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Archive for October, 2012

SAS Africana Commences Research Cruise

The SAS Africana sailed yesterday under the command of the Navy to begin the final small pelagic research cruise for the 2012 season. This research cruise will provide the scientific basis to determine the size of the 2013 pilchard and anchovy quota.

The Department of Fisheries also confirmed that by March 2013, the research and compliance vessels will once again be operated by a private service provider.

That Ernst & Young Report: Our Analysis

So a lot has been said and DAFF has thrown its toys out of the cot about the leaking of Ernst & Young’s October 2012 Phase 1 Report into possible irregularities pertaining to the SMIT Amandla Marine vessel management tender. 
Before we go any further, it is important to point out two facts. One, the fact that the report’s investigative ambit is limited to the Smit tender and did not include the unlawful allocation of the R800 million tender to Sekunjalo is important as it again shows the Minister’s hand and perhaps involvement in the latter. Ultimately, we will have to wait for the Public Protector to pronounce on this matter. 
Two, the E&Y Report was supposed to have been published on the department’s website according to the Acting DG of the Department. He made this clear on 2 October. The fact that it failed to appear there was a clear give-away that the report simply did not say what the department and its tainted Minister wanted it to say and in fact had said anyway in their prematurely bizarre press statement issued on 1 October 2012.
But what did the report – even if just preliminary – find? The short answer is … nothing. 
Paragraph 145 states – 
Paragraph 146 proceeds to however note certain concerns but none of these concerns are substantive particularly if one considers the rather bizarre content of the paragraph 150 pertaining to “Outstanding Procedures”, which reads as follows – [You need to actually read it as “E&Y must still …”]
E&Y actually drafted a preliminary report about the procurement of SMIT’s services without even understanding the procurement regime applicable to the tender and extensions! This is incomprehensible. 
But it explains a number of E&Y’s “summary of findings” under paragraphs 146 and 147. For example, E&Y states that the Marine Living Resources Fund is simply a creature of statute established under the Marine Living Resources Act and that it is not a legal entity with powers to contract. Not correct. The MLRF is in fact a Schedule 3A Public Entity established under the Public Finance Management Act. 
The E&Y Report notes that the Agreement with SMIT is for 5 years while the State Tender Board prescriptions “as a rule” limit contracts to “two years”. Again, not correct. Directive ST 37 of the State Tender Board makes it clear that this is a “general rule” and that where contracts for a longer period are required, prior approval from the State Tender Board is required. Did E&Y determine if such prior approval was given? No they did not and they should have. In fact, both the original Agreement and the Extension Agreement signed in 2004, were not only submitted to the Office of the State Attorney for approval but were approved by the Chief Financial Officers of both the MLRF and the national Department of Environmental Affairs prior to them being signed by the DG of Environmental Affairs at the time, Dr Crispian Olver who was the Accounting Officer for the MLRF in terms of the PFMA. 
It is also important to note that the State Tender Board was done away with in January 2004. The Extension Agreements were signed in July and December 2004. 

DAFF – The Brand Destroyer

It is painfully clear from the recent fiasco involving Smit Amandla Marine and now Ernst & Young that associating yourself with the Department of Fisheries and its tainted Minister is certainly brand destroying.

Both the department and its Minister do not give a fig when publishing hugely damaging and defamatory press statements because they ultimately know they are above the law and are completely unaccountable. At the very worse, they will be taken to court and will lose a defamation case and the taxpayers will bleed the costs.

And these Mamparas will simply be promoted to another cadre facilitated post in the civil service no doubt with a “golden handshake”. And some other economic sector of our damaged and battered economy will be made to suffer these fools.

DAFF Now Dumps Ernst &Young!

The Department of Fisheries issued a press statement today after it was again exposed as being guilty of deceiving the public. If we recall, on 1 October the DAFF issued a shocking press statement claiming that the Ernst & Young Forensic Auditors had produced a report confirming, inter alia, corruption by Smit Amandla in the award of vessel management tenders since 2000. The following day, at a press conference where this report was to be handed ceremoniously to our increasingly compromised Minister of Fisheries, the department ducked and dived and reduced the “report” to a “preliminary report” that mentioned some problems. No mention suddenly of corruption! 
Then, the full 200 page report found its way to the Democratic Alliance. And when the Department realised this today, they suddenly panicked realising their false claims about corruption against Smit   Amandle would now be exposed. 
And indeed they are. Feike has seen the report and the findings simply do not support any contention of corruption or maladministration. What is extremely clear however, is that the Department itself was the most significant obstacle in its own investigation, refusing to make documents available and certain staff members refusing to be interviewed unless the Minister instructed them. And it is clear that the Minister simply did not instruct these staff to avail themselves to the E&Y investigators! Now, why could that be, Minister?
The Department now bizarrely claims there are two 200-page reports as the one they have is substantially different to the one in the possession of the DA! Conveniently the department now states that – 

[It] notes recent developments as having gravely compromised the integrity of the investigation, including the confidentiality that we entrusted to Ernst & Young as an independent and respected forensic body. The department has lost faith in the work of Ernst & Young and as a result of these concerns, has resolved to put the investigation on hold until further notice.

 What rubbish! The department and its Minister are obviously not happy with the findings produced by E&Y. These findings did not match the outcome they had pre-planned as per their press statement of 1 October 2012.

So we will undoubtedly see this compromised Minister run around and try and find another auditing firm to undertaken another “investigation” that will produce (she hopes) the result she so desperately needs. Or the Public Protector can put an end to this miserable fiasco and publish her findings on the remaining to two complaints against Minister Tina Joemat-Pettersson.

Based on the findings of the first complaint alone, Joemat-Petersson should be removed from office.

Feike will be highlighting some of the key preliminary findings from the E&Y Report in a subsequent BLOG.

The State of Fisheries Management in SA

On 17 October 2012, Pieter van Dalen, the Deputy Shadow Minister for Fisheries (DA) addressed the Cape Boat and Ski-Boat Club on the state of fisheries management in South Africa. This is his address.

“By way of preface, it is worth situating the state of fisheries in South Africa in the broader global context. The world’s fisheries are the quintessential case of the “tragedy of the commons”, whose symptoms include persistent over-fishing and fleet overcapitalisation. This tragedy shows how individually rational agents will use a common resource in a socially irrational way because, when each agent exploits the resource, they ignore the negative externalities that this generates for other agents. The consequence is that the resource is over-utilised in a dramatic way, even though all those involved could change their behaviour (extract less) and leave everyone better off. Such a scenario raises notable political economy challenges in developing country-specific pathways of reform.
 
The World Bank reports that despite growing evidence of success in selected fisheries, less than two percent of the world’s fisheries have actually undergone effective reform because of these challenges. “It is estimated that the world’s fisheries could generate at least US$50bn per annum and the economic benefits generated could be much higher if management systems were established to enable investment in growing this important economic sector in a sustainable manner”. The trade in global seafood and fish products is worth more than R480 billion annually according to the Food and Agriculture Organisation of the United Nations. Importantly for South Africa, fisheries are crucial for enhancing economic growth and alleviating poverty as we have significant fisheries assets – one of the top 5 producers in Africa.
 
 
In 2011, South Africa’s commercial fishing industry was worth at least an estimated R5.54 billion, landed 498 000 tons of fish and presently employs approximately 30 000 people directly in full and part time jobs. Investments in fixed assets have an insured value of approximately R12bn. More than 3000 commercial fishing right holders deploy some 1400 fishing boats each year in South Africa’s exclusive economic zone (EEZ). The commercial future of the South African fishing industry is increasingly dependent on the sustainable utilisation and sound management of its wild marine living resources. However, accurate data on the fishing industry is increasingly less available in the wake of institutional dysfunction at the Department of Fisheries (DAFF). Without accurate and reliable socio-economic data it is impossible to properly regulate commercial or recreational fisheries. Regulation is particularly crucial in this industry as its long-run profitability is almost entirely contingent on fishing within a clearly identified ‘maximum sustainable yield’ (MSY). But the MSY cannot accurately be established without continued research to establish the levels and viability of fish stocks.
 
In ordinary circumstances, DAFF would conduct annual research in this respect for each component of the fisheries industry. Once the MSY has been determined, a Total Allowable Catch (TAC) is established. The TAC provides the grounds on which quotas are then allocated. The situation is so bad that the Africana had to leave on the 15 th of Oktober 2012 for us to be able to set these TAC. This sadly did not happen and now there is a real chance of the TAC being halved. That would mean halve of income and half of the industry shedding jobs. This is of real concern and the industry had offered to assist. The minister is so stubborn that she will not accept the help. It is a recognised world practice that industry can help. It is estimated that the salaries lost in the pilchard industry (which will be cut by 50 000 M/Tons) will be R100 mil.
The anchovy industry (which will lose 180 000M/tons) will lose about R200 mil.
This is not counting taxes that are paid plus it will hugely escalate this country’s food security and especially poor communities which relies on Fish as one cheap source of protein.
 
Of course, circumstances are currently anything but ordinary, especially with research cruises only being undertaken under great pressure from the industry. Research vessels are tied up at Simon’s Town harbour under the auspices of the Navy, though the Algoa was recently handed over to the Department of Environmental Affairs to be manned by Smit Amandla Marine. This strange situation is attributable to the administrative bungling of an R800 million tender in November last year, infamously and prematurely awarded to Sekunjalo Consortium before being withdrawn. The contract is to operate and maintain state-owned research and patrol vessels. The next round of allocating commercial fishing rights in 16 commercial fisheries is due to take place in 2013 and 2015 respectively. But DAFF’s 2009 review of industry performance (published only in 2012) has been woefully inadequate, littered with errors, including getting the number of rights holders in certain sectors incorrect. Further, DAFF has not undertaken any substantive measures to even begin preparing for these quota allocation processes, which take approximately two and a half years to properly prepare for.
 
 
To add to the general malaise, Small Scale Fishing Policy adopted by Cabinet wildly contradicts the findings and objectives of the National Development Plan (NDP). The policy calls for new entrants and additional quota holders to gain from the industry under the name of redress, but the NDP is opposed to this as it threatens the sustainability of the already depleted fish stocks. Moreover, the NDP emphasises that the allocation of quotas should be done in such a way as to ensure compliance, yet the department insists on allocating the interim relief lobster quotas, which have proved to be an illegal fishing racket. Small-scale fishing is not the solution to poverty and unemployment – the promise of communal fishing rights only fuels discontent. Finally, the allocation of more small-scale fishing rights (over against focusing on industrial fisheries development) will ultimately lead to fewer jobs being created.
 
The Fisheries Branch remains without a plethora of top and senior managers, including having been without a permanent DDG, head of Fisheries Management and CFO since at least December 2010.
 
Undoubtedly the greatest institutional challenges facing the sustainability of South Africa’s fisheries, then, are poor management, policy incongruence and illegal, unregulated and unreported fishing.
 
In the current context of South Africa’s political landscape, it appears that the relevant politicians – namely Minister Tina Joemat-Pettersson – do not actually operate under an incentive structure that encourages them to execute actions carefully computed by economists and policymakers that will make fisheries, and the communities that depend on them, better off. Certainly the last three years of fisheries management has witnessed the destructive effect of institutional dysfunction. It turns out we are not alone, though.
 
Economist James Robinson makes the important point that, globally, the number of metric tons of fish caught per fisher has fallen since the 1970s, from 5.25 tons in 1970 to about 3 tons in 2000, and this occurred despite considerable technical change. The World Bank report to which he refers is “the most canonical example that market failure proceeds unabated with little effective response from governments of from private agents. Indeed, only New Zealand and Iceland have managed to construct the type of rational fisheries regulation which would solve these problems.”  He goes on to point out that it is not enough, then, for economists to propose sensible solutions to fisheries management as these already exist. The problem is that the sensible solutions are not adopted because political forces are not aligned in the right way. It is currently not politically feasible for Minister Tina Joemat-Pettersson, for instance, to implement the optimal policies. She is more concerned with using her department as an instrument of political gain for President Zuma’s  Mangaung campaign than ensuring the sustainability of the fishing industry. And there are very few countervailing measures to stop her – not even three concurrent investigations into her conduct, repeated calls from the DA for her resignation and a damning exposé in Noseweek.
 
Without an increasingly powerful opposition party and increased activism from civil society, the South African government will have perpetually little incentive to intervene in order to promote real efficiency in the fisheries sector.”

Public 1 | Tina 0: Public Protector Report One

The first of three reports by the Public Protector finds against both the Minister, Tina Joemat-Pettersson, and her former Chief of Staff.

The full article is available on IOL. Here is an excerpt.

“The public protector has recommended that Agriculture Minister Tina Joemat-Pettersson’s former chief of staff must repay R420 000 for booking her boss into a pricey guest house. 

And the minister was slammed for displaying a “blank cheque attitude towards public funds” for not querying a booking at the Emperor’s Palace casino in Joburg. 

Thuli Madonsela has recommended in her report, seen by The Sunday Independent, that President Jacob Zuma “consider reprimanding” Joemat-Pettersson. She spent five nights at the 28A On Oxford guesthouse in Joburg, where the rate rose from R1 450 to R5 257 a night because of the World Cup. The department booked three rooms to accommodate her children and their nanny.”

DAFF Alleges SMIT Amandla Corruption Again

There can be little doubt that the rushed, gaff-filled and defamatory press statement issued by DAFF on 1 October and its subsequent dishonest backtrack on 2 October 2012 now exposes the Minister and DAFF to a serious defamation law suit by Smit Amandla.

The statement issued on 1 October confirmed that an “Ernst & Young forensic report” confirmed that Smit Amandla was essentially found to be guilty of corruption. The opening paragraph of the 1 October statement reveals that,

“The Ernest & Young forensic report confirmed substantial evidence of irregular contracts awarded to Smit Amandla Marine (SAM) or different guises thereof since 1995 until 31 March 2012.”

The statement then proceeds to allege gross violations of various South African tender and procurement rules and laws, which amount to corruption. 
Importantly, the statement refers to “the Ernst & Young forensic report”. 
However, at a press conference on 2 October 2012 to which the media was invited to witness the Acting DG of the Department, Mr Sipho Ntombela, present the content of the report to Minister Tina Joemat-Pettersson, the Department suddenly changed its tune. Mr Ntombela now refused to even mention the word “corruption” and instead referred to the “preliminary report” just “highlighting ‘something’ irregular that had happened”. And the “Ernst & Young forensic report” suddenly became a “preliminary report” that could not be made public! So why invite the media to the handing over of nothing? And who hands over a “preliminary report” that just highlights “something irregular”. And now its just “something”?

And why not make this “Ernst & Young forensic report” (preliminary or otherwise) available if it shows such blatant collusion and tender fraud? It cannot be confidential as the department quotes extensively from it in its 1 October 2012 statement. 

The conduct demonstrated by DAFF officials and its Minister in this matter is indicative of a desperate and urgent personal vendetta against Smit Amandla. But what would motivate such appalling conduct on the part of a Minister and certain of her staff? Why has she involved herself so deeply in the R800 million Sekunjalo tender debacle, leading defamatory and damaging accusations against Smit Amandla and defending Sekunjalo at every opportunity and even declaring them innocent of any wrongdoing before any investigation into the tender debacle had begun (remember her press statement of 21 March)?
We trust that the Public Protector’s investigations and report into this matter will reveal the answers.