The Namibian fisheries and the allocation of quota rights ..... to some people

Too many small fish riding on our back?

Standing on the shore of the South Atlantic along the Skelton Coast you cannot fail to be in awe of the sheer stunning beauty of the meeting point of the barren Namib dessert and the freezing South Atlantic. The apparent lifelessness of the scene is only true for those who do not look hard and do not know. The dessert has many creatures that eek out an existence on what appears to be a bone dry dessert. But a real invisible world,teeming with life is to be found in the ocean with its massive marine resource that is amongst one of Namibia’s few renewable riches.

Thanks to the nutrient -rich Benguela current ecosystem  which support high abundance of valuable species, Namibia   has one  the richest fishing grounds in Africa. Namibia, after Morocco/Mauritania and South Africa produces the third largest catch in Africa. The catch includes low value species like pilchards and horse mackerel which are principally exported to DRC,Mozambique as well as Angola Cameroon Ghana Zambia and Zimbabwe. The much more valuable exports like hake, rock lobster and crab go to EU, China and Japan and fetch apparently good prices.

If one looks at what the government permits to be harvested from the Namibian Exclusive Economic Zone, the so-called total allowable catch the volumes have been declining for virtually every species over the last 15 years. The more valuable species hakepeaked in 1999 when the TAC was a massive 275,000 tonnes and has subsequently declined to slightly over half that figure at 140,000 tonnes in 2015/16. For the biggest species by volume, Horse Marckerel  the TAC has decreased from a peak of half a million tonnes in 1994 has decreased to 335,000 tonnes in 2016. Does this mean that the country is over- exploiting its one significant renewable resource? Namibia has an excellent reputation for fisheries management but few countries have ever sustained their fisheries for very long. Even what was the world’s the most sophisticated fisheries management system in Canada failed to protect the country’s massive cod fisheries from complete collapse. Fisheries science is often far more of an art than a precise science and so knowing what happens in fish populations in any given year. In the end the economic pressures on the country’s N$10 billion per year fish export industry may be what kills the sector.

The industry is showing clear signs of the sort of commercial pressures that result in the failure of fishery. The first factor is over-capacity. The horse mackerel industry worth about N$2.5 billion on average between 2010-2014 there has been a massive growth in the number of vessels operating in the industry. While the TAC in Namibian waters is 335,000 tonnes the fishing capacity of 445,000 tonnes. This means that that they are operating , on average at 70% of capacity. One of the most significant factors that puts commercial pressure of vessel owners to catch more and push catch level to and beyond sustainable levels is already in Namibian waters. The country has allowed Icelandic, Dutch Chinese and Russian vessels to operate in the local waters.

This raises the second source of commercial pressure on the fisheries and that is the cost structure. Unlike other fisheries in order to catch fish one must have quota rights which are held by the country’s 358 rights holders. They are allocated these quotas for a relatively short periods of time, between 7 to a maximum of 20 years and then on top of this they are allocated a quota each year based on the country’s total allowable catch. The minister has dramatically increased the number of these quotas rights from 135 at the beginning of his tenure in 2010 to 358 in 2015.

This has created a large number of rights holders who each have such a small share of the total quota that they have to either form a joint venture with other rights holders and start-up new firms which has been happening. But as overcapacity becomes a dominant fact of commercial life in the industry along with declining profits then starting new firms looks less and less commercially viable. As a result these rights holders, who are strictly speaking not allowed to sell their quotas, then turn around and sell these ‘usage and access rights’ to other companies. This a legal sleight of hand and amounts to the same thing as selling the quota.

The current market price for these in the horse mackerel usage fee is between N$3250-$3,500/tonne. With a quota of say, 5,000 tonnes that is available for only a few years experts in the fisheries sector feel  that the quota  is simply too small to be ‘bankable’ and hence the most profitable thing to do with the quota is to on-sell it someone who wants the access to Namibia’s rich fisheries. Selling the rights for such a 5,000 tonnequota would bring in some N$18 million without the bother of starting a business that may or may not succeed.

If Namibia wishes, as its legislation says to Namibianize the fishing industry, then creating hundreds of sub-economic quotas may spread the economic benefit of the industry around but will not create a health and profitable industry in the long term. The old South African owned/ controlled duopoly which dominated the Horse mackerel industry and was controlled by Bidvest (Namsov) and the Erongo group have seen their quotas cut dramatically from 240,000 tonnes or in 2011 to some 100,000 in 2016. This has squeezed profits of the foreign owned companies in the industry without, as yet, creating a new viable and profitable local industry.

The current policy runs the risk that it will result in the in the delocalization of production and a shift to simply foreign owned vessels who buy up quota rights. There are many ways to ‘Nambianize’ the fishing industry. The most common is to get local institutions such as pension plans and other financial institutions which are concerned with a profitable industry to buy out foreign interests. Another  policy  would be to create a locally owned industry is that of ‘Ramaposaization’ that is,  creating a rich businessman like Cyril Ramapoza  from within the political elite that is both big and rich  enough to run the industry profitably.  But in either case, no Namibian businessman or financial institution will want interests in an industry that is being squeezed by government.

The name horse mackerel derives from the myth that small fish ride on the back of the mackerel . This is untrue but nonetheless it seems an appropriate caricature for the case of the Namibian industry where there many ‘small fish’ riding on the back of the industry and what the industry needs is economies of scale and efficient businesses run by Namibians. The current policy of issuing so many quota rights needs to reconsidered for the sake of the country’s most important renewable resource.

These are the views of Professor Roman Grynberg and not necessarily those of UNAM where he is employed.