Tuesday, June 19, 2018

The Viking Buy-Out: Good or Bad?

Over the past few months we have seen two large transactions concluded involving the procurement of wild fish quotas worth more than R230 million. 

The first one to be approved this year by the Competition Tribunal and the Department of Agriculture, Forestry and Fisheries involved the effective buy-out of Talhado Fishing Enterprises by Premier Fishing in the squid sector. The Talhado transaction was particularly well-timed given the recent recovery of squid stocks and vastly improved fishing conditions (including prices) and the current depressed South African currency. Premier's purchase of Talhado's squid interests gives it effective control over some 20% of the total fishing effort available in the SA squid industry and just under 25% of the South African squid export market share. 

The purchase of Viking Fishing's entire portfolio of fishing quotas by the Sea Harvest Consortium Group is a substantially more complex and important transaction for South African fisheries management. For one, the consortium's purchase extends across 9 of South Africa's 22 commercial fishing sectors and involved 34 individual fishing rights transfers in sectors such as hake deep-sea trawl, hake inshore trawl, KZN prawn trawl, horse mackerel, West Coast rock lobster (offshore), tunas and small pelagics. 

Although there have not been any notable objections raised to either transaction, the Viking/Sea Harvest transaction raised a minor concern about the impact the deal would have on "small-scale" fishing and the relationship between directors of Sea Harvest, Oceana Ltd and Brimstone Investments, which owns equity in both Sea Harvest and Oceana. Giving the transaction the green light in May 2018, the Competition Commission authorised the transaction subject to the condition that Oceana Ltd and Sea Harvest (Pty) Ltd may not share any single director. With regard to the concern raised by a third party about the impact on "small-scale" fishing, this concern was patently misplaced given that the transaction did not concern any small-scale fishing sector fishery or small-scale fishing fishing rights. 

With the contraction in the size of wild fish quotas, coupled with increasing operating costs (particularly fuel and labour costs), consolidation of fishing effort (and thus the number of large fishing companies that principally export substantial volumes of high value South African seafood such as white fish, lobsters, tunas and wild-caught prawns) is a necessary commercial reality. Consolidation of fishing effort has long been a fisheries management policy (since at least 2005) and of course is in congruence with the policy prescripts of the National Development Plan, which recognised the importance of consolidating South African fishing quotas within the context of global seafood trade where South Africa is a very small contributor. 

South Africa's principal area of fishing instability and mismanagement remains the small-scale fishing sector which continues to operate schizophrenically under the notion that allocating small-scale fishing rights to hundreds of "fishing co-operatives" with hundreds of members will magically solve the dire socio-economic hardships faced by fishing communities. But this matter has been extensively covered by previous blog-posts. 

One of the more interesting aspects of the Viking/Sea Harvest transaction is the condition which the Fisheries Department attached to the approval of the buy-out of Viking's horse mackerel fishing rights. The horse mackerel sector quota purchase will create a significant competitor to Oceana Ltd for the first time. But more importantly, the Fisheries Department has required that an initial 5% of the quota has to be landed and processed in South Africa before being marketed (whether locally or regionally). A consequence of this condition will be that smaller fishing vessels will have to be deployed to the fishery as opposed to a single, expensive and inefficient large mid-water trawler, allowing smaller right holders in the fishery to be less dependent on Oceana Ltd to catch, process and market their quotas. The prospect of on-land fishing processing jobs is also created. 

Sunday, February 18, 2018

Fisheries & Oceans Governance Under a Ramaphosa Presidency

Subsequent to President Ramaphosa's 2018 State of the Nation Address on Friday last week, his mention of the need to reduce the size of his Cabinet has led to some interesting speculation about the possible reconfiguration of the environment-related government departments.

In 2009, President Zuma split fisheries and oceans management between two separate departments (DAFF and DEA, respectively) despite all expert and academic advice that to do so would cause more harm to fisheries and oceans governance. Not to mention that splitting oceans and fisheries governance would be in direct contradiction to the domestic and international recognition that oceans and fisheries governance required integration, not disintegration.

Ideally, I believe that an efficient and effective administration responsible for regulating the environment (within the context of the Bill of Rights) would entail the creation of a single super environment ministry with deputy ministers responsible for overseeing -

  • fisheries, ocean governance and aquaculture;
  • water, human settlements and sanitation; 
  • forestry and terrestrial park management; 
  • agriculture and land affairs. 
Each of the above departments will be led by a director-general as opposed to the current departmental branches that report to directors-general who by large lack the sector expertise to actually provide technocratic leadership.

We already have a suite of overarching environmental laws under the NEMA statute umbrella that provides overarching environmental, protected area and biodiversity regulation. This bureaucratic structure would also be able to give effect to the important prerogative of implementing an ecosystem approach to environmental management.

Financial savings from the consolidated bureaucracy can instead be used for actual enforcement, monitoring, research and management.

Sunday, February 11, 2018

New Entrants to the SA Horse Mackerel Fishery: 1 Year On

In December 2016, the South African government took the brave step of expanding the South African horse mackerel fishery by granting fishing rights to new entrants for the first time this century. The last time mackerel rights were allocated back in 2005, it was decided to maintain the status quo in a bid to support the investments made up to then (including the introduction of a large Russian flagged mid-water trawl owned and operated by the Oceana Group) and on the understanding that the crop of right holders would begin to change the manner in which horse mackerel was fished, processed and marketed.

Over the duration of the long term fishing period, nothing in fact changed. The fishery continues to be dominated by a limited number of vessels (1 midwater trawler and a handful of hake trawlers that also target horse mackerel for their owners). On-land processing remains almost non-existent with minimal jobs created in factories in Cape Town and Port Elizabeth.

So, when 27 new entrant rights were allocated in December 2016, there was expectant hope that the fishery would open up to new and alternative fishing technologies, including the deployment of smaller vessels and greater on-land processing.

More than 12 months later, and most new entrants have either been forced to enter into exploitative agreements with traditional vessel owners or have elected to not activate their quotas at all. Because the traditional or "pioneer" operators in this fishery remain in control of the vessels, processing capacity and market access, new entrants have been denied the right to bring in alternative, smaller vessels that would permit them to exploit their quotas more efficiently and profitably.

New entrants who have elected to have their quotas caught by one of the pioneer companies, have been forced to accept a paltry R1/kg for their supposedly high-value quotas! They are denied the right to negotiate when their quotas are caught, how the fish is processed or where it is sold. They are also required to forsake any claim to valuable by-catch species.

They are nothing more than beholden paper quotas who apply for their annual permits and wait for the proverbial cheque in the mail.

This feudal system cannot be permitted to continue for the next 14 years.

The Department needs to proactively start supporting new entrants by -

  • facilitating access to alternative, smaller vessels;
  • providing new entrants who invest in vessels, processing technologies and/or market access for their own fish with subsidies via levy discounts;
  • negotiating access to markets in Southern Africa by, inter alia, introducing right holders to buyers and traders; and
  • supporting and funding an annual South African fish trade expo. 

The Law of the High Seas

After more than five years of negotiations, UN state members agreed at the end of 2017 to draw up a new rulebook by 2020, which will establish conservation areas, catch quotas and scientific monitoring in terms of an internationally binding treaty to protect and regulate the High Seas. 

The waters outside national maritime boundaries – which cover half of the planet’s surface – are currently a free-for-all that has led to devastating overfishing and pollution.

The 2017 UN vote was supported by 140 nations, which is more than the two-thirds needed for passage to authorise the commencement of substantive negotiations on the text for a Law of the High Seas Treaty. The conclusion of a High Seas Treaty would mark the most significant development of oceans management since the adoption of the UN Convention on the Law of the Seas in December 1982. The UN will now host four meetings over the next two years to draft a legally binding treaty. 

Only 3.5% of the world’s oceans are currently protected. The remainder is increasingly over-exploited and contaminated by pollution, fishing and seabed mining. However, rapidly increasing global public concerns about the ongoing mismanagement of marine ecosystems, the pollution of seas and the threat of damaging seabed mining have focussed a majority of governments and politicians into accepting that the High Seas can no longer be left unmanaged and its resources unregulated. 

The next 2 years will be crucial to negotiating the extent and parameters of the treaty, particularly issues pertaining to regulation, access, management and utilisation of High Seas resources and pertinently the monitoring and surveillance of treaty obligations. As there will certainly not be a "United Nations Navy" deployed to protect the vast High Seas, the success of any international High Seas treaty will substantially depend on wealthy nations, particularly those with substantial naval resources (such as Russia, the United States and China) to assist with High Seas MCS. However, the mandatory electronic tracking of all fishing vessels, reefers and supply ships will assist in the global monitoring of fishing activity and reduce the impossible obligation of physical naval deployments across the High Seas.

And of course, the effective and global implementation of the Port State Measures Agreement will be key to the substantial curtailment of IUU fishing by denying rogue vessels (including supply vessels) and their IUU catches access to markets. 

Thursday, September 21, 2017

Fixing Fisheries Compliance

A key concern plaguing fisheries management in South Africa (besides the ever-problematic growth in demand and call for more quotas vs the depressing contraction of available quotas: see our last piece which touches on this subject), is the ongoing inability by fisheries compliance officials to make any significant impact in reducing illegal fishing - whether it is hake, pilchards, abalone, lobsters or line fishes. 

I dont believe that this wheel needs re-invention. What is needed is a single-mindedness to cut out corruption by departmental staff, fishery control officers and the local "fisheries monitors" and to urgently implement some basic forms of smart monitoring, management and reporting technologies. Oh, and bring back those impressively efficient and effective Green Courts to prosecute, jail and asset strip poachers.  

1. All marketers of fish (whether they export or sell domestically) must be required to register under the MLRA as the marketing of fish is a “related activity” as defined by law. In this way, every marketer must report their first purchase and first sale. 

2. All fishery control officers, harbour masters and fisheries monitors must be subjected to comprehensive lifestyle audits to eliminate all forms of corruption and maladministration in the landing and documentation of fish. 

3. The reporting of catch landings and submission of logbooks to be done via electronic submission to secure receipting servers (and not to individual officials who could manipulate data and documents). Small-scale fishers should be required to report using the Abalobi application, which is simple and has been successfully trialled by fishers. 

4. All Vessels of 12m and longer should be required to install Electronic Monitoring and Surveillance systems (closed system on board video & surveillance recording) which will assist with the monitoring of catches, landings, dumping, transhipment of fish (offshore trap-based lobster vessels are known to unlawfully tranship catches to small-scale lobster boats to facilitate catches). Importantly, this will reduce the pressures on patrol vessel deployments and costs and allow for more targeted EPV deployments and fishing vessel boardings.   

5. Green Courts (Regional Magistrates Courts) need to be re-opened. In our view, at least one regional court will be needed in Hermanus for the Overberg region, one in Cape Town and one in Port Elizabeth. 

Finally, the Department needs to urgently review all of its current levies on fish and fish products and harbour fees as these were last reviewed in September 2010. 

Monday, September 18, 2017

The West Coast Rock Lobster: Fishery and Communities in Crisis

The ongoing community carnage in Hout Bay, which was apparently sparked by recommendations by the Department of Agriculture, Forestry and Fisheries' (DAFF) scientific working group on lobster to cut the 2017/2018 season TAC by 69%, exposes our coastal communities' grave reliance on lobster for the incomes. Reliance on a single resource for ones entire or substantial portion of incomes even as small scale commercial fishers, has long been considered problematic. 

That is why back in 2003/2004, the erstwhile Marine and Coastal Management identified the urgent need to expand the number of commercial and small-scale fisheries by identifying new fisheries. South Africa today could have had 28 or 32 commercial and small-scale-commercial fisheries. Unfortunately, today we continue with 22 fisheries; thousands more fishers added to rights registers; and more than 200,000 tons in reduced landings and catches since 2005.  

When commercial and small-scale lobster fishing rights were allocated back in 2004/2005, 80% of the TAC was allocated to the commercial trap fishery and the balance was allocated to the small-scale hoop-net fishery. Today, that split is 50%/50% but we have added an extra 2000 "small-scale" community-based fishers to this number and the TAC has plummeted from record highs in 2004 to record lows today. West coast rock lobster today is only at 2% of pristine levels. There is no doubting that the additional effort of the "small-scale community" fishery coupled with increased commercial poaching have contributed to the collapse of our famed lobster stocks. 

If West and Southern coast fishing communities think they can continue to demand near unfettered access to lobster, there will be nothing to left to harvest in 5 years (if that). Fishermen complain year-in and year-out how it is taking them longer to fish the same or less fish. And with each passing year, fishing costs increase while incomes decrease in real terms. This year saw South African lobster prices collapse to US$24 / kg. Relying on a weak ZAR currency cannot be a sustainable alternative either. 

And demanding more quota from the commercial trap fishery will only continue the destruction of the resource and commercial value of fishery - not to mention further job losses. There is no denying that the commercial trap fishery sustains more jobs per kg of fish allocated than the nearshore fishery. It is also generates more value on a per kilogram basis. To continually redistribute a shrinking resource pool only increases poverty - it does not generate wealth or prosperity. Just look at the state of our coastal communities over the past 9 years since the introduction of the fateful "interim relief" quotas. This Blog has documented case-study after case-study of failed co-operative ventures and community conflicts as "community representatives" have stolen millions in income meant for lobster fishers. 

This may also explain in part the targeted destruction of certain properties belonging to "lobster middlemen" in Hout Bay. 

The only immediate solution to this resource crisis is for fishers, the Department's scientists and managers and "community representatives" to accept that relying on lobster quotas for a substantial portion of incomes for at least the next generation will be dangerous. Lobster quotas will have to be cut - perhaps not by 69% - but cuts are necessary, coupled with a massive compliance initiative to curtail illegal fishing are necessary to ensure some level of recovery. 

A substantial burden is placed on the DAFF to explain what financially and biologically sustainable quota harvesting alternatives there are on an area-by-area basis. And there are very viable options. 

From the Northern Cape down south and along the West Coast, small scale fishers should have access to horse mackerel and pilchards caught by "bo-lyne", line fish, lobster and seaweed, which is increasing in value and demand from a number of growth markets and industries. 

In addition, the continued conservative approach to developing new fisheries and expanding current fisheries needs to be abandoned. Fishery managers need to think beyond rejecting new fishery applications and pandering to protect the current and vested interests of commercial right holders who understandably recognise any expansion or change as a threat to their strangle hold over the fisheries. Just consider the absolute panic and negative media storm that was generated by the South African Deep Sea Trawl Industry Association the DAFF considered expanding the current horse mackerel fishery which is controlled by two right holders. 

The only solution to the crisis afflicting fishers in Hout Bay and other areas is for the DAFF to start urgently leading the expansion and growth of our current commercial and small-scale fisheries. This means investing in the recovery of over-exploited fisheries and identifying possible species for economic growth. 

Thursday, February 16, 2017

Can SA's Lobster and Abalone Fisheries be Saved?

Can South Africa's famed West Coast Rock Lobster and abalone fisheries be saved from economic collapse caused by rampant illegal fishing? Quite simply, there is no option but to ensure their recovery and pull-back from complete decimation. 

The nagging question is how this pull-back can be achieved. With regard to lobster, there is a growing tension between environmental lobby groups such as WWF and the Fisheries Department since the Department elected to maintain the lobster TAC at 2016 levels as opposed to reducing the TAC by 34% in terms of a scientifically proposed recovery plan. The Department's fishery managers and ultimately the Deputy Director-General elected to adopt an alternative management strategy that is premised on the understanding that it makes little sense to punish law-abiding quota holders by reducing their TAC's while poachers continue fishing. 

Abalone is the obvious case in point. The legal catch limit has been reduced to 95 tons while poachers continue to harvest upward of 3000 tons annually! 

Given the demand for both abalone and lobsters which outstrips supply (legal and illegal) by some measure, the obvious ease with which IUU fish can be exported and the lack of alternative income sources for most poachers in fishing communities along our coast, the recovery plan mooted by WWF and co was doomed to fail. The only parties who would have been affected by the plan would have been legal quota holders who would have seen a 70% cut to quotas over the next two seasons. 

Think about it again. Imagine you are a small scale lobster fisherman or a local lobster fishing company whose sole quota and income is a 5 ton, 4 ton or 3 ton lobster quota and your sole income is to be cut by 70% over the next two seasons. I am quite certain a significant number of these fishers would join the poaching class using the legal quotas to launder illegal catches. 

However, there is also no doubt that both lobsters and abalone are in a dismal biological state with lobsters generally thought to be at 2% of pre-fished levels. Recovery is a non-negotiable. The question remains how can South Africa successfully recover these mega value, high demand nearshore fisheries while simultaneously balancing the socio-economic needs of fishers who rely on them for their livelihoods. 

The solution is neither novel nor complex. The solution has been stated on these pages on numerous occasions over the last few years. But essentially we need a combination of upgrades and updates to the fisheries compliance and management toolbox. 

For one, we need to bring back dedicated regional environmental courts whose sole business is the prosecution of environmental and marine crimes. Not only will this allow for the faster processing of criminal matters, but dedicated prosecutors and magistrates who know and understand the social, economic and ecological gravity of environmental crimes will ensure swift and visible justice. The success of these courts were proven when they existed between 2003 and 2005. 

The way we currently manage fisheries requires updating to the 21st Century. Hard copy paper records managed by individuals at landing sites and remote harbours are not only corruptible but do not allow for proper and real time management of catches, landings, processing of fish or sales. By the time these records are eventually collated and analysed the poached products have long been consumed and digested in South East Asia. 

Further, in a fishery such as abalone where the amount of fish poached exceeds the legal quota by more than 40 fold, I would instead increase the legal catch limits substantially to encourage greater levels of compliance by current right holders and to displace illegal fishing. Displacement can work in a fishery like abalone simply because its geographic distribution is confined to specific fishing zones over a relatively short coastline between Paternoster and Pearly Beach. 

Finally, we need to increase the number of commercial available and exploitable nearshore resources to begin a reduction of right holder reliance on abalone and lobsters. New and alternative fisheries development is critical if we are to substantially and seriously increase coastal community incomes and reduce fishing reliance on abalone and lobsters.