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.