The COVID-19 Lockdown Impact On Operation Phakisa: The Maritime And Ocean Economy

 Lihle Ngcobo

**Submitted: August 2021

*Accepted: March 2022

  Abstract

The maritime and ocean sector contributes a great deal to the South African economy. Kwa-Zulu Natal (KZN), a province housing two of the busiest ports in the country, largely depends on the revenue directly or indirectly generated by the Port of Durban and the Port of Richards Bay. All of South Africa’s ports contribute to Operation Phakisa’s ocean economy programme, and any type of disturbance like the COVID-19 restrictions and the recent social unrest greatly affects the country as a whole. The COVID-19 outbreak was first discovered in Wuhan, China, in December 2019 and the virus quickly spread across the world, devastating livelihoods, affecting global supply chains, and impacting the economy of the world at large. With the virus rapidly spreading in early 2020, restrictive measures were quickly implemented by many nations to combat its spread. South Africa was one of the countries to implement COVID-19 restrictions and introduced the national lockdown alert level system which came in 5 levels.

The COVID-19 lockdown restrictions affected the South African economy which included the maritime and ocean economy. With the ongoing and ever-changing alert levels and the recent social unrest, South Africa was undoubtedly affected in a massive way, and KZN evidently most impacted. The maritime and ocean economy was additionally affected when the government restricted access to the country’s ports of entry. This paper examined how the maritime and ocean economy was affected by the COVID-19 lockdown restrictions.

Furthermore, the study used a desk research approach and was conducted using secondary data. The paper focused on the maritime and ocean economy, which is also one of the institution’s mandates. This study zoomed into how the lockdown restrictions affected global maritime and the shipping industry with regard to crew change and the shipping supply chain. It also elaborates on how the social unrest negatively impacted the already crippled maritime and ocean economy, and how the recent cyber security at Transnet was the nail in the coffin for South Africa’s maritime and ocean economy during the COVID-19 pandemic.

Keywords: COVID-19, COVID-19 lockdown, Operation Phakisa, maritime and ocean economy, shipping industry, shipping logistics, supply value-chain

1. Background

South Africa is one of the many African countries that has huge potential for maritime business and industry development due to its strategic geographical position in the continent. It is for this reason that the South African government introduced Operation Phakisa (Ocean Economy). According to the Parliamentary Monitoring Group (2012), in a meeting between the South African Maritime Safety Authority (SAMSA) and the three Portfolio Committees (Transport,  Public Enterprise and Trade and Industry), the government adopted seven maritime sectors, which include (1) the maritime logistics infrastructure; (2) shipping transport; (3) coastal and marine services; (4) fisheries, pharmaceuticals and aquaculture; (5) offshore energy and mining; (6) boating and cruising; and (7) sports and recreation services. These components, if well exploited, can boost South Africa’s international trade and generate revenue for the country while at the same time increase job opportunities.

Moreover, it is understood that the maritime sector has the potential to contribute to the economic growth and development of South Africa; as well as contribute to the building of an inclusive society; thus addressing the triple challenges of poverty, joblessness and inequality. The ocean economy's contribution to the country's GDP was estimated to grow by R129-177 billion by 2033; some 250% to 350% of its present value; and subsequently creating a potential of 1 000 000 jobs (Scholtz, 2020). This can be achieved more profoundly if adequate human capital is made available that will contribute to the body of knowledge and skills pertaining to South African waters. Gasconading a coastline of around 3,000km within three oceans on a major strategic shipping route with eight established commercial ports, the country has endless opportunities to offer (Department of Forestry, Fisheries and the Environment, 2020). 

Despite the country’s potential, South Africa faces numerous challenges exploiting its maritime potential compared to other maritime countries such as Brazil, Russia, India, among others (Parliamentary Monitoring Group, 2012). Fortunately, this sad reality was considered in the Executive Summary of the South African National Development Plan for 2030 (2012). The National Development Plan (NDP) is South Africa’s socio-economic development plan which encourages the country to generate a better life for all its citizens, and create an inclusive society.

It is true that some advancements have been recorded to improve the maritime and ocean sector in South Africa. One of the most significant advancements was the introduction of the Operation Phakisa (Ocean Economy) programme. Operation Phakisa is an initiative of the South African government designed to fast track the implementation of solutions on critical development issues; therefore, accelerating the delivery of some of the development priorities (Operation Phakisa, n.d.). The project was launched in July of 2014 to assist the government in implementing the NDP, with the ultimate goal of boosting economic growth and creating jobs. Operation Phakisa is a cross-sector programme which engages various stakeholders to implement initiatives and provide possible solutions that can assist in the delivery of the key focus areas for public accountability and transparency (Operation Phakisa, n.d.).

2. Introduction

Since the inception of Operation Phakisa (Ocean Economy) back in 2014, a growing body of literature has emerged discussing and challenging the impact of the initiative and drawing on the project's successes and failures. The onset of the global COVID-19 pandemic made this discussion even more relevant as South African citizens were desperate for solutions, and Operation Phakisa leaders had made big promises.

Another recorded advancement that speaks to Operation Phakisa (Ocean Economy) in the maritime sector is the Department of Transport’s approved Comprehensive Maritime Transport Policy (CMTP). The CMTP serves as the policy on maritime transport affairs in South Africa, and the embodiment of the Government's commitment to the growth, development and transformation of the sector. The CMTP was implemented with the intention of contributing to international trade and facilitating regional trade by providing maritime transport infrastructure and services. It was also for creating employment and building maritime capacity to delegate government authority to administer and regulate South African waters efficiently, as well as empowering coastal communities to sustainably exploit their maritime domain.

South Africa has several provincial and national institutions and government departments that are mandated to advance and develop the nation’s maritime interests. Operation Phakisa roped in some of these organizations to accelerate the development of the maritime nation, as the country envisaged being an international maritime player by 2030, a vision born from the former President Zuma’s state visit to Malaysia in August 2013. He was introduced to the Big Fast Results Methodology through which the Malaysian government achieved significant government and economic transformation within a very short time (Department of Environmental Affairs, 2016, 2017). Phakisa means “hurry up” in Sesotho and Operation Phakisa was going to be a results-driven, on-going monitoring, clear plans and targets setting project; and would make the project’s results available to the public. The COVID-19 pandemic has however halted several Operation Phakisa (Ocean Economy) projects thus presenting a challenge for the country.

3. The Impact of COVID-19 Lockdown on Operation Phakisa (Ocean Economy)

 

3.1. Lockdown Restrictions on Global Maritime and the Shipping Industry

The World Health Organization (2020) declared the coronavirus a pandemic on 11 March 2020, and many countries around the globe introduced strict measures locking down their borders of entry, in  an attempt to decrease the spread of the virus. China was the first to react in implementing a national lockdown, followed by Europe, and then South Africa - being the first to react in Africa. This was the first bold move by the South African government which subsequently resulted in the decline of Operation Phakisa-related activities, especially port-related activities.

The South African President, Cyril Ramaphosa, announced in March that there would be a 21-day national lockdown commencing on 27 March 2020. This was extended to 30 April 2020, which was then followed by a series of lockdown alert levels from the 1st of May 2020 to date. The lockdown restrictions ultimately were to control the movement of people and goods coming in and out of South Africa.

These COVID-19 lockdown measures disrupted the global trade, maritime supply chain systems and distribution channels of many nations.  These measures brought about strict regulations and restrictions on numerous sea ports. By July 2020, around 120 countries implemented coronavirus-related restrictions, while 92 prohibited ship crew changes entirely according to data from Inchcape Shipping Services (Kinsey, 2020). Furthermore, prolonged periods of working on board a ship may lead to crew fatigue which is known to cause human error. This not only affected and risked the lives of seafarers but also compromised on the very promise of the International Maritime Organization (IMO) and its Member States. The IMO was very quick to make a call that the welfare of seafarers should be globally prioritized as seafarers are the backbone of the maritime and shipping industry.

3.2. Seafarer Welfare and Crew Change

Globally, the lockdown restrictions affected the seafarer's crew change schedules. The inability for vessels to change crews at the scheduled time became a huge concern for the shipping industry. The crew change routine is essential for ensuring the seafarers' wellbeing as well as the safe operation of ships. The IMO intervened on the seafarer crew change issue and assisted in convincing maritime authorities around the world to designate seafarers as key essential workers and to be exempted from COVID-19 travel restrictions. This came after more than 400,000 seafarers were reportedly stranded at sea for months beyond their contract expiration date (International Maritime Organization, 2020).

The United Kingdom of Great Britain’s Department of Transport (2020) hosted government representatives from 15 states at an International Maritime Summit on crew changes on 09 July 2020. The summit brought about high-level United Nations officials with political and business leaders from across the globe. The summit was able to facilitate a joint pledge from government officials to commit to opening foreign borders for seafarers and increase the number of commercial flights to expedite the needed repatriation of seafarers. Some governments signed the pledge, including South Africa who later started permitting crew changes at its commercial ports and later eased its COVID-19 lockdown restrictions to level 2 on 18 August 2020.

The easing of crew change restrictions was a positive turnaround for the country as South Africa is the preferred international stopover hub for seafarers. This stopover provides vessels with bunkering services, replenishment of provisions and stores, fresh water, spares, and enables medical evacuations and other husbandry services that are offered while ships anchor off port limits - OPL services (G&G Digital, 2020). These port activities contribute immensely to the country's economic growth and job creation, as it is often reported.

3.3. Global Shipping Supply and Value Chain

The South African maritime transport and marine manufacturing industries contribute around R56.5bn to the economy each year (Wood, 2019). Approximately 98% of the country’s total trade (in volume) is carried by ships, which translates into about 13 000 ship calls handling trade through South African ports, employing about 60 000 seafarers (Duncan et al., 2016). Investments have unlocked around US$1.1 billion since the inception of Operation Phakisa (Ocean Economy) and created over 4 500 jobs (InvestSA and Operation Phakisa, n.d.) in the ocean's economy sector.

The gesture to allow crew change by the South African government was commended by numerous individuals in the maritime sector who expressed their concerns that if the welfare of seafarers is compromised, the global shipping supply chain will be compromised, which ultimately affects the whole global seaborne trade value chain. The COVID-19 outbreak globally impacted the maritime sector’s industry value chain by over USD$200 billion (G&G Digital, 2020), with the global freight and shipping industry being the biggest casualties (SAIMI, 2020).

The pandemic, however, brought about changes for cargo transportation, impacting freight forwarders and transport companies around the world. Although cargo transportation was widely recognized as an essential activity, a number of cargo handling company's operations were shut down during the COVID-19 lockdown, while ports were operating under strict restrictions. Cargo stored in high-risk areas without appropriate security controls or protective safeguards ran the risk of large losses from fire or extreme weather conditions, while delays at ports may have also resulted in cargo damage especially the perishable or temperature-sensitive goods.

The slowdown in shipping demand, furthermore, caused many ports to experience a reduction on vessels calling, due to the rescheduling of itineraries as a result of decreased cargo volumes. Some ports were experiencing a decline in exports, because of the closure of destination ports in Asia and Europe (IAPH cited in SAIMI, 2020). South Africa was not spared as well.  Major container shipping lines reportedly temporarily suspended their trade route between Asia and Europe because of some ports rejecting shipments from China in the attempt to reduce the risk of the virus spreading. South African ports, nonetheless, remained open for goods coming in from high risk countries; but these goods first had to be sanitized. These COVID-19 lockdown alert level adjustments caused terminal operation changes, resulting in a scale down of transportation services; which ultimately led to the servicing of essential and strategic goods only (SAIMI, 2020).

3.4. Social Unrest Contributing to Shipping Supply Chain Disruptions

While South Africa was still under adjusted alert level 4 lockdown from 28 June 2021, the country saw something it had never seen before. The former President of South Africa Jacob Zuma had been sentenced to jail for 15 months for contempt of court and had surrendered himself to the police. This shortly erupted into protests and violent riots, which exploded into unpredicted social unrest which included the looting of businesses in an unsparing way.

The South African supply chains were heavily disrupted following the rioting and burning of vehicles and trucks, which caused the haulage system to come to a standstill. In response to this, Hapag-Lloyd announced closure of some of their terminals due to the social unrest. Maersk also reported some of its depots being shut down and terminals operating with limited staff. It also declared that no detention would be invoiced from 12 to 19 July 2021 (Container News, 2021).

Kotze (2021) reported that the port, rail, and road transport operations and systems were also heavily disrupted by the social unrest, which affected the movement of mined raw materials. He further revealed that the Kwa-Zulu Natal supply routes were most affected, resulting in Southern Africa's largest oil refinery in KZN, the 165,000 bbl/d South African Petroleum Refineries, to declare force majeure on July 13, 2021.

Assmang and ArcelorMittal South Africa, the ferrous metals miner and processor, also declared force majeure on their customer contracts on 14 July 2021. Transnet, too, declared a force majeure on the 688-km-long Natcor bulk freight rail network, which links Gauteng to the Durban and Richards Bay ports, and furthermore stated that the service levels at the two ports had been negatively affected due to the unrest.

The social unrest and disruption added to the COVID-19 negative impact caused by the restrictions. It further affected business operations, which resulted in the further loss of income in a number of companies that rely on the movements of cargo for their operations, or are in the business of transporting goods. South Africa was double-hit by COVID-19 restrictions and the social unrest, and the country is still slowly recovering from these two major disruptions. It is now evident that the social unrest affected the economy of the country which ultimately resulted in the closure of some companies and loss of jobs in some instances. 

3.5. Cyber disruptions affecting Operation Phakisa - Oceans Economy

While Transnet was still trying to recover from the social unrest activities and COVID-19 restrictions, the company was additionally hit with cyber-attackers who successfully hacked their information technology systems, thus weakening their cybersecurity. Cybersecurity is the practice of protecting systems, networks, and programs from digital attacks. The specter of attacks that exposes critical maritime infrastructure exists against a backdrop of rapid digitalisation, as ports and shipping companies increasingly rely on new information and communication technologies. Transnet, South Africa’s state-owned rail and port company’s computer systems were shut down due to a ransomware attack on 22 July 2021. Transnet National Port Authority (TNPA) is a landlord of South Africa’s ports systems, and the Authority is responsible for promoting, improving, developing and controlling the land use within these ports.

The company shortly after declared a force majeure (Reuters reported) on 27 July 2021, emanating from the attack. Transnet operations slowed down to a near standstill, with its IT systems shut off, the company had to go back to using manual systems for the operation of the ports. “Transnet has identified and isolated the source of the disruption on its IT systems,” said the operator in a statement released on 23 July 2021, and that the Port of Durban was prioritizing export reefers with perishable cargo (Savvides, 2021). Minister Khumbudzo Ntshavheni, in addition, stated that the government believes that the cyber attack had nothing to do with the recent social unrest.

4. Conclusion and Recommendations

The ocean and maritime economy has always been posed as a sector that will create job opportunities, generate more revenue for the country, and grow the country’s Gross Domestic Product (GDP). The productive and efficient use  of  the ocean  resources in growing the South African maritime sector is well captured in the Operation Phakisa (Ocean Economy) project objectives. However, more action is required to deliver on the big promises made by the maritime leaders.

The pandemic affected the global maritime supply chain and seaborne trade, and the added social unrest affected South Africa as a whole, but more especially the KZN province. As much as the COVID-19 pandemic affected and continues to affect the maritime and ocean sectors, the industry can still improve. Maritime is a global industry and will never stop forging ahead regardless of the current continuing challenges. The government should, however, be intentional and show boldness in its efforts to progress the industry. The departments and state agencies assigned to take the maritime sector forward need to deliver on its mandate and account to the plans set in motion by Operation Phakisa (Ocean Economy) programme deliverables.

The COVID-19 global pandemic has shown that the systems that are put in place by the IMO for its Member States to ensure that seafarers' wellbeing is prioritized need further improvements.  The recent social unrest put a challenge to the South African government to address the vast social inequalities devastating the country. The cyber-attack on Transnet further revealed that the maritime sector supply chain is crucial for the country to connect with the rest of the world, and that Transnet plays an important role in South Africa and should ensure that their operations are safe and secure from cyber-attackers.

This paper has reasonably raised critical issues relating to the impact of the COVID-19 lockdown restrictions on the Operation Phakisa initiative, and the results are evidently clear. The maritime and ocean economy is visibly one of the most crucial sectors for global trade and the  country’s social unrest and the cyber-attack on Transnet has exposed the weakness South Africa has on its systems.

It is therefore imperative that all nations recognize the value of shipping and seaborne trade because without it, life as we know it will come to a complete standstill across the globe. The COVID-19 pandemic has globally shown how interconnected the world is, and how information technology is the future in the maritime sector - despite its cyber-security risk factors. As the world moves forward, countries must invest more in putting appropriate measures in place to minimize the financial risks presented by global pandemics, social unrest, eruptions and cyber-security attacks.

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