The cost of mod­ern­day piracy

Piracy on the high seas is flour­ish­ing around the world, mak­ing goods trans­ported by ship more ex­pen­sive – a cost that is passed on to con­sumers.

Finweek English Edition - - Contents - Mariam Isa By Mariam Isa

mar­itime piracy hit world head­lines in 2009 when So­mali pi­rates boarded the US-flagged Maersk Alabama in what was the first hi­jack­ing of a US ship in 200 years. The dra­matic in­ci­dent fo­cused at­ten­tion on a wave of at­tacks off the coast of So­ma­lia which se­verely dis­rupted ship­ping for sev­eral years, and in­spired a pop­u­lar Hol­ly­wood film, Cap­tain Phillips.

The ship­ping route around the Horn of Africa and the Suez Canal is a con­duit for about 10% of the world’s trade. A con­certed in­ter­na­tional re­sponse helped con­trol the threat in that par­tic­u­lar re­gion.

But what the gen­eral pub­lic doesn’t know is that mar­itime piracy is flour­ish­ing across the world, from Latin Amer­ica to Africa and Asia, cost­ing the global econ­omy bil­lions of dol­lars ev­ery year.

The lat­est sta­tis­tics from the In­ter­na­tional Mar­itime Bureau (IMB), an arm of the In­ter­na­tional Cham­ber of Com­merce, showed that although there was a dip in 2017, piracy surged in the first half of this year, with 107 in­ci­dents re­ported glob­ally com­pared to 87 over the cor­re­spond­ing pe­riod of last year.

The num­ber of hostages taken in the first six months of 2018 shot up to 102, com­pared to 63 in the same pe­riod of 2017.

The ge­og­ra­phy of those at­tacks has sig­nif­i­cantly shifted – 45% were launched from sub-Sa­ha­ran Africa, with the big­gest hot­bed the Gulf of Guinea along Nige­ria’s coast­line, where the num­ber of in­ci­dents has in­creased three­fold from 2014 lev­els. Ac­cord­ing to the IMB, 31 at­tacks were launched from Nige­ria in the first half of this year, com­pared with just two off the coast of So­ma­lia in the same pe­riod.

Ex­perts warn that the real pic­ture could be far worse, as many in­ci­dents are not re­ported due to the re­luc­tance of pri­vate com­pa­nies to dam­age their rep­u­ta­tions by ex­pos­ing flaws in their se­cu­rity sys­tems.

Ac­cord­ing to the eighth an­nual re­port of Oceans Be­yond Piracy (OBP), pro­duced by the US-based One Earth Fu­ture or­gan­i­sa­tion, there were 321 piracy in­ci­dents around the world last year and 5 000 sea­far­ers af­fected, with 17 crew mem­bers killed in Asia and two killed off West Africa. The re­port noted a “big in­crease” in those in­ci­dents in Latin Amer­ica and the Caribbean.

Mod­ern mar­itime pi­rates tar­get mainly bulk car­ri­ers to steal their cargo or kid­nap their crew for ran­som, board­ing them with ma­chine guns or ma­chetes. Iron­i­cally, au­toma­tion makes com­mer­cial ships much more vul­ner­a­ble, since a large ves­sel can have as few as 15 crew.

Nige­rian pi­rates are of­ten ex­tremely vi­o­lent – board­ing ships quickly and en­gag­ing in fierce gun bat­tles be­fore snatch­ing vic­tims or set­ting them adrift, re­treat­ing into the Niger Delta’s maze of rivers where it is dif­fi­cult for se­cu­rity forces to find them. Ac­cord­ing to the IMB, 65 of 75 crew mem­bers kid­napped in 2017 were taken in or around Nige­rian wa­ters. Re­search shows that the toll taken on crew is huge, both in terms of post-trau­matic stress dis­or­der af­ter an at­tack, and the anx­i­ety of sail­ing in a high-risk area.

The eco­nomic cost of mar­itime piracy is heavy given the range and com­plex­ity of vari­ables in­volved, with some es­ti­mates hov­er­ing at around $6bn an­nu­ally. Ac­cord­ing to the OBP re­port, to­tal costs in East Africa alone amounted to $1.4bn last year, down from $7bn in 2010. But in West Africa they climbed to $818m from $719.6m in 2015.

Lev­els in Asia were harder to cal­cu­late given the com­plex­ity of ship­ping pat­terns and in iso­lat­ing ded­i­cated counter-piracy pa­trols, but in­ci­dents of kid­nap for ran­som plunged by 80%, and over­all in­ci­dents by 20% due largely to the effective co­op­er­a­tion by re­gional law en­force­ment ac­tors, it said. How­ever, 17 sea­far­ers were killed, more than in any other re­gion.

In Latin Amer­ica, piracy and armed rob­bery in­ci­dents at sea surged by 163%, with an­chored yachts in­volved in about 59% of all in­ci­dents, the OBP re­port showed. It was again un­able to cal­cu­late the to­tal cost of piracy in that re­gion.

The cost of ship­ping it­self has climbed glob­ally as ves­sels try to avoid piracy hotspots, in­creas­ing the du­ra­tion of their jour­neys, and hire armed se­cu­rity for pro­tec­tion.

In ad­di­tion, ship­ping com­pa­nies are now com­pelled to take out in­sur­ance against the scourge – not only for loss of cargo or dam­age to ves­sels, but for their crew. Some in­sur­ance com­pa­nies of­fer pack­ages which in­clude cover for in­ter­est on loans to meet a ran­som; the fees and ex­penses of in­de­pen­dent cri­sis ne­go­tia­tors, in­ter­preters, and pub­lic re­la­tions con­sul­tants; and the costs of med­i­cal and psy­chi­atric care, in­clud­ing cos­metic surgery for vic­tims. All of these costs add to the prices of trans­ported goods and are passed on to con­sumers.

The lat­est IMB re­port urged a struc­tured and more co­op­er­a­tive re­sponse from gov­ern­ments to ad­dress piracy, in­clud­ing im­proved pa­trolling of the sea, in­tel­li­gence shar­ing, and the elim­i­na­tion of pi­rate safe havens on land. It also en­cour­aged ship­ping com­pa­nies to im­prove se­cu­rity on board their ves­sels – a pre­cau­tion which is de­clin­ing in some ar­eas. ■ ed­i­to­rial@fin­week.co.za

is a free­lance jour­nal­ist who came to South Africa in 2000 as chief fi­nan­cial cor­re­spon­dent for Reuters news agency af­ter work­ing in the Mid­dle East, the UK and Swe­den, cov­er­ing top­ics rang­ing from war to oil, as well as pol­i­tics and eco­nomics. She joined Busi­ness Day as eco­nomics ed­i­tor in 2007 and left in 2014 to write on a wider range of sub­jects for sev­eral publi­ca­tions in SA and in the UK.

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