It is not commercially feasible to launch a State-owned shipping company, owing to recent managerial challenges experienced by other State-owned enterprises (SOEs), says advisory firm Frontier Advisory CEO Dr Martyn Davies.
The establishment of a State-owned shipping company or of such a company in conjunction with other African countries, was proposed by the South African Maritime Safety Authority (Samsa) as a solution to the country’s monetary loss as a result of importing goods by ship. Samsa argues that, if the country had its own shipping company, it would be able to transport goods cheaply, which would save on import costs.
The call for a State-owned shipping company was made last month at a Brazil, Russia, India, China and South Africa (Brics) maritime trade forum discussion, in Durban, which was attended by South Africa’s Transport Minister Ben Martins.
About 98% of the country’s internationally bound trade is carried by ships and at least R160-billion a year is paid to foreign owners and operators for shipping services. Samsa CEO Tsietsi Mokhele said before the said forum the discussion provided an opportunity for strategic partnerships comprising maritime stakeholders to spearhead a maritime develop- ment agenda for South Africa and Africa.
Mokhele told State-owned broadcasting company the South African Broadcasting Corporation last month that South Africa’s only chance of growing in local consumption was to produce and sell to others and to receive imported goods.
However, he pointed out that South Africa’s regulatory system hindered industry development and that existing maritime policies needed clarification.
Davies argues that, in South Africa, the increased inclination of the State toward “interventionist management” of its key corporate institutions has not driven productivity or competitiveness gains. Political interference, corruption, and nonadherence to good corporate governance practices are causing a number of SOEs to misfire, he says.
While nationalisation has replaced privatisation as the dominant debate in South Africa’s economic policy arena, and global financial woes have made privatisation a nonstarter, Davies says, it is obvious that the State is unable to run its large enterprises efficiently and profitably. “This is clear, given the recent problems that SOEs, such as national carrier South African Airways and telecommunications group Telkom, have encountered,” he states.
The proper management of South Africa’s existing ports should be a top priority for the maritime industry, as this will provide the country with a competitive edge in the African trade industry, says Davies, pointing out that Bloomberg ranked the Port of Durban 46 out of 100 ports in the world in 2010.
However, the business and financial market news provider notes that Durban must improve its competitiveness to continue as the logistics services hub for Southern Africa with the drive to regionally integrate the economies of Southern and East Africa.
“State-owned freight and logistics company Transnet charged an average container vessel $182 151 (R1.372-million) to dock at Durban port. This is more than double the global average of $86 251 and the highest of any of the top 100 harbours. This is the price of nationalisation – higher costs and lower efficiency, owing to the stifling of competition,” states Bloomberg.
South Africa’s Brics Role
After its inclusion in the Brics group in December 2010, following the invitation by Beijing, South Africa has probably become its most enthusiastic member, says Davies. If Brics represents the first tier of developing economies in the new post-West-dominated world order, then South Africa’s joining of Brics is to be regarded as the greatest foreign-policy success of President Jacob Zuma’s administration, he explains.
“We are offering great market access to the region and try to speak on behalf of Africa. A number of African cities are competing to become hubs in their respective regions. African countries are only beginning to compete with each other for capital and investment. This will be a future driver of competitiveness and growth on the continent.”
Legal firm Hoja Law Group founder Jacqueline Muna Musiitwa told the Mail & Guardian ahead of the fifth yearly Brics Summit, in Durban, that, with booming oil- and gas-driven economies along the west coast of Africa, Cape Town should be competing to be the corporate and oil and gas services hub of Southern Africa.
Infrastructure, services and the living environment are all comparative advantages, but increased port efficiencies and policy incentives to attract companies are required to bolster Cape Town’s claim, she added.
“The benefit of being a Brics member should be to track our growth as individual countries. It is also about competition with countries outside the Brics group, as we are living in a competitive world.
“This suits the South African government, which seeks to draw its Brics partners into its foreign commercial policy for Southern Africa. In the same way as China’s and Brazil’s development banks have served as tools of foreign commercial policy, so will South Africa’s, albeit with a regional focus,” concludes Davies.