PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES

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PRESENTATION TO THE PORTFOLIO COMMITTEE ON
MINERAL RESOURCES USING SHIPPING TO SUPPORT
AFRICAN INFRASTRUCUTRE DEVELOPMENT AND THE GROWTH
OF THE AFRICAN MARITIME INDUSTRY September 2013
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AN OVERVIEW

• A framework for analysing the geo-economic and
  strategic nature of South Africas maritime
  interests
• The missing link shipping and maritime sector
• Role of the maritime sector that shipping, in
  particular, can play in advancing South Africas
  global geo-economic, geo-strategic and
  geo-political interests
• The business case for strategically investing in
  South Africas shipping and the broader maritime
  sector as a key driver for socio-economic growth
  and development
• KEY FOCUS AREAS
• Maritime interests
• Maritime Industries
• Priority investment areas
• Using Mineral Resources to leverage for growth in
  the maritime sector

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THE SAMSA ROLE AND MANDATE

• Foundational Maritime Policy Mandate National
  Transport White Paper 1996
• The grand vision for South Africas transport is
  stated in the White Paper as being to
• ... support government strategies for economic
  and social development whilst being
  environmentally and economically sustainable.
• The maritime policy imperatives and goals in the
  Transport Policy are articulated as
• Developing maritime awareness
• Assisting in the creation and fostering of an
  economic environment for the
• Maritime Transport Industry which will allow
  it to compete... with other nations
• Contributing to the release of the full
  potential of the maritime industry in S. Africa
  
• Modernisation of South Africas shipping
  administration
• 2. SAMSA Legal mandate The South African
  Maritime Safety Authority Act, 5 of 1998
• To ensure the safety of life property at sea
• To prevent and combat pollution of the marine
  environment by ships and
• To promote the Republics maritime interests.

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AFRICAs GEO-ECONOMIC AND GEO POLITICAL PROFILE

• Largest island on earth with oceans on all
  sides
• Atlantic Ocean (West)
• Indian Ocean (East)
• Southern Oceans (South)
• Mediterranean Red Sea (North)
• 39 (70) out of 55 African countries are coastal
  or islands
• Coastline of 31,000 km
• Inland waterways of 300,000 square kilometres
• Seaborne trade volumes 91
• Trade dependent GDP (e.g RSA 58 of GDP comes
  from trade)
• 2nd second largest land-mass in the world after
  Asia
• The largest number of land- locked states in the
  world (15)

Africa
The Island Continent
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IS SOUTH AFRICA A MARITIME NATION, A MARITIME
ECONOMY
A MARITIME COUNTRY BUT NOT A MARITIME NATION A
CONUNDRUM?

• 3,000 km coastline in 3 oceans Atlantic,
  Indian and Southern Oceans, located on a
• major strategic shipping route
• 8 established commercial ports, and many fishing
  and leisure harbours and marinas
• Trade is over 50 of GDP (98 of SA trade
  volume/ 80 trade value is by sea)
• 3.5 World sea trade by volume, in the top 15
  countries on seatrade tonne-mile
• Continental shelf claim increases sea land to
  2.8 times land mass
• Extensive off shore interests (islands,
  Antarctic, marine and offshore oil gas
  resources)
• South Africa leads in Africas intra-regional and
  Africas international trade
• All key partners such as in BRICS are major
  regional maritime powers with vast maritime
  interests and capabilities in sea trade, commerce
  and naval influence
• South Africas strategic global maritime
  interests and international obligations include
  providing safety of navigation and ships,
  ensuring freedom of the seas and security of
  shipping supply chains, as well as protection of
  the marine environment

IS THE SOUTH AFRICAN ECONOMY, A MARITIME ECONOMY
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PROFILING AFRICA A DEVELOPMENT OPPORTUNITY NOT
TO BE MISSED

• South Africa is far removed from its trading
  markets
• The minerals of this country spend 15 to 28 Days
  getting to the market
• Linking African Production to markets in the
  region
• The cost to the country for transportation of
  its trade to market amounts to R160 Billion
• The bulk of this trade by volume is made up of
  bulk cargoes
• These are mainly mineral resources as well as
  liquid cargoes
• Transnet is spending R300 Billion in new capacity
  for transportation infrastructure yet there is no
  program to build the actual capacity to transport

AFRICA THE ISLAND
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Africa - extended 27 Feb 2013 13073 vessels
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PROFILING AFRICA OFFSHORE OIL AND GAS SUPPORT
DESIGN SHORTCOMINGS

• The Offshore Oil and Gas support requires an
  industry for the fabrication of structures
• It requires transportation of often large
  equipment from the support bases
• The region is best positioned to provide
  logistics bases for the booming industry owing to
  the proximity to exploration sites
• South Africa, specifically has had a head start
  in this regard with the facilities in Cape Town
  and Saldanha ports albeit not developed as fully
  as they should have been by now
• With the discovery of the gas in the East Coast
  of the continent, more support bases will be
  necessary and the Southern Cape and KwaZulu Natal
  offer opportunities.
• The most essential link for the logistics bases
  is transportation and specifically continental
  coastal shipping, which is not established as yet
• According to Sunrise Energy, more than 218
  floating structures are required for the floating
  structures only to support the East Coast gas
  activities

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PROFILING AFRICA MINERAL RESOURCES AND LOGISTICS

• South Africa and its rich mineral resources
  requires transportation of such to place the in
  the market
• These are transported in large quantities using
  vessels
• South Africa, is putting a lot of infrastructure
  for transportation (Transnet R300 Billion)
• The types of vessels (bulk carriers) require a
  lot of repair support that would need to ship
  repair activity

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PROFILING AFRICA CONNECTING AFRICAN TRADE TO
MARKET

• The maritime connectivity of African countries
  is largely determined by the amount of mineral
  resources they possess, leading to resource
  export led urbanisation of Africa, which is a
  very unsustainable model
• Africas trade is dominated by coastal economies
  in all the 4 regions of the East, West, North and
  South
• Africas GDP of 1,05 Billion people and USD 1
  Trillion has a fair amount of intra regional
  trade that should be used to develop and grow the
  coastal shipping on the continent
• That trade is largely seaborne and moves through
  its ports (91)
• The development of the land-locked countries
  and their access to international markets are
  dependent on the performance of the network of
  maritime transport and logistics corridors,
  including ports and ships
• Transport, in this case maritime transport and
  logistics has become an essential and strategic
  area of economic consideration
• In that context, the development of the maritime
  transport infrastructure become a key enabler and
  catalyst for the competitiveness and development
  of Africas economy

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CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS

• The African Maritime Charter objectives are to
  (Article 3 1) Declare, Articulate and Implement
  harmonised maritime transport policies capable of
  promoting sustained growth and development of
  African Merchant fleets..
• The Charter recognises the role of maritime
  transport in the facilitation and development of
  trade between Africa and the rest of the world as
  well as the need to implement an effective
  maritime transport policy with a view to
  promoting intra African trade (Preamble)
• In promoting Cooperation among African Shipping
  Lines, the Charter encourages adoption of
  national policies, regulations and programs that
  attract public and private investment in ships
  and shipping in general (Article 131)
• Establishment of Trans African Cabotage system
  requires all state parties to promote Cabotage
  and effective participation of private sector
  operators at national, regional and continental
  levels in order to promote intra African trade as
  well as economic and socio-economic integration
  of the continent (Article 15)

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CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS

• The African Maritime Charter objectives are to
  (Article 3 1) Declare, Articulate and Implement
  harmonised maritime transport policies capable of
  promoting sustained growth and development of
  African Merchant fleets..
• The Charter recognises the role of maritime
  transport in the facilitation and development of
  trade between Africa and the rest of the world as
  well as the need to implement an effective
  maritime transport policy with a view to
  promoting intra African trade (Preamble)
• In promoting Cooperation among African Shipping
  Lines, the Charter encourages adoption of
  national policies, regulations and programs that
  attract public and private investment in ships
  and shipping in general (Article 131)
• Establishment of Trans African Cabotage system
  requires all state parties to promote Cabotage
  and effective participation of private sector
  operators at national, regional and continental
  levels in order to promote intra African trade as
  well as economic and socio-economic integration
  of the continent (Article 15)

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CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS

• The SADC Protocol on Transportation,
  Communication and Meteorology has as one of its
  policy objectives a requirement by member states
  to develop a harmonised maritime and inland
  waterway policy with regards to (Article 8.2)
• The promotion of ship owning, ship registration,
  ship operations and slot chartering
• The growth and development of a viable SADC
  Merchant Shipping Industry, including the role of
  concessions and incentives to improve
  competitiveness.
• Tonnage capacity in member states, including
  enhanced use of coastal shipping and feeder
  services
• The role of coastal shipping and the
  encouragement of joint ventures and alliances
  between ship owners to promote economies of
  scale.
• Implementation of a regional cabotage policy
  within the member states

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KEY CHALLENGES AFRICAS SHIP REGISTRIES AND
SHIPPING

• Africa is the only world region with no merchant
  tonnage of note under its control (registry) to
  handle her coastal intra-regional and
  extra-territorial seaborne trade
• Africa imports transport and logistics services
  with every import - export activity
• No tax and tonnage related benefits hence skewed
  balance of trade
• Decimation of maritime services expertise (sea
  based and ashore) and competitiveness
• Lost opportunities for possible investment in
  shipping by Africans
• Vulnerability to foreign geo- political and
  geo-economic pressures
• Undermines the establishment of viable coastal
  industry to complement the land and aviation
  national transport infrastructure and services
• Loss of opportunities for domestic industrial
  development and job creation
• Weaker position in coordinating intra-regional
  African coastal trade strategies
• Weakening of the capacity of countries and
  governments to govern their ocean territories and
  provide safety and security

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SAMSA PERSPECTIVE
SAMSA controls, manages and administers the
South African Ship Register (the Register). It is
common knowledge that there is no trading ship
registered on the Register. Some of the reasons
for the continuation of this status quo put
forward by ship-owners is that the Register is
uncompetitive and unattractive in the sense that
certain policies and practices make it difficult
for aspiring South African citizens or South
African owned companies to own trading ships that
would enable them to enter the shipping industry.
The Infrastructure Development program driven
by Transnet, will introduce an additional
transportation capacity of over 50 million tons
of cargo, mainly minerals at a cost of R300
Billion. It is appropriate that this additional
capacity be used to introduce transformation of
the transportation sector insofar as the
transportation of such additional minerals is
concerned in order to realize the full potential
value of the investment.
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SAMSA PERSPECTIVE..CONT
Due to the fact that the minerals are exported
Free on Board (FOB), it is the buyer who
nominates the ship to carry the cargo and also
clears the minerals for export. Currently, the
buyers have consistently nominated foreign
flagged ships that they have had relationships
with to carry the cargo. The result of this is
that it becomes difficult for an aspiring South
African ship owner to enter the shipping industry
as in this industry, cargo is king or queen.
Without access to cargo, there will be no use for
South Africans to acquire trading ships, and
South Africa will continue to import
transportation services each time it needs to
export its minerals. This worsens the balance of
payment in the countrys current account. The
two critical elements in correcting this
situation are the access to cargo (which SAMSAs
comments on the MPRDA Bill seeks to address) as
well as the attractive ship registration regime
(largely driven by Treasury) which will allow
South African registered vessels to compete in
the international shipping market.
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SAMSA PERSPECTIVE..CONT

• To assist in making the Register attractive,
  Treasury has introduced certain taxation
  amendment laws pertaining to international
  shipping which proposes taxation exemptions in
  respect of normal tax, capital gains tax as well
  as the tax on seafarers working on South African
  registered ships that are engaged in
  international trade
• It is in respective of the above status quo that
  SAMSA saw it necessary to submit it written
• comments which, if accepted, will have the effect
  of
• Preventing the outflows of freight
• Bolstering the South African maritime industry
• Creating employment opportunities for South
  Africans as seafarers as well as in downstream
  industries that support the shipping industry.
• To ensure South Africans participate in the
  logistics chain of the nations natural resources
  it is imperative that a policy in this regard is
  clearly articulated in the Mineral and Petroleum
  Resources Development Act (the Minerals Act).

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RECOMMENDATIONS SAMSA SUBMISSION
In order for the Maritime Industry to benefit
from the amendments of the MPRDA, it is important
to align the BBBEE Charters of Transport with
that of Mineral Resources Specifically, SAMSA
would like to submit that the Mineral Resources
Charter should incorporate elements of logistics
and Supply Chains The UNCTAD approach of
ensuring that countries participate in the
transportation of their trade (the 404020
principle) allows for this arrangement and as
such its spirit should be built into the
amendments The Transnet Infrastructure
development program with the additional cargo it
creates should be used to allow for more
participation of South African owners in the
transportation industry
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CONCLUSION

• The key challenge Africa must face up to is the
  absence of indIgenous tonnage to keep the sea
  lines of communication open
• The current situation is not sustainable,
  undermining Africas ability o
• African naval support for off shore operations
• Carry influence in world trade and shipping
  affairs
• Secure and diversify opportunities for African
  investors
• Sustain numbers of African who could find jobs
  at sea if they had berths for training
• Promote the maritime industrialisation programme
• provide adequate ship repair infrastructure
  facilities on the continent
• establish regional maritime industrial hubs for
  ship building, boat building and component
  manufacturing
• Provide world class soft infrastructure
  development programmes
• introduce maritime awareness and education in
  the populacel
• Provide high tech training and research centers
• Improve participation of females in maritime

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MARITIME DEVELOPMENT - AN INTEGRATED MARITIME
DEVELOPMENT FRAMEWORK
SAMSA STRATEGIC GOALS
SAFETY, SECURITY AND DEFENCE PERSPECTIVE

• GOAL 2 Promote South Africas maritime
  industry/economy development
• Promotion of Maritime BBBEE and industry
  transformation
• Promotion of maritime awareness, maritime
  industry skills capacity and creation of jobs

MARITIME SUPPLY CHAIN SECURITY
SAFETY OF LIFE, PROPERTY ENVIRONMENT
TERRITORIAL INTEGRITY
INDUSTRIAL PERSPECTIVE
TRANSPORT PERSPECTIVE
OFFSHORE ENERGY MINING
SHIP REPAIRS CONVERSIONS
SHIP BOAT BUILDING
LOCAL/REGIONAL COASTAL SHIPPING LOGISTICS
INTERNATIONAL SHIPPING LOGISTICS
PRODUCTION
MID DOWNSTREAM
MARITIME CORRIDORS
EXPLORATION
PORTS HARBOURS
SHIP REGISTRY
SERVICES (VALUE ADDED) PERSPECTIVE
BUSINESS CONSULTING SERVICES
ENGINEERING TECHNOLOGY SERVICES
SKILLS TRAINING RESEARCH INNOVATION
FINANCING ASSURANCE SERVICES
SHIPPING/CARGO OPERATIONS LOGISTICS
PORT MARITIME ADMIN
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THANK YOU