Government moves to enforce cabotage for coastal traffic through the newly re-drafted Merchant Shipping Act is not just raising industry eyebrows but also hackles.
Seen as an attempt to grow the country’s maritime economy and ships register, the Act, which is currently before Parliament, will restrict the carriage of coastal cargo to SA-registered vessels once promulgated. Considering the lack of attractiveness of the South African flag at present, as well as the volume of coastal cargo available, the practicality of this legislation has been questioned. There is also some uncertainty over the impact it will have on shipping in general.
“The current proposed clause 61 in the Bill states that no ship arriving from a place outside South Africa, although bound for more than one port in the Republic, shall be deemed a coasting ship – meaning mainline carriers will not be impacted,” said an international shipping line representative. “However, that exclusion has been raised at subsequent meetings since the new Act was published in March this year on the basis that if it applied there would be very little cargo reserved for South African-owned and licensed ships.”
The representative, who preferred not to be named, said in a meeting with the Department of Transport (DoT) earlier this year officials had confirmed that the intention of the Act was that all cargo loaded in one South African port and discharged in another, whether for repositioning purposes or not, was intended to be reserved for South African-owned and licensed ships and confirmed that the section would be amended accordingly.
“Clearly the implications of this are enormous,” he said. Whilst to date the bill had not been amended, even in its current state it was questionable, said Malcolm Hartwell, a master mariner and director at Norton Rose Fulbright.
“The cabotage issue really is a red herring,” Hartwell told FTW. “Ship owners and industry at large have repeatedly said the reason ships are not on the SA registry has nothing to do with the carriage of cargo along the South African coast, but that the country’s registry is just not attractive compared to that of countries like Malta, Singapore and Liberia.”
It is commonly accepted that for any cabotage laws to have even a remote chance of successful implementation, the government would need major fiscal concessions to increase the attractiveness of vessels flying under the South African flag.
“International vessels can be registered anywhere and there are many countries that are not only more affordable, but also have no laws that are hostile to ship owners, and are efficient and tax friendly.”
He said in comparison South Africa remained extremely unattractive. “There would be real challenges for companies opting to register here as our labour legislation would apply to them. The new Act makes it very clear that while the Basic Conditions of Employment do not apply, the Labour Relations Act does as well as all of the broad-based black economic empowerment legislation,” said Hartwell.
He said it remained unclear how the country was planning to encourage exporters to use SA registered flags.
“The new Customs acts introduce the notion of an export tax. They might try to use that to force cargo onto SA-flagged ships, but that is just going to ensure that traders go to different markets to source rather than South Africa.”
South Africa currently has a handful of merchant vessels on its registry.
