South Africa may soon have a brand new state-owned enterprise — a shipping line to move cargo between ports.
The Merchant Shipping Bill, due to go before parliament, envisages inserting a new layer of state bureaucracy into South Africa's already embattled logistics sector. The bill in its current form proposes local ‘cabotage’ services — the transport of goods from one port to another.
Currently privately owned shipping lines deliver containers direct to the ports where the goods are required. But under the new bill any vessel engaged in 'coastwise traffic' would need a permit issued by the South African Maritime Safety Authority (Samsa). Foreign companies would only be allowed to transport their containers to a central port hub, where they would then be trans-shipped to the South African service.
Private industry stakeholders say the move contradicts government's stated intention of introducing more private sector participation in the logistics sector.
The sector is already weighed down by inefficiencies related to Transnet, which has resulted in cargo bottlenecks at key ports including Durban and Cape Town, private sector sources say. The bill in its current form would most likely aggravate logistics challenges, not alleviate them. In addition, it could make freight services more costly.
South Africa is very well fed by international carriers — they do global shipments. If we have a South African shipping line it would just do coastals (shorter trips between local ports), and it just won’t be profitable. Freight rates are already extremely high and this would make us even less competitive.
— Terry Gale, Exporters Western Cape chairman and vice-president of the Cape Town Port Liaison Forum
Added to industry's concerns are moves to establish a state-owned shipping line to conduct the 'coastwise traffic' currently managed by private companies. These concerns are contained in a legal memo prepared for the freight sector.
“The government has been quite open in the past with its desire to re-establish a viable South African shipping industry with vessels on the South African Ship Registry owned and operated by South Africans. This was clearly evidenced in the release in 2022 by the department of trade of the pre-draft of the South African Shipping Company Bill which envisaged the establishment of an SOE owning and operating ships,” the memo reads.
Industry stakeholders say the latest iteration of the Merchant Shipping Bill appears designed to facilitate this process.
“They are putting the cart before the horse — we don’t have a South Africa-owned shipping company,” said Terry Gale, Exporters Western Cape chairman and vice-president of the Cape Town Port Liaison Forum. “South Africa is very well fed by international carriers — they do global shipments. If we have a South African shipping line it would just do coastals (shorter trips between local ports), and it just won’t be profitable. Freight rates are already extremely high and this would make us even less competitive.”
“Government is not looking at it from a business point of view,” Gale said.
“We are trying as hard as possible to get our ports working. But if for instance we now have containers hubbing at Cape Town, which is already badly affected by wind, what would happen? There are so many questions.”
A well-placed business source said the state cabotage should be excluded from the bill, which also covers the full sweep of maritime regulatory issues such as compliance and safety. “It's like creating a government gatekeeper,” the source said.
The bill featured prominently last week in Southern Africa Freight News, which cited sources concerned about the envisaged new SOE to take charge of trans-shipment along the coast.
“’Currently, it’s simply not feasible at all. If our government didn’t have the reputation it has when it comes to running SOEs, state-owned trans-shipment along our coast might have been worth considering. It’s obviously meant to generate more revenue for our fiscus. But you only have to look at what happened to Eskom and Transnet to realise that the bill, as it pertains to cabotage, is a bad idea,” the source said.
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