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Development Bank of Southern Africa, one of the few relatively well-functioning state-owned enterprises, is playing a key role in this.
The government owned Safmarine for over 50 years – and imports and exports do not depend on whether SA has a national shipping carrier. Picture: Shutterstock
It really is preposterous, isn’t it? A government that wants to establish a new state-owned shipping company, but whose navy has little to no working ships and whose air force has little to no working aircraft.
Thankfully, government is – as it does – moving forward so unhurriedly that we may not see final legislation to create a new state-owned shipping company by the early 2030s.
The process to establish the unimaginatively named South African Shipping Company (Sasco) began in 2017 with the publication of the Comprehensive Maritime Transport Policy, under then minister of transport Joe Maswanganyi.
In 2022, a pre-draft bill regarding Sasco’s establishment was published by the then minister of transport Fikile Mbalula.
It took a further three years after that for the department to start engaging stakeholders.
Recently, it invited industry role players to participate in a steering committee to help guide its development.
The Development Bank of Southern Africa (DBSA), one of the few relatively well-functioning state-owned enterprises, is playing a key role in this process.
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‘Own import and export trade’
“In particular,” the department says, the state will “implement radical measures” and intends to ensure “a significant targeted percentage of exports and imports are moved by the national shipping carrier”.
It says the company model “will enable South Africa to carry its own import and export trade which has suffered a negative growth since the 1980s since South Africa does not have a national shipping carrier”.
Not only is this factually incorrect (we had a state-owned shipping company until 1999), it also simply makes no sense.
The government owned Safmarine for over 50 years, but it was sold to global shipping giant Maersk at the end of the 1990s, which integrated it into the group in the 2000s. Maersk dropped the brand in 2020.
Imports and exports do not depend on whether South Africa has a national shipping carrier. In fact, regulations that restrict cabotage, or the transporting of goods between two ports within the same country, may well negatively impact trade volumes. The policy sees a phasing in of cabotage restrictions, a targeted increase in domestic/state-owned vessels, and legislation on the carriage of government cargo by South African ships.
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Even Ethiopia has a fleet …
As far back as 2013, when Durban hosted the Brics Maritime Trade Forum, government appeared to realise that we were the only of the five founding members of Brics not to own a fleet of vessels. It highlighted that even Ethiopia had a state-owned fleet.
Speaking to SAfm Market Update with Moneyweb, transport economist Dr Joachim Vermooten explained that: “The international shipping industry is a very, very large industry, and it operates similarly to other network industries where you get economies of scope and scale.
“Now, with [just] a few ships you can’t get any economic leverage to actually do that – and ultimately it would mean that you would end up with higher shipping rates because it increases the empty directional operations by ships.
“So, I think, you know, under the current economic situation there is no room for actually starting up a state-owned shipping company because we just can’t generate the types of volumes to actually make it work.
“And that’s why Safmarine was eventually sold to Maersk, which is a very, very large organisation. And before it was absorbed into Maersk itself, the company grew, I think, seven or eight times larger than it had been under the auspices of government ownership.”
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Won’t compete effectively
That sums up the problem perfectly. A fleet of five, 10 or even a few dozen ships just won’t be enough to be able to compete effectively.
Thankfully, The Presidency knows that shipping is a network industry.
That’s part of the reason why it’s rammed through reforms to introduce private sector players into Transnet’s underperforming ports.
The policy ideologues at the Department of Transport, however, don’t seem to get this.
Vermooten also says cabotage, which comes from 16th Century France, was adopted across Europe to reserve port-to-port operations for shipping lines run by each country. This principle has been relaxed totally for those within the EEC [European Economic Community].
He adds that “South Africa’s waters are not very conducive to this type of operation”.
“Practically, I think it would be wrong for us to apply a cabotage. We don’t have the shipping, we don’t have the routes that operate, and our land transportation is so good with trucks in various forms that it’s very difficult to think that there are any routes along the coast that can actually financially sustain a shipping route.”
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‘Billions will be spent’
The overarching problem with the bureaucracy in national government (in particular), is that once a process like this starts, it’s very, very difficult to stop. The train has left the station.
And so the state will inch forward, slowly, and finally yet another state-owned enterprise will be established, complete with funding, a corporate structure (including board seats that must be filled), and staff.
By that point, it likely won’t own a single ship, but tens/hundreds of millions will have been spent to get there.
Once it starts amassing a fleet (even of a single ship), that’s where billions and billions will be spent. A cynical view might be that the DBSA is only involved as the fiscus has no money to fund Sasco. But that’s the reality.
This article was republished from Moneyweb. Read the original here.
