The Safeguard our Seabed Coalition calls for a moratorium on seabed mining.

Newsletter No.2 October 2015

The Safeguard our Seabed Coalition, of which SADSTIA is a member, continues to call for a moratorium on seabed mining.

Letters that set out the Coalition’s opposition to bulk marine sediment mining were sent to the Ministry of Mineral Resources on 30 July, and to the ministries of Agriculture, Forestry & Fisheries and Environmental Affairs on October 2. To date, no response has been received from any of the ministries.

The threat of bulk marine sediment mining to the South African fishing industry cannot be overstated. Although very little is known about its actual impacts, studies suggest they could be considerable and irreversible. For instance, independent studies relating to the Sandpiper Project that was proposed in Namibia, raised serious concerns about the destruction of benthic habitats; direct harm to breeding, spawning, feeding and aggregation areas for many species of marine fishes; the impact of increased turbidity and sediment disturbance; and the release of hazardous substances, including radioactive materials, methane and hydrogen sulphide.

The Namibian government declared an 18-month moratorium on marine phosphate mining in September 2013 and after its expiry, the Minister of Fisheries and Marine Resources announced the moratorium will remain in place for a further three years, with possible further extension.

However, in South Africa, the prospect of bulk marine sediment mining looms large. Rights for marine phosphate prospecting in the exclusive economic zone (EEZ) have been granted to three companies: Green Flash Trading 252 (Pty) Ltd; Green Flash Trading 257 (Pty) Ltd; and Diamond Fields International. The former two companies appear identical because they have the same directors and shareholding; the third company is listed in Toronto, Canada.

The rights held by these three entities extend over a considerable portion of the EEZ and together total more than 150 000 km2.

SADSTIA and its coalition partners believe that the extensive and invasive nature of marine phosphate extraction processes will devastate a substantial proportion of South Africa’s prime trawling grounds.

The process involves dredging the seabed and removing sediment at a rate of up to 100 000 m2 per day. A large dredging vessel could remove up to 5.5 million tonnes of sediment annually, equating to roughly 3 km2 per annum, or 90 km2 over the typical 30-year life of a mine. Excess water and fine particle would be released back into the water column and would almost certainly bury and smother marine habitats both within the mining area and adjacent to it. Experts believe the process has the potential to permanently alter and destroy the breeding, spawning and feeding of fish stock in the mined area, as well as in surrounding areas.

“It is unthinkable that the government would allow marine phosphate exploitation at the expense of South Africa’s future food security and employment,” said SADSTIA Secretary, Dr Johann Augustyn.

According to Augustyn, the prospecting areas coincide with, and will negatively impact on, a number of fisheries that provide significant numbers of jobs and earn valuable foreign exchange and taxes. These fisheries include the hake trawl and longline fisheries; the tuna pole fishery; the small pelagics fishery (anchovy and sardine); squid fishery; and the west coast and south coast rock lobster fisheries. Some 20 000 people are employed in these fisheries.

The jobs created by a seabed mining industry would in all probability be miniscule when compared to the jobs provided by the fishing industry. A feasibility study commissioned for a marine phosphate mining project in Namibia estimated the project would create only 150 full time jobs.

Other partners in the Safeguard our Seabed Coalition (SOSC) are FishSAResponsible Fisheries AllianceMasifundise Development TrustCentre for Environmental RightsWWF-SA and BirdLife SA.

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Memorial service to honour Lincoln victims

A memorial service to honour and remember the 12 men who lost their lives in September when the fishing trawler, MFV Lincoln, was overcome by heavy seas, will be held in Cape Town on Sunday 15 November 2015 at 12h00. The memorial will be held at the V&A jetty (directly opposite the Viking Fishing quay).


A fragmented fishing industry is bad for fish – and fishermen
By Tony Leiman and Johann Augustyn

In May this year, the deep-sea trawl fishery was awarded the holy grail of the international seafood industry: accreditation from the Marine Stewardship Council (MSC), the world’s oldest and most respected seafood certification body. This is the third time South Africa’s deep-sea trawl fishery has secured certification from the MSC and in the latest assessment, the fishery scored highly for almost all the criteria against it was measured, and met the MSC standard for all.

However, in spite of the deep-sea trawling industry’s unquestionable success – both in terms of sustainability and competitiveness – there continue to be strident calls for its fragmentation. Most recently, Kholiswa Mnisi and Bongisa Lekezwa, in a paper delivered to the Competition Commission, argued that the Department of Agriculture, Forestry and Fisheries (DAFF) should use the forthcoming renewal of long-term fishing rights (due in 2020) to fragment access to fishing resources. More particularly they suggested that DAFF should actively oppose the industry’s natural tendency to consolidation:

During the 2020 review of fishing rights, DAFF has the opportunity to restructure the industry by breaking (the) path dependency of reconsolidation that the industry has been locked in. In the short run such an approach may cause job losses, however the long run ownership and economic participation would be diverse.

This is not the first such call and is unlikely to be the last. However, in order to demonstrate the dimensions of the problem posed by such proposals, it is sensible to describe in full the characteristics of the South African hake trawl fishery.

Firstly, it is a “mature” fishery in which profits have long been based on sustainable harvesting rather than mining down the resource stock. All “get rich quick” opportunities are long gone and the industry’s members have demonstrated a mature willingness to sacrifice short-term yields for long-term stability.It was the industry itself that initiated the costly and time consuming process of achieving recognition by the MSC, and in the past 10 years it has addressed many of the concerns raised in the original MSC certification process: bycatch (the catching of species other than hake) is better managed than ever before; interactions between trawl gear and seabirds have been drastically reduced; historical trawl grounds are now ring-fenced to confine the impact of trawling; and the industry is part funding a long-term studyinto the impacts of trawling on the marine ecosystem. Indeed, the industry’s focus on corporate responsibility is increasingly translating into an assumption of responsibility for the well-being of the ecosystem.

Since 2006, the industry has had the security of long-term rights. Government allocated long-term (15 year) rights to 49 right-holders, later raised to 51 after the close of the appeals process. Very quickly, these right-holders formed themselves into first nine and then eight, de facto groupings. The level of concentration is consequently high: the three largest clusters hold 75.7% of the quota and operate 70% of the 50 vessels in regular use, and only one cluster has under 5% of available quota.

The reasons for this clustering are not hard to find. It has three fundamental drivers. The simplest is the need to spread risk. With a single vessel a company carries all of its risk itself; however, if three such firms form a quota-sharing cluster owning three vessels, if one boat is unable to leave harbour, the week’s catch does not fall by 100% but by 33%.

Economies of scale are also clear to see; bigger is often more efficient. A simple physical example demonstrates the issue: one can double the size of a vessel without doubling the steel that goes into it,the crew needed to run it, or the size of its engine room, hence one more than doubles its storage capacity and less than doubles its mass (and possibly its cost). The resulting longer vessel moves more easily through the water and runs at a lower cost per ton of landed fish. At company level the same is seen: overheads can be spread as output rises. E.g. management costs are unlikely to double if production is doubled. Again, as a group’s output rises so its average costs will fall.

Economies of scope are a trickier, but equally important, concept. The wider the range of products one can produce, the more market niches one can fill and the longer and steeper the value chains at one’s disposal. If one looks at the two largest companies operating in the sector, the effect of size on the value chain becomes clear. A glance at their website showed one firm providing twenty-four processed hake products in addition to the conventional offerings of chilled or frozen gutted fish, while the range offered by the other was similar. Smaller operations cannot match such product diversity. The size and broad range of the target markets to which these value chains allow access helps inoculate larger firms against market and exchange rate risks. Not only is their return per ton of quota typically greater, it is also less risky, and because shore-based processing is involved, it is also more labour intensive, increasing job opportunities for the local population.

Why has this apparently irrational desire to fragment the fishing industry arisen, and why is it so commonly expressed?

Three reasons seem to lie at the heart of the problem. One, the common perception that the fishing industry is untransformed, is easily disposed of. The three biggest firms in the industry are either public companies themselves, or components in public conglomerates. However, the biggest shareholders in South Africa are pension funds holding assets on behalf of a racially mixed workforce, the management and senior staff of the fishing companies have long been similarly mixed.

The second reason is the innate fear of monopoly power and unjust pricing. This fear is not relevant to an industry that exports most of its catch and whose products have numerous close substitutes.

It is the third reason that is most difficult to overcome, for it is based on the old lie that giving a man a fish feeds him for a day, but teaching him to fish feeds him for a lifetime.

The reality is cruelly different: letting more and more people fish merely condemns them to poverty. To increase fishers’ incomes one has to increase their catch per unit effort, and that means enlarging the stock of fish. More small firms will mean a race to deplete the stock, typically breaking the rules that regulate fish mortality along the way. To have firms whose individual incentives are compatible with maximising industry level profits one needs a collusive oligopoly with long-term rights. It is not surprising that the competition commission shudders at the notion, but it is imperative that they think seriously about the situation.

DAFF would like to see a stable resource that yields the maximum possible sustainable profit. They cannot manage the fish in the sea, but they can manage the fishers. That task is eased when the incentives facing fishers are aligned with the imperatives of fisheries managers. As experience has shown, this is achieved by the allocation of stable long-term rights to a few large groups; clustering provides economies. Any attempt to fragment the industry will encourage irresponsible short-term rent seeking. The current condition of such formerly high-value inshore sectors as abalone and west coast rock lobster shows what happens when access is fragmented and rights are insecure. The warning should be clear to all.

Tony Leiman is associate professor in the School of Economics at the University of Cape Town.

Johann Augustyn is secretary of the South African Deep Sea Trawling Industry Association.