PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES

1. PRESENTATION TO THE PORTFOLIO COMMITTEE ON MINERAL RESOURCES USING SHIPPING TO SUPPORT AFRICAN INFRASTRUCUTRE DEVELOPMENT AND THE GROWTH OF THE AFRICAN MARITIME INDUSTRY September 2013

2. AN OVERVIEW • A framework for analysing the geo-economic and strategic nature of South Africa’s maritime interests • The missing link – shipping and maritime sector • Role of the maritime sector– that shipping, in particular, can play in advancing South Africa’s global geo-economic, geo-strategic and geo-political interests • The business case for strategically investing in South Africa’s shipping and the broader maritime sector as a key driver for socio-economic growth and development KEY FOCUS AREAS • Maritime interests • Maritime Industries • Priority investment areas • Using Mineral Resources to leverage for growth in the maritime sector

3. THE SAMSA ROLE AND MANDATE • Foundational Maritime Policy Mandate: National Transport White Paper 1996 • The grand visionfor South Africa’s transport is stated in the White Paper as being to • ‘... support government strategies for economic and social development whilst being environmentally and economically sustainable’. • The maritime policy imperatives and goals in the Transport Policy are articulated as: • Developing maritime awareness; • Assisting in the creation and fostering of an economic environment for the • Maritime Transport Industry which will allow it to compete... with other nations; • Contributing to the release of the full potential of the maritime industry in S. Africa; • Modernisation of South Africa’s shipping administration • 2. SAMSA Legal mandate : The South African Maritime Safety Authority Act, 5 of 1998 • To ensure the safety of life & property at sea; • To prevent and combat pollution of the marine environment by ships; and • To promote the Republic’s maritime interests. • The mandate positions SAMSA as the country’s strategic center for maritime governance and development

4. AFRICA’s GEO-ECONOMIC AND GEO POLITICAL PROFILE • Largest island on earth with oceans on all sides: • Atlantic Ocean (West) • Indian Ocean (East) • Southern Oceans (South) • Mediterranean & Red Sea (North) • 39 (70%) out of 55 African countries are coastal or islands • Coastline of 31,000 km • Inland waterways of 300,000 square kilometres • Seaborne trade volumes 91% • Trade dependent GDP (e.g RSA: 58% of GDP comes from trade) • 2nd second largest land-mass in the world after Asia • The largest number of land- locked states in the world (15) Africa The Island Continent

5. IS SOUTH AFRICA A MARITIME NATION, A MARITIME ECONOMY A MARITIME COUNTRY BUT NOT A MARITIME NATION: A CONUNDRUM? • 3,000 km coastline in 3 oceans – Atlantic, Indian and Southern Oceans, located on a major strategic shipping route • 8 established commercial ports, and many fishing and leisure harbours and marinas • Trade is over 50% of GDP (98% of SA trade volume/ 80% trade value is by sea) • 3.5% World sea trade by volume, in the top 15 countries on seatradetonne-mile • Continental shelf claim increases sea land to 2.8 times land mass • Extensive off shore interests (islands, Antarctic, marine and offshore oil & gas resources) • South Africa leads in Africa’s intra-regional and Africa’s international trade • All key partners such as in BRICS are major regional maritime powers with vast maritime interests and capabilities in sea trade, commerce and naval influence • South Africa’s strategic global maritime interests and international obligations include providing safety of navigation and ships, ensuring freedom of the seas and security of shipping supply chains, as well as protection of the marine environment IS THE SOUTH AFRICAN ECONOMY, A MARITIME ECONOMY

6. PROFILING AFRICA A DEVELOPMENT OPPORTUNITY NOT TO BE MISSED • South Africa is far removed from its trading markets • The minerals of this country spend 15 to 28 Days getting to the market • Linking African Production to markets in the region • The cost to the country for transportation of its trade to market amounts to R160 Billion • The bulk of this trade by volume is made up of bulk cargoes • These are mainly mineral resources as well as liquid cargoes • Transnet is spending R300 Billion in new capacity for transportation infrastructure yet there is no program to build the actual capacity to transport AFRICA – THE ISLAND

7. Africa - extended 27 Feb 2013 – 13073 vessels

8. PROFILING AFRICA OFFSHORE OIL AND GAS SUPPORT DESIGN SHORTCOMINGS • The Offshore Oil and Gas support requires an industry for the fabrication of structures • It requires transportation of often large equipment from the support bases • The region is best positioned to provide logistics bases for the booming industry owing to the proximity to exploration sites • South Africa, specifically has had a head start in this regard with the facilities in Cape Town and Saldanha ports albeit not developed as fully as they should have been by now • With the discovery of the gas in the East Coast of the continent, more support bases will be necessary and the Southern Cape and KwaZulu Natal offer opportunities. • The most essential link for the logistics bases is transportation and specifically continental coastal shipping, which is not established as yet • “According to Sunrise Energy, more than 218 floating structures are required for the floating structures only to support the East Coast gas activities”

9. PROFILING AFRICA MINERAL RESOURCES AND LOGISTICS • South Africa and its rich mineral resources requires transportation of such to place the in the market • These are transported in large quantities using vessels • South Africa, is putting a lot of infrastructure for transportation (Transnet R300 Billion) • The types of vessels (bulk carriers) require a lot of repair support that would need to ship repair activity

10. PROFILING AFRICA CONNECTING AFRICAN TRADE TO MARKET • “The maritime connectivity of African countries is largely determined by the amount of mineral resources they possess, leading to resource export led urbanisation of Africa, which is a very unsustainable model” • Africa’s trade is dominated by coastal economies in all the 4 regions of the East, West, North and South • Africa’s GDP of 1,05 Billion people and USD 1 Trillion has a fair amount of intra regional trade that should be used to develop and grow the coastal shipping on the continent • That trade is largely seaborne and moves through its ports (91%) • The development of the land-locked countries and their access to international markets are dependent on the performance of the network of maritime transport and logistics corridors, including ports and ships • Transport, in this case maritime transport and logistics has become an essential and strategic area of economic consideration • In that context, the development of the maritime transport infrastructure become a key enabler and catalyst for the competitiveness and development of Africa’s economy

11. CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS • The African Maritime Charter objectives are to: (Article 3: 1) “Declare, Articulate and Implement harmonised maritime transport policies capable of promoting sustained growth and development of African Merchant fleets……..” • The Charter recognises the role of maritime transport in the facilitation and development of trade between Africa and the rest of the world as well as the need to implement an effective maritime transport policy with a view to promoting intra African trade (Preamble) • In promoting Cooperation among African Shipping Lines, the Charter encourages adoption of national policies, regulations and programs that attract public and private investment in ships and shipping in general (Article 13:1) • Establishment of Trans African Cabotage system requires all state parties to promote Cabotage and effective participation of private sector operators at national, regional and continental levels in order to promote intra African trade as well as economic and socio-economic integration of the continent (Article 15)

12. CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS • The African Maritime Charter objectives are to: (Article 3: 1) “Declare, Articulate and Implement harmonised maritime transport policies capable of promoting sustained growth and development of African Merchant fleets……..” • The Charter recognises the role of maritime transport in the facilitation and development of trade between Africa and the rest of the world as well as the need to implement an effective maritime transport policy with a view to promoting intra African trade (Preamble) • In promoting Cooperation among African Shipping Lines, the Charter encourages adoption of national policies, regulations and programs that attract public and private investment in ships and shipping in general (Article 13:1) • Establishment of Trans African Cabotage system requires all state parties to promote Cabotage and effective participation of private sector operators at national, regional and continental levels in order to promote intra African trade as well as economic and socio-economic integration of the continent (Article 15)

13. CONNECTING AFRICAN ECONOMIES POLICY FRAMEWORKS • The SADC Protocol on Transportation, Communication and Meteorology has as one of its policy objectives a requirement by member states to develop a harmonised maritime and inland waterway policy with regards to (Article 8.2): • The promotion of ship owning, ship registration, ship operations and slot chartering • The growth and development of a viable SADC Merchant Shipping Industry, including the role of concessions and incentives to improve competitiveness. • Tonnage capacity in member states, including enhanced use of coastal shipping and feeder services • The role of coastal shipping and the encouragement of joint ventures and alliances between ship owners to promote economies of scale. • Implementation of a regional cabotage policy within the member states

14. KEY CHALLENGES AFRICA’S SHIP REGISTRIES AND SHIPPING • Africa is the only world region with no merchant tonnage of note under its control (registry) to handle her coastal intra-regional and extra-territorial seaborne trade • Africa imports transport and logistics services with every import - export activity • No tax and tonnage related benefits hence skewed balance of trade • Decimation of maritime services expertise (sea based and ashore) and competitiveness • Lost opportunities for possible investment in shipping by Africans • Vulnerability to foreign geo- political and geo-economic pressures • Undermines the establishment of viable coastal industry to complement the land and aviation national transport infrastructure and services • Loss of opportunities for domestic industrial development and job creation • Weaker position in coordinating intra-regional African coastal trade strategies • Weakening of the capacity of countries and governments to govern their ocean territories and provide safety and security

15. SAMSA PERSPECTIVE SAMSA controls, manages and administers the South African Ship Register (the Register). It is common knowledge that there is no trading ship registered on the Register. Some of the reasons for the continuation of this status quo put forward by ship-owners is that the Register is uncompetitive and unattractive in the sense that certain policies and practices make it difficult for aspiring South African citizens or South African owned companies to own trading ships that would enable them to enter the shipping industry. The Infrastructure Development program driven by Transnet, will introduce an additional transportation capacity of over 50 million tons of cargo, mainly minerals at a cost of R300 Billion. It is appropriate that this additional capacity be used to introduce transformation of the transportation sector insofar as the transportation of such additional minerals is concerned in order to realize the full potential value of the investment.

16. SAMSA PERSPECTIVE…..CONT Due to the fact that the minerals are exported Free on Board (FOB), it is the buyer who nominates the ship to carry the cargo and also clears the minerals for export. Currently, the buyers have consistently nominated foreign flagged ships that they have had relationships with to carry the cargo. The result of this is that it becomes difficult for an aspiring South African ship owner to enter the shipping industry as in this industry, cargo is king or queen. Without access to cargo, there will be no use for South Africans to acquire trading ships, and South Africa will continue to import transportation services each time it needs to export its minerals. This worsens the balance of payment in the country’s current account. The two critical elements in correcting this situation are the access to cargo (which SAMSA’s comments on the MPRDA Bill seeks to address) as well as the attractive ship registration regime (largely driven by Treasury) which will allow South African registered vessels to compete in the international shipping market.

17. SAMSA PERSPECTIVE……..CONT • To assist in making the Register attractive, Treasury has introduced certain taxation amendment laws pertaining to international shipping which proposes taxation exemptions in respect of normal tax, capital gains tax as well as the tax on seafarers working on South African registered ships that are engaged in international trade • It is in respective of the above status quo that SAMSA saw it necessary to submit it written • comments which, if accepted, will have the effect of: • Preventing the outflows of freight; • Bolstering the South African maritime industry; • Creating employment opportunities for South Africans as seafarers as well as in downstream industries that support the shipping industry. • To ensure South Africans participate in the logistics chain of the nation’s natural resources it is imperative that a policy in this regard is clearly articulated in the Mineral and Petroleum Resources Development Act (“the Minerals Act”).

18. RECOMMENDATIONS – SAMSA SUBMISSION In order for the Maritime Industry to benefit from the amendments of the MPRDA, it is important to align the BBBEE Charters of Transport with that of Mineral Resources Specifically, SAMSA would like to submit that the Mineral Resources Charter should incorporate elements of logistics and Supply Chains The UNCTAD approach of ensuring that countries participate in the transportation of their trade (the 40:40:20 principle) allows for this arrangement and as such its spirit should be built into the amendments The Transnet Infrastructure development program with the additional cargo it creates should be used to allow for more participation of South African owners in the transportation industry

19. CONCLUSION • The key challenge Africa must face up to is the absence of indIgenous tonnage to keep the sea lines of communication open • The current situation is not sustainable, undermining Africa’s ability o: • African naval support for off shore operations • Carry influence in world trade and shipping affairs • Secure and diversify opportunities for African investors • Sustain numbers of African who could find jobs at sea if they had berths for training • Promote the maritime industrialisation programme: • provide adequate ship repair infrastructure facilities on the continent • establish regional maritime industrial hubs for ship building, boat building and component manufacturing • Provide world class ‘soft infrastructure’ development programmes • introduce maritime awareness and education in the populacel • Provide high tech training and research centers • Improve participation of females in maritime

20. MARITIME DEVELOPMENT - AN INTEGRATED MARITIME DEVELOPMENT FRAMEWORK SAMSA STRATEGIC GOALS SAFETY, SECURITY AND DEFENCE PERSPECTIVE • GOAL 2: Promote South Africa’s maritime industry/economy development • Promotion of Maritime BBBEE and industry transformation • Promotion of maritime awareness, maritime industry skills capacity and creation of jobs MARITIME SUPPLY CHAIN SECURITY SAFETY OF LIFE, PROPERTY & ENVIRONMENT TERRITORIAL INTEGRITY INDUSTRIAL PERSPECTIVE TRANSPORT PERSPECTIVE OFFSHORE ENERGY & MINING SHIP REPAIRS & CONVERSIONS SHIP & BOAT BUILDING LOCAL/REGIONAL COASTAL SHIPPING & LOGISTICS INTERNATIONAL SHIPPING & LOGISTICS PRODUCTION MID & DOWNSTREAM MARITIME CORRIDORS EXPLORATION PORTS & HARBOURS SHIP REGISTRY SERVICES (VALUE ADDED) PERSPECTIVE BUSINESS CONSULTING SERVICES SHIPPING/CARGO OPERATIONS & LOGISTICS FINANCING & ASSURANCE SERVICES ENGINEERING & TECHNOLOGY SERVICES SKILLS TRAINING RESEARCH & INNOVATION PORT & MARITIME ADMIN

21. THANK YOU