FOCUS ON RIGHTS ALLOCATIONS BY PETER EDWARDS – FISHING INDUSTRY NEWS (DEC 2018)


RECENT ALLOCATIONS

This is an apt publication in which to review recent developments and topical issues relating to the granting of fishing rights both recently and in the future.

The 2016 rights allocations (FRAP 2016) were of course a roller coaster ride particularly in the Hake Inshore Trawl and Horse Mackerel sectors.¬† In fact there are appeals still outstanding in the Horse Mackerel sector and recently in December 2018 the redeciding of the category B and C appeals (after a number of court orders) looks to create further controversy and court applications ‚Äď in essence the category A right holders‚Äô quanta have been further reduced to accommodate additional new entrants in the B and C categories.¬† Accordingly whilst we are at the end of the year 2018, the 2016 allocations have yet to be finalised.

The mayhem started with allocations of Hake Inshore Trawl which resulted in the urgent High Court interdict application of Viking Fishing which was initially successful in January 2017 and then overturned by a full bench (two judges to one) of the Cape High Court on the 7th of July 2017.  The roller coaster did not end there with the decisions on appeal (through the Minister’s appeal advisory team) ultimately finding that the quantum allocation mechanism was in fact unlawful (contrary to the Court’s finding) and re-instating Viking’s quantum to levels comparable with its previous allocation.

Finalising the 2016 appeals in the Hake Inshore Trawl and Horse Mackerel sector must now be an extreme priority for the Minister in order to move forward with the FRAP 2020 process.  Out of all of this a key lesson for the Department is that in future they should ensure that the delegated authority finalise the initial allocations with sufficient time prior to the expiry of current rights for a full appeal process to take its course.  This will then prevent urgent interdict applications and the unnecessary disruption of industry pending appeals.

LOOKING FORWARD

Overlap of small scale and commercial

Two vitally important allocation processes which will be unfolding in the next few years will be the 2020 commercial fishing rights allocations (FRAP 2020) and of course the small scale fishing allocations.  It is not overstating matters to claim that FRAP 2020 and the upcoming small scale allocations will shape the road of the fishing industry for at least the next two decades.

To a large extent these processes run parallel but there are some very important intersections where small scale meets or clashes (depending on your perspective) with commercial allocations.  This becomes critical in that the Department has made it clear that they have approximately 22000 registered small scale fishers falling under approximately 300 odd co-operatives which have been registered.  This process of registration and verification by the Department has occurred by and large without any input or consultation requested from the commercial sector.  Arguably consultation with the existing commercial sectors should have been paramount in that the larger the small scale sector the greater the impact on certain of the commercial sectors Рin particular the West Coast Rock Lobster sector and now it would appear the Squid sector (not to mention the Line Fish sector).  The greater the size of the small scale sector the greater the portion of the relevant TAC or TAE which will be required to be apportioned off for the small scale sector.  As such if the Department has not properly verified and recognised small scale fishing communities and their underlying fishers, it is possible that a greater chunk of TAC’s and TAE’s may be apportioned towards small scale than indeed is warranted.

Impact of the WWF judgment

The crossing of paths of commercial sectors and the small scale sector is no better illustrated than in the West Coast Rock Lobster sector.  In particular the recent WWF High Court review application resulting in the declaration of the West Coast Rock Lobster TAC as being unlawful is an example of such a clash.  With the West Coast Rock Lobster stocks declining and the scientists recommending a TAC of around 790 tons, the Department was clearly under pressure to keep as high a TAC as possible in order to allow sufficient tonnage for the small scale sector (and nearshore rights holders) despite the fact that such a large TAC was (according to scientists) not sustainable.

The WWF judgment was also of vital importance for the cause of consultation which is imbedded in the Marine Living Resources Act and now confirmed by this judgment.  As such with the sector policies and TAC/TAE declarations in the commercial sectors eminent, the Department is under a heightened pressure to implement meaningful consultation with interested and affected parties.

CAF to be implemented

Staying with the consultation theme, the Department has announced that it is in the process of complying with its obligations in terms of the MLRA to appoint a Consultative Advisory Forum (‚ÄúCAF‚ÄĚ).¬† The Department and the Minister have been in breach of this obligation for many years and it is submitted that this has greatly impacted on the ability of the Minister and the Department to make informed decisions on various issues in the fishing industry and in particular relating to rights allocations, TAC/TAE declarations and the effect thereof on the industry/resource.¬† It is hoped that the persons appointed to the CAF are independent, broadly representative and multi-disciplinary as is legally required in terms of the MLRA.¬† The CAF performs a vital part of the consultation process as set out in the MLRA and in particular is obliged to give consideration to submissions made by registered industrial bodies and interest groups before consulting with the Minister.¬† The Minister in turn is obliged to allow the Forum to consult the Minister on wide ranging issues which would of course include sector policies, general policies, the issues surrounding the TAC/TAE declarations, rights allocations ¬†and the like.

Squid TAE issue

With reference to TAE declarations a particular upcoming issue which is looming and which needs resolution is the apparent proposal by the Department to apportion 25% of the Squid TAE towards the small scale sector.  This is despite the fact that the Squid commercial sector is not a small scale sector in that the vessels are sophisticated vessels with blast freezers which go to sea for three weeks at a time (i.e. the nature of this type of fishing does not fall within the legal definition of small scale).  Any Squid rights which could be allocated to the small scale could only possibly be small scale rights which would be exercised on small vessels such as ski-boats on day trips.  As such this should be a vital factor when determining a TAE in the Squid sector.  Consultation between the Department and the Squid commercial sector is therefore of considerable importance going forward and should this be lacking, a very lucrative and important commercial fishery in South Africa which provides thousands of much needed jobs in the Eastern Cape could be at risk.  In a nutshell the danger is that the squid commercial sector is overly restricted with regard to effort in order to provide small scale Squid rights which will not be able to be utilised as effectively as the commercial rights due to the legal  restrictions on the small scale sector (i.e. small vessels, day trips and squid preserved on ice and not in blast freezers).

New Entrants

This then leads to a further issue for the commercial sectors and that is to what degree TAE’s and TAC’s will be apportioned towards the admission of new entrants.  Certainly for the Squid sector having an apportionment towards small scale and then again for new entrants will provide a double whammy from which there may be no return.

The issue of new entrants is traditionally motivated by DAFF in order to increase the levels of transformation in the various sectors.  However, before rushing to decide that there is a need for new entrants in any of the sectors, what the Department and the policy teams should be doing is researching the detailed current level of transformation in these commercial sectors (which has developed since the inception of the MLRA in 1998) to determine whether in fact and to what extent new entrants are actually required to enhance transformation.  There does not appear to be any such proper research currently being conducted.  As such it would also be advisable for the various industry associations to conduct their owned detailed research on this aspect in order to assist the Department during the consultation process so that informed policies are created and adopted.

A prime example of blindly advocating the need for new entrants can be seen in the 2016 allocations where a proper analysis of say the Hake Inshore Trawl sector would have evidenced that the sector has transformed considerably since the advent of the MLRA in 1998 and the bringing in of new entrants in fact prejudiced 100% black owned existing rights holders who had invested and performed for the past 20 years.  Certain of these rights holders received no increase in their allocation despite their 100% transformation and investment. The most recent appeal decisions in  Category B and C has further exacerbated this issue for transformed category A rights holders who have now lost further quantum.

Accordingly the approach should rather be that existing rights holders who have transformed significantly over the period of their rights as well as performed and invested should in fact be rewarded with increased allocations (which will increase black ownership of fishing rights in the sector and accordingly enhance transformation).¬† The introduction of new entrants should only be as a last resort to increase transformation after an internal look at existing rights holders and their transformation efforts.¬† Fragmenting the rights further where there are already great transformation strides in a particular sector will just place the investment and jobs in the sector at risk- and create ‚Äúpaper quota holders‚ÄĚ.

Accordingly, the need for new entrants and transformation in the sectors should be researched properly and to place in perspective should be compared to other sectors of industry in the country to determine whether the fishing industry is lagging behind or is ahead in its efforts.

New Sector Policies

In the commercial sectors the next key event is the publication of draft sector policies which will be the guide for the FRAP 2020 allocations.  These are expected early next year (2019) and it is important for all interested parties to be involved in the comment process and for the Department to engage in meaningful consultation on key issues.

FTC back

An interesting development is the recent announcement that the Fisheries Transformation Council (FTC) will be brought back into play.  The MLRA provides for the FTC to lease fishing rights to certain applicants in order to enhance transformation.  The conditions of these allocations and the process of leasing will be novel and interesting to follow bearing in mind that the FTC only made a very brief appearance when the MLRA was first passed but then disappeared after its initial allocations were set aside.

New Transfer Policy

It would also appear that the current Rights Transfer Policy of 2009 is to be replaced which is a positive step in that the current policy has certain material lacunae which have created uncertainty over the years.  Certainty regarding the conditions for the transfer of a right or shares in a rights holding company is key for both large and small entities in the fishing industry.

CONCLUSION

 

With so many issues up in the air at the moment and with the next two years in the industry being pivotal to the future shape of the various sectors, industry associations need to step up, get involved and play their part in the allocation process both in the support of their members and to provide much needed information to the Department so that informed decisions can be taken. The  introduction of a competent CAF as an additional consultative body in theory should enhance this process.