Shipbuilder sees industry as vital to economy

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Southern African Shipyards (SAS) is pursuing shipbuilding contracts worth more than R6 billion over the next five years while Khulubuse Zuma, President Jacob Zuma ‘s businessman nephew intends to enter the international shipping industry after agreeing to sell a stake in one of his companies to the world’s second- biggest shipbuilder, the business media reports today.

Business Report says SAS chairman and longtime-Zuma ally Don Mkhwanazi wants to bring the shipbuilding industry into the national agenda “and to align it with economic policies aimed at eradicating poverty, creating jobs, increasing skills and attracting fixed investments.”

Mkhwanazi was speaking at the launch of Transnet’s latest harbour tug, Pholela, yesterday. The paper says though the shipbuilding firm has submitted a R110 million bid for Namibian tugs, the majority of the work expected over the next five years would come from South Africa. Prasheen Maharaj, SAS chief financial officer says the firm expects a decision on the Namibian contract next month. “The big ones (contracts) will be coming from South Africa. From the SA Navy, we expect tenders to be out for tug boats, hydrographic vessels (Project Hotel) and patrol vessels (Project Biro),” Maharaj said. “We also expect the SA Maritime Safety Authority (SAMSA) to order two tugs and this is all expected to happen within the next five years.”

The Pholela was built for Transnet and will be used at the port of Durban. It is the fourth of seven tugboats that were ordered by the state-owned enterprise three years ago. Two of the tugboats that were delivered last year went to the Port of Ngqura. There are still three more to be built with one expected to be completed later this year while the remaining two will be launched next year. Maharaj said the Transnet contract, which was valued at more than R600 million, assisted in building a platform on which to grow the company and train more skills for the industry.

Southern African Shipyards employs 400 people and it has trained 38 apprentices. It has an annual turnover of R250 million. “Everything was done in South Africa by local people. But we had to import the mechanical work like engines, generators and propulsion systems from Europe. The biggest thing about this industry is that it has a huge multiplier factor, because for every one direct job, you create seven others through subcontracts and suppliers,” Maharaj said.
“Though some of the jobs are on contract, they go on for a long time. The Transnet contract began in 2007 and we still have three more tugs to build. It takes about 18 months to build one ship, so the jobs are available for many years,” he said. Ricky Bhikraj, the manager at the port of Durban, said the Pholela would become the ninth tugboat at the harbour.

Meanwhile, the younger Zuma has signed a “preliminary agreement” with Daewoo Shipbuilding & Marine Engineering of South Korea that could see Daewoo take a 49% stake in the shipping and logistics arm of his Impinda Group. Business Day reports the younger Zuma has become a controversial figure after a troubled attempt to enter the mining industry through Aurora Empowerment Systems, of which former president Nelson Mandela’s grandson Zondwa Mandela is a fellow director. Aurora has not paid its workers since March and has – surprisingly – or otherwise to date escape Department of Labour censure. The Water Affairs department was also long in charging the mine for offences under water quality legislation after it pumped untreated mine water into local streams.
“The critical thing in this industry is that you don’t yet have a South African-owned shipping company,” Zuma told Business Day yesterday. “I had to select a partner, and this is a formidable shipping company. If we position ourselves properly we can work in the export of coal and other mineral resources across Africa.” He expected the deal to be completed in about six months. Daewoo confirmed the bid, saying it would help reduce its reliance on building vessels. It would help Impinda grow its commodity, oil and natural gas shipping service.

Business Day adds that last month two Impinda subsidiaries were awarded exploration rights to two oil blocks in the Democratic Republic of Congo, prompting a furious response from Tullow Oil, a British company that claimed it and its partners had already been awarded the rights. Tullow said the award of the licences “to two unknown British Virgin Islands-registered companies does nothing to help Africa build any sort of reputation for transparency”.

Mr Zuma said it was not for him to pronounce on the Congolese government’s decision, but he noted that Tullow had never received a presidential decree authorising exploration. “The only thing I can say is that the (Congolese) government is satisfied we’re going to deliver to their expectations,” he said.

Both developments would be in line with the ambitions of SAMSA CE Tsietsi Mokhele, who several times this and last year said a locally-flagged merchant navy has the potential to create hundreds of thousands of jobs “in five years”. He last month repeated that a revival of the country’s shipping industry as well as the transporting at least 40% of South African exports on locally registered ships would create up to 248 000 jobs in five years.
“In a fleet of 300 [ships] we could create 240 000 jobs,” he told the African Ports and Harbours Congress in Johannesburg, the South African Press Association reports. “Shipping is very intensive in terms of jobs.” Mokhele told attendees SA currently had just one ship on the commercial register. This is because of ships registering in countries that offer owners better legal and taxation regimes.

Mokhele says his organisation has lobbied the government to change some of its regulations around taxation and banking, to make the country a more appealing host. “If we don’t move now, we’re missing an opportunity to create jobs.”

The SAMSA CE made the same comments at last October’s defenceWeb maritime security conference and the SA Navy’s 3rd Sea Power for Africa symposium in April last year. He then lamented that the SA Oranje, the last ship on the SA register was on the verge of decommissioning.

He noted that at its heyday, in the early 1990s, the SA merchant marine had about 120 ships on register: about 60 Safmarine vessels and a similar number of Unicorn-line vessels. While successors to both still operate in SA waters, their ships now carry flags of convenience. Mokhele says the problem with this is that SA – and Africa – can never become maritime powers “so long as on the commercial side we don`t own commercial vessels.”

Speaking to defenceWeb on the side of the conference, he said SAMSA initiated a programme called “Project 300” in October 2008 to argue for a 300 ship merchant fleet as a baseline figure. This would be done, in part, by rewriting legislation to draw ships back onto the SA register. But it would also involve reviving the shipbuilding industry and constructing ships.
“Project 300” consultations have included ship owners such as Grindrod, who were then expanding their fleet to about 60; ship operators and the departments of Transport and Trade & Industry. “Together with DTI and DoT we have initiated a maritime cluster forum combining a number of departments and agencies to find a way forward to best position this country as a maritime centre in the global economy,” Makhele added.
“Three hundred is not an overambitious target. Safmarine by 1990 had 60 ships. Grindrod is ramping up to between 54 and 64.” He said the fleet should include medium-sized fuel and chemical tankers as well as multipurpose cargo ships, “capable of carrying bulk cargo one way and containers the other”. Business could be secured by introducing a cabotage policy similar to that in the European Union which restricts the carrying of cargo between EU ports to EU-flagged ships.

Legislative changes to encourage ships to carry the SA flag include migrating from taxing profits to taxing tonnage: “Paying a nominal tax will be a big incentive for ship owners,” he says.

Building ships will create a sustainable maritime building industry, he continues. But it will need some government underwriting. “It needs a guarantee, like 2010 [the Soccer World Cup] If government does not commit … it means you can`t build the needed infrastructure, you can`t make the investments.” He was hopeful the state-owned Industrial Development Corporation and the Development Bank of Southern Africa would play a lead role in this endeavour. “The IDC held shares in Safmarine. They used government money to set up Safmarine so this is not the first time this is done.”



At the time he further stated hat SA would purchase two salvage ships worth R800 million. “We`ve just completed the feasibility study and with the DoT we will be buying two salvage vessels,” Mokhele said in a presentation on his agency`s activities. Mokhele said indications were the vessels will cost between R360- and R400 million each at the current exchange rate. “We are looking at buying two, one for the east coast, one for the west coast so we can respond to all incidents off our coast.” He did not further elaborate on the requirement. At present, salvage work is contracted to private hands, with Dutch-owned Smit Amandla Marine being a prominent name in the business.