BCP HORSE MACKEREL REVIEW – PUTTING THE BRAKES ON THE NEW ENTRANT PROVISIONS OF THE MLRA (SECTION 2 (j) AND SECTION 18 (5))
On the 8th of November 2019, three of South Africa’s largest fishing companies Blue Continent Products (Pty) Limited (BCP/Oceana), Seaharvest Corporation Limited and Irvin & Johnson Limited launched a ground-breaking High Court review application in the Western Cape High Court. They are challenging the Minister of Environment, Forestry and Fisheries appeal decision in the Horse Mackerel Sector taken on 24 May 2019.
In particular, they want the appeal decision set aside and referred back to the Minister and for the appeal decision to be declared unlawful insofar as it related to:
- The introduction of 30 new entrants into the Horse Mackerel Fishery;
- The allocation of 62% of the TAC to such new entrants; and
- The DDG’s quantum allocation methodology which affectively reduced existing rights holders allocations by the percentage of their white ownership.
Why is it ground-breaking one might ask?
Firstly, it effectively revisits the dispute over the quantum allocation methodology which was one of the main issues in the Viking interdict court application in the inshore trawl sector previously decided by a full bench of the same court. In that matter two judges held inter-alia that there would be no grounds to set aside the quantum allocation methodology (which allowed for the reduction of existing rights holders quantum by the percentage of their white ownership), whereas one of the judges held that such a quantum allocation mechanism was unlawful.
Ironically in the hake inshore trawl sector, the Minster on appeal held that such quantum allocation methodology was invalid and it was scrapped. But the very same Minister in determining the Horse Mackerel appeals has now decided to maintain such quantum allocation mechanism on the basis of the 2 judges to 1 finding in the Viking interdict court case.
Secondly, interlinked with the quantum allocation methodology, is the challenge to the introduction of 30 new entrants into the Horse Mackerel Fishery. The traditional basis for new entrants being admitted into a fishery is the objective at Section 2 (j) of the MLRA and Section 18 (5) of the MLRA both of which read as follow:
“2 (j) – The need to restructure the fishing industry to address historical imbalances and to achieve equity in all branches of the fishing industry”.
“18 (5) – In granting any right referred to in such sub-section 1, the Minister shall come in order to achieve the objectives contemplated in section 2, have particular regard to the need to commit new entrance, particularly those from historically disadvantage sector of society”.
As referred to by the applicants in this matter, the Bato Star Constitutional Court case comes into play where it was held already in 2004 that while Section 18 (5) is an important section of the MLRA, it does not mean that new entrants can be catered for in every allocation and that the Section 2 objectives of the MLRA must be considered as a whole and in a balanced fashion.
In essence, the applicants are arguing that “one of the important considerations when having regard to the need to admit new entrants for the purposes of transformation is the nature and extent of the internal transformation that has been undertaken by existing participants in the fishery”. To add further, they argue that “there can hardly be a need to admit new entrants to address a historical imbalance if that previous historical imbalance has already been redressed and no longer exists”.
In a nutshell, their argument is that Section 18 (5) read with Section 2 (j) of the MLRA cannot be applied in perpetuity to admit new entrants. As such, their argument is that in the horse mackerel sector historical imbalances have already been addressed by internal transformation and as such the admission of new entrants for transformation purposes is not only unnecessary but also irrational and unlawful in terms of the MLRA and the prevailing policy provisions. They base this argument on an analysis of the increase in black ownership of shareholding and rights holding in the sector over the long term rights period.
Essentially, based on the substantive internal transformation of existing rights holders within the sector, particularly in comparison to the transformation in other industries, the brakes must be pushed on Section 2 (j) and Section 18 (5).
Whilst this challenge relates to the current Horse Mackerel appeal decisions, presumably, this application also constitutes the applicants drawing a line in the sand for the future FRAP 2020/2012 process where large value rights are to be allocated inert-alia in the hake trawl and small pelagic sectors to name a few. This is particularly important in light of the departmental rhetoric (albeit prior to the commencement of the current Minister’s tenure in office) which is proposing a set 30% cut for existing rights holders across the various fishing sectors in order to accommodate new entrants – not to mention the possible overlapping of the small scale sector into certain of the commercial sectors.
One way or another, the handling of this court application by the Minister may be indicative of her approach to FRAP 2020/2021 and in particular with regard to transformation and new entrants.