Wednesday, November 18, 2009

SA needs 300 ships in merchant navy - Samsa

South Africa needs to have 300 ships registered to secure supply of goods and build skills capacity for the maritime sector, according to the the SA Maritime Safety Authority (Samsa).

Samsa said yesterday it wanted to attract close to 20 percent of this number by the end of the 2010/11 financial year through legislative changes that were already under way.

The changes, which include the introduction of tonnage tax, revision of the maritime transport policy and the SA Ship Registration Act, are expected to be ratified and implemented next year.

Samsa said a merchant navy of 300 vessels would create 30 000 jobs at sea.

At present, only one ship is registered in South Africa and it will be decommissioned by the end of next year.

Samsa chief executive Tsietsi Mokhele said it was risky for a country that relied heavily on trade not to own ships.

"The first problem is security of supply because 98 percent of imports and exports are transported by sea," said Mokhele.

"We are a freight-dependent economy as 50 percent of gross domestic product is trade and if there was to be a disruption to connecting us to the rest of the world the economy would grind to a halt.

"If you don't own vessels, you cannot grow the industry itself because one vessel creates about eight to 10 jobs on the land and you cannot increase the number of seafarers because graduates must do training on a ship before they qualify."

Tonnage tax would mean that shipping companies would be taxed at a fixed rate according to the size of their ships and not according to income, making South Africa's tax environment more competitive.

Treasury spokeswoman Thoraya Pandy said the Treasury had asked for more comment from the industry, which must be submitted by the end of February.

It was too early to determine if tonnage tax would attract shipping lines to register vessels because tax was one of many considerations for potential investors, Pandy said.

Safmarine has indicated that it would consider registering more ships in the country if there was a tonnage tax. Of the company's 20 vessels, one is registered in South Africa, four in Belgium and 15 in the UK.

"Tonnage tax in our view would create a more globally competitive tax environment, which in turn would act as a catalyst for foreign investments in the maritime industry," said Fred Jacobs, the corporate affairs executive at Safmarine.

"Business decisions would also be based on sound commercial rationale rather than just on tax considerations."

The key amendment in the act relates to the mortgage claim ranking, which determines the order in which creditors are paid if a customer goes insolvent before paying its debts. It has been proposed that shipping companies should be ranked at between six and seven, which is in line with international standards, as opposed to the current 13 in the claim ranking.

The better mortgage claim ranking means that if a shipping line is owed money by a firm that goes under, it would be more likely to recover the debt.