BEE, despite its redistributive intentions, has been doubly conducive to the interests of large-scale South African capital, says a new academic paper. It has largely served to entrench established interests, especially in the industrial fishing industry, with a few high-profile black partners receiving some of the cut while the risk is outsourced to black capital.
This is the conclusion of The Chimera of Redistribution in Post-Apartheid South Africa: Black Economic Empowerment in Industrial Fisheries, written by Stefano Ponte and Lance van Sittert and published in the journal African Affairs.
They say BEE has by and large confirmed the historical share of fishing rights to incumbent, largely white-controlled operators. It has also created a layer of “black captains of industry” to whom incumbents are increasingly outsourcing primary production in a volatile, high-risk and currently loss-leading sector. But, at the same time, it is still indirectly controlled by established capital, which controls logistics, distribution, marketing and branding, claim the authors.
Hake exports represent about 40% of the total value of South African exports of fish and fishery products. In 2003 this represented a value of R2,6billion, according to Ponte and Van Sittert. Since then rand strength, fuel price inflation and falling catches have meant huge losses for the industry.
The hake deep-sea trawl industry is regulated through the allocation of an annual total allowable catch (TAC) quota and of individual, non-tradeable quotas assigned to fishing companies by the environmental department’s marine and coastal management unit (MCM).
Historically companies such as Irvin & Johnson (I&J), Oceana and Sea Harvest have dominated the fishing sector and transformation has been slow. Brimstone, chaired by Jakes Gerwel, now holds 21,52% of Sea Harvest and 10% of Oceana. A BEE consortium comprising Ntshonalanga Investment Enterprises, Dyambu Holdings and Mast Fishing owns 25% of I&J.
Long-term fishing rights (LTRs) were allocated last year, with the next allocation due only in 2020. Of the current 46 LTR holders, 27 (59%) are more than 50% black-owned. But, in 2002, when the medium-term rights (MTRs) were allocated, this proportion was 74%. These rights holders control 43% of the catch, from 25% in the MTR allocation. As fishing companies have a number of agreements with each other, incumbent groups — which the authors term “pioneers” — still control the lion’s share of the quota, directly or indirectly, they say.
The LTR allocation process, which was ostensibly about transformation, was weighted towards larger companies, according to the paper. Applicants for LTRs were given scores based on three elements: 24% of the total was allocated to investment and financial performance, 26% of the total was awarded for job creation, safety and value addition and the third element, representing 50% of the total, was awarded for transformation and broad-based BEE. Given the concerns of broad-based BEE, only 35% of the total score was allocated to ownership.
About 16% of the TAC was allocated to small rights holders that scored well, resulting in major gains for this set and creating what the authors term a new “middle class” of companies. Mean black ownership of rights holders, compared to black-controlled entities, increased from 59% to 61%. Female shareholder figures remain at 22%.
New applicants, which did not receive any rights, had an average black shareholding of 78% and an average female shareholding of 41%.
But the effect of the redistribution was that two large groups remained dominant, controlling 60% of the catch (from 66% before the redistribution). The sector was consolidated by creating a larger group of new and relatively empowered companies with medium-size allocations. Before redistribution, 39 companies, all new players, held the smallest allocations with a total of 17% of the TAC. Following redistribution, just 28 companies held 11% of the quota.
Companies that appear to be individual and independent are often linked by a variety of agreements, formal and informal, say Ponte and Van Sittert, such as joint ventures and marketing agreements. So there are 23 operating groups, made up of 46 individual quota holders. In the case of two groups, once joint ventures and other agreements are considered, the stated losses actually end up being gains. Calculated as individual allocations, “pioneer” companies sustained a loss of 6Â 281 tons, but the total loss they sustained was actually 4Â 468 tons. The quota losses by pioneer companies are almost a third lower than it appears, and these groups still control almost 84% of the quota.
There is no guarantee, the paper says, that transformation, such as it was, will be monitored during the 15 years of validity of LTRs. “Insiders at MCM made it clear that, with the current loss of scientists and managers in the regulatory agency, there will be no capacity to properly monitor the use and possible abuse of quotas,” says the paper.
As most of the established players in the fishing industry are subsidiaries of large capital groups, such as Tiger Brands, Anglo Vaal Industries and Foodcorp, with “multisectoral” interests and multinational operations, the BEE process has enabled “monopoly capital” to migrate from direct to indirect control over primary production through brand ownership, say Ponte and Van Sittert.