THE South African Revenue Service (SARS), estimates that the fiscus has lost R7 billion due to offshore bunkering operators’ non-compliance with the rules of the Customs and Excise Act. In a case heard in the Eastern Cape High Court before Judge Potgieter in February, one of the three licensed operators estimated the company’s monthly loss while the operations are interrupted by SARS’ detention and subsequent seizure of vessels, at approximately R300 million per month.
Bunkering operations were described as extensive in scope and the applicants, Heron Mauritius and Heron Marine South Africa indicated that it counted among the biggest of such operations worldwide.
Bunkering – the process of supplying fuel to ships – is potentially a booming business for South Africa due to the country’s proximity to heavily trafficked shipping lanes. Offshore bunkering is particularly attractive as it avoids port levies and speeds up turnaround times.
The protected waters of Algoa Bay are ideal for the ship-to-ship (STS) transfer of marine fuel. Before SARS’ intervention, it was a vessel’s only option for offshore bunkering in South African waters.
Deficient tax law
The resolution of this legal ‘lacuna’ is not speedy. SARS halted all operations in September last year and it looks as though operators will have to wait until amendments make their way through the political channels (possibly distracted by elections in May) before they can start up again.
SARS has published draft amendments to the rules of the Customs and Excise Act which was open for comment by 12 January 2024. The purpose of these amendments appears to be aimed at coming to terms with novel operations which utilise tankers as floating storage facilities for fuel stocks that are sold to foreign-going vessels and supplied through STS transfers or transhipment within ports.
An article published by the trade law centre, tralac, detailed the unfolding saga. Researcher Emily Pender says the February ruling is not surprising given that SARS laid out its argument months ago. SARS claimed (and still claims) it has acted lawfully and is investigating tax evasion within South African waters.
She notes that Algoa Bay is the largest bunkering location in South Africa. With monthly sales of 50,000-100,000 metric tons, has played a crucial role in global shipping since 2016.
Bunker operations and services are conducted in accordance with bunkering licences granted by Transnet National Ports Authority (TNPA) and approved by the South African Maritime Safety Authority (SAMSA).
Increased demand
SARS’ timing could not be worse. With most of the major shipping lines re-routing vessels around South Africa to avoid the risk of attack by Houthi rebels in the Red Sea, passing vessels on this longer route burn more fuel as they race to cover the extra distance.
Overall sales of marine fuel in Singapore were 4.9 million tons in January, up about 12%, according to the Maritime & Port Authority. In December, they hit 5.1 million tons, the highest monthly volume in data going back to 1995, gcaptain.com reports.
Appealing to government to intervene in the issue after the SARS raid in September, Unathi Sonti, chairperson of the Maritime Business Chamber, said that about 30 000 vessels sail along the coast of South Africa each year and approximately 13 000 vessels visit South African ports annually.
Sonti outlined the economic impact, in addition to direct employment, brought by offshore bunkering operations to Algoa Bay, including off-port boat operators, shipping agents, chandlers, diving companies, and activities associated with seafarer transfers.
Sonti remains hopeful that the impasse will be resolved as the MBC promotes the ocean economy.
Environmental impact
The calm waters of Algoa Bay also attract marine life, such as the endangered African penguin. conservation bodies like the Southern African Foundation for the Conservation of Coastal Birds (SANCOB) are not in favour of offshore bunkering in the bay. An environmental study commissioned by TNPA was published on 29 February 2024.
It investigated the effects of offshore bunkering activities in the bay including underwater noise pollution, oil pollution and increased vessel traffic.
One of the study’s recommendations is that the bunkering activities be reduced to only one of two allocated anchorage sites within the bay.
