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.