AUGUST 2021 – FISHING INDUSTRY NEWS ARTICLE


MINISTER’S BOMBSHELL COURT APPLICATION TO SET ASIDE SMALL-SCALE FISHING RIGHTS ALLOCATIONS

On the 5th March 2021 under case number 4020/21 in the Western Cape High Court, the Minister of Forestry, Fisheries and the Environment applied to the High Court to have the allocations (effectively her own decisions) of small-scale fishing rights in the Western Cape set aside on review. A shocking development on a number of levels.

Firstly, since her Department was ordered in 2007 by the Equality Court to develop a small-scale policy to include small-scale fishers in the access to marine living resources which they traditionally fished, it took another 5 years to finalize a small-scale fishing policy in 2012, a further 2 years to amend the MLRA, a further 2 years to pass small-scale fishing regulations and then a further approximately 3 years to allocate small-scale fishing rights. On top of these delays is now this court application and the start of the process afresh.

Secondly, despite the large scale systemic flaws in the small-scale allocation process (as stated by the Minister in her founding affidavit in the Court application), the Minister only chose to set aside the Western Cape small-scale allocations – her answer may be that most of the complaints were received in the Western Cape area and hence she only contracted an independent audit to investigate the Western Cape process/allocation.

However, when one views in detail the submissions of the Minister, the findings of the internal audit report, and the fact that the same process, forms and criteria would have been applied by the same Department in all the provinces, there is a high probability that small-scale allocations in all the provinces have the same underlying flaws which would justify the setting aside of the small-scale allocations in all the provinces.

The conclusion of the report as found in the executive summary thereof states that:

“Based on our verification of the processes, listings and documents, we have concluded that the process followed in the assessment of the applications for recognition of small-scale fishers was wholly inadequate, and the results of these assessments cannot and should not be relied on for any decision making purposes in terms of the regulations.”

Therefore, once the internal audit report for the Western Cape had been received with such a conclusion, one is left wondering why the Minister did not immediately extend the mandate of the independent auditors to investigate all of the provinces.

There were 6 underlying systemic flaws referred to in the independent audit and in the submissions of the Minister in the court papers.

  • There were inconsistencies between the policy and regulations which led to confusion around the criteria applicable to small-scale fishing applications and the interpretation of these criteria.
  • The criteria used to assess applicants was not objective and clearly defined.
  • The small-scale fisher verification form was a key factor in the independent audits overall conclusion that the process was flawed and open to legal challenge in that the form was not aligned to clear objective criteria and as such applicants were therefore not fully aware of the criteria or the impact of their responses.
  • The assessment process was inconsistent and not fairly and transparently applied.
  • The appeals process was inconsistent and may be considered unfair.
  • The data records of the applications and appeals processes were grossly inaccurate and unreliable.

In conclusion, we have not as yet seen any explanation from the Minister as to why the investigation was limited to the Western Cape and in particular why it was not extended to all the other provinces taking into account the underlying systemic nature of these major flaws.



FISHING INDUSTRY NEWS ARTICLE – ITAC MAY 2021


ITAC PROHIBITION ON THE PURCHASE AND IMPORT OF SECONDHAND/USED FISHING VESSELS INTO SOUTH AFRICA

Section 6 (1) (b) of the Act reads as follows:

 “(6) 1 the Minister, may by  notice in the gazette, prescribe that no goods of a specified class or kind, or no goods other than goods of a specified class or kind, may be:

Over the last few years, it has become apparent that the International Trade Administration Commission (ITAC) is refusing to allow the import of used fishing vessels into South Africa.

ITAC is the state agency appointed under the International Trade Administration Act of 2002 (the Act) to process and decide on applications for import permits which are required for the import of used/secondhand goods into South African.

… (b) imported into the Republic expect under the authority of and in accordance with the conditions stated in a permit issued by the commission;…”

Furthermore, sections 26 1 (1) (a) of the Act reads as follows:

            “26 (1) – A person may in the prescribed manner and form apply to the commission for…

(a)an import or export control permit, ….in terms of part B of this chapter and the regulations;.”

Then, Section 27 (1) (a) and (b) of the Act reads as follows:

“27 (1) (a) – The commission must, after evaluating an application made in terms of section 26 (1) (a) or (b):

            (I) Refuse the application;

            (II) Approve the application in whole or in part and with or without conditions.”

Furthermore, regulations published on 10 February 2012 in terms of section 6 of the Act provides for the requirement that second hand/ used goods require such an import permit and reads as follows:

“……..  (b) All secondhand or used goods, including waste and scrap of whatever nature, excluding goods referred to in scheduled 4, shall not    be imported into the Republic of South Africa except by virtue of an import permit issued in terms of section 6 of the said International Trade Administration Act, 2002, and in which such goods are specifically described;”

With such wide ranging and draconian powers regarding the import of used/secondhand goods, one would expect a detailed policy which had gone through a proper public consultation process. However, there is no such policy. When enquiring with ITAC with regard to applications, only after numerous requests is one presented with an internal guideline document which has been developed internally within ITAC and without public participation.

The internal document is headed “International Trade Administration Commission of South Africa Import Control. It is a 17-page document with part 1 having introductory comments and part 2 containing the import control policy. At part 2 section C the document sets out the types of goods which require an import permit. Section C 2 in turn deals with the specific sub-categories of used goods such as tyres, motor vehicles, engines, spares for trucks etc. There is nothing whatsoever dealing directly with used/secondhand fishing vessels.

The only part of this document that could be relevant to dealing with applications for import permits for used fishing vessels is the introductory comments at paragraph 2.1 and it is these general statements that are almost always quoted in decision letters received from ITAC when applications are submitted for import permits for used fishing vessels. The relevant paragraphs from the introduction reads as follows:

“The importation of used and secondhand goods, waste and scrap is controlled for environmental reasons, health reasons and safety and quality compliance reasons. Control is also maintained to support sustainable industrialization and international competitiveness”.

“And it is a general rule that the importation of used and secondhand goods is not allowed in the event or similar or substitute new goods being available from local manufacturers. These measures are necessary and are applied as most used goods are available from affluent societies at very low prices and the uncontrol importation of such goods could have a devasting effect on local manufacturing activities and job creation.”

Recent experience has shown that using these general principles and a very basic confirmation from a local shipyard that they are able to build steel fishing vessels (but still at international rates), ITAC are refusing applications from all sectors of the fishing industry for the importation of secondhand steel fishing vessels.

These decisions are being made by ITAC despite:

Substantive representations from the applicants, fishing sector associations and FISHSA, and in certain cases even support from the Department of Environment, Forestry and Fisheries;

  • The relevant fishing sectors not having the financial strength/economies of scale to afford such a high value brand new steel vessels;
  • Current vessels becoming older and from a safety and efficiency point of view requiring replacement;
  • Imported used vessels are often required to be refitted and refurbished by local ship repairers and suppliers with resulting job creation and turnover for local industries in South Africa.
  • The legislative imperative to empower the fishing industry by promoting investment in vessels by new entrants so as to compete with established industry players;
  • New build vessels from abroad do not require an import permit from ITAC, so if an applicant could afford a new vessel, they would most likely place an order with a more experienced ship builder abroad, who would most likely also complete the build in a shorter period of time.
  • Many glass fibre vessels are built locally for the fishing industry in any event.
  • It is not a common occurrence for the import of a secondhand steel vessel from abroad, and the granting of an import permit for a secondhand fishing vessel will unlikely cause a flood of new secondhand fishing vessels being brought into South Africa. Previously, import permits have readily been granted by ITAC for the import of secondhand fishing vessels.

In summary, it is submitted that the refusal to grant such an import permit will only lead to local fishing companies being prejudiced in terms of safety, efficiency, investment, empowerment and international competitiveness. On the other hand, there will be no benefit to local shipyards and ship repairers as fishing companies (if they could afford to) would likely only order a new steel vessel from foreign ship yards at a similar cost.) In fact, local shipyards will lose out because there will be no refurbishment or repairing of secondhand vessels which are imported into the country.

Going forward, it is submitted that the answer lies in urgent high level consultations between the Minister of Environment, Forestry and Fisheries, and the Minister of Trade and Industry together with industry stakeholders. This should be sooner rather than later to prevent an aging steel fleet from being irreplaceable due to this current change in policy by ITAC (without any proper consultation with the industry at large).



A South African Fishing Industry Tribute to Rachel Zeelie (20 February 1965 – 7 March 2021)


The 7th of March 2021 marked the sad passing of Rachel Zeelie, long serving consultant to the fishing industry.

A South African Fishing Industry Tribute to Rachel was held at the Italian Club in Cape Town on 27 March 2021. A number of industry representatives Mike Stowe, Dr Johan Augustyn, Clyde Bodenham, Mymoena Poggenpoel and myself, as well as Sue Middleton, the DDG at Fisheries Management, put forward their praises of Rachel, an intelligent woman of integrity and honesty, who served the industry faithfully.

Rachel was born on 20 February 1965 and grew up in Crawford on the Cape Flats. She excelled at school and matriculated at Groote Schuur High School in1982 with 4 distinctions. After obtaining a government bursary she completed her BA Political Science Degree at RAU University (now UJ).

Rachel first worked for the Department of Transport in Cape Town where she was involved in the administration of the taxi permit system. In the early 1990’s, she obtained a more senior post at the Department of Sea Fisheries (now DEFF). Since this time, she has remained committed to the fishing industry.

After excelling in her career at Fisheries, in 2002 she decided there was a need for consultants in the fishing industry to assist fishermen and women with the administrative issues of their operations. She left government employment and started her own consultancy with offices in Paarden Eiland. In 2005 her best friend Karien Van Kesteren joined the consultancy (named Marine Management Services) where they serviced large and small, boat owners and processing facilities. This consultancy they ran together for the past 16 years.

The fishing industry also gave Rachel the opportunity to travel to Vietnam, Sweden and Norway where she gained experience in different fisheries and aquaculture.

Rachel leaves behind her husband Johan to whom she was married for 31 years, her daughter Natalie, and son Michael. Her other son Johnathan had previously passed away when he was 15 years old.

On top of running her own business and a busy family life, Rachel still had found the energy to study a BA Law degree in Marine Law at the UCT.

However, Rachel’s greatest attributes were her consistent virtues.   Having known Rachel since the late 90’s much of our involvement related to stressful situations where we were trying to resolve issues for clients. Regardless of the circumstances, Rachel always remained committed to serving her clients – it mattered not whether the client had a small lobster quota or a fleet of vessels, she fought equally hard for all of her clients. In fact, she always showed great empathy for those clients who had been ill-treated and needed help in the protection of their rights.

Being passionate about her work, she enjoyed getting to know the personalities of everyone she delt with and had great respect for those who had worked hard in trying circumstances.

Personally, I will always remember Rachel for her sense of humour and that hearty laugh on the other side of the phone. This laugh showed her happiness and love for life.

Thank you, Rachel, for your legacy and contribution to the industry, your love for life and your laughter…Rest in peace.



MINISTER OF DEFF; FRAP POLICY PICKLES


MINISTER OF ENVIRONMENT, FORESTRY AND FISHERIES : FRAP “POLICY PICKLES”

 

Introduction

 

  1. With the recent notice granting exemptions to existing rights holders (whose rights expire at the end of 2020) to continue fishing for the year 2021, the focus of Minister Creecy and her team at DEFF, should fall squarely on getting FRAP 2021 completed by the start of 2022 – a tall order considering there are 12 sectors including some key capital intensive fisheries where the stakes are high. Not to mention, the parallel process of launching the small-scale sector.

 

 

Policy formulation

 

 

  1. Other than the appointment of various service providers to assist, the most pressing issue now is the formulation of 12 sector policies and a general policy to underpin the FRAP allocation process. In theory, the socio-economic impact assessments studies (SEIAS) for each of the sectors including appropriate consultation thereon, should have preceded the policy process but frankly one can’t see when this will happen – which leaves some type of parallel process as the only option.

 

Policy Pickles

 

  1. There will be a number of controversial policy issues on which stakeholders will be keeping a close watch.

 

  • New Entrants

 

Section 2J of the Marine Living Resources Act (MLRA) objectives states “… the need to restructure the fishing industry to address historical imbalances and to achieve equity within all branches of the fishing industry.”

Furthermore,  Section 18 (5) of the MLRA states: “… in granting any right referred to in subsection one, the Minister shall, in order to achieve the objectives contemplated in section 2, have particular regard to the need to permit new entrants, particularly those from historically disadvantage sectors of society”.

 

These 2 sections are the corner stones for the transformation of the fishing industry by means of introducing new rights holders (“new entrants”) into the various sectors.

 

However, it has been argued by industry in the current horse mackerel High Court review application that these sections cannot be applied in perpetuity – in other words

(as the argument goes) there comes a point where a sector has reached sufficient transformation and where economic stability, sustainability and job security become the

overriding policy objectives.

 

It is unlikely that there will be a judgment in the horse mackerel review matter to give guidance on this issue prior to the commencement of FRAP.

 

There have previously been rumors of a set 30% reduction in TAC’s to make provision for new entrants. Whether the Minister will play her hand so directly at the policy stage

remains to be seen – one senses that any upfront policy dictate such as this will be challenged already at policy state by existing rights holders which will most likely lead

to a delay in the commencement and completion of FRAP – this delay could well kick FRAP into a 2022 “no man’s land”.

 

The Minister may well have to “fudge” this issue in a non-comital way in order to appease the opposing sides – the tough call she can leave until allocation stage.

 

  • Brother – Sister / Holding Companies

 

In the previous FRAP, the brother – sister and holding company policy principal emerged. In a nutshell applicant companies who are controlled by the same shareholders or applicant companies who were in a holding and subsidiary relationship would not both receive a full allocation regardless of how well they scored in the adjudication process – allocations would be split or only one company would receive an allocation .

 

The apparent logic behind this principal is that allocations should be spread to a wider base and not merely within the same group.

 

The clear counter argument is that groups can structure in different ways with some groups having allocations held in one rights holding company and other groups having the allocation split into different entities. As such it makes no sense and is irrational penalizing a group for their particular structure when they both have the vessels and crew as well as infrastructure to catch these allocations and in addition score equally well in the adjudication process.

 

If this is a method to hold in reserve a portion of the TAC for reallocation, this could also be a policy area which the Minister keeps vague in order to leave her options open and to avoid a pre- allocation challenge on the policy.

 

  • Transformation Criteria

 

South African companies black economic empowerment (i.e. transformation)  is traditionally measured by the codes and score cards set out in the Broad Based Black Economic Empowerment Act (BBBEE ACT)and are issued with score cards and certificates in this regard setting out their level of black economic empowerment.

 

However, in previous rights allocations to date DEFF have not applied the codes and score cards in their assessment of transformation – from FRAP to FRAP different criteria and weighting have been used which even changed from sector to sector. Whether or not DEFF are obliged to apply the codes was previously tested in the Supreme Court of Appeal who found that legally there was no such obligation in a fishing rights allocation process – arguably DEFF were able to rely on a technical point in this regard.

 

However, there have been amendments to the BBBEE Act and its codes and the argument is now much stronger in favor of there being an obligation on DEFF to strictly apply the codes and score cards in their assessments of transformation.

 

Again, it is doubtful whether in any sector or general policy the Minister will commit fully to the exact measure of transformation and the exact extent to which the codes will apply.

 

  • Economic Units

 

During the 2006 FRAP the concept of “economic units” was allowed when assessing criteria such as job creation and investments.

 

Effectively parties (and applicants for fishing rights) involved in joint operations and joint ownership of a fishing asset, could by agreement share the jobs created or investment in assets, even if one of the applicants was not the employer of the workers or the owner of the asset. As long as there was no “double counting” this use of economic units allowed smaller rights holders who had a part investment (in say a vessel) to get credit therefore both on an investment and job creation basis.

 

However, the previous FRAP did not officially recognize the economic unit although in instances certain applicants may have been credited where they had structured their affairs on the basis of an economic unit.

 

Whilst it is a fair mechanism, it can be complicated to properly apply and is open to abuse if the correct systems are not in place. Whether DEFF has the ability in this extremely rushed process to officially bring back the economic unit remains to be seen.

 

  • Access to a Suitable Vessel

 

The exact specifications of a suitable vessel will obviously vary from sector to sector. The question will be how flexible the policy will be regarding access to a vessel. Traditionally, a catch agreement or ownership in a vessel were seen as modes of access but commitments to build or purchase a vessel, or even nominate a vessel within 90 days of being allocated a right have been allowed in previous FRAPS. The level of flexibility in this regard may of course depend on the approach towards new entrants and is something that will have to be carefully considered by the Minister.

 

  • Appeals

 

The general policy usually sets out the nature of the appeal process. An important aspect will be what information and documentation will be made available to applicants and how, in order for them to appeal efficiently and in an informed manner. In addition, the section 80 (3) process of allowing affected parties to comment on other applicants appeals needs to be  accommodated. These processes take time and due to the tight timeframe and the fact that there are 12 sectors up for allocation, will require an extremely organized process with little room for maneuvering.

 

 

Conclusion

 

  1. In closing, the sooner the policy process commences, the better the level of consultation and input, and hopefully the better these issues will be dealt with by the Minister.

 

  1. Finally, it remains to be seen if the Minister will be able to appoint a CAF to assist with FRAP – legally she is obliged to appoint a CAF.


FRAP 2020/21 – THE TIGHT SQUEEZE AND THE CAF


INTRODUCTION

It would appear that Department of Environment, Forestry and Fisheries (DEFF) and its Minister are already behind on their most recent timeline for FRAP 2020/21.

The latest official notification regarding the FRAP 2020/21 rights allocations was published by the Minister of Environment, Forestry and Fisheries (the Minister) on 26 June 2020 setting out the following deadlines:

  • The notice firstly confirms the Cabinet’s decision to extend the time frames for dealing with the fishing rights allocation process in the commercial fishing sectors (which expire on 31 December 2020) until 31 December 2021;
  • The notice thereafter states that the department will soon conduct socio-economic impact assessment studies (SEIAS) in order to review the general policy, the policy on the transfer of commercial fishing rights, the policy on the allocation and management fishing process establishments and the various sector policies;
  • The notice thereafter confirms that the project plan for FRAP 2020/21 has been revised and that the Department intends to:
  • Between 12 October 2020 until 30 November 2020 publish draft policies, application forms and proposed fees for public comment;
  • From 12 October 2020 to 27 November 2020 conduct public consultations on the draft policies, application forms and proposed fees.
  • Publish in a government gazette notice an invitation for applications for fishing rights which will commence on 1 February 2021 and continue until 2 April 2021during which time applications will be receipted by the department.
  • The department was then to commence the fishing rights allocation process and adjudication thereof with effect from 17 May 2021 until 30 November 2021 – I presume that this process will include not only the DA(s) provisional decisions and final decisions but also the entire appeal process to be conducted by the Minister.

TIMELINE TO BE AMENDED

However, recently it has been reported to industry that this timeline is to be amended considerably.

Firstly the SEIAS, which should already have been commenced and possibly completed (so that the various sector policies and other policies could have been drafted and published for public comment and participation) are only going to be completed during the period from end October 2020 to mid-December 2020.

Therefore, the draft general policy, transfer policy, various sector policies and application forms are only likely to be published for public comment and consultation around mid to end January 2021.

In these circumstances, and in addition with the moratorium cut off for section 21 applications most likely also being extended from end September 2020 to the end of February 2021, after invitations for rights applications, the deadline for lodging of applications is only estimated to be around the end July 2021.

THE TIGHT SQUEEZE

If this is the case, there will then only be 5 months left of 2021 for the completion of the assessments of the applications by the DA’s be compiling of the general reasons and announcing of the provisional decisions; the assessments of comments on the provisional decisions and the announcement of final decisions by the DA; the submission of appeals against the final decisions, furnishing of the regulation 53 reports by the DA(s) in respect of the appeals, and then the assessment of the appeals by the Minister and the announcement of the appeal decisions for all the sectors.

This is an extremely tight squeeze and based on previous processes, unlikely to be achieved (but I am happy to be proved wrong).

If because of the squeeze, the appeals process continues into 2022 then a further exemption/extension of rights (on top of the 2021 exemption/extension) will have to be given to the current existing rights holders. This would be to avoid the untenable situation of allowing the rights holders awarded by the DA(s) from activating their rights from January 2022 while the appeals have still not been decided – the appeals decisions by the Minister may result in different rights holders being awarded than those awarded by the DA(s). By allowing the DAs’ allocated rights holders to commence fishing without the appeals being finalized may lead to another 2015/16 hake inshore trawl type fiasco, which is still not finalized (and we are in 2020 already).

CONSULTATIVE ADVISORY FORUM (CAF) – STILL MISSING IN ACTION

Although the Minister has in mid-2019 requested nominations for persons to sit on the CAF, nothing further has been made public regarding the appointment of the CAF,

As stated repeatedly in other articles, the Minister has a legal obligation in terms of section 5 of the Marine Living Resources Act (MLRA) to appoint a CAF. As such, there has been a breach of this obligation for almost 20 years by the Minister which in my view has resulted in the various Ministers over the years being without informed and independent industry knowledge in order to make decisions – the legislature clearly intended the CAF to be a body which can provide such independent and informed industry knowledge to the Minister for decision-making purposes.

With regard to the CAF’s particular role in commercial fishing, section 21 (3) of the MLRA is clear and states as follows:

21(3) The Minister may, after consultation with the Forum, make regulations regarding –

  •  Guidelines or criteria concerning the transfer of any right of access, including determining limits on the transfer of rights between holders of such rights on a temporary basis;

 

  •  The maximum or minimum portion of the allowable commercial catch, the total applied effort, or a combination thereof, which may be allocated or transferred to, or acquired or otherwise held by, any person;

 

  •  Reallocation of any right of access, having regard to any significant alteration in the long – term revenue derived from the resource being exploited or in the long-term availability of the resource;

 

  •  The determination of rights to, or disposition of, by-catches in relation to any right;

 

  •  The monitoring and control of the use of rights of access;

 

  •  Subject to the provisions of the Labor Relations Act, 1995 (Act No. 66 of 1995), the employment of South African persons on board fishing vessels that are used for the utilization of any right of access;

 

  •  The utilization of South African fish processing establishments in the exercise of a right of access; and

 

  •  The other measures that may be necessary or desirable to achieve the effective implementation of a scheme for rights of access.”

 

The majority of the provisions of these subparagraphs relate to rights of access and includes the reallocation of rights of access.

One might be tempted to argue that the Minister is only obliged to consult with the CAF when making “regulations” relating to these matters. However, the definition of “regulation” in the MLRA is: “a regulation made and includes a notice issued under this Act(my underlining).

The general, sector and transfer policies are all issued pursuant to notices (“regulations”) under the MLRA. The invitation for fishing rights and the application forms are in addition also issued pursuant to notices (“regulations”) under the MLRA. As such, it is submitted that for FRAP 2020/21, the Minister is obliged to consult with CAF as part of the process (as should have been done over the past 20 years with regard to all fishing rights allocation processes).

This obligation is over and above the obligation of the CAF where section 6 states that the CAF “shall advise the Minister on any matter… in respect of the objectives and principals referred to in section 2 but in the opinion of the forum should be brought to the attention of the Minister”.

This glaring non-compliance with the MLRA has never been taken as a point of challenge in any review applications in respect of fishing rights allocation processes, most likely because it is such a foundational systemic flaw that it could render the entire FRAP process invalid. As such, it is presumed no person has to date been prepared to take this point upfront at the initial stages of a FRAP as at this time most stakeholders (after delays and extensions) are generally desperate for the process to commence and for rights to be allocated.

However, after the allocations are finalised, it would be difficult for a disgruntled applicant to take this point. It would mean that they would have to challenge the entire process including the fishing rights granted to all those applicants (including new rights holders and existing rights holders alike), which in turn would mean a stop to all fishing operations under these new rights and for the process to start afresh after the appointment of a CAF – one might call this the “atomic bomb” point which no challengers have been prepared to take (at least in court proceedings to date) due to its devasting effect on an entire process.

TO PUSH FOR A CAF OR NOT 

If it is believed that the CAF could potentially benefit the Minister’s decision making in FRAP and that the law should be upheld, industry bodies and stakeholders alike should now already be insisting on the appointment of the CAF being “a broadly representative and multi-disciplinary” body whose members are qualified to make a substantial contribution to the FRAP process.

However, it is unclear whether “in the tight squeeze process above” the Minister has provided time for consultation with the CAF (if actually appointed) in terms of the obligations of the MLRA.