A BILL aimed at establishing a new state-owned enterprise (SOE) to operate as a cargo shipping company has been described as a risk to taxpayers as the already existing public entities are struggling to service their debts worth hundreds of billions of rands.
These were the reactions to the pre-draft South African Shipping Company (SASCO) Bill 2022, which Transport Minister Fikile Mbalula released recently. The fear is that the new company will be an additional burden to the state.
Mbalula released the document soon after Finance Minister Enoch Godongwana had announced that the state would take over a lion’s share of R400 billion debt, which Eskom is failing to service. In its 2020/21 budget review, the treasury revealed that SOEs combined owed a total of R692.9 billion, which was R415.5 billion, guaranteed by the government.
The aim of the bill, which is yet to be tabled in Parliament, is to establish SASCO whose sole shareholder is the state. It will have board members with vast management experience from the private sector, including maritime.
Some among those who spoke to Independent Media supported the formation of SASCO while others vehemently rejected it as a waste.
Political analyst Mpumelelo Zikalala said the new SOE was unnecessary as there was an already existing South African Maritime Safety Authority whose mandate could be extended to include running the marine business.
“They should be focusing on economic development without creating another entity. The economic development department can run that project without creating a new entity that would require the employment of staff, including the chief executive. Under the economic development you create its directorate and employ only four or five people who are experienced in this and look for legislation to cover it,” Zikalala said.
According to the draft bill, SASCO would have between seven and 13 board members and a chief executive officer to be appointed by the minister of transport. The board members would have to be specialists with experience in shipping trade, corporate management, business studies, maritime transport, transport and logistics, ship agency, clearing and forwarding, commerce, banking, finance, and economic or legal matters.
The entity will be required to run cargo shipping activities on behalf of the state. “Despite the country being a cargo-owning nation that generates approximately more than 80% of export cargo, the carriage of cargo is predominantly undertaken by foreign-owned ships,” read the bill.
The aim of establishing SASCO will also address the fact that South Africa is the only BRICS member that does not have its own ships. The government’s Industrial Development Fund (IDC) will finance the formation of SASCO while another state-owned Industrial Development Fund would provide funds for the acquisition of a strategic fleet.
However, SASCO may borrow money from financial institutions as per the determination of the board using the state as the guarantee. In case SASCO runs into serious financial or management difficulties it may not be placed under judicial management or liquidation, except if that is authorised by an act of Parliament enacted specifically for that purpose.
Organisation Undoing Tax Abuse (OUTA) said SASCO might fail because the government had proven itself to lack principles to manage SOEs that operate in the space of complexity and competitive business.
“It’s a big mistake because shipping is a complex industry. If our government is going into business, that business is going to be financed by you and me. Why would we want to finance the shipping company when there are lots of shipping companies that compete with each other,” said OUTA spokesperson Wayne Duvenage.
He made an example with South African Airways (SAA), which he said had for years been a financial burden to the state. “This would be another loss and cost to taxpayers because this is about people in government leadership that have the interest to make money (for themselves) out of these businesses that are financed by you and me.”
According to IFP member of the transport portfolio committee Khethani Sithole, there were lots of questions that needed to be answered about the company. Sithole expressed concerns that SASCO might be stillborn as the country lacked the capacity to fulfil what was contained in the bill.
The bill is talking about the state acquiring vessels and certain marine companies to be incorporated into SASCO. It also states that SASCO will have to build its own ships, but Sithole said South Africa does not have the capacity for this.
“We have not been told where the vessels will be acquired from,” said Sithole.
Cosatu parliamentary spokesperson Matthew Parks said the bill came when the country was in desperate need of its own dedicated shipping company to inject badly needed competition into the maritime industry which has long been dominated by international monopolies. He called on the country’s exporting industries to support the “positive initiative if it is to succeed”.
“South Africa is a major maritime economy with massive potential yet we do not have a dedicated South African-owned maritime company. The creation of such a company will have to fill that critical domestic economic need, create local jobs and value chains and help ensure the security of South African exports,” said Parks.
South African Association of Ship Operators and Agents (SAASOA) chief executive Peter Besnard warned that this might be a very costly exercise. He said there were three vessels that were on the SA register.
“South Africa has the technology to do almost anything. We have a slipway in Durban that did build 1 200 to 1300 TEU container vessels until it was terminated when foreign exchange regulations were changed some years ago,” said Besnard.
Various stakeholders would soon be engaged in the matter.