The shipping news: This ship has sailed

7 Dec 2022

It just doesn’t seem to penetrate the bureaucratic brains that maybe SA is not in the shipping business because it’s very competitive, very hard to do, and you need a lot of ships.

The Department of Transport last week released for public commentary the first draft of the South African Shipping Company Bill. The legislation aims to establish the country’s first national shipping carrier. Now, we are going to all have to contain our enthusiasm here, and not because the prospect of another state-owned enterprise is just too thrilling for words. What could possibly go wrong?

Actually, as it happens, the notion of a South African shipping company is not, in principle, a terrible idea, at least in my opinion. SA did once have a shipping industry, Safmarine, but the company was sold long ago to Maersk, the Danish shipping giant.

The justification for the South African shipping company, to be called, very originally, the SA Shipping Company (Sasco), was outlined in the Comprehensive Maritime Transport Policy, which was published in 2017. So, not that one necessarily expects lightning action, but it is worth noting that it’s taken the Department of Transport five years from the point of conception to actually produce some legislation. Anyway, it is here now.

The policy makes the following points: SA generates about 300 million tonnes of global seaborne trade activity. This constitutes just over 1% of the total global seaborne trade. In 2014, however, SA companies (through ownership or long-term charter) controlled only about 0.13% of global carrying capacity, the document states. The national flagged fleet is less than 0.01% of the world’s total.

The policy document sees enormous potential in this disparity. “There exists an imbalance, which if addressed, has potential to create economic opportunities for South Africa and the South African shipping industry,” it says.

“Ships owned by South Africans and ships sailing under the South African flag have drastically diminished. This occurred incomprehensibly during one of the fastest growth periods in international trade volumes experienced by South Africa and it led to a significant loss of critical public and private maritime expertise, auxiliary support, commercial maritime services, industrial capacity, the potential for research, innovation, and development that a country accrues from owning and operating indigenous ships.

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“We need to rebuild South Africa’s presence in global shipping trade,” it says. Well, of course, almost everybody would raise a glass to that idea. But the question is, how? In some ways, the new proposed legislation aims to answer that question.

Before we examine it, just imagine for a moment, how a country, any country, might best approach the issue. One of the first questions to ask, and this is coming right off the top of my head, is this: Is there a global shortage of ships? If there isn’t, you better have identified a niche in the industry that SA could conceivably fill. (Hint: there is no global shortage of ships, there is a global oversupply of ships).

One other thing: how is this all going to be financed? The top 10 global shipping companies have somewhere between 100 and 700 ships. Say you want to start modestly and have a company with just 10 ships. How you would compete with 10 ships against companies with 10 times that, I don’t know, but anyway… what would that cost? Modern container ships cost about $130-million a pop, so that’s R2.3-billion each, so call it R230-billion. That is three times the current budget of the Department of Transport.

What does the new legislation say about what niche the new company will fill? Actually, nothing. It just says the company will “own and manage a fleet of vessels, either bought or built, that will work alongside and aid logistics services and infrastructure”. But it won’t only manage the ships, it will also offer tanker services, bunkering services, container services, bulk cargo services and coastal shipping services. (I am not making this up.) It is just the broadest of broad shotgun approaches.

And what does the legislation say about the cost? Actually, nothing. It says the company will be financed by the “Industrial Development Fund” (presumably they mean, the Industrial Development Corporation) and money appropriated by Parliament. But how much? What for? All those pesky details are conveniently blank.

What is clear is the ownership structure. No irritating cooperation with the private sector here. The company will be 100% state-owned.

Obviously, with Eskom trying to wriggle its way out of a R400-billion debt burden, this is not going to happen. But what irritates me here is the mentality we see so often in government-owned businesses. The essence of the approach is a massive over-emphasis on ownership and a massive under-emphasis on the precise nature of the business opportunity, if there is one. (There isn’t.) It just doesn’t seem to penetrate the bureaucratic brains that maybe SA is not in the shipping business because it’s very competitive, very hard to do, and you need a lot of ships.

So what could SA do instead? The Western Cape government, which by the way opposes the creation of the shipping company, suggests the way forward is to spend money on ensuring SA’s ports are more efficient and have the infrastructure to function optimally. This is actually an issue highlighted in the policy document.

I also think SA could upgrade its shipping service industry, which would be a way to gradually gain more understanding of the industry as a whole. Once that expertise is gained, then identifying a niche that SA could fill might be a possibility. I doubt it, but it’s not impossible. Gradualism is, sadly, not our government’s forté; throwing bones to the left wing of the party before the governing party’s national congress is. DM/BM

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