Covid Q&A

Covid Q&A

The Covid-19 outbreak and the measures introduced to curb the spread of the disease have hit the global seafood market hard. Fishing Industry News talked to Felix Ratheb, chairman of the SA Deep-Sea Trawling Industry Association, about the impact of COVID-19 on the export-oriented hake trawl fishery.

This article was published in Fishing Industry News on 5 October 2020:

Q: Fishing Industry News Southern Africa: What would you say has been the overall impact of Covid-19 on the industry?

Felix Ratheb: We were very fortunate because the Department of Environment, Forestry & Fisheries (DEFF) very quickly identified the fishing industry as a core sector of the economy from a food security perspective and we were allowed to continue fishing, processing and selling. Without that, we would have been another statistic in the economy. Having said that, we have experienced serious supply chain disruptions and significantly lower demand in the food service sector globally. Balance sheets have been severely impacted. The final result is a weakened sector. Big companies and small companies – everybody felt it in the same way.

Q: FINSA: What exactly were the problems with the supply chain?

FR: Most of our products are exported and the main markets we export to, as a sector, are Italy, Spain, and to a certain extent Australia. Those three markets were severely hit with Covid. There were very high infection rates, very lengthy lockdowns and a virtual disappearance of the food service (“out of home”) sector. The prices and returns you get from the food service market are generally higher, probably 10 to 15% higher, than you get in the retail environment. And that market fell to almost zero, either because there were enforced lockdowns or because people were scared to go out. The retail market experienced the opposite effect, but not all companies could adapt their business models for the retail market. The result on the market side has been a dilution of margin, or a significant stock build up, and it hasn’t normalised yet.

Q: FINSA: The deep-sea sector employs more than 7 000 people. How were employees affected over this period?

FR: The multiplier effect in our sector is high. It is estimated to be four times the number of direct employees and therefore closer to 30 000 employees were affected.

The industry as a whole has engaged in a massive effort to try to ensure that its employees are safe. Very strict protocols were put in place to ensure safety. Most effort was directed at preventing Covid-19 from entering processing facilities or vessels, because the risk of the disease spreading is so high. We have quarantined crew in private facilities to make sure they are Covid-negative by the time they on-board vessels. We also focused on screening. We had to make sure that we had clinics on site and enough medical professionals to screen our employees. And we had to ensure social distancing in our facilities. Lastly, most companies identified that public transport was the highest risk of transmission and they organised private transport to bring people to work. In the eight weeks between mid-May and mid-July, the industry probably spent R50 million or more to try to protect their employees.

Q: FINSA: How were the fishing fleets and factories impacted?

FR: When South Africa started relaxing the lockdowns, moving from level 4 to 3, the biggest issue we had was that the infection rate in our facilities started to increase. Every person who tested positive, generally affected about five other people. For example, a Covid-positive employee might have been in contact with others on a processing line, or by interacting in a canteen or a change room. At one point more than 50% of fish processing employees were at home, either Covid-positive or self-isolating. Production halved. Then we had the cascading effect of having to pull in the fresh fish vessels because if you don’t have a productive factory, you can’t deliver fish to that factory. That was really, really difficult.

The drop in production was compounded by outbreaks further down the supply chain. For example, we couldn’t get containers out (of the country) because there were Covid-19 outbreaks in the Port of Cape Town. A lot of our third-party partners for logistics had the same problems with outbreaks with their staff. The other thing was that you couldn’t do refits and maintenance, as you couldn’t do dry docking.

Q: FINSA: What are the positives to come out of this period?

FR: Importantly the sector did not lose any jobs because of Covid-19. That’s a huge positive for the economy. It shows the resilience of the hake deep-sea trawl sector. We got through the past six months. All the companies were responsible. We took it on the nose, it was a cost that we all absorbed.

Another very important positive is that Government was supportive and proactive. The DEFF was very quick to give us exemptions for a lengthy period of time and effectively show trust in the sector. The onus was put on us as operators to do the right things to ensure the safety of our staff. Those exemptions allowed us to operate. The other thing that was important was that the Minister was very involved in leading the industry in terms of getting the right protocols in place to ensure the safety of our employees. It was the first time the industry, through FishSA, worked so closely with the Minister and we’re very thankful to her for holding the industry’s hand through a most difficult period.

Q: FINSA: What is the situation like now?

FR: The situation is still very fluid. Most of our people have recovered and have come back to work, so that’s a huge positive, but unfortunately we’re seeing (infection) spikes in the markets where we operate, just like we did in January. From a market perspective, it’s still tough. From a supply side, it has normalised, but our concern is that we have a second wave in South Africa.

Q: FINSA: Since taking up the chairmanship of SADSTIA you have been quite vocal on the subject of FRAP. How does the Covid-19 crisis impact on FRAP?

FR: The truth is that Covid-19 has weakened the industry. Right across the board, it drove up our costs, seriously impacted our productivity and the demand from our major markets. As a sector we are going into FRAP 2021 in a weakened position. FRAP 2015/16 damaged the competitiveness of the hake inshore trawl fishery and the midwater trawl fishery. Our research has shown that definitively. We can’t afford another mistake in 2021.

Q: FINSA: Some people in the fishing industry thought the wording of your opinion piece (published in Business Day on 27 August 2020) was very prescriptive, i.e. it was telling the government what to do.

FR: To be honest, nothing I have said in recent months is new. SADSTIA has cautioned against the fragmentation of the capital-intensive industrial fisheries for at least the past five years. Taking tonnage away from established operators who are substantially transformed, to allocate it to many small new entrants with no experience in fishing, will reduce the socio-economic contribution of the hake deep-sea trawl fishery, for little or no gain in transformation. This was one of the key findings of the Genesis Analytics study. Our analysis of the impact of FRAP 2015/16 on the hake inshore trawl and the midwater trawl fisheries only substantiates this finding.

Q: FINSA: You have emphasised the importance of a socio-economic impact assessment study (SEIAS). What will SADSTIA’s position be if no SEIAS is conducted for the hake deep-sea trawl fishery prior to the start of FRAP 2021?

FR: Our understanding is that any draft policies, bills or regulations that Cabinet is asked to approve, must include a SEIAS that is signed off by the SEIAS unit of the Department of Planning, Monitoring and Evaluation. Therefore, it is step that must be taken prior to the finalisation of the FRAP 2021 policies.

Q: FINSA: If a SEIAS is completed for the hake deep-sea trawl fishery, will SADSTIA interrogate the content, or will SADSTIA accept the recommendations?

FR: Through FishSA we have repeatedly stressed the importance of a comprehensive SEIAS that captures the unique socio-economic characteristics of every sector that will participate in FRAP 2021. It is not only important for our fishery. It is vitally important for all 12 fisheries that those who are responsible for allocating rights are well informed. In this way, we can avoid costly administrative mistakes like the allocation of rights to the hake inshore trawl fishery in FRAP 2015/16. SADSTIA is totally supportive of Government’s objectives of preserving and creating jobs, boosting investment and inclusive growth. We are also supportive of the National Development Plan. All we are asking is that allocations policy is aligned to these objectives. The only way this can be achieved is by having a deep understanding of the socio-economic realities of a capital-intensive fishery such as ours, in which maximum beneficiation occurs in South Africa, 70% of the catch is exported and competition is against other fishing nations such as New Zealand, Iceland, Norway and the United States, etc.

Q: FINSA: Has SADSTIA done its own value chain assessment of the hake deep-sea trawl fishery?

FR: The Genesis Analytics study we commissioned in 2018 was an in-depth study conducted by a highly respected and independent economics consultancy. Genesis Analytics is in the process of updating that study. The facts and figures pertaining to the hake deep-sea trawl fishery are accurate and up-to-date.

Q: FINSA: Does SADSTIA believe it is possible to reverse the number of new entrants in the hake inshore trawl sector?

FR: As you know, rights in the hake inshore trawl fishery remain disputed and subject to an appeals process. We are hopeful that process will be completed before the end of this year so that the industry can move on from the uncertainty that has affected the inshore trawl fishery for almost five years. We are also hopeful that the DEFF will do a post-mortem that identifies the lesson learnt from FRAP 2015/16, so as to inform the policies for FRAP 2021.

Q: FINSA: What are SADSTIA’s plans for the remainder of this year and 2021?

FR: We will continue working hard to keep our employees safe. That’s our most important priority. We hope we can retain the trust that was created between industry, DEFF and organised labour throughout the Covid-19 crisis. We expect to participate actively in the public participation process that will precede FRAP 2021 and which is scheduled to start soon. Finally, we are confident that after a lot of hard work by everyone, especially the DEFF and the University of Cape Town, that we will retain our Marine Stewardship Council certification for another five years.

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