DEVELOPMENT OF COASTAL SHIPPING
2.7 COASTAL MONOPOLY (FROM 1985 TO 2000)
Figure 2.3: South African commercial fleet during the period from 1947 to 1985 (Source: Tonnage figures adapted from Berridge, 1987:229)
These and other achievements established a basis on which South Africa could build further on its coastal trade.
on the Johannesburg Stock Exchange on 5 November 1986, thus becoming the first listed South African coastal operator.132
However, the listing of Grindrod came at a very politically tense time. The government’s tyrannical policies and generally messy political handling invited fresh calls for tougher economic sanctions, which reduced the number of South Africa’s trading partners even further. This limited cargo to the country, which in turn had a negative effect on feeder volumes on the coast. The 1987 global shipping recession exacerbated commercial frugality. Grindrod was driven to relocate some operations to offshore centres to shield133 the business from negative perceptions created by adverse political conditions in the country.
Further pressure on coastal shipping came in 1989 with the abolition of the road permit system. The long-awaited overhaul of the road freight system finally arrived. It will be remembered that commercial road freight was heavily regulated until this time. Long distance road haulage had been operated under strict licence conditions for a period of about 60 years since 1930. Some flexibility had been introduced under the Road Transport Act of 1977, which saw a measure of competition between road and rail.134 Jones states that this period saw an unprecedented rise in road freight’s market share, largely at the expense of rail, and to a lesser extent at the expense of coastal shipping.135 He shows that road had gained a 55% share of the freight market only ten years after deregulation, while rail, the main casualty, had stagnated at 45%. This, of course, resulted in financial strain for Grindrod, which had to shoulder the burdens occasioned by the shrinking coastal market share.
In the light of new market conditions, Grindrod decided to move its core operations offshore as well, with disastrous consequences for the country’s ship registry. This shift was particularly perilous to coastal trade because the company had a virtual monopoly
132 Safmarine retained its 40% share in Unicorn Lines acquired during the 1967 the merger, while Grincor held the other 60%.
133 For instance, Grincor formed Griffin Shipping Holdings Limited and moved its vessels into that company to enable the vessels to trade in an identity that had no association with South Africa. The business operated out of Hong Kong. For fuller details see Ingpen (note 86) 88.
134 Trevor Jones in S. Jones The Decline of the South African Economy (2002) 143.
135 Ibid. 193.
at this stage. It effectively resulted in the complete “de-flagging” of the South African commercial ship register.
In the absence of cabotage anywhere on the African coast, Unicorn Lines began to operate as a foreign flag further up the coast of Africa, both to the east and to the west, through joint ventures with European entities that were already established on the routes. The company also operated services to the Indian Ocean Islands in a joint venture with Delmas. Furthermore, the company joined Moore-McCormack from the US and together they operated fortnightly calls at all South African ports, and in Mozambique, Tanzania and Kenya. On these trades, Unicorn Lines vessels bore no reference to South Africa. The trade was eventually conducted under the guise of the US counterpart who were free to trade on the coast. The glaring duplicity was, of course, the fact that none of the African countries in which US companies traded enjoyed reciprocal rights on the US coast due to the latter’s ardent cabotage policy.136 Unicorn Lines increased its capacity on the west coast of Africa routes in 1992 to Angola137 and to the then Zaire.138 However, this did little to enhance the company’s financial standing. The Indian Ocean Island route was also badly affected by fluctuations in returns and therefore was soon phased out. Trade between Angola and South Africa eventually improved, and this prompted a joint venture between Unicorn Lines and Safmarine to provide coastal services that covered ports from Angola in the east to Kenya in the west. However, service on this route was withdrawn because of over-tonnage.139
In 1994 South Africa shed its pariah status and did so convincingly. Despite the new developments, Grindrod retained its tonnage offshore. The company listed the subsidiary, Griffin, on the Johannesburg Securities Exchange, but kept Griffin’s core operations in Hong Kong.140 It seemed that through Griffin, Grincor had been convinced that it was more worthwhile to operate from offshore than from the South
136 Ingpen (note 86).
137 Ibid. The conflict in Angola, at its peak in 1995, led to higher insurance premiums. The turnaround came with the assassination of Jonas Savimbi in 2002. The event was followed by peace and fresh investments.
138 Ibid. Zaire civil war disrupted the services with consequent financial losses.
139 Grindrod withdrew from this route as soon as it bought the “Safmarine shares” in 1999.
140 Griffin delisted in 1997 following the Asian market crash that significantly lowered chartering rates.
Its fleet was either sold or brought back onshore to Unicorn Lines. Ingpen (note 86) 90.
African coast. Grindrod’s 141 approach to coastal services changed from this point onwards. The result was that by the turn of the century, the company had withdrawn whatever was left of its multi-purpose fleet from the South African registry.142
With Unicorn Lines operating overseas or trading on the African coastline under pseudonyms or joint ventures, the beginning of the new millennium marked the end of South African-flagged vessels on the coast. The country was confined to trading with foreign-flagged vessels which has, for all intents and purposes, remained the norm to date.143