The overriding objective of the department of transport (DoT) to develop SA into one of the world’s top 35 maritime nations (See: “Government takes action to revive SA shipping sector” FTW December 13) is, at this stage, purely a dream, according to Andrew Robinson and Peter Lamb, maritime specialists at the international legal firm, Norton Rose Fulbright (NRF). “The maritime transport policy (of August 10 , 2010) and the drive for an SA ship register has been hailed by many in government as a bold new dawn for the maritime industry,” Robinson told FTW. “But many who are involved in the hurly-burly of the commercial maritime world have commented to us that this well-intended zeal to create a national fleet that we can be proud of is a misguided chasing of a rainbow.” The main problem is that SA is starting from a zero base. “There are currently no cargo ships of any description on the SA Register,” he added. “And, apart from the new tax exemptions, there is little to attract any potential customers. There is also little to encourage banks or, as is currently the case, other private equity interests, to invest in ships.” The NRF duo also highlighted that, for some reason, the government believes that the vast tonnage of bulk export cargo leaving the ports of Richards Bay and Saldanha Bay should be carried by SA-owned ships. Robinson conceded that, in the days when the freight rates were extremely high, it was frustrating to see foreign shipping lines earning vast sums of money – but freight rates are a fraction of what they were and running ships is now an altogether more miserly game. “But the reality,” Robinson said, “is that ships that leave Richards Bay or Saldanha are large bulkers that are unlikely to return until much later, given that there is very little demand for bulk cargoes being shipped into SA ports. It follows that SA-flagged ships will still be obliged to trade in competition with other flagged vessels. It seems unlikely that, even over time, there will be enough SA flagged ships to service the SA bulk export market. “SA is a major exporter of bulk products, such as coal and iron ore. Furthermore, the local industry players often prefer to export on a free on board (FOB) basis. In this instance, it is the foreign buyer that charters in and pays for the tonnage required, using the benefits of their existing chartering arrangements, often at a lower freight rate than can be arranged by an SA seller. It is not clear how the government intends incentivising local exporters to either sell on cost, insurance and freight (CIF) or cost and freight (CFR) terms, or to encourage foreign buyers to charter in SA-flagged ships.” But, Robinson suggested, if local industry players were encouraged to sell on a CIF basis and to purchase on an FOB basis, opportunities for employment in the landbased maritime sector would be created. But government has not indicated how it would incentivise this. For SA to attract ships onto its register, according to Lamb, a drastic change of regime is required. “And this,” he added, “begs the question - why do it? “We are not traditionally a large ship-owning nation. The few ship-owning companies that we had are no longer South African but have their head offices in Antwerp or Singapore. There is not a great volume of cargo moving between SA ports, so even if some sort of cabotage is introduced, there is probably insufficient cargo to sustain it.” But Andrew Pike, director of Van Velden Pike Incorporated, who was the source for the information in our December 13 issue, disagreed with this rejection of cabotage. It is a stimulant to reverse the current direction of freight f low, he told FTW. “I made the point that we have an outflow of billions of rand in freight and passenger fares each year because we have no ships of our own,” he said. “This is a serious issue and one of the main motivating factors for wanting to bring ships back onto the SA register. “Supporting legislation restricting cabotage activities to SA ships will also help to achieve this change in the direction of freight flow.” Lamb also pointed out that a main driver behind the maritime transport policy is that it aims to increase the number of vessels under the SA flag and to create employment in the maritime transport sector. But, he added, there is no obvious correlation at all between ship registries and the employment of seafarers – consider the Philippines (low tonnage but a great provider of crew) and Liberia (high tonnage but few of its citizens employed as crew). “If SA wants to encourage employment opportunities for seafarers it needs to provide the appropriate training facilities and possibly to amend its labour laws which are applied to seafarers,” he told FTW. The focus should be on training. Pike’s reaction to this was that he agreed that the creation of a national merchant fleet may not necessary make a meaningful contribution to employment. “Nonetheless,” he said, “it would make some difference. “Although each ship can only offer employment to around 15 crew members, in order to operate that ship the supporting infrastructure requires staffing. For instance, the administrative support of the ship-owning entity requires staff, and ship repairers would inevitably become busier with annual dry dock inspections and routine maintenance for locally-owned ships.” INSERT & CAPTION Freight rates are a fraction of what they used to be and running ships is now an altogether more miserly game. – Andrew Robinson . This article has been shortened due to space constraints. For the full version go to www.ftwonline. co.za and click on the ‘FTW continued’ menu item.
