It remains unclear how the South African government plans to entice ship owners to register their vessels in the country once the redrafted Merchant Shipping Act becomes law.
It is unclear when the bill – which is currently before Parliament – will be promulgated, while the rules guiding the long-overdue redrafted legislation have yet to be perused by industry – and it’s believed they have not yet been drafted. The impact of any legislation can only be ascertained once a Bill is read in conjunction with the rules and regulations accompanying it.
According to Malcolm Hartwell, a master mariner and director at Norton Rose Fulbright, the Merchant Shipping Act introduces cabotage in clause 61 and 62 stating that no ship, other than a South African-owned ship, is permitted to engage in coastwise traffic.
“It is unclear how they plan to encourage exporters to use SA-registered ships,” said Hartwell. “The only coastwise cargo solely carried between SA ports as is referred to in the Bill is some fuel and sugar. Other than that, the amount of coastal cargo is minimal,” he said.
Cargo moving from East London to Durban for export on the same ship, for example, would not be deemed coastwise cargo in terms of the legislation. The South African government, however, has been adamant that cabotage will contribute significantly to growing the maritime sector. There have in the past also been calls for African cabotage meaning cargo moving from one port on the continent to the other must be flagged somewhere on the continent. While talks of such practice have dramatically decreased in light of the impracticality of it all, South Africa has forged ahead with its own cabotage plan.
“Considering the size of the South African market and the costs involved it remains questionable how viable this all is.” Hartwell said cabotage laws implemented in Nigeria some 20 years ago had to date had no impact on the local ship owners and was considered to be far more negative than positive. The South African Maritime Law Association is on record stating that operating on SA-flagged ships would simply not work and would also make the country uncompetitive.
“The policy documents all talk about encouraging trade to use SA flagged vessels,” said Hartwell. “The only way to encourage businesses is with a carrot and a stick and this is not it. The stick might very well be in the new Customs legislation and the carrot in a tax rebate of some kind. We simply don’t know.”
The fact remains: The South African flag is unattractive compared to other maritime countries due to the import tax regime, shipowners being subject to an outdated legislative regime, the host of unresolved labour issues that continue to plague South African employers, the reluctance of financiers, local or foreign, to finance ship mortgages, and now the uncertain property rights regime
Considering the size of the South African market and the costs involved it remains questionable how viable this all is. – Malcolm Hartwell
