Is the tide turning for Namibia’s fishing sector?
Namibia’s ‘Fishrot’ scandal exposed evidence of huge corruption in the fishing sector. But politicisation of the rights and quotas allocation process runs deep
In the world of industrial fishing and economies of scale, fishing rights and quotas are everything. Yet Seawork Fish Processors, Namibia’s most successful seafood-processing company, does not have a single catch quota. And it’s not interested in lobbying for one.
"We just stay out of the politics completely," shrugs Seawork CEO Peter Pahl, sitting in his temporary office at the former Cadilu plant in Walvis Bay. It’s up the road from the company’s main plant on "Factory Road", where a R50m state-of-the-art upgrade is being finalised.
But keeping out of politics has meant the company is forced to import fish for its four processing plants. This, while most Namibian fish is apparently illicitly sold to mostly Spanish-owned factories by financially stressed new operators.
"I own four factories, but only one is running," says Pahl. "It just kills me that Namibian fish is being processed elsewhere … The fact is that the Namibian fishing industry is still mostly in foreign hands."
The problem, he says, is that politics has for the past decade trumped policy on the watch of fisheries minister Bernard Esau, who resigned in disgrace late last year.
Namibia’s fishing industry — worth R8bn a year at its 2005-2010 peak — has always been politicised. It’s been a key component of ruling party Swapo’s stab at empowering previously disadvantaged Namibians through the "Namibianisation" of marine resources — local ownership and participation.
While rights are awarded for five, seven, 15 and 20 years, quotas — the "total allowable catch" that is divided between the rights holders — are awarded on an annual basis by the fisheries minister.
Since 1994, when the newly independent government began allocating quotas, the sector has made instant millionaires of many politically connected individuals. But inexperience, unsustainable debt, poor management of the resource and rising operating costs have led to one newcomer after the other being forced to consolidate their quotas in single processing plants, or sell out to foreign interests. (The actual numbers are hard to come by, as Esau stopped making sector data publicly available in 2012.)
Now, after 25 years of Namibianisation politics, the industry is in its worst slump since the 1970s, when pilchard stocks collapsed as a result of overexploitation and the use of smaller nets, which trapped breeding stock. Though the industry still employs about 16,000 people directly, most are now hired on a seasonal and part-time basis.
And as Esau — along with former justice minister Sacky Shanghala, former Investec Namibia CEO James Hatuikulipi and six others — sits in jail awaiting trial on charges of corruption, fraud and money laundering, more than 5,000 applications for fishing rights have been languishing on his former desk since August 2018.
The fact is that the Namibian fishing industry is still mostly in foreign handsPeter Pahl
At last count — in 2012, when Esau stopped releasing data — there were 122 rights holders for 11 classes of rights, including for hake, crab, guano and seaweed. These have now expired, and have to be reallocated (a process that is expected to run until March).
But to divide the quotas equitably among the mostly new applicants would render the sector economically unfeasible, says Pahl.
"I’ve signed letters of support for over 3,000 of those new applicants," says Pahl. Seawork, he says, drew up a pro forma letter that it gave to everyone who asked for it because "I didn’t want to have to choose between new applicants or take sides in this Fishrot mess".
"Fishrot" is the unfolding scandal involving an elaborate bribery and kickback scheme allegedly devised by Esau, Shanghala and Hatuikulipi to sell horse mackerel quotas — that had been allocated to state-owned fishing company Fishcor — to Icelandic company Samherji. The alleged scam seemingly drew in the Angolan fisheries ministry too: a joint venture between the Angolans and Fishcor was allocated Fishcor’s quota — which was then allegedly sold off to Samherji.
Investigators say the accused allegedly used front companies in Namibia, Angola and SA to siphon about R103m in kickbacks to companies in the offshore tax havens of Dubai, Cyprus and Mauritius.
Esau apparently even went so far as to hand Samherji the 10,000t horse mackerel quota allocated to Bidvest-owned Namsov — allegedly for a $140,000 bribe. Esau and Shanghala (Namibia’s attorney-general at the time), had amended parts of the 1992 Fisheries Act to strip out checks and balances, giving the fisheries minister final discretion over all quota allocations. (Namsov has successfully sued for the return of its allotted quota, and the amendment is being reversed.)
The secret offshore empire came crashing down in November, when Icelandic state TV broadcast an exposé of the shenanigans, including a sting apparently showing Esau as being willing to take illegal payments from a purported Chinese client in return for guaranteeing the transfer of quotas already allocated to Fishcor.
Coming, as it did, in the run-up to the national and presidential elections on November 27, the exposé elicited a public outcry that forced President Hage Geingob’s hand. But Esau and Shanghala’s forced resignations were not enough to placate Namibians.
Following a public march on the offices of the Anti-Corruption Commission, Esau, Shanghala, Hatuikulipi and three others — including Esau’s son-in-law, Tamson Hatuikulipi (the brother of James) — were arrested, their bank accounts were frozen, and their assets impounded by the Namibian Financial Intelligence Centre.
All denied guilt in an urgent application for bail in December — an application that the judge ruled was not urgent, and would be heard on February 20. It hasn’t helped their case that three more suspects have since been arrested for attempting to remove evidence (Shanghala allegedly sent a friend to access files and hard drives from a property under police surveillance), or gain access to the seized bank accounts by allegedly trying to bribe an Anti-Corruption Commission investigator. Esau and Hatuikulipi have subsequently also challenged the warrants for their arrest, but that application, set to be heard on Thursday February 6, also seems to have little chance of success.
What they seem to have done was "commit plain old fraud and theft, and for that you do not even need a warrant to arrest someone," says a local criminal lawyer not involved in the case.
What is of far greater concern, says Ronnie Coppin, a former MD of Fishcor subsidiary Seaflower and past chair of the Namibian Hake Association, is the state of limbo in which Esau has left the fisheries sector.
On Esau’s watch, the hake industry shrank from 38 companies in 2010 to just six. "The [only] guys who survived are those with very deep pockets," says Coppin. "And where is the noise from the worker union leaders on behalf of their [now unemployed] members?"
Coppin points out that all fishing rights effectively expired in August 2018. Though rights holders would, by law, have reapplied three months before expiry, Esau threw the application process wide open — eliciting more than 5,000 applications. As a result, existing rights were extended on a month-to-month basis with no grounding in law, creating great uncertainty among those who were not part of Esau’s inner circle.
Under Esau’s predecessor, Abraham Iyambo, quota allocations were clearly based on criteria such as the number of employees, investment in value-adding plant and equipment, and — above all — majority Namibian ownership. Yet under these same criteria, Esau allocated 80,000t of horse mackerel to Seaflower Pelagic Processing (SPP), a new plant — built at a reported cost of R850m — next to Pahl’s current offices on Factory Road.
But local ownership — required under BEE requirements — seems hard to establish.
SPP is a 60:40 joint venture between African Selection Trust Namibia (ASN) and Fishcor subsidiary Seaflower.
ASN is itself a subsidiary of the Angolan-based African Selection Trust (AST), which operates a fishmeal plant in Angola and is controlled by SA businessman AJ Louw and two Namibian lawyers. It operates as a discretionary trust, meaning beneficiaries are unknown.
AST’s SA subsidiary apparently plans to open a R300m fishmeal plant in Mossel Bay. But it has no quota of its own, relying instead on its local partners in Angola and Namibia for raw product, according to its environmental consultant, Melissa Mackay.
What it means:
Fallout from the Fishrot scandal has opened a small window for reform of Namibia’s fisheries sector
The Angolan operations ground to a halt after the Fishrot scandal broke and that country’s fisheries minister was fired in the fallout.
Questions have also been asked about transactions involving the new plant: The Namibian newspaper reported in 2018 that Fishcor vastly overpaid for the SPP plant — a run-down factory owned by José Luis Bastos, a well-connected Spanish businessman and rumoured friend of Namibia’s first president, Sam Nujoma. (Fishcor’s then CEO Mike Nghipunya — now suspended — denied at the time that the state-owned company had overpaid for the plant.)
The publication also questioned how much Fishcor was expected to pay for reconstruction.
The cost is rumoured to be double what such a plant should cost, says Pahl — all for a low-value product that is mostly frozen whole at sea and exported to central African markets.
In the meantime, former attorney-general Albert Kawana — who will act as fisheries minister until Geingob announces his new cabinet by March 21 — has turned over responsibility for allocating quotas to the University of Namibia.
If politics can be removed from the equation, Coppin believes this will present Namibia with the opportunity to reform Seaflower as a co-operative through which the smaller new rights holders could pool resources for catching, processing and marketing their quotas, and achieve the necessary economies of scale to become financially sustainable rather than being throttled by the onerous terms imposed on them by large processors.
As it stands, Namibia urgently needs to rethink its fishing industry if it is to compete in international markets and maximise revenue from its marine resources. But first, the political culture of patronage has to be rooted out.
"This presents a small, one-off opportunity for reform," says Coppin. "But I am worried that we’re going to miss the boat again."