What if Shareholders / Members of Fishing Corporations Want to Sell Now?

The Department of Fisheries recently unlawfully elected to amend the deadline by which applications for the transfer of fishing rights had to be submitted. That date was brought forward from 31 December 2020 to 11 December 2020. 

The decision unsurprisingly has not elicited a legal challenge from the fishing industry given the industry's ongoing reluctance to challenge an increasingly unlawful and failing Fisheries Department. 

However, bureaucratic failure and incompetence does not end commercial and trade realities. 

So, what happens if a shareholder or member of a fishing corporation wishes to sell their shares/member's interest?

The short answer is that from 1 January 2021 the department and its minister will have absolutely no jurisdiction over regulating the sale of these shares or interest because section 21 of the Marine Living Resources Act and the 2009 Transfer of Commercial Fishing Rights Policy only applies to the sale of shares/interest involving corporations holding fishing rights. With effect from 1 January 2021, corporations in the 12 affected fishing sectors will no longer have fishing rights but will continue to operate in terms of a section 81 exemption (in itself an unlawful regulatory process). An "exemption" is not subject to regulation under section 21 or the Transfer of Rights Policy. 

Accordingly, any shareholder or member of a corporation that currently holds a fishing right, will be able to freely sell and trade their shares / interest after 1 January 2021. 

The Minister NOT of Fisheries' Performance Agreement

 On 30 October 2020, the Minister of Environment, Forestry (and Fisheries) signed a "performance agreement" with the President some 20 months after being appointed to this position. The performance agreements for all cabinet minister appear to have been published on either the 7th or 8th of December. Minister Creecy's agreement is accessible here.

The agreement is completely silent on anything related to fisheries management, ocean governance, marine protected areas, aquaculture .... and critically a fishing rights allocation process worth an estimated R140 billion rand affecting 12 fishery sectors and thousands of fishers, fishing companies and jobs! Silent. 

The agreement perhaps gives away the lie that the minister and her department is even seriously planning to allocate fishing rights before 2024 (the end date of the performance agreement)! 

It is quite something to digest that the Minister of Environment, Forestry (and Fisheries) is prepared to publicly state she has no objectives, intentions or plans to do anything related to fisheries and oceans governance between now and 2024. Nothing. 

Fishing Rights and Fronting: The Case of African Tuna Traders

South Africa's Broad-Based Black Economic Empowerment Commission confirmed on 25 November 2020 that it had found African Tuna Traders CC, owned and operated by Chris Hamel and Jonathan van Breda, to have used Umbhalo Trading (Pty) Ltd and Homotsego Trading (Pty) Ltd as black-operated fronts in contravention of the Broad-Based Black Economic Empowerment Act ("B-BBEE Act").  

The Commission's investigations revealed that black employees were presented as black shareholders for the purposes of obtaining the fishing rights that African Tuna Traders CC currently trades with in the fishing industry, with no participation or economic interest for these black employees. 

The consequences could be severe for African Tuna Traders CC, Umbhalo Trading (Pty) Ltd and Homotsego Trading (Pty) as their fishing rights could now be cancelled in terms of section 13A of the B-BBEE Act, read with section 28 of the Marine Living Resources Act. 

According to the investigation, African Tuna Trading owns 20% of Umbhalo Trading (Pty) Ltd. The balance of 80% is owned by Homotsego Trading (Pty) Ltd in which Mr Phephe Elias Khekhe and six other black people held 14.29% each as direct shareholders. In practice, the Commission found, all three entities were operated by Jonathan Ronald van Breda and Christopher Fergus Hamel, "without the participation of and/or economic interest to black people who were presented as shareholders."

African Tuna Traders CC has 0% black ownership while Homotsego Trading (Pty) Ltd is dormant and does not have any financial statements. Both Umbhalo Trading (Pty) Ltd and Homotsego Trading (Pty) Ltd were created as empowerment companies but had no employees and the administrative functions for Umbhalo Trading (Pty) Ltd were performed by African Tuna Traders CC. African Tuna Traders CC stated that the only revenue of Umbhalo Trading (Pty) Ltd was from the license fees charged to other related companies on the basis of the fishing rights it holds.

The Commission's findings also expose African Tuna Traders CC, Umbhalo Trading (Pty) Ltd and Homotsego Trading (Pty) Ltd to criminal charges related to fronting and misrepresentation.

The Commission's findings bring to the fore two important issues that concern the South African fishing industry, particularly given that a high value long term fishing rights allocation process is on our horizon.

The first is that fronting and the use of vulnerable black folk as "shareholders" and "directors" by existing right holders is certainly pervasive. We know that working in the industry. What is also pervasive is that the granting of hundreds of economically unviable and tiny fishing rights to many predominantly black companies has created a class of paper quotas and rent-seekers. 

The second is that the department's near singular focus on allocating fishing rights to black owned and managed companies to the near exclusion of assessing anything else creates the vulgar incentive to use  desperate black people who are increasingly and largely the mass of unemployed South Africans as fronts to secure fishing rights. 

A Fisheries Department at 6s & 7s

        On 24 November 2020, the Fisheries Department under the signature of Sue Middleton (Acting DDG of Fisheries) issued an undated and (unlawful) retrospective exemption notice to all current right holders in those fishery sectors where rights are set to expire on 31 December 2020 and to the former right holders in the South Coast rock lobster fishery. These fishing rights expired on 30 September 2020 and operators in that fishery have effectively been fishing unlawfully since that date. 

The exemption notice is unlawful and invalid in so far as it seeks to apply retrospectively to the South Coast rock lobster sector and regularise fishing from 1 October to 24 November 2020. Neither the DDG (as delegatee), nor the Minister (As the original repository of authority), has the authority to issue exemptions that apply retrospectively. The Marine Living Resources Act does not permit the retrospective application of such powers and as such there is a legal presumption against permitting any law or administrative decision to apply retrospectively. 

As we had previously stated, the Minister is exercising her authority under section 81 of the MLRA to authorise commercial fishing post the termination of fishing rights on 31 December 2020. We have also recorded why we believe that such an act is unlawful and reviewable. 

However, what we had not expected, is the de facto abandonment of the resource split proposal issued by the Minister on 23 October 2020! This exemption notice has effectively rendered the Minister's gazetted intentions to allocate 100% of the effort in the oyster and mussel sectors, 50% of the effort in the traditional line fish, hake handline and abalone sectors and 25% of the squid effort in 2021 to the small-scale fishing co-operative sector moot. 

The exemption records that the current right holders in the affected fisheries are "authorised to harvest their allocation in full for the 2020/2021 fishing season..." subject only to the condition that they do so in terms of a section 13 fishing permit. 

Accordingly, there will not be any allocation of effort or quota to small-scale fishing co-operatives in 2021. The current right holders in the traditional linefish, hake handline, abalone, oyster, mussel and squid sectors will continue as they had in 2020, in 2021.  

The confusion, mixed messaging and policy mess just continues unabated.  

 

What is Going to Happen on 1 January 2021 With Fishing "Rights"?

With less than 30 fishing days left before the end of 2020 and the official termination of more than 1000 commercial and small-scale commercial fishing rights, the Department of Fisheries and its Minister continue to remain silent on what will happen come 1 January 2021. The last time the Minister mentioned "fishing rights" was back on 23 July 2020 when she promised that the small-scale commercial fishing allocations in the Western Cape will be completed before the end of 2020. That is another failed undertaking.

Of course, for most of the fisheries, such as tuna, hake trawl, small Pelagics and hake long line, we fully expect the unlawful issuance of "exemptions" which will authorise incumbent right holders to continue fishing despite the termination of section 18 fishing rights. These erstwhile right holders will nonetheless have to apply for section 13 fishing permits and other permits, such as export permits, to continue operating during 2021. 

Of concern however, is what is to become of the 225 traditional line fishers, 150 abalone divers and 50% of hake handline fishers and 25% of squid businesses who stand to lose their authorisations to fish in a month's time because of the Minister's threat to allocate 50% of the effort in all three of these fisheries (and 25% in squid) to "small-scale" co-operatives? 

And which 50%/25% (as in the case of squid) of existing operators will lose their ability to fish in 2021? How is the Minister going to select the "lucky" abalone divers, traditional line fishers, hake handliners and squid fishers? 

Given that the Minister has yet to even understand what is required from the infamous socio-economic impact analyses, she will not know that the average abalone diver supports 3 support crew. The average traditional line fisher employs 10 crew and the average hake handliner, 5 crew. The average squid operation employs approximately 20 crew and support staff. This means that no less than 4000 crewmen will lose their jobs this "festive season". 

AND NO, NONE OF THESE LOST JOBS WILL BE REPLACED BY SMALL-SCALE CO-OPS as none of the existing co-ops in the Northern Cape or Eastern Cape have created a single job or fished a single kilogram of their own quotas. Every right has been hawked to a large fishing company in the case of the Northern Cape lobster co-ops. In the Eastern Cape, the rights are worthless and have not generated a Rand in income as far as we have been able to determine.  

We fully anticipate the squid, abalone and traditional line fisheries to interdict the Minister and halt any attempt at arbitrarily denying current right holders their fishing rights next season. 

The small-scale fishing sector led by the South African United Fishers Front (SAUFF) is also disputing the legality of the Minister's proposals. 

We need to be clear. The Minister's quota split proposal is unlawful and will not stand. To arbitrarily threaten more than 4000 crewmen their jobs given the current hostile social and economic environment in which this country finds itself (thanks to the shocking policies of the ANC) is criminal. To suggest that collapsed fisheries such as abalone and the traditional line fishery, which is a fishery governed under section 16 of the MLRA, can accommodate another 10,000 fishers through the co-operative model is a direct attack on the economic, ecological and biological sustainability principles recorded in section 2 of the MLRA. 

A Revised FRAP 2021 Timetable: Simply Impractical and Unachievable

On 10 November 2020, a month after the minister failed to honour her undertaking of gazetting the draft fishing sector policies for "FRAP 2021", a new set of timelines were presented to Parliament. 

In short, the new timelines are 6months delayed BUT confirms that all fishing rights and appeals will be completed before 31 December 2021. In other words, the revised timeline is even more ridiculous than the previous one.  

Here is the convoluted thinking of the revised timeline:

• Appointment of FRAP Service Providers: Nov 2020 – Jan 2021 (A key problem with the types of service providers who services have been identified is that there is no business analyst or process experts to be appointed. In addition, the advertisement does not seek to appoint any IT specialists which means the FRAP will certainly be an ancient hard copy application process).
• Finalise Small-scale resource splits and Commencement of Allocation of Fishing Rights: Nov 2020 (This is entirely unlikely as the traditional line fish, squid and abalone sectors have confirmed that they would oppose any splitting of the resource given that any allocation of small-scale rights to co-operatives in the squid and abalone sectors would be entirely unlawful).
• Review and Finalisation of current Fishing Policies: Jan-July 2021 (The glaring anomaly is the sudden removal of any mention about compliance with the SEIAS that are required FOR EACH OF THE 12 FISHING SECTORS. 6 months to review, draft, consult on and finalise 12 individual fishery sector policies, application forms, fees and allocation processes is simply not practically possible given that the department has not achieved less over the past 18 months).
• Invitation for Commercial Fishing Rights: June/July 2021 (See previous bullet. If the ambitious policy review and finalisation process is set to be completed in July, the simultaneous commencement of the application process is simply impossible. More so, given the next bullet point!)
• Adjudication of Applications and Allocation of Fishing Rights: July – Nov 2021 (Does this mean applicants will be given mere days or hours to complete application forms before they are submitted and simultaneously evaluated AND decided! The Minister is committing to evaluate and decide 1000s of applications across 12 fishing sectors in less than 5 months when she has failed to decide 70 appeals in hake inshore trawl in 18 months and failed to allocate 300 abalone rights since 2013. Ok). 
• Appeals Process: Oct - Dec 2021 (Legally impossible given that rights allocation processes (and no mention of the quantum allocation process consultation and finalisation will still be ongoing and that a minimum 30 day period must pass between each applicant receiving its decisions and the submission of appeals. This is then followed buy the preparation of mandatory appeal reports on each appeal before these are forwarded to the Minister for consideration. Again 90 days to DECIDE appeals is legally and practically impossible. A extremely efficient appeals process that complies with all legal requirements would take between 4 and 6 months to complete). 

This timetable has been produced by people who simply do not understand fisheries, administrative law obligations and practical considerations pertaining to a fishing rights allocation process. Compliance with the public consultation and administrative law requirements of the Promotion of Administrative Justice Act alone renders this timetable unattainable. 

This FRAP timetable is dead in the water... Again. 

 

The Ongoing Stupidity of Robbing Peter to Pay Paul

In May 2019, the previous Minister of Fisheries proposed allocating 50% of rights in the abalone and line fish sectors and 25% of squid rights to the small scale fishing sector. That proposal - we thought - died a natural death, as it should have. 

In May 2019, we wrote an article explaining why allocating any rights to small-scale fishers in the squid fishery would be impractical, unaffordable, unlawful and only create a class of community fronts who would have to beg commercial vessel owners with the crew to actually fish the rights. 

Squid is certainly not small-scale fishery as we explain below in red font. 

The full article is available here. The current Minister, Barbara Creecy, has now rekindled this daft proposal (GG Notice No. 1129 of 23 October 2020) by proposing to allocate 50% of rights and effort in the traditional linefishery and abalone sectors, and 25% of effort in the squid sector, to the "small-scale" fishing sector.

The following extracts of that article remain applicable. 

"On 13 May 2019, the [erstwhile] Minister of Fisheries, Senzeni Zokwana, published a notice in the government gazette calling for comments on the proposed splitting of effort allocation levels between "commercial fishing" and "small-scale" fishing in the traditional line fish and squid fishing sectors and the intention to declare the oyster, white mussels and hake handline as small-scale fishing sectors. 

We have repeatedly pointed out for probably a decade now that these fisheries (except squid) have always been small-scale in nature with fishing rights historically only ever allocated to individual fishers who depend on them for their livelihoods. In fact, the most substantial deviation from allocating small-scale fishing rights exclusively to small-scale fishers came in 2013 when that woefully unlawful and corrupt fishing allocation process opened up small-scale fishing rights to large companies. The careful fishery cluster system designed in 2004 to protect small-scale fishers from having their rights exploited by fishing companies was decimated in 2013 and that is why we currently have a number of hake handline fishing rights for example allocated to a large fishing group and its subsidiary company.  

The first point therefore is that the hake handline, oyster, white mussel and traditional line fish sectors ARE small-scale commercial fishing sectors and have always been small-scale. Success by right holders in these fishery sectors have one thing in common - the successful fishers run their own fishing operations and personally manage their crew. These fishery sectors are "the real deal" fisheries where income is earned from hard-work by the right holder himself. There can be no paper quotas or selling of rights to the highest bidder as we see in lobster or other high value fishing sectors. 

To believe that [these] sectors can in any way support the dozens of large community-based co-operatives that have sprung up along the coast is exemplary socialist thinking. What we will achieve is an equal spread of poverty.  

To insist on allocating small-scale fishing rights exclusively to co-operatives is misguided and impractical. And every fisherman knows this. For example, when I was advising the Minister of Fisheries on the West Coast rock lobster appeals in late 2018, we had a number of instances where an appellant could elect to either have an individually allocated lobster fishing right or participate in a community co-operative. Not a single appellant opted for participation in the "community co-operative" system and for obvious reason. For one, these community co-operatives are just another vehicle for patronage and corruption (As we have seen with similar entities over the past). Second, the same amount of fish that was available to a few individuals who made a living off the individual small-scale right, must now be shared amongst dozens, if not hundreds more, people. Third, there is simply no accountability with the co-operative structures (Again as past experience and failure have shown). 

Finally, turning to squid and the proposal to allocate 25% of the effort in that fishery to small-scale co-operatives. Our view is that any attempt to do so would be unlawful as the Marine Living Resources Act defines "small-scale fishing" (in a very convoluted way) to mean fishing undertaken by a "small-scale fisher" who is a member of "small-scale fishing community" that - 

• traditionally operates in near-shore fishing grounds; 

• predominantly employs traditional low technology or passive fishing gear (which squid does not - it employs expensive vessels with efficient jigs and expensive freezing and on-board processing capabilities); 

•  undertake single day fishing trips (the average squid fishing trip is between 2 and 3 weeks and cant be a single-day trips); and 

• is engaged in consumption, barter or sale of fish or otherwise involved in commercial activity, all within the small-scale fisheries sector. (South African squid is block-frozen and exported and hence none of the consumption, barter or sale of squid occurs in the small-scale fisheries sector).

Squid therefore cannot be considered a small-scale fishing sector and any attempt to allocate small-scale squid fishing rights would be unlawful. " 

Accordingly, any attempt to allocate squid rights to the small-scale fishing sector would be unlawful.

The proposal to allocate 50% of the effort to small-scale fishing (ie co-operatives) in the traditional line fish and abalone fisheries would be unlawful for, inter alia, the following reasons.

• The proposal to split the resource effort essentially will rob peter to pay paul. There has not been any prior socio-economic impact assessment or any understanding of the impacts of such a proposal. It is an arbitrary and irrational thumb-suck;
• The decision to add 1000s of people as dependents in these two fisheries would fall foul of a number of the Section 2 MLRA objectives, particularly those pertaining to responsible and sustainable fisheries management. Both the abalone and line fisheries are in a state of environmental emergency. Line fish has been in this state of official emergency since 29 December 2000; 
• The complete and unequivocal failure of fishing co-operatives to date should be reason alone to stop the perpetuation of failure at such great social, economic and biological cost. How many of the Eastern Cape co-operatives that were allocated squid earlier this year are fishing their hake, abalone and squid rights? None;
• To further split the woefully inadequate abalone TAC of 50 tons between amongst individual divers and co-operatives will not only further accelerate poaching but it will lead to even greater socio-economic declines in communities. The average abalone diver today catches his entire season's quota in less than a single day! To essentially cut this in half will not only halve income but will make legal diving for the quota simply uneconomical, which will create a vacuum to be filled by poachers. 

The Minister's statement that the proposal will further transformation is false. 90% of all abalone fishing rights are held by historical divers who also happen to be black. More than 58% of line fish rights are held by black fishers. More than 95% of all crew on line fish boats are black. Crew on line fish boats earn 50% of the gross total value of every landing. 

The claim that adding more right holders to these two fisheries would further transformation is patently false. Adding any additional right holders would increase poverty, disempower every current right holder even further and increase unemployment and intra-community conflict. 

Members of the squid, abalone and line fish sectors have 30 days until 24 October 2020 to submit formal comment on these proposals. 

If the Minister insists on implementing these, there is little doubt that they will be challenged. There is little doubt that a decision to allocate these splits is arbitrary, unscientific and therefore unlawful.