JC FISHING (PTY) LTD

Dear ladies and gentlemen and honourable members of the Portfolio committee

My name is Timothy Jacobs and I address you as a director of JC Fishing (Pty) Ltd a Hout Bay based 100% black owned fishing company.

1 By way of introduction, JC Fishing (Pty) Ltd was a rights holder in the Small Pelagics Sardine and

West Coast Rock Lobster Offshore fisheries during the medium term rights period. During this period JC Fishing established itself as a sound performer within the fishing industry and set itself the goal of maximizing its investments in the industry to the extent that it invested all of its available resources in fishing vessels and infrastructure. This investment, at the expense of dividends to its shareholders, was made based on the premise that JC Fishing's responsible management and good performance during the medium term rights period would be rewarded by increased allocations in the long term rights period.

2 It was with some relief that JC Fishing welcomed the Minister's announcement that the long term

rights allocation procedure would be simpler and cheaper than previous procedures and that, based on the Minister's policies, smaller rights holders would be affirmed as would transformed entities. Based on these statements and the Minister's written policy objectives JC Fishing was extremely confident going into the long-term rights application process.

3 Unfortunately the results of the long-term rights allocation process do not appear to tie in with the

stated objectives of the Minister at all and this leads one to question whether the process has in fact achieved these objectives of the Minister or, more to the point, whether these objectives were in fact actual objectives in the first place.

4 The long term rights process has been riddled with controversy and it is a widely held opinion within

the fishing industry that if the scrapping of the whole process would not lead to even greater delays the entire re-allocation process should be done again. Just a few of the major problems encountered in the long term rights allocation process included:

4.1 A highly complex application form that was clearly weighted in favour of larger companies with greater resources;

4.2 An extremely costly application procedure involving the assistance of consultants {where the Minister had previously stated that owing to the simplicity of the application form there would be no need for consultants, attorneys, auditors. and access to computer software and equipment. This cost issue once again favoured larger companies with greater resources and immediately placed smaller and invariably black operators at an immediate disadvantage.

4.3 Unreasonable delays with the rights allocations supposed to have been completed by 31 December 2005 instead it went on after that. The appeals procedure has also been significantly delayed. This in effect means that certain applicants who were unsuccessful in their applications have not been able to fish for the majority of the season and once again this impacts extremely heavily on smaller operators, which in many cases translates to black operators. The roll over for the current West Coast Rock Lobster sector is also a nightmare for small operators and this could have major financial implications for us.

4.4 Multiple errors in the assessment process and problems with the statistical model utilized in the assessment of applications.

4.5 No credible verification procedure.

4.6 Procedural irregularities where the provisions of the Marine Living Resources Act, for example compliance with Section 81 (3) of the Act, were skilfully circumvented.

5 The faults and flaws in the long-term rights allocation process are far too numerous to mention here today. Save to say that JC Fishing is confident that an impartial and objective enquiry into the process will reveal what the majority of the fishing industry already know: that the rights allocation process was fraught with procedural irregularities and bias.

6 The issue that most concerns JC Fishing, however, are the issue of transformation. Was the constitutional imperative of the transformation of the South African fishing industry achieved by the Minister? The answer to this question is a resounding "no".

7 Transformation is of course measured in many ways and just one of the enactments that sets about trying to address the inequalities of our past is the Broad Based Black Economic Empowerment Act. In the first instance and in mitigation of our claim that the Minister paid lip service to the notion of transformation, the Minister ignored the application of this Act. The Minister effectively relied on the fact that as the codes of good practice had not yet been finalized he was not bound by the draft codes and therefore could assess transformation in any way he deemed fit. This departure from the widely accepted legislation is enshrined in the first instance in the Minister's General Policy. Despite a significant outcry from the fishing industry the Minister decided to ignore the pleas of the fishing industry and elected to assess transformation as he saw fit.

8 This in itself while maybe being procedurally questionable would have been excusable if the Minister actually achieved his so called objectives. As stated earlier the question of whether transformation has been achieved in the fishing industry is most easily assessed in the results of the long-term rights application process.

8.1 In the Small Pelagics (Sardine and Anchovy) sector, according to the Ministers own appeal results, black ownership of the T AC fell from 72.29% in the Medium term to just over 60% in the long term.

8.2 In the Hake Deep Sea Trawl sector black ownership of entities in the sector went from 61.44% in the Medium term to 47.24% in the long term. The Minister may argue that black control of the T AC has increased from 25% to 27% but when you consider that on after the initial allocations results in his appeal decisions he reduced the black control of the TAC to 27% from 43% the 2% increase does not seem to convey any conviction towards the "constitutional imperative".

8.3 In the South Coast Rock Lobster sector black control of the TAC stayed the same.

8.4 In the Horse Mackerel Sector it is impossible to tell as no two sets of the Ministers data correspond at all but we can assume that his best case scenario appears in his appeal results where he records an increase in black control of the TAC of some 1.5%. A comparison with the data presented in his initial application data suggests that black ownership has gone down from 45.28% to 39.8%.

9 This data appears to be contrary to the Minister's stated objectives as set out in his General Policy and Sector Policies for the fishing industry. How the Minister can claim a triumph or suggest that transformation as a constitutional imperative was regarded as such is not backed up by the above data.

10 The data speaks for itself and clearly evidences the fact that the Minister has paid lip service to transformation in the South African fishing industry. The results paint a clear picture and we suggest that the Minister has acted to protect certain interests, which was his objective all along. The mere fact that the issue of transformation was dealt with so blithely in his General Policy is clearly indicative of this. While the entire fishing industry was crying out for parameters or yardsticks so they could determine how they would be assessed the Minister's General Policy merely stated that once all the applications had been assessed, and only then, would the Minister decide how to weight particular point scoring categories and, in fact, decide which point scoring categories to score. The objective, clearly stated in the Minister's General Policy, was so that he could achieve the objectives he sought to achieve. If transformation was one of these objectives then why do the results not bear this out?

11 The Minister may tell you that in most of the sectors transformation counted 50% of the points available to be scored. Factually this may be correct, but a closer look at the breakdown of the points available for transformation reveal that actual black ownership of entities did not count very much more than the corresponding categories of investment and I or employment.

Once again investment and employment were categories that were heavily weighted in favour of larger established companies who had already received significant allocations which enabled them to not only invest in vessels and processing facilities but to also employ staff on these vessels and processing facilities.

The balance of the scoring of transformation covered issues such as corporate social investments, which looked only at tax-deductible donations, salaries and wages ratios, which once again emphasized employment which favoured larger companies and compliance with legislative enactments which were once again in the sphere of larger companies.

12 Even on the above scenario you may be mistaken for thinking that a transformed entity could still score very well. This is in fact true. Where the true failings of the process become clearly apparent however are in the contrived manner in which the Minister set about allocating quantum to rights holders. At the end of the day your point scoring is meaningless, what the industry is concerned with most is the allocation of quantum and effort. In almost all instances the quantum allocation mechanisms utilized by the Minister were submitted for consultation to the industry and the comments from the industry were either ignored or a quantum allocation mechanism that had not been put to the industry from comment was then utilized.

You would be forgiven for thinking that the allocation of quantum would be a simple matter of highest scoring applicants being awarded the lion's share of the quantum available. Sadly this is not the case. The Minister contrived to skilfully exclude transformed entities particularly smaller transformed entities by virtue of making the allocation of significant amount of quantum, which were made available through contrived allocation pools, available only to entities that scored well in both transformation and performance.

Performance was invariably made up of only two categories being investment and employment. As previously stated when compared to the bigger and established companies smaller entities many of whom are black owned could not possibly compete on the same level as the larger established companies who had bigger quotas historically which allowed them to create significant employment and invest in a significant number of assets. The net result was that while most black companies performed very well in the transformation side of things they were excluded from being allocated any meaningful amount of quantum due to their poor performance scores.

13 You may well argue that the same could be said for the larger entities who scored well in performance but weren't as transformed. Unfortunately while performance was made up of only two point scoring categories (Jobs and investment) transformation was made up of on average some 12 scoring categories which allowed entities with lesser black ownership additional categories to up their transformation scores. In addition to this the verification of transformation data was clearly not of any interest to the Minister with the result that a large number of the empowerment deals which impacted on the allocation of rights were questionable and in some cases, such as the highly publicized Oceana matter the data was simply wrong.

14 At the end of the day the legacy of the Minister's self-proclaimed successful long-term rights allocation process determines whether the process was in fact a success. Did the results previously mentioned suggest success? Did the results suggest that Minister believed that transformation was a constitutional imperative? Do the results reward the transformed? The resounding answer to all of these questions is no.

15 As the old English adage says "the proof is in the eating of the pudding". If this is in fact the case then as a 100% black owned participant in the South African fishing industry JC Fishing can say that we have tasted the fruits of the Minister's labour and have found them wanting.

16. The so called constitutional imperative of transformation has not been served by the Minister in the long term rights allocation process and it is submitted with respect that to attempt to claim that it has discredits the notion of transformation in South Africa and the sectors of the economy where transformation is really taking place.

Thank you for the opportunity of addressing you today. I will be available for any questions that any members of the Portfolio Committee may have.