THE renewed focus on improving the competitiveness of SA's ports and maritime industry has the potential to play a significant role in developing the economy, as well as cementing our position as a regional power. Speaking at the South African Maritime Industry Conference last week, newly appointed Transport Minister Ben Martins indicated that the government now sees the ports as key drivers of economic growth and job creation.
A draft green paper on maritime shipping that has been under development for several years is expected to be put before the Cabinet shortly. It is hoped that the introduction of a new policy that streamlines the registration and taxation of ships registered in South Africa will increase thoroughfare, make South African ports more competitive and in turn promote economic development.
The change is necessary because existing shipping policy has effectively priced South Africa's ports out of the market. Despite the fact South Africa has the biggest economy on the African continent, and as much as 98% of its two-way trade is carried by sea, the country has not had a single commercial shipping vessel on its ship registry since the Safmarine Oranje deregistered in December 2010.
Outdated legislation and an uncompetitive taxation regime have made South Africa unattractive to international operators, and this has had a hugely negative effect on national maritime capacity. This, in turn, is damaging our economic prospects, especially with regard to intraregional trade. Ship owners' reluctance to register vessels in South Africa stems from a combination of high taxation and crew costs, and the quality and efficiency of the register - largely a function of state bureaucracy.
The greatest value of the new policy is that it seeks to make efficiency, rather than direct government intervention, instrumental in attracting private investment to the sector. Part of the strategy involves developing South African ports into regional repair and maintenance hubs for the burgeoning African oil industry. Given that the west African oil industry is one of the fastest growing in the world, and the recent discovery of extensive gas reserves off Mozambique and Tanzania point to an explosion of activity off the east coast, South Africa has a natural competitive advantage that it can exploit only by establishing itself as a reliable and convenient regional hub.
The new policy is especially welcome because it builds on existing engineering expertise and capacity at the ports rather than tries to develop a new sector from scratch, as is hoped will happen with Special Economic Zones. For example, Cape Town harbour is already involved in the repair of a number of rigs each year, and with gas exploration picking up pace off the west coast over the next five years, this is likely to grow. Furthermore, increasing efficiency via lower taxes and more streamlined processes is significantly less controversial for the government than the development of Special Economic Zones, because exemptions from labour legislation will not be needed.
The promotion of South Africa's ports will also play a significant role in facilitating the Department of Transport's broader strategy to improve the efficiency of national transport services and infrastructure. One of the central economic goals of government policy documents over the last several years has been for South Africa to harness the full value of our strategic position by promoting the country as a regional hub. Ports play a crucial role in this by strengthening key transport corridors.
The maritime economy is crucial to the successful development of the domestic economy, and if harnessed correctly will create a virtuous circle whereby both regional and domestic growth will be accelerated. Increasing the capacity of South Africa's freight infrastructure requires a combination of government investment and greater private-sector involvement, which will always be determined by competitiveness and access to modern, efficient infrastructure in the end.
It appears as if the powers that be have finally realised it is pointless to tax our maritime industry out of existence. Shipping is a zero-sum game; either vessels will choose to register in our waters or they won't, so it is imperative that we make our ports as appealing as possible. Moreover, depending on the elasticity of maritime taxes, there will also be a sweet spot at which lower taxes could raise more revenue by boosting volumes, while at the same time attracting investment and creating jobs.
While it may have taken longer to prepare than is desirable, the document is the result of an extensive consultative process between industry, government and regional stakeholders, and will hopefully play a central role in achieving the integration of maritime transportation into the overall transport strategies of the Department of Transport.
Although the government may hold the ideal of a developmental state close to heart, and documents such as the New Growth Path outline plans to develop South Africa's shipbuilding capacity, the new policy appears to be a step away from this. Perhaps considering the limited resources available, the government has had the good sense to realise we need to walk before we can run. While there is scope for South Africa to develop the domestic shipbuilding sector, it should not be a priority.