Thank you for inviting us to make these written submissions and for agreeing to table these submissions formally as part of the hearings.

We act for three associations, namely the South African Deep Sea Trawling Industry Association ("SADSTIA"), the Port of Cape Town Fishing Industry Association ("POCTFIA") and the South East Coast Industrial Fishing Association ("SECIFA") ("the associations" or "our clients").

All the associations represent various interests in the fishing industry. The members of POCTFIA are also members of SADSTIA. SADSTIA's members are the largest and most significant players in the South African deep sea fishing industry. We attach hereto, marked "Annexures A", "B" and "C", a detailed breakdown of the members of the associations.

Our clients have vested interests in ports throughout South Africa and have invested in excess of R260 million in upgrading and maintaining property leased by them in ports. Many of the members have long-term leases which, in themselves, have significant financial value. In the Port of Cape Town, the majority of the leases are near the beginning of their 25 to 30 year- long periods and were entered into post the first democratic election in South Africa.

Our clients support the overriding objective behind the National Ports Authority Bill ("the NPA bill" or "the Bill") i.e. that safety, efficiency and performance in the management and operation of ports be promoted so as to develop an efficient South African ports industry that is capable of competing in international markets. The intention in making these comments on the NPA Bill is to assist with the achieving of these objectives. Due to the limited time available, we do not propose to deal with the Bill in its entirety but focus below on our members' submissions with regard to the provisions dealing with leases (section 67) and with licences (sections 56 - 66). Our clients have perused the submissions made by the National Port Users Forum and endorse its submissions in their entirety.

We set out below: -

1. the interests of members of the Deep Sea Fishing Industry as lessees in ports;

2. the tripartite agreement in respect of port leases by fishing companies;

3. our submissions on leases (Section 67) and

4. our submissions on licences (Sections 56 to 66).

SADSTIA has been in existence for 30 years. Its members and associates lease property in all but two ports in South Africa. They lease in excess of 85% of all properties occupied by the fishing industry in ports and its members generate over half of the entire output of the South African fishing industry.

The deep sea fishing industry should be distinguished from other lessees of port land for a number of reasons:

1. The deep sea fishing business is, by virtue of its nature, site bound. Consequently, the commercial survival of fishing enterprises necessarily entails the leasing of substantial fixed property within Port confines;

2. The industry is very capital intensive and its key players make an important contribution to the South African economy as a whole. As is set out in more detail below, fishing industry lessees have made extensive capital investments in the improvement of port buildings and land.

3. The industry is also very labour intensive. SADSTIA employs some 9000 people. Employment in the trawling industry is characterised by permanent full-time employment, a fixed wage plus commission and the negotiation of terms and conditions of employment with recognized trade unions.

4. The industry has re-structured and transformed itself extensively so as to re-dress previous racial inequalities. Please see "Annexure D" for examples of the contributions of certain of SADSTIA's members to the development and transformation of the fishing industry.

The tripartite agreement

The Port of Cape Town incorporates a working harbour within a very successful shopping, commercial and residential land complex. In order to achieve the successful transformation of the Port of Cape Town, certain lessees agreed to the termination of long term leases they held within the waterfront area and relocated their businesses to alternate sites within the port.

The majority of the Fishing Industry lessees either converted old harbour buildings at their own cost or built their own premises from which to operate. This development of port property was therefore at a very considerable cost to the fishing industry. For example, prior to the development of the V&A Waterfront, I&J conducted extensive repairs to the once derelict South Arm Building at the cost of millions of rands. When the V&A Waterfront was developed, I&J had to establish cold storage facilities for the bulk of their catch in Paarden Eiland. Viking and Lusitania relocated to the balance of the derelict South Arm building and also expended considerable monies in rendering those building suitable for fishing industry accommodation. All three of these lessees thereafter undertook major capital improvements to their premises.

As POCTFIA members had invested heavily in the improvement and development of the Port of Cape Town, it was felt that they should be granted the security of long term lease commitments. This lead to POCTFIA, Transnet Ltd and the V&A Waterfront entering into a tripartite agreement ("the agreement") governing the period of tenure, allocation of space and conditions of use applicable to POCTFIA members in the port of Cape Town.

The agreement specifically recorded that fishing companies directly involved in the industry should enjoy security of tenure in regard to properties currently leased. It recorded further that lessees may, at their own option, prior to the termination of their existing lease agreements, enter into new lease agreements for a period of 25 years with the option to renew for a further period of 10 years. It was a further principle of that agreement that, subject to the Port Captain's overriding authority with regard to berthing, certain quays and associated landward sites would be made available to the fishing industry on a long-term basis.

The tripartite agreement therefore justified both the fishing industry's previous investments in the port of Cape Town as well as their ongoing and future investment in their businesses and in the improvement of their leased premises. The spirit and intention behind that agreement formed the basis for further lease agreements entered into with members of SADSTIA in respect of the lease of property in other ports in South Africa. The proposed amendments in section 67 of the NPA bill are in direct contradiction to the spirit and letter of the agreement. Insofar as the provisions in section 67 are aimed at redressing inequalities arising from leases concluded in the apartheid era, both in terms of the racial composition of lessees and low, non market related rentals, they overlook this significant agreement reached in 1991 and individual leases subsequently concluded in the period after April 1994.

Section 67 of the Bill deals with restructuring and reform of ports. The section, up until very recently, only dealt with restructuring and reform of the Maydon Wharf Area in Durban, but it has now been broadened to apply to all ports in South Africa.

In our view, the measures to vary or terminate existing long-term leases proposed in the Bill are drastic measures which are not desirable and are almost certainly unconstitutional. We set out below the impugned measures, the relevant constitutional rights, our motivation as to why the provisions are unconstitutional, as well as further concerns with the provisions. By way of conclusion, we summarise our clients' proposed amendments to the Bill.

The impugned measures

The Bill provides a framework for intervention in existing leases in ports in three circumstances as follows:

a) where it is necessary to change the use to which immovable property may be put in order to improve the safety, efficiency and effectiveness of the operations of the port; (section 67sic(1)(a))

b) to increase the value of leases to be market related; (section 67sic(1)(b)) and

c) to enhance economic participation of historically disadvantaged persons ("HDPs") in economic activities of ports (section 67sic(1)(c)).

Where the National Port Authority Ltd ("the Authority") deems it necessary to alter the use of immovable property, this would be done by way of a directive to a lessee with the lessee being given reasonable notice of the proposed change in use, reasons for the proposed change in use and an opportunity to make representations on the proposed change in use, i.e. certain procedural administrative justice requirements need to be met by the Authority.

In respect of circumstances (b) and (c) above, i.e. to improve market conditions or to increase participation of HDPs, the lessee is afforded an opportunity to re-negotiate the terms of the lease, failing which the Authority would be entitled to unilaterally declare the relevant lease to be invalid.

The Bill further provides that "If the application of this section results in an expropriation of property, section 25 of the Constitution applies."

Constitutional Rights

Section 25 of the Constitution of the Republic of South Africa, Act 108 of 1996 (the Constitution") provides as follows:

"(1) No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property.

(2) Property may be expropriated only in terms of law of general application –

(a) for a public purpose or in the public interest; and

(b) subject to compensation, the amount of which and the time and manner of payment of which have either been agreed to by those affected or decided or approved by a court."

It is generally accepted by commentators, that, in line with foreign case law, the concept of "property" should be interpreted to include not only immovable and moveable tangible property, but also intangible property, mostly in the form of rights. The latter category is not limited to immaterial intellectual property but also extends to commercial rights based on contract. The concept of property would include the rights of a lessee under a lease agreement pertaining to immovable property and our clients' property is accordingly constitutionally protected property.

The provisions of the Bill outlined above are unconstitutional as they allow for arbitrary deprivation of property in conflict with section 25(1) of the Constitution, as outlined in the legal opinion by Adv. Stewart, included in the NPUF submissions to the Portfolio Committee:

"Failing a re-negotiation of a lease, it being entirely within the power of the Authority to ensure that there is no agreement, the relevant lease will be invalid. No requirements are laid out for the identification of a particular lease which must be re-negotiated and the Authority is placed in a position to cause any particular lease to become invalid by being able to refuse to agree the terms of a new lease. This is arbitrary."

On this basis alone, sections 67(1), (a), (b) and (c) should be removed in their entirety from the Bill.

The proposed clauses may also result in an expropriation of property in the event that the Authority terminates a lease as the lessee's rights in the property would be permanently taken away by the Authority. In respect of an increase in market value and promotion of HDPs, the provisions are also in conflict with section 25(2) of the Constitution as the expropriation would not meet the requirement that the expropriation must be for a public purpose or in the public interest.

The provisions of sections 67 insofar as they relate to our clients' leases further infringe our clients' rights in terms of section 22 of the Constitution to freedom of trade, occupation and profession.

The infringements of the rights to property and freedom of trade do not meet the requirements of the limitation clause of the Constitution (section 36) as they are not reasonable and justifiable in an open and democratic society based on human, dignity, equality and freedom, taking into account all relevant factors, including the nature of the right, the importance of the purpose of the limitation, the nature and extent of the limitation, the relation between the limitation and its purpose; and less restrictive means to achieve the purpose.

We elaborate below on these aspects and detail our further concerns with these provisions. We deal in turn with each circumstance which empowers the Authority to intervene in a lease.

Use of property

Section 67(1)(a) provides that "[If in any area in a port] it is necessary to change the use to which immovable property may be put in order to improve the safety, efficiency and effectiveness of the port, the Authority may in writing address to the lessee and every lawful occupier of such property, direct that the use be altered to a new use. In terms of section 67(2), before issuing a directive under sub-section 1(a), the Authority must in writing give the lessee and every lawful occupier of the property concerned –

(a) reasonable notice of the proposed change in use;

(b) full reasons for the proposed change in use; and

(c) a reasonable opportunity to make representations on the proposed change in use."

No reference is made in this section to the effect of the alteration of the use of the property on an existing lease. The subject matter of a contract of lease is not the leased property itself but the use and enjoyment thereof. The existing lease agreements, accordingly, include provisions in respect of the use of the property.

Our members use the properties which they lease in ports for their commercial fishing activities. The use of properties leased by our clients is typically described in the leases as "purposes directly connected to the fishing industry, i.e. catching, processing, cold storage and marketing of fish and fish products". Such usage is an integral part of the activities of the fishing industry. In Cape Town these "use rights" were extensively negotiated with the relevant authority and or role players. It should not be open to the Authority to unilaterally vary the use. The granting of procedural rights of administrative justice is not appropriate where the state has entered into a contract and does not save the imposition of a varied use from being unilateral in the event that it is imposed. The implications of varying a use could have tremendous financial implications for both our clients and the national economy, to which they make a substantial contribution.

In the event that the use of a property leased by a member is altered to a use other than those related to fishing activities, our clients would have to cease participation in the fishing industry. Almost all these activities cannot be conducted from an area outside of a port. By definition then, the abrogation of our clients' rights in terms of their long term leases is unreasonable, since no compensation awarded can properly compensate them for the permanent loss of their means to make a living, which is protected in section 22 of the Constitution.

Nevertheless, if these provisions are retained, we propose that an alteration of use of property be treated in the same manner as the other two circumstances in which a lease may be varied or terminated.

Clause 67(1)(b) provides that "if the terms of a long lease which existed immediately before the section took effect are so unrelated to market conditions as to result in the lessee being enriched at the expense of the authority to an unjustifiable extent, the authority may in writing address to the lessee directly that the lease be re-negotiated in order to bring the terms thereof into line with market conditions."

Our members have entered into written agreements of lease which should be honoured. It should not be open to any party, including the Authority, to simply terminate an agreement because the commercial terms thereof are not profitable enough. In any event, the bulk of the agreements, certainly in Cape Town, provide for market related rentals and for the review of such rentals at regular intervals during the course of the leases.

The use of the law of unjustified enrichment in this clause is not workable. To meet the requirements of unjustified enrichment, the Authority would have to prove that a lessee obtained money (the "saving" on not paying market related rental) for no justifiable cause, for example where money has been paid to the wrong party by mistake. In a circumstance where the State has entered into a lease, any financial benefit to the lessee would not have been for no justifiable cause. The cause of the benefit arises from the contract of lease.

Furthermore, this clause would not meet the constitutional requirement that an expropriation be for a public purpose or in the public interest. In circumstances where the State has negotiated itself a deal and subsequently concludes that it could then or should now do better, it cannot claim that an expropriation is for a public purpose or public interest where it clearly wishes simply to obtain a higher rental for the property. The reason must be for a purpose other than simple increased financial benefit to the State.

This clause also does not meet the constitutional requirement that government action be proportionate (part of the limitation enquiry under section 36 of the Constitution as set out above). The purpose is to achieve increased market value for the State, but this measure does not achieve this purpose. In the event that a lease is terminated in these circumstances, it would almost certainly be an expropriation of property and accordingly, the State would have to pay compensation to the lessee. Any increased rentals received under a fresh agreement of lease with a third party, at market related rentals, would effectively be off-set against the costs of effecting payment of compensation and the net result would be no increased financial benefit to the State.

Clause 67(1(c) provides that "if persons from historically disadvantaged groups are excluded from taking part in the economic activities of the port by virtue of long-term leases which existed immediately before the section took effect, the authority may in writing address to the lessee direct that any such lease be re-negotiated in order to ensure equitable access to the economic activities in the area in question."

This clause does not meet the requirement that an expropriation be for a public purpose or in the public interest. Property may not be expropriated to promote private interests and the purpose of the expropriation must be to the benefit of the public.

In the event that a lease is not re-negotiated and the lease is terminated, the property would presumably be leased to HDP third parties. Accordingly, the expropriation would be for the benefit of such private parties and not for a public purpose or a public interest. It is not in the public interest for the State to have to incur the cost of market related compensation to an existing lessee in order to advance the private interests of another lessee. There would also follow issues such as a perceived lack of security for investments and possibly loss of established jobs as businesses begin to seek less threatened methods of conducting their businesses, which are not in the public interest.

Expropriation of land for purposes of land reform to provide equitable access to those who were deprived by apartheid policies of access they had previously enjoyed, is entirely distinguishable from the expropriations envisaged by this clause. In Cape Town port almost all the leases were concluded after the first democratic elections.

Naturally, all our members support the promotion of black economic empowerment and transformation, but do not believe that re-negotiation or termination of their leases is the most effective manner of achieving transformation. As participants in the fishing industry, all our members are required to meet transformation objectives in order to be allocated fishing rights from the State. These transformation criteria and objectives are tailored to the fishing industry and take into account a balance between stability and transformation in the capital intensive hake deep sea industry.

It would be unfair and inequitable for our members to meet the transformation criteria as set down for the allocation of fishing rights and to then be deprived of their commercial lease rights which are part and parcel of conducting their fishing activities, for purposes of promotion of HDPs. Companies will usually be transformed more meaningfully by way of changes in shareholding (where practicable) and employment equity initiatives, rather than by the re-negotiation of leases. In this respect, the proposed section, while well-intentioned seems to be misguided.

The provisions of this clause go well beyond the measures contained in government's adopted Black Economic Empowerment Strategy. The Strategy does not contemplate taking away any existing rights from participants in the economy. Rather, it promotes the balanced scorecard approach which will be applied to participants in the economy when entering into new contracts with the State or applying for new licences, fishing rights, etc.

Granting the Authority the power to terminate a lease on the basis of "exclusion from economic activities of the port" by HDPs is impermissibly broad and possibly void for vagueness. There is no clear definition of what is intended. This clause is so broad that it entitles the Authority to terminate almost any lease. Such vagueness will potentially lead to inequities and possible litigation. A termination of a lease under this clause would accordingly unjustifiably infringe the property rights, and right to freedom of trade, of existing lessees in the ports.

General

It should also be noted that certain leases have been registered against title deeds of the property concerned (the Cross-berth cold stores in the port of Cape Town, for example) and mortgaged to financial institutions such as ABSA bank, as security for loans made to the companies concerned. Anything that affected such rights would need to be subject to notice to bond holders and appropriate protection of their interests. No such notice is provided for in the Bill and their interests appear to have been overlooked.

The procedure set out in section 67(3) read with section 67(1)(b) and (c) is in conflict with the basic tenets of administrative law, in that the Authority proposes to act as both a party in the re-negotiation of the leases and, in practical terms, is the arbiter as to whether an agreement has been reached. It is in a position to unilaterally determine whether it will or will not terminate a lessee's lease.

Section 57 introduces a system of licencing in respect of persons providing a port service or operating a port repair facility. Many of the activities conducted by our clients in ports on their own behalf, i.e. as in-house services, fall within the definition of port service, for example cargo handling, storage of cargo etc. A number of new HDP quota holders do not have big enough quotas to justify the investment in shore based facilities. They are supported by industry members with such facilities who render such services to other members of the fishing industry.

It is not clear, however, from the provisions of section 57 whether it is intended that persons such as our clients require licences, or whether it is only persons providing such services on behalf of the Authority or to outside customers (as a paying service). Section 57(4) places the discretion on the Authority to invite applications for licences to operate port services, which supports the latter interpretation of the clause. This aspect should be clarified.

These activities are critical to our clients' businesses. They should be able to continue with these activities without requiring a license which can be refused at the discretion of the Authority.

In the event that it is intended that persons holding leases in ports who conduct these services as part of their own businesses (or on behalf of other fishing companies) require a licence, our clients request that, as provided for in respect of licences for off-shore cargo facilities (section 66), any current leases in respect of port facilities be deemed to be a license issued under the Act and that such agreement remains valid for the duration of the term thereof, whereafter application for a license in terms of the Act may be made.

Accordingly, our clients request that the sections governing leases in section 67 be removed from the Bill in their entirety. Alternatively, the long-term leases held by members of the fishing industry should be exempted from the provisions of section 67. The purposes behind the proposed provisions can be met in a satisfactory way by enforcement of the current leases, and/or re-negotiation of the respective leases as and when they terminate. Enhancement of economic opportunities for HDPs is best addressed through the transformation initiatives of the fishing industry.

In respect of licences we request that it be clarified whether in-house services which fall within the definition of port services, and the performance of such services on behalf of other fishing companies, require a license. We suggest that those activities should expressly be excluded from the application of the license provisions. Alternatively, our clients request that current agreements of lease be deemed to be licences issued under the Act for the duration of such leases.

1. Atlantic Trawling (Pty) Ltd

2. Blue Continent Products

3. Eyethu Fishing Company (Pty) Ltd

4. Fempar Fishing Company (Pty) Ltd

5. Hangberg Fishing Company (Pty) Ltd

6. Irvin and Johnson Ltd

7. Foodcorp (Pty) Ltd

8. New South Africa Fishing Enterprises (Pty) Ltd

9. Radaco Sea Products (Pty) Ltd

10. Sea Harvest Corporation Ltd

11. Seavuna (Pty) Ltd

12. Sistro Fishing Company (Pty) Ltd

13. Viking Fishing Company (Pty) Ltd

14. Premier Fishing (Pty) Ltd

15. Ntshonalanga Fishing (Pty) Ltd

16. Combined Fishing Enterprises

The Port of Cape Town Fishing Industry Association

1. Irvin and Johnson Ltd

2. Viking Fishing Company (Pty) Ltd

3. Lusitania Fishing Association

4. Marpro Trawling Company (Pty) Ltd

5. Atlantic Fishing Enterprises (Pty) Ltd

6. Radaco Fishing Products

SOUTH EAST COAST INDUSTRIAL FISHING ASSOCIATION

Chetty's Fisheries CC

Capenis Investments (Pty) Ltd

M Cronje Visserye

P Cronje Visserye

G&T Fishing Enterprises (Pty) Ltd

Hermanus Seafoods (Pty) Ltd

Irvin & Johnson (Pty) Ltd

Sea Vuna (Pty) Ltd

Viking Inshore Fishing (Pty) Ltd

BMC Visserye cc

Esperado Fishing CC

Vecto Trade 126 (Pty) Ltd

Ezabantu Fishing

Irvin and Johnson ("I &J")

I & J has been in the industry for approximately 90 years. The scale of its operations and thus its importance to suppliers, customers and employees is enormous. It has investments in fishing vessels of R470 million and onshore based processing operations of a further R535 million.

I & J is owned by Anglovaal Industries Limited ("Anglovaal"), a company listed on the Johannesburg Stock exchange. 78% of Anglovaal is currently owned by financial institutions. The remaining 20% of I&J is owned by 3 black empowerment companies, with Anglovaal having committed itself to ensuring that at least a further 10% is acquired by historically disadvantaged persons ("HDP's").

Five of I&J's thirteen directors are black (including the chairman), while 86% of its employees are HDPs. 45.5% of its middle and senior management are from "designated groupings" as defined under the Employment Equity Act. I&J employs some 1170 employees in its trawling operations and a further 1490 persons in its two processing plants in Cape Town. The total monthly salary bill for the trawling operations is in the region of R7,9 million, while the total salaries and wages of its processing plants amount to R 6,25 million per month. I&J's employees are permanent employees who work the year round.

I&J holds leases in the ports of Cape Town, Mossel Bay, Port Elizabeth and Durban. All of the leases are being utilized to their fullest extent and generate employment and contribute to the economy of the port and city in question. The leases are all "full maintenance" leases. Therefore, in addition to paying rentals I&J is responsible for the maintenance of the premises and also attends to all renovations or refurbishment at its own cost. In many instances, I&J has also built the premises which it currently leases from Portnet.

I&J further assists HDPs who do not have their own facilities by allowing them to use their facilities in the various ports.

Sea Harvest Corporation Limited

Sea Harvest has been in the industry since 1964. Like I&J it successfully competes in the extremely competitive global white fish market and is a major supplier to local chain stores and the food service industry.

73,2% of Sea Harvest's shares are owned by Tiger Brands Limited which is listed on the Johannesburg stock exchange. 5,3% of its shareholding is held by its employees and the remaining 21,5% by Brimequity, a joint venture between Brimstone Investment Corporation Limited (a company entirely controlled by HDPs) and Coronation Holdings Limited.

96,3% of Sea Harvests employees are from "designated groups" as defined by the Employment Equity Act. Some 38% of its management comprise persons from the "designated groups" and three of its directors (including its chairman, Mr C Nissen) are HDPs. Sea Harvest is the largest single employer in the impoverished West Coast and can be described as the lifeblood of Saldanha Bay. It is also the largest employer in Hout Bay and employs approximately 2500 employees in all.

SeaVuna Fishing Company (Pty) Ltd

SeaVuna currently holds a lease agreement for the lease of property in Mossel Bay port. That lease was originally between Sea Harvest and Portnet, but was then ceded to Mariette Fishing Company (Pty) Ltd, which changed its name to SeaVuna Fishing Company (Pty) Ltd. The lease commenced on 1 May 1989 and is to run until 30 April 2019.

SeaVuna's two main shareholders (50% each) are Sea Harvest Corporation Limited and Vuna Fishing Company (Pty) Ltd; an Eastern Cape based black empowerment company. SeaVuna's workforce of 227 employees consists overwhelmingly (95%) of people from designated groups, as defined in the Employment Equity Act, with 75% of management consisting of people also from designated groups.

Viking Fishing Company (Deepsea) (Pty) Ltd.

Viking holds leases in the ports of Cape Town, Mossel Bay and (through a sub-lease with Kwazulu-Coldstore (Pty) Ltd) Durban. Those leases endure until 31 January 2026, 31 May 2016 and 31 May 2013, respectively. All of the leases were entered into post – April 1994, the earliest commencement date being 1 June 1996 (Mossel Bay).

Viking is an affirmative action and equal opportunity employer. It employs some 417 employees from the Western Cape and Natal regions (of which 89% is from previously disadvantaged communities as is 65% of the management). Selecta Sea Products, an associate company of Viking, uses Viking's Cape Town port facilities for it vessel operations. Selecta Sea Products employs some 122 employees (92% from previously disadvantaged communities). Viking Inshore, another associate company, is situated in Mossel Bay and employs some 196 employees, of which 93% are from previously disadvantaged communities.

Since 1996 ownership in Viking has been diluted by 35% throughout all its companies with approximately 27,5% of its equity being sold into various empowerment structures, the largest being a Staff Share Trust owning 15% (which value attributable to the staff has been estimated at R39 million)

The Viking group is at the forefront of providing market related employee benefits in the fishing industry and was actively involved in the negotiations for the establishment of a South African Fishing Industry Bargaining Council. The group has also made its infrastructure, capabilities and experience available to all new entrants in the fishing industry via a number of joint ventures.