How to Destroy a Successful Eco-Tourism Sector

The recent unlawful and irregular allocation of boat-based whale watching and white shark cage diving permits has demonstrated a narrow-mindedness to destroy South Africa's two most successful eco-tourism sectors second to none. 

Feike has served as the legal advisor to the South African Boat-Based Whale Watching Association (SABBWWA) and the Great White Shark Protection Foundation that represents the majority of shark diving operations in the country of some time and a number of historical operators summarily lost their operating permits to new entrant applicants who have no resources, client access, vessels, websites, or ability to operate a whale watching or shark cage diving operation. 

Of course, the need to allow new entrants and even additional permit holders is a legitimate way of growing the economy particularly in these non-consumptive sectors whose success is determined by the number of foreign and domestic tourists willing to come aboard an operator's vessel and jump into a metal cage that can be knocked about by 5m long, 2 ton white sharks. Whether any tourist is prepared to pay a few thousand rand for this adventure to be overseen by someone with zero historical experience, knowledge or ability is doubtful to say the least but the Minister of Environmental Affairs and her department seem convinced that by dishing out permits to a plethora of new entrants who do not own or have access to suitable vessels, employ properly qualified skippers, expert staff, knowledgable marine guides who could at least impart some level of information to high paying tourists or even have a website or access to a single client would magically "transform" the industry. 

In Kleinbaai, the heart of the global shark diving industry, 6 of the 8 historical operators, employing some 90 skilled local personnel with investments in assets exceeding R50 million and who spend an average of R30 million annually in Gansbaai and the surrounding areas were refused their permits. These 6 operators have been operating for an average of 18,5 years. The Minister instead elected to allocate permits to 7 new entrant applicants. The financial impact on Gansbaai's local economy will be substantial. Job losses are a certainty as most of the new entrants will simply not be able to afford the costs of operations. A number have already attempted to sell their permits thinking that these paper permits are worth millions of rand. 

However, a number of historical permit holders have already successfully launched urgent interdict and review applications against the Minister and her department's unlawful decisions. The first adverse order against the Minister was issued on 12 December 2017, which included an adverse costs order. 

The first of the whale watching decisions in the Gansbaai area which denied a permit to a founding member of SABBWWA, Ivanhoe Sea Safaris, has now been reviewed and set aside by the Western Cape High Court. The Minister failed to even file an affidavit trying to explain her unlawful and irregular decisions. 

Three further review applications are now set down for hearing on 16 August in the Western Cape High Court. The decisions in each of these three matters are so irregular that they beggar belief. 

In two of the matters (concerning whale watching permits), the initial decision on 9 November 2017 was to allocate the historical permit operators their respective 10-year permits. Then on 13 March 2018, these permits were summarily stripped from the operators in blatant violation of due process and the Promotion of Administrative Justice Act. In one case, the permit was allocated to an entity without a SAMSA certified commercial passenger vessel (instead they nominated a fishing vessel without a safety certificate), no public indemnity insurance or a tourist guide. In the other case, the Minister demonstrated her lack of commitment to local jobs and the well-being of local communities by denying the only applicant for a permit and instead elected to not allocate any permit - leaving the area with no operator, employer or investor! 

The only proverbial light at the end of this horrible tunnel for whale watching and shark cage diving operators who were unlawfully denied their permits, is the extent to which simple legal principles have been wilfully ignored and recklessly sidestepped in favour of maladministration and socio-economic destruction. The decisions will simply not stand in law and have already begun falling. 

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.