South Africa has repeatedly stated its ambition to become a leading maritime hub. Yet one small but important sector remains inexplicably excluded from a tax relief regime specifically designed to support non-road diesel users.
The Off Port Limits (“OPL”) industry performs essential maritime services just outside the boundaries of our commercial ports. OPL vessels transfer crew, provisions, spare parts, medical supplies, emergency equipment and technical personnel to ships that do not call at South African ports.
Despite operating entirely at sea and consuming diesel in non-road activities, these vessels currently do not qualify for diesel refund benefits available to many comparable maritime sectors.
What Does The Legislation Currently Provide?
The diesel refund system is governed primarily by the Customs and Excise Act 91 of 1964 and, more specifically, Schedule 6, Part 3, Note 6 thereof. Under the current framework, various maritime operators qualify for refunds of certain fuel-related levies where diesel is consumed in qualifying non-road activities.
Qualifying sectors presently include:
- Commercial fishing vessels;
- Coasting vessels;
- Offshore mining vessels;
- Research vessels;
- Cable servicing vessels;
- Coastal patrol vessels;
- NSRI vessels; and
- Certain harbour vessels and bunker barges.
These sectors receive relief because their diesel consumption does not involve the use of public roads, which is the underlying rationale for fuel levy and Road Accident Fund levy relief.
Yet OPL vessels, despite operating entirely at sea, fall outside the current definitions and therefore receive no relief.
Key Services Provided by OPL sector
OPL vessels provide critical services to merchant ships that do not enter South African ports. They transfer:
- Crew;
- Technical personnel;
- Stores and provisions;
- Spare parts;
- Medical supplies;
- Emergency equipment; and
- Other logistical support services.
In many respects, these functions are operationally very similar to those performed by sectors already qualifying for diesel refunds. Indeed, OPL vessels arguably play an even more direct role in supporting international maritime trade and ensuring South Africa remains an attractive service destination for passing vessels.
The Anomaly
As can be seen, under the current diesel refund framework, relief is available to a variety of maritime operators but OPL vessels, which perform comparable offshore support functions, are excluded.
This raises a simple question:
If the policy objective is to relieve sectors using diesel off-road as an operational input cost, why are OPL vessels treated differently?
The exclusion appears difficult to justify on any principled policy basis. OPL operators conduct maritime activities, consume fuel at sea rather than on public roads, and support international shipping in exactly the manner government seeks to promote through Operation Phakisa and South Africa’s maritime development objectives.
A Small Industry With A Large Economic Impact
Although relatively small in size, the OPL sector punches well above its weight economically.
According to industry figures:
- Approximately 16 operators run about 40 vessels nationally.
- The industry directly employs between 300 and 350 people.
- At least 250 South African seafarers depend on the sector for employment.
- More than 3,600 OPL service operations are undertaken annually.
- OPL activities generate an estimated indirect contribution of over R700 million per year to coastal economies.
Importantly, OPL operations create work for a wide range of associated industries, including: Ship repairers; Marine engineering firms; Ship chandlers; Transport companies; Warehousing businesses; Freight forwarders; Bunkering operators; Medical service providers; and Tourism operators.
Every time an international vessel is serviced offshore instead of bypassing the region entirely, South African businesses benefit.
The Competitive Reality
The maritime industry is highly mobile. South African OPL operators compete directly with service providers operating from regional maritime centres such as Walvis Bay and Port Louis. Every unnecessary cost imposed on local operators erodes South Africa’s competitiveness and increases the likelihood that business will migrate elsewhere.
At a time when geopolitical shifts and changing shipping patterns are creating new opportunities for maritime service centres, South Africa should be removing barriers to growth rather than maintaining them.
The third option may provide the greatest legal certainty while improving administrative efficiency.
The Bigger Question
South Africa cannot simultaneously pursue maritime growth and maintain policies that disadvantage sectors supporting international shipping. When a vessel transfers crew, provisions, emergency supplies or technical personnel to merchant ships offshore, it is contributing directly to maritime trade, economic activity and employment.
Treating OPL vessels differently from other comparable maritime operators appears inconsistent with the principles of neutrality, fairness and economic efficiency that should underpin tax policy.
As government continues to review the diesel refund regime, there is a timely opportunity to correct this anomaly. The issue is not about creating a new subsidy.
It is about ensuring that similarly situated maritime operators receive similar treatment.
In a sector that supports jobs, local economic activity, maritime safety and South Africa’s ambitions as a regional maritime hub, equal treatment seems not only justified, but long overdue.
The Submission to Treasury
Recognising the importance of this issue, the Off Port Limits Association South Africa (OPLASA) recently submitted formal representations to National Treasury requesting that the OPL sector be included in the diesel refund system during the current review of the legislation.
OPLASA’s central contention is straightforward:
There is no principled basis for excluding OPL vessels from a system specifically intended to provide relief where diesel is consumed in non-road operational activities.
Closing
For a sector supporting maritime trade, employment, ship servicing, foreign exchange earnings and coastal economic development, extending diesel refund relief is not about creating a new benefit. It is about achieving fairness, tax neutrality and policy consistency in a sector that South Africa can ill afford to disadvantage