SCOPE

This policy review addresses maritime transport issues relating to economic principles, trades and cargoes, ship financing and registration, the operation of ships, ports, safety at sea, employment & training, and administration.

MISSION

"To encourage and support the SA maritime transport industry in a manner which underpins the four fundamental objectives of the RDP, gives effect to the overall vision of transport and in so doing which:

Develops a maritime awareness in South Africa; assists in the creation and fostering of an economic environment for the Maritime Transport Industry which will allow it to compete on at least an equal basis with the maritime carriers of other nations and South African land-based carriers; ensures safety of life and property at sea and the prevention of pollution of the sea by ships; ensures fair labour practices, employee rights, job creation and security with acceptable standards of employee health, welfare and safety in the maritime industry; and contributes to the release of the full potential of the maritime industry in South Africa and to the modernisation of shipping administration in South Africa".

STRATEGIC OBJECTIVES

• To facilitate and enhance the expansion of international trade and tourism in general, and exports in particular
• To ensure that economic decisions are, as far as possible, left to market forces, subject to general competitive principles applicable to all industries, with the view to maximising consumer choice, need satisfaction and job creation
• To promote the development of an efficient and productive South African maritime industry capable of competing on international markets
• To maintain control over maritime services within a well defined regulatory framework that is flexible enough to cater for changing needs and circumstances and to ensure orderly, safe and reliable maritime transport services
• To promote international relations with other countries and international organisations involved in maritime activities

KEY POLICY AREAS

Critical issues
 
There is a need to encourage economic efficiency in the maritime industry The basic cost structure of sea transport provides the most powerful rationale for the organisation of the liner industry around Conference or consortia agreements. Full cost recovery is the only viable long term solution.

There is a need for efficient port pricing

Ports have the characteristics of natural monopolies, and when they function as state enterprises their pricing under normal efficiency criteria should be to expand output until price equals marginal revenue. This would be problematical for private profit-seeking port authorities.

Cross-subsidisation between the various operating and trading arms of Transnet have severely distorted South African transport markets by placing subsidisation burdens on discrete groups of transport users. Such an approach is inefficient and distorting in economic efficiency terms.

The need for competitiveness in international sea transport

International shipping is generally conducted in a highly competitive environment. The principal market imperfections that exist in international transport by sea stem from the protectionist policies of certain nations. South Africa has generally not practised shipping protectionism, but has permitted the industry to organise itself on laissez faire lines.

Coastal sea transport and intermodal competition

Coastal sea transport competes with land-based road, rail, and pipeline transport. Efficiency in domestic transport can be secured if all modes are able to compete on a level playing field, and where the real comparative cost advantages of all modes are fully reflected in the set of prices and tariffs faced by their users. Any distortions that skew prices from social costs introduce inefficiencies and misallocate scarce economic resources.

This requires that the prices paid for infrastructural facilities by all modes should reflect social opportunity costs, and that no hidden subsidies be made available to any transport modes. In this way, road users should pay equitably for the road infrastructure (and for damage inflicted on that infrastructure) rail users; coastal sea carriers and cargo owners should pay equitably for facilities and services.

Sea transport and economic development

Given sea's dominance in the carriage of the lion's share of South African foreign trade, sea transport has a pivotal role in securing the competitiveness of South African exports, and in mitigating imported inflation by minimising the landed costs of imports. It is significant also that there is a dominance of low-value primary products in South Africa's exports.
 

Key recommendations

Maritime transport policy should attempt to foster and maintain a competitive climate wherever appropriate and the Government should generally avoid protectionist maritime practices and maintain an "open ports" policy.

All transport policy should ensure that domestic transport modes receive equal and equitable treatment, and that their prices reflect social opportunity costs in all modes.

Maritime transport policy should recognise the South African shipping industry as a fully-fledged exporter of services whose activities considerably strengthen the South African balance of payments.

Government should recognise the strategic importance of the South African shipping industry and the external benefits it bestows on the wider economy and maritime transport should be given greater priority in the national order.
 

Implementation of recommendations
 
The above key recommendations should be central to the Government s formulation of policy and to its prioritisation of maritime transport in the national transport and economic structures

Critical issues
 
Without trade there can be no cargo. Without cargo there cannot be a healthy shipping industry. Shipping is essential for the promotion and preservation of fixed trade links between trading nations. Terms of trade exercise considerable influence over the benefit the country receives from the maritime industry. Buying Free on Board (FOB) and selling Cost, Insurance, and Freight (CIF) allows the trader to nominate the carrier.
 
Key recommendations
 
The State should be committed to the promotion and continued development of regular shipping services (and related infrastructural requirements) between South Africa and its major trading partners within a well-defined regulatory framework.

Commercial decisions should as far as possible be left to market forces to be resolved and accordingly, subject to general economic principles applicable to all industries, cargo interests should be unhampered in freight negotiations.

While maritime policy should encourage South African cargo interests to nominate South African carriers to carry their cargo, any attempt to statutorily stipulate terms of trade would constitute an unwarranted interference in trade.
 

Implementation of recommendations
 
The DoT should play a leading role in promoting an interdepartmental initiative to educate exporters of SA goods on the advantages of shipping their cargoes on SA vessels or on CIF terms. This process should be an on-going and pro-active educational, support and public relations exercise and should apply equally to importers buying FOB.

Critical Issues
 
In choosing an appropriate register under which to operate their vessels domestic shipowners and operators take into account, inter alia:

The efficiency, cost & suitability of SA s ship registration, manning legislation and administrative procedures

Their ability to raise US$ finance at a satisfactory rate on overseas markets. This ability is inhibited by SA s sovereign risk rating, and by deficiencies and anomalies relating to SA registered ship s mortgages - a ships mortgage being part of the normal security required by finance houses

The fiscal allowances and incentives given to them by the SA Income Tax Act

Cumbersome exchange control procedures

A duty & excise regime which favours foreign trading vessels over domestic vessels in relation to fuel costs and costs of spares SA should aspire to a modern ship s register which is efficient, which balances the interests of the nation, shipowners and seafarers in an internationally acceptable manner, and which accords with principles of international law relating to the necessity of a genuine link between the state of registry and the shipowner

The register should be attractive to both local and foreign investors, but in no way a flag of convenience.
 

Key recommendations
 
The DoT should promote interdepartmental and private initiatives to ensure that administrative, fiscal and legal inhibitors to the development of the SA register and its ancillary services are removed. In particular: There are shortcomings and anomalies in the present enabling legislation for the registration of ships and ships mortgages in SA - which is based on the British system of 1894. These shortcomings are in the process of being addressed by draft legislation which the DoT has circulated for comment.

There are anomalies in the priority accorded to SA ships mortgages which make them out of line with the majority of the world s maritime nations. These and other anomalies in the ranking of maritime claims should be urgently addressed by an interdepartmental initiative involving the DoT and the Department of Justice in consultation with interested parties such as the SA Maritime Law Association.

Fiscal aspects affecting shipping should be re-appraised on an interdepartmental basis with a view to initiating change where appropriate. These aspects include income tax paid by seamen, shipowners and operators, exchange controls, and duties.
 

Implementation of recommendations
 
The DoT should of its own initiative and through the Interdepartmental Committee and the Standing Committee on Maritime Transport (upon which, see below) address the key recommendations referred to above. The present initiative of the Chief Directorate: Shipping to amend ship registration legislation should be vigorously pursued until acceptable legislation can be tabled in Parliament. A similar initiative, driven by the Chief Directorate: Shipping, should be launched to examine the ranking of maritime claimants, especially the mortgagee, and to correct any anomalies in that ranking.

Critical issues
 
Shipping is highly cyclical and shipowners and operators must be able to adapt their fleets to meet continuously changing circumstances.

South African shipowners do not enjoy the same competitive advantages as many foreign carriers.

Coastal shipping competes directly with road and rail. The roadhaul industry is favoured by an indirect subsidy in the form of under-recovery of road repair costs caused by excessive allowable Gross Vehicle Mass, and ineffective law enforcement.

Both local and foreign owned vessels on the international trades to and from South Africa are free to carry South African coastal cargo, but those on international trades have the advantages of fuel at the international price, of seafarers being exempt from income tax, of no import duties payable on ship s spares, and, in the case of many, and of operation in low or no income tax regimes. The industry has an enforced reliance on monopolistic supply of services by Portnet. This adversely affects the competitive position of coastal carriage especially.
 

Key recommendations
 
The disincentives facing coastal shipping in relation to other transport modes and foreign competition should be addressed at an interdepartmental level and removed where appropriate:

Cabotage protection legislation should not be enacted at this stage though cabotage options should be monitored in the future in the light of changing international cabotage practices and attitudes.

South Africa should not accede to the UNCTAD Code but should nevertheless strive to increase its share of liner shipping, and should monitor its options in relation to the code in the future.

In order to promote the growth of South African shipping interests in the dry bulk sector, research should be undertaken to establish how other nations have successfully increased their market share in the shipment of bulk products and to seek acceptable ways of emulating this.

The scope for bilateral shipping agreements which will enable South African shipping interests to access markets which are currently inaccessible should be explored.

Bilateral shipping or taxation agreements should be concluded with countries which levy freight taxes on non-resident shipowners so as to eliminate or reduce foreign taxes.
 

Implementation of recommendations
 
Close liaison between the Chief Directorate: Shipping and the shipping industry should be promoted. The Department of Transport should establish a Standing Committee on Maritime Transport which should have an advisory function and which should comprise representatives of all participants in the maritime transport industry. This Committee should meet in open forum quarterly to consider all aspects of maritime policy and practice. It should have the power to co- opt, to commission research, and receive representations from any interested party.

An inter-departmental committee as proposed by the Floor Committee (involving the Departments of Trade and Industry, Finance and Environmental Affairs) should be appointed to review all issues affecting shipping in a holistic manner. In particular:

• Bilateral shipping or taxation agreements with countries which levy freight taxes on non- resident shipowners so as to minimise these taxes
• Disincentives affecting coastal shipping in relation to other transport modes and foreign trading vessels
Research parameters covering the investigation into growing the bulk shipping market share of South African operators should be drawn up and tenders called for once research funds have been accessed.

Critical issues
 
Ports play a crucial and strategic role in the facilitation of seaborne trade. Ports are strategic assets serving the nation as a whole. The real estate of South African ports is currently owned by Transnet Limited. The port authority function is delegated to Portnet, an operating arm of Transnet, and services within the ports are provided either by Portnet or by private enterprise. At present, Portnet provides the majority of services.

Transnet is however burdened with a considerable pension fund deficit which it has sought to meet inter alia from Portnet s earnings. This has put artificial and uneconomic tariffing pressures on Portnet s management which in turn has adversely affected port efficiency and the international competitiveness of SA s ports. There is at present no external port regulatory and monitoring authority. Portnet (through Transnet) enjoys a natural and legally structured monopoly and acts also as its own regulator. Within its quasi-government though legal corporate structure, Portnet also operates in direct competition with private operators offering various services within SA ports. The vagaries of international shipping, the profound changes flowing from the displacement of breakbulk cargoes by containerisation, and trade sanctions, have left a legacy in SA s ports characterised by a predominance of casual dock labour over an ever dwindling permanent dock labour force. Any re-structuring of ownership or operation of SA ports will need to take the interests of organised and unorganised dock labour into account. Inland ports (at present City Deep) operate outside existing port authority structures.
 

Key recommendations
 
The government should pursue negotiations directed at the restructuring of the ownership of the port real estate and hardware, inter alia through the National Framework Agreement, to arrive at a satisfactory and acceptable resolution with the minimum delay. An independently constituted National Port Authority should be established, within the jurisdiction of the DoT, to
 
• Administer the real estate and hardware of the ports, including inland ports, in whatever ownership they may fall to be structured;
• Act as a regulatory body to establish operating parameters within the ports in a manner which will prevent both the abuse of the natural monopoly of the port landlord and unfair labour practices within the ports;
• Promote regulated private enterprise within the ports in a manner which provides the most cost-efficient services including the development and operation of cargo handling facilities. As far as possible however, free market forces should dictate the entry and exit of players in the provision of port services, and the setting of price structures within the ports;
• Provide, on a cost recovery basis, any essential port services not willingly taken on by private enterprise;
• Ensure that revenues derived from port operations should be used primarily for the betterment of port infrastructures (including the development of a trained and permanent dock labour force) and not for other national or regional government purposes.

The constitution of the National Port Authority should make provision for an Appeal Board to which contested decisions of the Board of the National Port Authority should be referred for review.

In viewing SA ports not as a source of income but rather as a means of promoting trade, the concerns of organised and unorganised labour at all levels of the existing Transnet/Portnet structure (and outside it) must be accommodated.
 

Implementation of recommendations
 
The DoT should play a crucial role in negotiations relating to the re-structuring of Transnet s port assets within the National Framework Agreement and other appropriate negotiating structures. As soon as an appropriate stage has been reached in the negotiations for the re-structuring of Transnet s port assets (though not necessarily only after the conclusion of such negotiations), the DoT, through the Interdepartmental Committee, and in consultation with the Standing Committee on Maritime Transport, should establish a National Ports Authority. In the interim, the continuing role of Portnet in the operation of the nation s ports and in the provision of services in those ports should be a recurring item on the agenda of the Standing Committee on Maritime Transport. The Standing Committee on Maritime Transport should be briefed to commission further research into the formulation of a national ports policy for SA.

Critical Issues
 
SA seafarers are currently not given the same protections and rights in labour law as workers employed on land. The SA shipping industry is currently experiencing a shortage of skilled and adequately certificated SA seafarers, particularly in the deck and engine room officer ranks. This problem is exacerbated by the presently fragmented approach to training and development, and the declining resources available to institutions. Economic liberalisation in the ports, coupled with the vagaries of shipping and cargo movements and consequent sharply variable labour requirements have in the last twenty years led to wage competition particularly in stevedoring and other parts of the cargo handling industry. This has in turn led to the replacement of permanently employed dockers by casual workers. The majority of workers in port cargo-handling operations are unskilled with a high level of illiteracy, thereby limiting their ability and the industry to adapt to technological change and improve efficiency and levels of service.
 
Key recommendations
 
Labour legislation needs to be amended to ensure that seafarers employed by SA owners and operators are afforded the same rights and protections as other workers.

The structure of employment in the ports needs to be urgently addressed through:
 

• correct management of any restructuring
• involvement of labour in all developments affecting employment; and
• the re-structuring of employment to ensure that the variable labour requirement of port service providers are sourced from a common pool at equal unit cost in order to reverse the casualisation of port employment and to improve working conditions and efficiency of service.

The crisis of skills and basic education in the maritime labour market needs to be urgently addressed through a concerted programme of education and training to meet the growing demand for seafarers, and to improve the skills base of existing employees in the industry. Education and training must comply with domestic and international standards as defined and required in the SA Qualifications Authority Act and the STCW convention.
 

Implementation of recommendations
 
Government should facilitate the amendment of labour legislation to give greater protection to seafarers (and particularly to SA seafarers) through an interdepartmental committee involving the DoT and the Department of Labour, and involving organised labour and employers. Government should manage the restructuring of Portnet to ensure job preservation, and will create the necessary forums to ensure that such restructuring is done with the full input of organised labour. Government, though the DoT and the National Ports Authority, will actively support and facilitate the negotiated establishment of a statutory labour pool, which shall in each port create a single pool of permanently employed registered dockers to supply the variable labour requirements of port operators at equal unit cost according to skill. Whilst Government, through the DoT will continue to act as the competent authority administering the certification of seafarers in terms of the STCW, Government will also work with and support the Maritime Industry Training Board in its functions:
 
• as the competent standard setting and accreditation body for training and education in the maritime industry under the SAQA Act;
• as a facilitator of education and training to ensure that the training and education needs of employees and the industry are met; and
• as a sponsor of maritime training and education.

Government will also assist the MITB in its efforts to arrive at appropriate and effective financing mechanisms which require minimum wastage of resources on administration and enforcement.

Critical issues
 
A cohesive, co-ordinated and effective policy giving due cognisance to internationally accepted principles of safety of life and property at sea as well as to particular requirements of the South African coastline and the trades which ply its waters, is a prerequisite to ensuring safe and orderly maritime transport.

There exists in international law and practice, a procedure of Port State Control by which a state may conduct limited safety inspections of all vessels calling at its ports. PSC has demonstrably reduced the incidence of substandard ships calling at ports where it is rigorously enforced. Further measures such as mandatory ship reporting, are now legally enforceable under international law. SA s full membership of the International Maritime Organisation, and the development of international maritime controls such as improved flag state vessel safety requirements and PSC, have however imposed greatly increased obligations and burdens on the Chief Directorate: Shipping. The department is inadequately staffed to cope with this burden. There is an unsatisfactory overlap of departmental jurisdictions relating to oil pollution at sea and to the investigation of maritime casualties. Many SA maritime regulations are outdated and require updating or repeal. Most require re- examination in the light of the Interim Constitution. There are many international conventions which require examination to assess the advisability of SA acceding to them. The provision of a satisfactory well-prepared and well-equipped salvage service and marine pollution reaction service for the South African coastline is strategically necessary, and cannot be left to be funded entirely by the private sector.
 

Key recommendations
 
SA needs to embrace PSC as one of the more effective means of deterring substandard ships and their owners from calling at SA ports. The Chief Directorate: Shipping should increase its resources to enable it to deal satisfactorily with all maritime matters, including PSC and the revision of legislation, to which end attention should be given to the creation of a Maritime Safety Agency as an option. A statutory National Navigation Authority should be created under the auspices of the Department of Transport. Although Government participation in salvage, directly or indirectly should be discouraged as being a disincentive to the investment of the private sector in the industry, the State should stimulate investment from the private sector in the tug and salvage industry.
 
Implementation of recommendations
 
The Department of Transport should address the resource needs of the Chief Directorate: Shipping as a matter of urgency.

The Chief Directorate: Shipping should take steps to improve its PSC inspection rate and should promote regional initiatives concerning the establishment of regional PSC agreements. A Standing Committee on Maritime Transport (referred to above) should be established to ensure proper liaison between the Department of Transport and the industry it seeks to serve. The Interdepartmental Committee proposed by the Floor Committee should be established. The DoT, where appropriate in consultation with the Standing Committee on Maritime Transport, should continue to give urgent attention to the review, revision and updating of conventions, regulations and other legislation affecting maritime transport.

The unsatisfactory overlapping jurisdiction in relation to oil pollution and casualties should be reviewed and addressed by the Interdepartmental Committee. The Standing Committee on Maritime Transport should investigate and report on ways of stimulating the local salvage industry.