RIGHTS MANAGEMENT SYSTEM - SQUID

Download: Rights Form

OPENING STATEMENT

WE, THE SQUID (CHOKKA) INDUSTRY, WOULD STRIVE TO CONSERVE MARINE LIVING RESOURCES FOR BOTH PRESENT AND FUTURE GENERATIONS OF SOUTH AFRICANS.

WE RECOGNISE THE NEED TO UTILISE MARINE LIVING RESOURCES TO ACHIEVE ECONOMIC GROWTH, HUMAN RESOURCE DEVELOPMENT, CAPACITY BUILDING AND EMPLOYMENT CREATION CONSISTENT WITH THE DEVELOPMENT OBJECTIVES OF THE NATIONAL GOVERNMENT.

THESE TWO PRINCIPLES NEED NOT BE MUTUALLY EXCLUSIVE. WE WILL STRIVE TO RECONCILE THEM IN A SENSIBLE AND RESPONSIBLE MANNER.

  • TERMS AND DEFINITIONS
  • Rights Management System - A proposal for the management of the squid fishing industry and the allocation of squid fishing rights in response to the "DRAFT DISCUSSION DOCUMENT FOR THE FISHERIES MANAGEMENT PLAN TO IMPROVE THE PROCESS OF ALLOCATING FISHING RIGHTS" and the document entitled "STABILITY, TRANSFORMATION and GROWTH".
  • RMS - rights management system.
  • Stability in the squid fishery means reducing business risk to the natural fluctuations of the resource and the individual skills of business operators. Legislation, government, management and research should never stand in the way of maintaining & developing a sustainable industry.
  • Viability means businesses built on sound foundations of assets, finance, ability and stability such that they can reasonably expect a profit commensurate with the risk involved.
  • Transformation is the process through which the wrongs of the past should be righted. This means the promotion and development groups, previously discriminated against and suppressed under the apartheid regime. Equity across racial divides should be achieved by peaceful and economically viable redistribution of wealth from previously protected and promoted whites to blacks and other disadvantaged groups. This must be achieved by instituting mechanisms of economic upliftment instead of mechanical dispossession, which sows dissent and racial tension.
  • Sustainable utilization - utilization of natural resources in such a way as to ensure the renewal of the resource in the next generation, thereby avoiding any decline in abundance other than that which may occur due to natural (environmental or biological) causes.
  • Industry - The squid (chokka) jigging fishery and accompanying processes.
  • SMME - Small, medium and micro enterprises.
  • Length of vessel - The "length" of a vessel is, for the purposes of this rule book, defined as the horizontal distance, in meters, from the forwardmost extremity of the bow to the furthest point at which the transom of the vessel meets the deck, excluding any extensions in length undertaken after the 17th April, 2001.
  • 'domestic company' (as defined in section 1 of the Income Tax Act of 1962) means a South African company or a company which is managed and controlled in the Republic;
  • 'connected person' ( as defined in the income tax act ) means-
    1. in relation to a natural person-
      • any relative; and
      • any trust of which such natural person or such relative is a beneficiary;
    2. in relation to a trust-
      • any beneficiary of such trust; and
      • any connected person in relation to such beneficiary;
    3. in relation to a connected person in relation to a trust (other than a unit trust scheme in property shares as authorised under the Unit Trust Control Act, 1981 Act 54 of 1981), includes any other person who is a connected person in relation to such trust;
    4. in relation to a member of any partnership-
      • any other member; and
      • any connected person in relation to any member of such partnership;
    5. in relation to a company-
      • its holding company as defined in section 1 of the Companies Act of 1973 (Act 61 of 1973);
      • its subsidiary as so defined;
      • any other company where both such companies are subsidiaries (as so defined) of the same holding company;
      • any person, other than a company as defined in section 1 of the Companies Act, 1973 (Act 61 of 1973), who individually or jointly with any connected person in relation to himself, holds, directly or indirectly, at least 20 per cent of the company's equity share capital or voting rights;
      • any other company if at least 20 per cent of the equity share capital of such company is held by such other company, and no shareholder holds the majority voting rights of such company;
        • (vA) any other company if such other company is managed or controlled by-
        • (aa) any person who or which is a connected person in relation to such company; or
        • any person who or which is a connected person in relation to a person contemplated in item (aa) ; and
      • where such company is a close corporation-
        • (aa) any member;
        • (bb) any relative of such member or any trust which is a connected person in relation to such member; and
        • (cc) any other close corporation or company, which is a connected person in relation to-
        • any member contemplated in item (aa); or
        • the relative or trust contemplated in item(bb); and
    6. in relation to any person who is a connected person in relation to any other person in terms of the foregoing provisions of this definition, such other person, and in this definition the expression 'beneficiary' means any person who has been named in the will or deed of trust concerned-
      • as a beneficiary; or
      • as a person upon whom the trustee of the trust has the power to confer a benefit from such Trust;
  • DAFF - The Department of Agriculture, Forestry and Fisheries.
  • MCM - Marine and Coastal Management.
  • Value Added Statement -
  • ESS - Economic and Sectoral Study.
  • Medium Term Right - five years
  • Long Term Right - ten to fifteen years.
  • Family business - A "family business" is defined as a business unit which is the sole owner and operator of a single squid fishing vessel, where that vessel is the major asset and activity of the business, and the business is wholly owned by a member or members of an immediate family unit, where that business is the family's main source of income.
  • Commercial Stakeholder - One who holds a commercial fishing right in the squid industry and has made a significant investment for the purpose of exploiting that right.
  • Historically Disadvantaged Individual - One who was, or whose parents were, disenfranchised on the basis of race and skin colour under the apartheid regime.
  • HDI - Historically Disadvantaged Individual.
  • HDI enterprise - An enterprise, of which 50,1% or more is owned by HDIs.
  • Chokka - Loligo vulgaris reynaudii.
  • Squid - Loligo vulgaris reynaudii.
  • Utilise - to make use of a squid fishing right, by agreement with the right holder, in order to exploit the squid resource.
  • Safety Certificate - Certificate of seaworthiness as issued by SAMSA.
  • Manning - the crew of a vessel.
  • Manning level - the total number of men comprising the crew of a vessel.
  • Upgrade - To replace a squid fishing vessel with a vessel of greater length that fits into a higher category in terms of manning as contemplated in the RMS document.
  • Downgrade - To replace a squid fishing vessel with a vessel of lesser length that fits into a lower category in terms of manning as contemplated in the RMS document.
  • > - The symbol for "greater than" or "more than".
  • Allocations - refers to the allocation of squid fishing rights.

THE RESOURCE

  • Loligo vulgaris reynaudii or chokka squid belongs to the family Loliginidae. Various species of this family are subject to heavy exploitation throughout the world, and sustain fisheries from a few tonnes up to 100 thousand tonnes a year.
  • A direct biomass estimate of the South African chokka resource has not thus far been possible. Chokka squid occurs, and is commercially exploited, in shelf waters from East London to Cape Agulhas and occasionally as far west as False Bay. The major concentrations are from the Tsitsikamma in the West to Cape Padrone in the East. Port Elizabeth is the hub of the squid industry.
  • An average of 6000 tons of squid are caught per annum, generating foreign exchange in the order of R180 million and providing employment for 2500 fishermen and 300 fish factory workers.
  • Scientific research on the resource is industry supported and compares favourably with efforts elsewhere in the world. While some scientific indicators show a gradual decline in the resource the major fluctuations in catches appear to be the result of varying environmental conditions.
  • The areas in which the resource occurs is often subject to extreme weather and oceanographic conditions.
  • Catches over the years have varied from a low of 2500 tons to a high of 9800 tons per annum.

BACKGROUND - A SUMMARISED HISTORY

  • The squid jigging industry started in 1984 - 1985 and quickly developed due to high demand and good catches. Between 1984 - 1988 a whole new industry was created. The only requirement for participation was a valid "A" or "B" license. The only form of regulation in the fishery was the provisions of those licenses.
  • Participants with a valid "A" or "B" license and "proven performance" during the window period of 1987 were granted rights in the fishery with the inception of the new "C" license. Although this effectively put an end to the "gold rush" scenario that had developed, the squid industry was already proving to be best suited to individuals with line fishing experience and solid all round technical ability. Inexperienced investors, tempted by the prospect of what they perceived to be easy money, fell by the wayside in droves.
  • Even at this early stage it was realised that this industry was best suited to the SMME sector. Assurances were give by the incumbent minister, that the industry would not be dominated by big business.
  • In 1988 the first closed season was introduced and a moratorium on the transfer of permits imposed.
  • Those who created this industry can rightly be called the forefathers of squid fishing in SA. The right of those originators (1984 -1988) still active in the fishery, to fish for squid, should be regarded as part of our heritage. These rights should be protected, to the benefit of the industry as a whole, in terms of expertise and training.
  • Years 1989 - 1994 were years of development and prosperity, consolidating the industry.
  • Years 1994 - 1998 were years of a new order and slowly changing rules for the industry. Many people entered the industry in these years, speculating on the industry's previous years of success. The prevailing uncertainty worked to their advantage.
  • Years 1998 - 2000 were years of turmoil and insecurity. Botched process of false "restructuring" and new allocation process based on inappropriate and ill-conceived criteria did incalculable damage to the well being of the industry, new incumbents from formerly disadvantaged backgrounds included.
  • In 1998, a time when it was deemed undesirable to allow an increase in effort in the fishery, existing right holders were stripped of between thirty and fifty percent (a far greater proportion than other fisheries better able to afford it) of their rights.
  • Most of these rights were then redistributed to historically disadvantaged entities, while a small portion were not allocated in order to effect a reduction in effort.
  • Further redistribution took place in 1999. Redistributed rights were not necessarily allocated in viable units. New entrants (1998/1999) were thus obliged to enter into joint ventures and other arrangements in order to utilise their newly acquired rights.
  • The obvious solution to this scenario would appear to have been the formation of joint ventures between existing and new participants. In some cases this served as a cover-up for "paper quota holders", who did not have the means and ability or the intention to use their permits in actual fishing activity.

CURRENT SITUATION

The unfortunate outcome of an over hasty process of redistribution, lacking in balanced, well considered and clearly defined criteria, was the following:

  • Diminished economic viability of existing operators, leaving them with spare capacity.
  • Creation of "paper and cardboard" quotas, which resulted in destabilisation of the industry.
  • Creation of an opportunity for speculators previously unconnected with the fishery to gain access via a variety of deals with "new entrants".
  • Confusion and increased risk.
  • The current level of transformation achieved is difficult to determine due to incomplete and contradictory transformation criteria, obscurity of ownership, inaccessibility and lack of correlated information, etc.
  • The economic situation of the industry is difficult, with rising costs and unknown expenses in the present and future equation. The industry is plagued by notoriously variable export prices. The dollar price for Loligo Vulgaris has dropped from a high of US$6.80/kg to a low of less than US$4.00/kg over the last five years. The lack of long term rights together with the negative image and volatility of the fishing industry as a whole, and the squid industry in particular, has made finance very hard to obtain in recent times.
  • Compliance is at an all time low with law abiding operators facing hard choices between breaking the law or facing bankruptcy. This situation encourages less scrupulous operators to take maximum advantage of the situation.
  • Vessel owners are hampered in their normal hands on approach by the inordinate amount of time consumed by keeping up to date with the confusing, contradictory and ever changing political, legal and administrative issues, prevalent in the industry today. There is serious risk of red tape compromising vessel safety.
  • A positive effect of the first efforts to transform the industry was increased awareness and acceptance amongst stakeholders across the spectrum that transformation must be achieved, and that it is likely to be a long and difficult exercise.
  • Records of industry meetings will highlight that litigation was not initiated in response to the first redistribution of rights as industry accepted that it was necessary to open the industry to new entrants.

Present initiatives must mark the start of a healing process in the industry. This can be achieved if the rules of simplicity, transparency, goodwill and compliance are observed by all concerned.

DEFINITION OF SECTOR

The MLRA divides fishing into four different categories, namely, Subsistence, Recreational, Local commercial and Foreign commercial.

  1. Subsistence fishing - does not occur in the squid fishery.
  2. Recreational fishing - recreational fishermen are limited to a maximum of twenty squid per day. Recreational fishing has little impact on the squid industry except where commercial fishermen have continued to fish in the closed season, making several trips per day, under the guise of recreational fishing. Prohibiting the sale of recreational catches should go some way towards preventing this.
  3. Local commercial - the South African squid jigging industry falls into this category. The industry comprises shore based and sea-going operations.
    Shore based activities are:
    • Squid packing and freezing (of wet fish)
    • Final processing (boxing, etc. of sea frozen and land frozen) and cold storage
    • Marketing and export
    • Fleet supply and maintenance.
    Even though shore based and sea-going activities are interdependent, it is practical to view them separately for the purpose of this "rule book".
    There are currently three categories of squid fishing permit. These are:
    • The unrestricted permit - allows squid fishing in all unprotected South African waters, except those of the former Ciskei.
    • The restricted permit - allows squid to be caught in unprotected waters in a designated area.
    • The Ciskei permit - a hangover from the apartheid era, allowing squid fishing in the waters of the former Ciskei homeland.
    Some squid is landed as a bycatch of demersal trawlers.
  4. Foreign commercial - is not known to affect the squid fishery.

Shore based operations can be suitably classified in accordance with the outlines laid down by the Department of Trade and Industry as adopted by the Department of Marine and Coastal Management.

As the purpose of this "rule book" is to address the issue of squid fishing permits and their allocation, further analysis of shore based operations is not necessary, except where it pertains to fishing permits. Investment in shore based facilities is relevant to the level of an applicants participation in the industry and should be recognised, with points awarded accordingly.

Squid is an effort - based fishery. Exploitation of the resource is controlled and limited in terms of a TOTAL ALLOWABLE EFFORT (TAE). The unit of effort is, at present, the man (the crew of a squid fishing vessel should not exceed the number of men stated on the squid permit). Turnover, employment, investment, profitability and every other aspect of any squid fishing concern is directly proportional to the effort allowed in terms of the rights allocated to that operator. Even though this document recommends that the "boat" be adopted as the unit of effort, that unit still relates to "number of men". It is practical, when considering certain aspects of the industry, to revert to "number of men". It is therefor practical to classify squid fishing enterprises according to the effort employed.

The following subcategories are proposed for the "Local Commercial" section:

  • 1 to 16 men - micro
  • 17 to 46 men - small
  • 47 to 90 men - medium
  • 90 men and more - large

In line with current thinking, certain enterprises may be further classified as "Family Businesses" (see definition).

SUSTAINABLE UTILISATION AND COMPLIANCE

  • Pressure on the resource is currently managed by limiting the "TAE" (total allowable effort), protected areas (marine reserves) and a closed season.
  • As previously stated, it has, to date, not been possible to achieve a direct estimate of the biomass of the resource. Effort regulation of the existing fishery is therefor based on the "precautionary" principle together with hands-on abundance measures.
  • One such abundance measure, related to the CPUE (catch per unit effort) of the trawl bycatch, has shown a slow downward trend over the years. Until the various (often contradictory) trends in abundance indices are reconciled by research on the quantified life cycle of chokka, possible threat to the resource should be treated seriously and appropriate effort controls maintained.
  • Biomass research cruises to monitor the resource have not been possible for the last three years as no suitable research vessel has been available. These cruises, due to be resumed this year, will assist in decision making with regard to increase or reduction in effort.
  • Regulations must be reassessed from time to time, to keep pace with growing expertise.
  • No significant increase in effort can be considered for the immediate future. The squid industry is therefor fully subscribed and no new entrants can be accommodated at present.
  • Sustainable utilisation of the resource is dependent on orderly exploitation in compliance with well-balanced, practical, legally enforceable regulations. These regulations should be based on sound scientific findings.
  • Overly conservative and restrictive regulation is counter-productive and must be avoided. Regulations and their effectiveness should be reviewed on a regular basis and must not hamper right holders in the legitimate pursuit of their business.
  • Effective policing and adequate deterrents, together with the goodwill, support and assistance of the industry, are essential.

The fishing boat should be the unit of effort. Boats must be categorised by length. Manning shall be in accordance with the length category into which a boat falls. Manning levels on the vessels Safety Certificate may not exceed those contemplated below.

The length categories and manning levels are:

  • Ski-boat or non-freezer vessel    - 7 men
  • vessels up to 13m    - 12 men
  • vessels 13m - 15m    - 16 men
  • vessels 15m - 17m    - 20 men
  • vessels 17m - 19m    - 22 men
  • vessels 19m    - 26 men

Note: These lengths/manning levels are based on the most common vessel types found in the industry today.

  1. Provision is made in the "Application Form" for right holders operating vessels of a less standard nature to make and motivate an appeal with regard to the classification of those vessels.
  2. The permit shall reflect the number of men that a vessel may carry in terms of its "Safety Certificate". All of these men are permitted to fish. Effort levels will be subject to ongoing review in accordance with sound scientific data and in consultation with the industry via the industrial body.
  3. Should a vessel's Safety Certificate reflect a manning level less than those contemplated above, as at the 17th April 2001, the manning of that vessel shall remain at that level.
  4. Except for the provisions of items 5 and 6 below, only vessels that utilised squid fishing rights from the 17th April 2001 to the date of application, and vessels approved for that purpose by the Boat Limitations Committee before the 17th April 2001, will be considered for squid fishing rights.
  5. Replacement vessels falling within the same or a lesser length category are permitted with the approval of the MCM "Boat Limitation Committee" together with recommendation from the industrial body. If a (boat) permit is transferred from a vessel to another vessel of smaller size (downgrading), the smaller vessel will only be permitted the number of men designated in the smaller vessel's length category. The rights represented by the excess men will revert to the state for inclusion in the "Transformation Pool".
  6. Permits (boat permits) may be consolidated in order to effect an upgrade from one vessel category to a higher (greater length) vessel category according to the following rules:
    • The sum of the number of men represented by the permits to be consolidated must equal or exceed the manning level allowed on the upgraded vessel.
    • The rights represented by the excess men will revert to the state for inclusion in the "Transformation Pool".
  7. All boats with commercial chokka permits will be allowed to fish for squid in any unprotected SA waters. This includes the waters of the former Ciskei homeland.
  8. Boats with restricted permits are allowed to fish for squid in the area to which they are restricted.
  9. Permits issued in the name of the former Ciskei homeland must become area restricted permits. Ciskei permits currently allocated to vessels that qualify for South African commercial squid rights will become obsolete.
  10. Boats with unrestricted commercial squid permits will be entitled to a supplementary catch of non-threatened linefish species.
  11. Both skippers and owners must be compelled to sign a code of conduct.
  12. The MCM inspectorate must provide a comprehensive diagram/chart showing all protected areas, marine reserves and National Parks, on which the co-ordinates (lat/long) of boundary corners must be clearly marked.
  13. Severe penalties, commensurate with the potential rewards of transgressions, must be imposed.
  14. The owner of a vessel must be deemed to be the "transgressor" unless he can show:
    • a signed and witnessed document to the effect that he has provided the skipper with a true copy of the above mentioned chart and
    • a signed and witnessed undertaking, by the skipper, that he will refrain from entering those protected areas, in which case the skipper will be the "transgressor".
  15. Each vessel must, at own expense, fit an MCM approved vessel monitoring system which will report to the MCM base station, once this system is operational. MCM must undertake to ensure that confidentiality is maintained and that the system is used for compliance and research purposes only.
  16. Permits must only expire once annually at the date of expiry of the vessel safety certificate.

These simple rules, reviewed from time to time in accordance with the needs and dynamics of the industry and the results of sound scientific research, should ensure the sustainable utilisation of squid.

STABILITY

Definition: Stability in the squid fishery means reducing business risk to the natural fluctuations of the resource and the individual skills of business operators. Legislation, government, management and research should never stand in the way of maintaining and developing a sustainable industry.

  1. The boat should be the effort unit of the squid fishery
  2. Medium term rights should be granted to participants who:
    • can prove meaningful and active participation in the Industry
    • own or have secured access to a boat or can prove that they are buying or have bought a boat which shall be operational within three months of the date on which the rights are to be allocated (verification to be applied).
  3. Medium term rights should be for five years. Benefits to the industry would be to:
    • provide a breathing space for new transformation initiatives to take effect and produce results.
    • enable right holders to obtain finance (vessel purchases, working capital, etc.).
    • provide a degree of business security
    • facilitate long term planning
    • restore the image of the industry
    • rekindle a protective attitude towards the well being of the resource
  4. No single operator or person connected (see definition of 'connected person') to that operator may own more than 7,5% of the total number of rights (measured in men).This reduces the risk of SMMEs being absorbed by big business.
  5. There must be one industrial body. Membership of the industrial body must be encouraged. SASMIA should satisfy this requirement. The SASMIA constitution must be re-examined and amended to serve the demands of the industry today and for the future.
  6. Allocations must be made on time. If, for any reason, an allocation or the issuing of new permits, is delayed, existing permits must automatically remain in force for the period of that delay.
  7. Communication between the industry and M&CM must be improved. An M&CM official should be designated whose first priority is to deal with matters pertaining to the squid industry. The duties of this official would include communication with and informing the industrial body. This official should be contactable at least during working hours.
  8. The industry must be consulted prior to changes, increases or the introduction of Fees, levies, charges, etc.
  9. Given the constraints of effort control, the need to change to a boat based unit of effort, and the number of boats already active in the industry, there can be no further new entrants, or additional boats, for the time being.
  10. Rights must be transferable. The free market system must prevail subject to certain "Transformation" criteria.

Stability contribution is a criterion for allocation

VIABILITY

Definition: Viability means businesses built on sound foundations of assets, finance, ability and stability such that they can reasonably expect a profit commensurate with the risk involved.

  1. Businesses must have access to adequate finance.
  2. The Marine Living Resources levy should be in line with the current levy structuring in the fishing industry but must be negotiated with the squid industry and not unilaterally imposed by DAFF.
  3. Applications must designate and describe a vessel.
  4. Applicants must demonstrate that they have the necessary technical knowledge and ability.
  5. Applicants must demonstrate that they have the necessary business skills and ability.

Viability is a criterion for allocation

TRANSFORMATION

Definition:Transformation is the process through which the wrongs of the past should be righted. This means the promotion and development of groups, previously discriminated against and suppressed under the apartheid regime. Equity across racial divides should be achieved by peaceful and economically viable redistribution of wealth from previously protected and promoted whites to blacks and other disadvantaged groups. This must be achieved by instituting mechanisms of economic upliftment instead of mechanical dispossession, which sows dissent and racial tension.

The registration of participants in 1987 was, as with the traditional linefish sector, based on historic participation and did not discriminate against any component of the fisher population. The demographics of the established permit holder component results from trading in permits over the past decade and a half and were only influenced by the possible lack of access to capital funding.

The "Economic and Sectoral Study" of the squid industry, currently being undertaken on behalf of M&CM, has yet to ascertain the level of transformation thus far achieved in the squid industry. The industry is fully subscribed in terms of effort, capacity and participants, at this time. This means that any further transformation must come from within. Provision is however made for further redistribution of rights should the industry prove to be unable to achieve its' transformation goal before long term rights are allocated.

Further transformation should ideally be implemented:

  • with a minimum of disruption to the industry.
  • with little, or no, increased pressure on the resource (effort).
  • with the minimum dispossession in terms of rights.
  • within a predetermined timeframe.
  • without creating non - viable business entities.
  • without rendering existing business entities non - viable.
  • with due regard to the constitution of the Republic of South Africa.
  • in such a manner that the future stability of the industry is assured.
  • in a manner acceptable to the majority of commercial stakeholders in the squid industry.

Transformation is addressed as follows:

  • The degree to which the squid industry is transformed is determined by the "ESS" task team.
  • Transformation goals, actions and initiatives are promoted and acknowledged by means of points scored in the "Application Form".
  • It is anticipated that the "Value Added Statement" will be adopted as a means of assessing transformation.
  • Established transformation initiatives are acknowledged.
  • Effective past reductions of fishing rights for redistribution are acknowledged.
  • The practicalities of the transformation of small and family business units are provided for.
  • Provision is made for further transformation in the squid industry.
  • Further transformation takes place in an orderly and predictable manner, criteria are known and stakeholders can monitor their own, and the industry's progress.
  • A transformation goal and timeframe is set.

Implementation and Procedure

Phase I

  1. The "ESS" task team ascertains the level of transformation already achieved in the squid industry, expressed as a percentage.
  2. A tentative transformation target of forty percent is set for the Squid Industry. This can be confirmed or adjusted once the "ESS" task team provides the formula by which transformation will be calculated.
  3. The "ESS" task - team devise a formula for the future calculation of the percentage by which the industry is transformed. This formula should be simple, transparent, realistic, and easily understandable. The completed "Application Form" must be the source of the data required for the application of this formula.
  4. Medium term rights for a period of five years are allocated in accordance with the terms and conditions of the "Rule Book".
  5. Note: This period can be viewed as a "breathing space" in order to:
    • give the various stakeholders a realistic opportunity to conform to the clearly delineated further transformation requirements that will be expected of them.
    • prove the effectiveness of the transformation element built into the criteria for the transfer of ownership of squid fishing rights.
  6. The "sale" and transfer of squid fishing rights for purposes other than "upgrading" or "downgrading" (see definitions & items 3. & 4. under Sustainable Utilisation and Compliance) is allowed within a strict framework of rules designed to promote further transformation in the industry. A separate application form is provided for the allocation of rights set aside in the "transformation pool" contemplated below.

Phase II

  1. Applications for long term rights are called for prior to the expiry of the medium term rights.
  2. The "Transformation Formula" is applied in terms of the applications received. The level of transformation is ascertained and compared to the "transformation target".
  3. A pool of rights, the equivalent of any shortfall in transformation, is set aside. The remaining rights are allocated in accordance with the applicants' scores.
  4. The transformation pool is allocated to applicants in accordance with the appropriate "Application Form".
  5. Mentoring is made available to new entrants who may wish to take advantage of this service.

VALUE ADDED STATEMENT: We await further enlightenment on this subject.

TRANSFER AND/OR CHANGES IN THE OWNERSHIP OF A RIGHT

Rights are allocated on the basis of information supplied by the applicant at the time of application. This includes details regarding the shareholding and ownership, in whatever form, of the enterprise. In order to achieve the industry's transformation goal on or before the expiry of medium term rights, certain conditions must be introduced with regard to the sale, transfer, alienation or disposal of squid fishing rights and/or the shares and ownership of enterprises that have been granted squid fishing rights. These conditions must apply for the duration of the medium term rights.

Two separate"Application Forms" have been developed. "Application Form A" is for making application for medium and long-term rights. "Application Form B" is more heavily biased towards transformation issues and is intended for use in making application for rights held in the "transformation pool".

Transfer of a Medium-Term Right.

The purpose of these stipulations is to afford a right of first refusal to the prospective purchaser of a squid fishing right who best serves the transformation goal of the industry.

  1. Should the holder of a medium-term right wish to accept an offer to purchase that right and such offer to purchase is not from an HDI or an HDI Enterprise as defined, he shall:
    1. advertise that application will be made for the transfer of rights in terms of an offer to purchase. The advertisement shall include the physical address of the legal representative of the seller where the offer to purchase can be inspected by interested parties. Interested parties must demonstrate that they qualify as either an HDI or an HDI Enterprise and undertake to keep the details of the offer to purchase confidential. Two insertions of the advertisement, in the standard format of legal notices, shall be published twice in two daily newspapers in Cape Town and two daily newspapers in Port Elizabeth (i.e. two insertions in each of four newspapers).
    2. submit a completed "Application Form A", together with the appropriate application fee, to the relevant MCM official on behalf of the prospective buyer.
  2. Any other prospective buyers who qualify as either an HDI or HDI Enterprise and are willing and demonstrably able to meet the terms and price of the offer, may submit a completed "Application Form A", to the relevant MCM official. If additional offers are received (and applications made), transfer is approved to the prospective purchaser whose application scores the highest.
  3. If no other prospective buyer is forthcoming within one month of the last advertisement appearing in the relevant newspapers the initial offer may be accepted and the transfer may proceed.
  4. Question 6. of Application Form A will apply to the transferee in his subsequent application for long-term rights.

CHANGES IN SHAREHOLDING AND OWNERSHIP

Should, during the period of the medium-term right, any change occur which materially effects the shareholding, membership, beneficiary structure or ownership details as supplied by an applicant in Application Form A, that applicant shall be required to complete an additional question (Application Form A, Section 4, Question 6.) in respect of his subsequent application for long-term rights.

  • Note 1: Rights may be ceded to financial institutions for the purpose of securing finance. Such cession shall be subject to the same conditions should they be forfeited to that financial institution, or any other entity, for any reason whatsoever.
  • Note 2: The provisions of 1 and 2 above, or those titled "Changes in Shareholding and Ownership", will not apply in the case of a deceased estate or if the transferee or buyer is a member of the transferor or seller's immediate family.
  • Note 3: The provisions of 1 and 2 above will not apply in the case of an upgrade or downgrade where, in the process of upgrading or downgrading, excess effort has been relegated to the transformation pool.

Unutilised Rights

If a permit in respect of a right that has been allocated is not activated within three months of that allocation, that right will revert to the state for inclusion in the transformation pool, unless the holder of the right can prove that exceptional circumstances or circumstances beyond his control have prevented the activation of that permit.

Mentoring

The inclusion of a provision for the mentoring of inexperienced HDIs or HDI elements new to the squid industry benefits not only the immediate beneficiary but also the mentor and the industry as a whole.

  1. The beneficiary:
    • receives invaluable technical and business advice.
    • has instant access to and knowledge of suppliers of goods and services.
    • is advised on the intricacies and peculiarities of the industry that would otherwise take years to learn.
    • enjoys added credibility in the eyes of financial institutions.
    • has the opportunity to earn additional points in the following round of applications for rights in the squid industry.
  2. The mentor:
    • is afforded an additional opportunity to contribute to the transformation of the industry.
    • has the opportunity to earn additional points in the following round of applications for rights in the squid industry.
  3. The squid industry, as a whole, benefits in terms of stability by the improvement of its transformation profile.

Procedure and Implementation

  1. The secretary of the industrial organisation shall keep and maintain a list of suitable persons desirous of participating as mentors.
  2. Any individual, having successfully managed a squid fishing operation for seven years or more, may submit his name to the secretary of the industrial organisation for consideration as a mentor.
  3. Any HDI having, or applying for, a right in the commercial squid fishing sector may, by mutual consent, select an available mentor from the list.
  4. The parties (mentor and beneficiary) enter into a formal agreement with regard to the period, terms and responsibilities of the mentorship. It must be clearly stated in the agreement that the goal of this arrangement is to assist the beneficiary to gain the skills and knowledge to become a fully-fledged, successful participant in the squid industry. The agreement must provide for at least an annual review of the arrangement by the parties, whose comments shall be recorded in writing and be attached to the agreement.
  5. An individual who has actively functioned as a mentor, as contemplated above, may claim the points allotted in that regard, on behalf of his enterprise, in the following round of applications for rights in the commercial squid fishing sector.
  6. An HDI who has participated as contemplated above, may claim the points allotted in that regard on behalf of his enterprise in the following round of applications for rights in the commercial squid fishing sector.

Termination of Transformation Directed Initiatives

Transformation will be deemed to have been fully and successfully accomplished on completion of the allocation of long-term rights.

CRITERIA FOR THE SELECTION OF SUCCESSFUL APPLICANTS

These criteria will be self evident on the study and completion of "Application Form A".

ALLOCATION OF RIGHTS SET ASIDE IN THE TRANSFORMATION POOL

These criteria are self evident on the study and completion of "Application Form B".

RIGHTS ALLOCATION-SQUID

PROCESS

  • A deadline is set and published / notified for the submission of applications. Application forms and guidelines describing the process, criteria, timetable and other requirements are made available.
  • Applications are checked. Applications deficient in essential information or documentation are eliminated. Eliminated applicants are notified (with reasons given). Eliminated applicants may re-submit within a very limited time frame on payment of an additional Application fee. (This in order to avoid litigation with regard to technical omissions)
  • Applicants are assigned to the appropriate business category. Boats are classified according to length. The basic means to conduct fishing, i.e. boat registration, availability of finance, etc., is verified.
  • The provisions of the "RMS" Document is applied.
  • "Transformation Criteria" are applied.
  • Quantified results are scored.
  • Oral presentations of not longer than fifteen minutes duration and relating only to those topics addressed in the "Application Form", by those who so wish, are heard, after which the applicant may be questioned. This should include boat classification appeals.
  • The quantified results are adjusted as deemed necessary.
  • Applicants are notified as to the outcome of their application. Reasons for failure are given.
  • Written appeals are considered.
  • Successful (always subject to verification) and unsuccessful appellants are notified.
  • Permits are issued on application. Permits not utilised within three months are re-allocated to the applicant with the next best score.

Timetable

A practical and achievable schedule for the implementation of the above process is devised, by MCM, in such a way that the industry is not disrupted.

VERIFICATION

The Verification Unit will validate information provided in each application. Applicants may be called upon to provide additional information at a formal public hearing. Should interviews with applicants be necessary they should take place in conjunction with the oral presentations. Verification will be an ongoing process.

FEES AND LEVIES

Fees and levies are to be decided by MCM in consultation with the industry.

THE APPLICATION FORMS

THERE ARE TWO APPLICATION FORMS FOR THE COMMERCIAL SQUID FISHING SECTOR.

"Application Form A" is used when applying for medium-term rights and long-term rights.
"Application Form B" is used when applying for rights set aside in the "transformation pool".

Guidelines for the Completion of the Application Forms - Squid

  • Each application must relate to a particular vessel.
  • Only one application may be submitted per vessel.
  • The original, and four certified copies of the application must be submitted.
  • Each Application Form is in five sections:

SECTION 1:

DETAILS OF APPLICANT    No points are allocated in this section.

SECTION 2:

BASIC REQUIREMENTS TO QUALIFY FOR SQUID FISHING RIGHTS
The application is checked to ascertain that:

  • the correct application form has been used.
  • the required documentation is included.
  • the required information is included.
  • the applicant meets the basic requirements for squid fishing rights.
  • the application is complete in all respects.

Applications not satisfying these requirements are eliminated. No points are allocated in this section.

SECTION 3:

HISTORICAL INVOLVEMENT, COMPLIANCE, STABILITY, VIABILITY, etc. - all aspects of the application are examined, except those relating to transformation issues. Points are allocated.

SECTION 4:

TRANSFORMATION - deals with transformation. The impracticality of dividing ownership in "Family Businesses" is recognised and allowance is made in this section. Points are allocated.

SECTION 5:

DECLARATION

Declaration A       Declaration B

ANNEXURES:

  1. Documentation submitted as annexures need not be individually certified as true. The applicant must however sign the declaration at the end of the form.
  2. Annexures must include a cover page, clearly indicating the Annexure number. The attached documents must be accurately described and/or listed on the cover page, stating, inter alia, the number of documents/pages. If an Annexure does not apply to a particular applicant, the words NOT APPLICABLE must follow below the Annexure number on the cover page.
  3. A total of 13 Annexures are required in Application Form A and a total of 10 Annexures are required in Application Form B.

Note: Each page of the application, including annexure cover pages, must be headed with the following:
Name of applicant; Name of vessel; (page #) of (total # of pages).

TIE BREAKER

In the event of it being necessary to break a tie in score between two or more applicants, the total of the scores achieved by each candidate in respect of section 3, questions one and two, and section 4, questions one and two, are compared. The candidate with the highest score takes precedence. Should a tie still exist, the candidates submissions with regard to section 3, question 3 must be judged by a panel of three suitably qualified persons, i.e. one M.B.A., one C.A. and an economist. This applies to both "Application Form A" and "Application Form B".

CLOSING STATEMENT

The Rights Management System document has been compiled in good faith and on the assumption that the department is sincere in its frequently expressed desire to achieve stability, viability and transformation. The system can obviously not be finalised, and the department can not be expected to take decisions, until they have defined the "Value Added Statement" and the "ESS" study has been completed. A clearly delineated process for the orderly transformation of the squid industry is proposed, whereby role players can gauge their progress in this regard. This system avoids the sudden arbitrary and destabilising redistribution of rights that has caused such hardship and chaos in the past and consequently minimises the ensuing spate of litigation that would inevitably follow.

Due to time constraints, this document is submitted in its present form and will be supplemented by comments, criticisms and objections that shall be recorded at a meeting of stakeholders to be held on the 8th June 2001, together with an outline of the procedure that has been followed in its development.