maritime departments within government – placed more of a priority on its maritime mandate.

DEPARTMENT OF PUBLIC ENTERPRISES

Also delivering his Budget Vote on 25 May, Minister Pravin Gordhan kicked off by acknowledging the damage caused by state capture, corruption and ineptitude within the State Owned Enterprises (SOEs).

“The inability to invest in new infrastructure, replace old equipment, pay salaries to workers, and other obligations is a consequence of the corruption and malfeasance,” he admitted.

Noting the importance of the port system to the country and other inland economies, Gordhan emphaised the need for new investment in infrastructure to increase port capacity, investment in adequate equipment, an increase in productivity at the ports, and appropriate tariffs.

“There is a need to align the TNPA (Transnet National Ports Authority) pricing methodologies to those of port regulation for competitiveness and efficiencies of the terminal operators. The institutional structure of Transnet, the establishment of TNPA as a subsidiary, and new creative partnerships with the private sector, particularly Black businesses, is imperative,” he said.

Although noting some of the investment in equipment being made by Transnet within the ports, he did not however, acknowledge the dismal scoring for local ports in the recent World Bank ranking of 351 global ports.

He did report that partnerships had been undertaken with research institutions and innovation hubs to address weather challenges that contribute to congestion in the ports.

He also emphasised the need for private sector participation in the port system in an effort to reposition the Port of Durban as an African and Indian Ocean hub for containerised cargo.

“In addition to the container and automotive growth strategies, Transnet is enhancing its export growth capability in the bulk sector focussing on mega corridors through the road to rail initiatives,” he added.

Addressing the farming industry’s concerns about inefficiencies in the Port of Cape Town, he said that equipment was being transferred from Durban to support export capacity of fruit and cold goods. In relation to congestion issues that continue to thwart movement of cargo in the Port of Durban, he said that engagements with property developers to acquire land for truck staging for cargo to the Maydon Wharf terminals was being undertaken.

A quick nod in the direction of Denel showed that the SOE is continuing to face financial and operational difficulties with full salaries last being paid in May 2020.

“The Economic Reconstruction and Recovery Plan identifies the Defence and Aerospace industry as key to economic growth, particularly in localisation and exports. The Defence and Aerospace Masterplan was finalised last year,” he said. This does include maritime defence.

DEPARTMENT OF PUBLIC WORKS AND INFRASTRUCTURE

Addressing the rather pressing issue of small harbours in her Budget Vote on 25 May, Minister Patricia De Lille, reported that R500 million had already been spent to repair and maintain the proclaimed fishing harbours within the Western Cape and this formed part of the Department’s contribution to Operation Phakisa to develop the oceans’ economy.

She added that this investment had created 672 jobs and empowered local SMME companies to the value of R61 million. “The Programme is expected to reach culmination by March 2022, bringing the existing harbours to an 80 percent operational efficiency,” she said failing to acknowledge that the current operational efficiency is far below harbour-user requirements and expectations. Aiming for an 80 percent efficiency by March next year is unlikely to appease many.

Interestingly, De Lille reported on a “kind grant from the Chinese government” to conduct feasibility studies along the coastlines of the Northern Cape, Eastern Cape and KwaZulu Natal to develop new harbours.

She concluded by saying; “The Deputy Minister and I are determined to lead and drive a greater level of urgency in DPWI to ensure that we deliver to the people of our country and expedite the implementation of the Infrastructure Investment Plan so as to create the conditions conducive for investment by the private sector which can in turn create more jobs for our people.”

 

DEPARTMENT OF MINERAL RESOURCES AND ENERGY

Discussing the “ocean’s economy agenda”, on 18 May Minister Gwede Mantashe emphasised the significance of oil and gas exploration in the country’s territorial waters.

“In October 2020, Total announced a significant gas condensate discovery on the Luiperd prospect, located in the Outeniqua Basin, 175 kilometres off the southern coast of South Africa.  This Luiperd well was drilled to a total depth of 3,400 metres and intercepted 73 metres of net gas condensate pay in well matured lower Cretaceous reservoirs. Following coring and logging more work is being done to test the dynamics and characteristics of the reservoir,” he said adding that the significance of the find should not be underestimated.  

“These two gas finds, the onshore gas operation in the Free State, coupled with more prospects that is under way along South Africa’s western and eastern territorial waters are delivering positive signals that we will succeed in developing these resources in line with our ocean’s economy agenda,” he told parliament.

Currently developing an “exploration strategy”, Mantashe said that the Department aimed to increase the country’s share of the global exploration in the next three to five years. As such the Upstream Petroleum Bill has been approved by Cabinet and will be tabled for parliament shortly. This is being hailed as the needed game-changer that will unlock exploration and develop a local industry component.

“Our developmental state is centered around a legislative framework that captures among others our transformative agenda, our environmental commitment to the society, as well as setting both the minerals and energy sectors on a growth path. Precisely for that reason all hands have been on deck in advancing the course,” he explained.

  • Council for Geoscience – R377.1 million mainly for operational activities.
  • Petroleum Agency of South Africa - R136.3 million for operations.

DEPARTMENT OF FORESTRY, FISHERIES AND THE ENVIRONMENT

The Department under Minister Barbara Creecy, which took the strange decision to rename itself on 1 April this year, plays an equally important role in the maritime industry and has been managing the ongoing Operation Phakisa programme since its inception in 2014.

Speaking to the National Assembly (NA) on 14 May and the National Council of Provinces (NCOP) on 25 May, Minister Creecy had to defend the department’s position with regard to allocating fishing rights as well as champion of Phakisa’s ability to deliver quick results to the sector.

High on the agenda was the Fishing Rights Allocation Process (FRAP) 2021 which is pacing itself slowly towards meeting an allocation deadline of 31 December this year. Despite mounting doubts from industry commentators, the minister affirmed that the deadline was feasible and that the department had appointed service providers to “bolster” its capacity to succeed by the year end to re-allocate rights in 12 fishing sectors.

“The FRAP 2021 implementation process aims to be clean, transparent, accountable, transformative and legally defensible,” she told the National Assembly alluding to past incidents of court challenges from the industry.

Based on her presentation, however, the department appears still to be in the process of review. “As part of the FRAP 2020/21 process, the Department will be reviewing the General Policy on the Allocation of Commercial Fishing rights; the 12 sector-specific policies; the Policy on the Transfer of Commercial Fishing Rights, and the Policy on Fish Processing Establishments (FPEs). The department will also be reviewing all our fees for applications, licences and permits,” she said.

The current FRAP process will also, for the first time, include the undertaking of Socio-Economic Impact Assessments (SEIAS). These will be taken into account during the review process mentioned above. The deadline for commenting on the outcome of some of these assessments was recently extended – a situation that could have knock on delays for the entire FRAP timeline.

Small scale fishing also came under the spotlight as she highlighted some of the successes and challenges being faced in this sub-sector. While 110 Small Scale Fishing Cooperatives were allocated 15-year fishing rights across the Northern Cape, Eastern Cape and KwaZulu Natal prior to the lockdown in March 2020, the restrictions associated with COVID-19 have impacted on the support offered.

The department aims to increase the basket of species available to this sector with the view of instituting an apportionment split for squid, linefish and abalone. The industry is still awaiting more details on this initiative, however.

Unlike the areas mentioned above where some success has been achieved in rights allocation within the small scale fisheries sector, a number of challenges in the Western Cape saw the department approach the courts to set aside the rights in the province.

“This decision was informed by the outcomes of an independent audit which found that the process was not fair and transparent; and that many bona fide fishers were left off the successful list while others were included who should not have been successful,” she explained adding that until such time as this has been concluded, those with existing rights under previous dispensations are being permitted to fish.

Turning her attention to the department’s role in emphasising the country’s maritime status under the Operation Phakisa initiative, the minister noted the economic potential presented by South Africa’s jurisdiction over one of the largest Exclusive Economic Zones (EEZ) in the world.

“Our oceans represent a significant asset for current and future generations, with enormous economic potential, in aquaculture, bioprospecting, marine ecotourism, extractive industries, and less obvious benefits of healthy ecosystem services such as climate regulation, carbon storage and waste absorption,” she said.

Noting that the ocean economy has thus far contributed R41 billion to the South African GDP and created 26,764 jobs – presumably since the implementation of Phakisa in 2014 – what Minister Creecy, and the government, however, fails to take into consideration is the extent of job losses in the sector over the same period. While there have been some gains – there have also been some significant losses including the total closure of one of the country’s oldest ship repair institutions.

Giving credit where credit is due, however, those industry stakeholders that have been privileged enough to be present in the online engagements with the Minister over the last year have been encouraged by her tenacity to tackle some of the bottlenecks and deadlocks head-on. She has proved willing to listen to concerns directly from the industry and has attempted to take other government departments to task where possible.

“Over the last year, our increased effort has seen us working with sister departments and the respective industries to stabilise the sub-sectors and sustain jobs.   The Department of Trade, Industry and Competition is helping us to address issues around market diversification, both internationally and locally, for the aquaculture and fishing sector affected by Covid 19 - related market restrictions,” she said reporting that steps have been taken to address the challenges in the marine engineering sector including repairs to infrastructure and dry-docking facilities.

Acknowledging the priority given to aquaculture development under Operation Phakisa, Minister Creecy reported that consultations around the Aquaculture Development Bill are being finalised and that she hopes to see the Bill tabled in Parliament before the end of the year. The Department is also developing a National Freshwater Wild Capture Fisheries Policy.  

During her speech to the NOC, she said: “Within the Aquaculture sub-sector, projects are being implemented in inland and coastal provinces, focusing on both fresh water and marine species. Of the 45 projects in implementation, 28 are in production phase and distributed across the provinces, aligned to the District Development Model.

“Access to land and basic infrastructure such as water supply, electricity and roads are key in the implementation of these projects.  The involvement of Local and Provincial Authorities is thus critical if we want to advance aquaculture in order to promote local and rural economic development.  We need to collectively explore local markets for fish and aquaculture products so that local jobs are created within the value chain.”

She also noted the importance of integrating terrestrial and marine spatial planning to the NOC. To this end the Department has, together with the Nairobi Convention within the Western Indian Ocean (WIO) Large Marine Ecosystems (LME) have agreed to strategic cooperation to implement demonstration projects regarding Land - Sea Interaction (LSI) planning for a coordinated Ocean and Coastal Ecosystem Management approach in South Africa.

These projects are being funded by the Global Environment Facility (GEF) under the United Nations Environmental Programme (UNEP) for two years.

Concluding her presentation to the NA, Creecy said that, despite the need to grow the ocean economy, it was necessary to remain mindful of the impact that increased activity would have on the health of the oceans.  

“Hence our Oceans Economy Programme includes a specific focus on marine protection and ocean governance.  Our Marine Spatial Planning Act provides for the development and implementation of a shared marine spatial planning system to facilitate responsible use of the oceans, and to conserve the oceans for present and future generations,” she said.

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