State’s ambition to establish a shipping company draws scorn
Inserting a freight SOE into the mix is ‘too horrible to contemplate’
Trade advisers have called a government plan to establish a state-owned shipping company an “awful” idea that could hamper exports.
The state is pushing to establish its own shipping company, saying such a move is necessary to reduce reliance on foreign companies and shield SA from supply disruptions.
Transport minister Fikile Mbalula believes a national shipping carrier is vital to “building strategic national shipping capacity and capability”.
His department will be holding virtual stakeholders’ consultation on the bill, starting with participants in Kwazulunatal (November 28), the Western Cape (November 29), and Eastern Cape (November 30).
International trade is at the core of SA’S economy. In 2021 more than $100bn worth of goods was shipped out, and products worth $70bn brought in.
Marine transport is the main driver of trade, with the bulk of imports and exports transported by sea through commercial ports. Estimates suggest that seaborne trade accounts for between 80% and 90% of SA trade.
“It is precisely for these reasons that [establishing a stateowned shipping company] is a truly awful idea,” said Clive Vinti, an associate at XA International Trade Advisors, a major trade advisory firm in SA.
“Aside from the horror that is any state-owned enterprise (SOE), it is not clear why anyone would choose to use this shipping line to move their cargo.
The drive to establish a stateowned shipping company comes amid growing calls for the privatisation of SA’S struggling SOES, like Eskom, which cannot keep the lights on and relies on government bailouts to stay afloat.
Critics often highlight the government’s poor track record in overseeing state companies.
Vinti said a new state-owned shipping company is very likely to rely on government to stay afloat in a very tough market.
“Like all other SOES, the government could put subsidies into the system — we end up calling them bailouts when we pretend they can ever be commercially viable and then are not.
“If we found the magic money tree to do this, we would run the very real risk of our exports being countervailed (duties imposed to offset subsidies), by our trading partners,” Vinti said.
Shipping lines are fiercely competitive and ships are expensive, both to buy and run, “so don’t expect the existing shipping lines to step back for this new entrant”.
A new Panamax, a “typical” cargo ship, holding between 3,000 and 5,000 20-foot containers costs about $35m (R600m).
“And you haven’t yet put in fuel or employed a crew. Running costs are about $9m (R153m) per annum (mainly fuel and port costs). Now you have to sell this space to freight forwarders and if your price and service are not good they won’t use you,” Vinti said.
He said that ordinarily, the setting up of an SOE in the shipping sector should create more competition for the transport of exports and imports, which is good for customers and, hopefully, pricing, stability and availability of services.
“[But] the obvious challenges are the enduring scourges of corruption and maladministration in SOES.
"The significance of shipping cannot be understated since our international trade policy and economy overwhelmingly rely on ships for our imports and exports.
"To insert a shipping SOE into the mix is too horrible to contemplate.”
Paul Matthew, CEO of the Association of Meat Importers and Exporters, said he’d rather see getting the ports up to standard being prioritised.
According to the draft SA Shipping Company Bill published by the department of transport earlier in November, SA is the only country among Brics states not to have its own ships.