/ 20 March 2006

Fishing for quotas: Authorities under fire

Allegations of incompetence, conflict of interest and inadequate consultation are being levelled at fisheries authorities as appeals against the allocation of R70-billion in long-term fishing rights flood in. Some 4 000 appeals are expected from 20 fisheries, from deep sea hake trawl to south coast rock lobster

Allegations of incompetence, conflict of interest and inadequate consultation are being levelled at fisheries authorities as appeals against the allocation of R70-billion in long-term fishing rights flood in.

Some 4 000 appeals are expected from 20 fisheries, from deep sea hake trawl to south coast rock lobster, says Shaheen Moola of Feike, the consultancy handling the process.

The Mail & Guardian has spoken to several industry executives who have lodged appeals with the department of marine and coastal management (MCM). Few were prepared to comment on the record, but they were adamant they would seek high court reviews if they did not see changes as a result of the appeals process, which could tie up the already delayed rights allocation for up to two years.

Applicants are scored on numerous criteria under the broad headings of performance — which measures job creation and investment — and transformation. These are used to rank companies and determine their quotas. The statistical approach is meant to limit corruption.

However, I&J CEO Roy Gordon said there were numerous errors in scoring. “We think they are bona fide mistakes that should be corrected on appeal. We have pointed out errors in our favour and to our detriment.”

Other industry players say the software built to handle the applications is “riddled with problems”, a charge Moola flatly denies.

There are also more substantive contradictions — most controversially in the way levels of black ownership are calculated.

Oceana, one of the industry’s biggest companies, is under a particular spotlight. Its applications were vetted, as MCM requires, by its auditor, Deloitte & Touche, which signed off on the claim that the company is 37,25% black-owned. The figure was passed to MCM by its rights verification unit (RVU) — which is outsourced to a consortium led by Deloitte forensics.

Marius Alberts of Deloitte forensics insisted there was no conflict of interest. “If MCM asked us to investigate something relating to a client, we would hand it over to our consortium partners,” he said. Conflict of interest or not, Oceana, its competitors allege, inflated its black shareholding by failing to follow the MCM-mandated “flow-through principle”, requiring companies to trace shareholding to individual beneficiaries.

Forty-six percent of Oceana shares are held by Ocfish, in turn held 50/50 by Tiger Brands and Real Africa Holdings. In its application, Oceana claimed Real Africa is 100% black-owned. In fact, Real Africa has substantial blocks of shares in the hands of asset managers, which are far from 100% black-owned.

With Sea Harvest, however, the department rigorously enforced the follow-through principle in calculating the empowerment contribution of its shareholder, JSE-listed Brimstone.

Moola insists that Oceana’s ownership points were adjusted, but the relevant MCM documents suggest it was not. Similarly, Foodcorp claims 99,75% employee ownership in its applications, which helps boost its transformation score. In fact, staff own 20% and management 15%. The balance belongs to the investment firm, Pamodzi, whose shareholders include African National Congress leaders Kgalema Motlanthe and Manne Dipico.

Moreover, the way MCM measures transformation is heavily skewed toward ownership, which accounts for 70% of the points on offer — much higher than the ownership weighting in the government’s black economic empowerment good practice codes.

Companies that have invested heavily in staff development, affirmative procurement and other “internal transformation” measures feel this penalises them.

Moola disagrees: “We have achieved substantial transformation in this industry without the aid of the charter,” he says.

There is also anger at Minister of Environmental Affairs Marthinus van Schalkwyk’s decision to admit several late or defective applications. Under MCM policy, these must automatically be thrown out. However, SACO, a subsidiary of Eastern Cape firm Pioneer, along with five other firms, got exemptions after lobbying the minister, and SACO ultimately received more than triple its previous deep sea hake quota.

Even those companies satisfied with their allocations are appealing in order to defend their quotas against possible reallocation to other appellants.

They are nervous because the MCM’s scoring system allocates rights based on how each applicant performs relative to its competitors. A company that initially scored in the top 10%, for example, might slip down the rankings after a rival is reassessed.

Moola says the department’s approach of linking companies’ interests so closely will ultimately encourage “co-management” of the resource and help stave off the kind of court challenges that followed the previous rights allocation.

“If we allow for years of instability through unnecessary reviews ,we simply won’t get where we need to. We need to bed this down as quickly as possible and move on to debate substantive operational and management issues such as [industry] consolidation and performance management.”

For now, however, tough talk is the order of the day.