Non-profit company Maritime Business Chamber (MBC), based in South Africa, on Wednesday (27 December) said the shutdown of Algoa Bay offshore bunkering due to the “abrupt moratorium” imposed by the South African Revenue Services (SARS) has hampered the country’s opportunity to meet high bunker fuel demand due to the Red Sea crisis. The following is the full statement by MBC on the matter:

The outbreak and escalation of the geo-political military conflicts in the Middle East have abruptly disrupted international shipping along the world’s busiest sea route through the Suez Canal, turning the traffic towards South Africa’s Cape Sea route and coast. Since maritime transport makes up 90% of international trade, the effects of the Red Sea blockade are likely to be felt in higher energy and food prices, rising costs of moving goods and disruptions in supply chains.

The Suez Canal has benefited from the drying up of the Panama Canal, caused by a severe drought linked to El Niño. The Panama Canal’s reduced capacity has forced shipping companies to reroute through the Suez Canal, particularly for U.S. grain exports and other bulk cargoes. This rerouting has increased traffic and potential revenue for the Suez Canal, highlighting its strategic importance in global shipping amidst environmental and logistical challenges. Now, the Suez Canal is under threat.

The crisis presents South Africa and its maritime industry with massive economic and commercial opportunities to generate beneficial value in a substantial global dollardenominated market whilst playing a significant role in rescuing international shipping and rendering the Cape Sea Route commercially viable despite the Middle East disruptions.

That conflict has again re-asserted South Africa’s Cape Sea Route as the only feasible alternative and one of the world’s significant and enduring sea routes for international trade.

The disruptions of the Red Sea Route, which handles annually 17,000 ships constituting 12% of global trade, which includes 30% of global container traffic and 7 million barrels of oil (UNCTAD), and the diversion of such massive traffic comes with many direct operational challenges, including likely delivery delays and shortages, rising shipping and trade costs.

However, the critical question for South Africa is how its maritime industry rescues international shipping and still manages to capture the significant beneficial economic and commercial value of this massive global shipping trade market. The answer lies in providing the required critical maritime services efficiently, reliably, and consistently. One such critical service is the marine bunker fuel service.

Already, with the adoption of Operation Phakisa – Ocean Economy, South Africa had been positioned and marketed as an attractive International Maritime Center that reliably and efficiently provides critical maritime services needed by large international fleets as they circumnavigate the Cape Sea Route along its long 3,000km long coast, in-shore, and off port limits. Providing Offshore – Off Port Limits (OPL) marine bunkering services to passing ships has been one of the critical strategic target initiatives to make the Cape Sea Route viable, competitive, and attractive for international shipping.

In the present crisis, 5 out of the six biggest shipping companies have already announced their decision to divert their ships through the Cape Sea Route. In almost all cases, in deciding on and planning for the new route for their mega carriers (cargo ships), there will be a tradeoff between loading more cargo (which means more revenue) or more fuel (which is a significant cost item). If mid-way along the extended journey, there is to be a reliable and efficient bunker fuel centre, then the ship will consider the route to be economically viable; they will take less fuel and load more cargo to offset the high voyage costs and generate more Revenue.

In that context, one of the best and most successful business innovations in offering offshore maritime logistics services was establishing the international Marine Bunkering Services Center in Algoa Bay, off Gqeberha. The business targeted the passing maritime traffic of about 30,000 ships not headed for any of the South African ports. In under five years, that business had attracted thousands of ships requiring many different services, mainly from the tens of Small and Medium Enterprises. It has created employment opportunities for thousands in the Country.

Unfortunately, on September 12, 2023, the industry was brought to a screeching halt by the abrupt moratorium imposed by the South African Revenue Services (SARS) on Offshore – Off Port Limits (OPL) operations, including vital marine bunkering services, was not just an ill advised decision; it was a significant misstep that hampered South Africa’s golden opportunity in the maritime sector. This blockade, amid a global shipping crisis caused by the Red Sea route disruption, is short-sighted and economically damaging. 

The crisis in the Middle East has presented South Africa with a rare and lucrative opportunity. By serving as an alternative route through the Cape Sea Route, South Africa gains immensely from redirecting global maritime traffic. This is not just about redirecting a few ships; it’s about tapping into a worldwide trade artery that could bring substantial economic growth and boost tourism and employment opportunities to the region. The potential benefits are staggering increased international trade, heightened global standing in maritime logistics, and a boost to the local economy through job creation and business opportunities. 

However, SARS’s moratorium threatens to squander this unparalleled opportunity. By halting critical maritime services, they are causing immediate disruption to global trade flows and significantly impeding South Africa’s ability to seize a pivotal role in international shipping. This is when South Africa should be capitalising on this geopolitical shift, not retreating due to regulatory hurdles. 

SARS must reassess its position with the utmost urgency. The continuation of this moratorium is indefensible when weighed against the potential benefits to both the South African economy and the global shipping industry. The maritime industry’s willingness to engage with SARS and find a workable solution underscores the critical nature of the situation. Any further delays in lifting this moratorium will not only hinder the growth of South Africa’s maritime sector but also reflect poorly on the country’s ability to adapt and capitalise on global economic shifts. The time for action is now. South Africa has the chance to participate in and significantly benefit from the global maritime economy. Letting this opportunity slip due to regulatory overreach would be a grave error with long-term consequences for the nation’s economic and commercial landscape.

Related: ENGINE: Suppliers and authorities still working to resolve Algoa Bay bunkering crisis – sources
Related: ENGINE: Algoa Bay closure spurs surge in bunker calls at nearby ports
Related: South African Revenue Service issues media statement on detention of bunkering vessels
Related: ENGINE: Algoa Bay bunkering at a standstill as authority detains barges – sources

Photo credit: MarineTraffic / Bernd Bölscher
Published: 29 December, 2023