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