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Quota auction fails to achieve target

Quota auction fails to achieve target

Niël Terblanché

THE participation of speculators from outside the fishing industry and a lack of punitive measures and time sank the Namibian Government’s hope to generate substantial income from the recent quota auction.

 

After two rounds of renegotiating the terms of the auction and the extension of payment deadlines, the auction generated only N$8,446 million in revenue.

 

The Minister of Finance, Ipumbu Shiimi announced the final results of the auction of the Government’s share of the annual of the Total Allowable Catch and said that in the end only 1 517 tonnes out of 72 000 tonnes of horse mackerel and 100 tonnes out of 11 000 of hake were successfully sold to five bidders. He said the national treasury also generated N$76 000 in registration fees.

 

“Although the first auction did not yield the desired outcome, we gained significant insight from the process. This knowledge will be used to ensure that future auctions will reach the set objectives,” Shiimi said.

 

Quota auction fails achieve target participation speculators fishing industry Namibian Government
Pictured: Minister of Finance, Ipumbu Shiimi. Photo: File

 

The Minister of Finance’s full speech during the announcement reads as follows:

Background

I wish to thank you most sincerely for responding to our invitation today. As you would recall, the Government of the Republic of Namibia decided to sell the fish quota for Governmental objectives through a competitive auction to the highest bidder. The aim was to determine the correct value of Namibia’s fishery resources with the view to ensuring that the country fully benefits from her natural resources. This was the first time that the quota for Government objectives was sold through a public auction since in the past Fishcor facilitated the disposal of this quota. The auction was also implemented in response to the recommendations of the Presidential High Level Panel on the Namibian Economy (HLPNE).
Establishment of the technical committee

The auction process was managed by a Technical Committee. This committee is comprised of senior officials from the Ministry of Finance, Ministry of Fisheries and Marine and Resources, National Planning Commission, Central Procurement Board, Ministry of Works and Transport, and Office of the Attorney General.

Outcome

The auction process (from invitation to bidders to the finalisation of auction results) was implemented between 17th August 2020 and 09th September 2020. The fish species that were auctioned were 11 000 MT of Hake; 72 000 MT of Horse Mackerel and 392 MT of Monk. In the spirit of transparency and to keep the Namibian public informed on the developments of this important intervention, we announced the results of the first round of the Auction to the public on the 27th of August 2020. Information shared included the highest successful bidders for each of the spices (Hake, Horse Mackerel, and Monk). We further informed the public that a total number of 52 companies participated in the auction, out of which thirteen (13) emerged as the highest successful bidders. The successful bidders from the first round of the auction were awarded bids valued at a collective amount of N$627.9million and they were expected to settle their allocations by the 2nd of September 2020.

As the deadline for payments by the highest successful bidders in the first round of the auction was coming close, most of them requested for an extension of the deadline for payment and/or harvesting season. Even though the deadline could be extended for payment, bidders were informed that extending the harvesting period was not legally possible. Unfortunately, many did not keep their payment commitments.

In line with regular auction practices, when the highest successful bidder is unable to take up the offer, an award is offered to the next highest successful bidder, a situation that calls for a second round of auction. In this case, the second round evaluation took place on the 9th of September 2020. A total number of 18 highest successful bidders were awarded the bids valued at N$464.9million. Award letters were sent to the bidders, and they were given up to the 15th of September 2020 to make payments for their respective allotments. Out of these, only three (3) bidders accepted and settled their payments while others requested for the extension of payment deadlines and/or fishing season. The names of these bidders are also attached to this press statement.

Observations

Some of the prices offered by the bidders were on the high side compared to the reserve prices of Government. While others were not too far off from the reserve prices, which was set at 20-30 percent higher than the prevailing market price. Therefore, we believe that the auction is still the best option for our Government Objective Fish Quota.
I wish to point out that most of the players who participated in the auction are not necessarily existing players in the fishing industry. Most, if not all, do not own vessels. It also appears as if many fishing industry existing players that own vessels stayed away from the auction while those that participated, their bid prices were far lower than the reserved price. New players that participated in the auction claimed that they faced a number of challenges such as the non-availability of Namibian registered fishing vessels which was a condition of the auction. The position of the industry, through the Confederation of Namibian Fishing Associations, is that it is not in support of the auctioning of the governmental objectives quota.

We further observed that the allocated timelines for payment and for harvesting the quota were too short to enable international companies to participate in the auction. For example, the Metric Ton (MT) offered to international entities only resulted in 23% participation, while local participation accounted for 77%.

I should also point out that we as a Government, did not have enough time to ensure that all necessary measures were put in place before the auction took place. This was mainly due to the fishing season for some species, such as Hake, which is ending today and we wished to have the quota exploited before the end of the season. It was therefore difficult to provide a longer payment period for bidders.

In respect to the request from bidders to extend the fishing season, it should be noted that in terms of section 38(1) of the Marine Resources Act, Act 27 of 2000, the Minister of Fisheries and Marine Resources limits the Total Allowable Catch (TAC) for a given period. After the fishing season period, there is a time period for spawning (reproduce). Therefore, the quota cannot be harvested outside the fishing season.

It is against this background that today I hereby announce to the public, through you the media, the final results of the auction process after two rounds of negotiations with successful bidders. Out of the highest successful bidders, only 5 bidders managed to take up their offers and settled their payment obligations, which amounted to N$8,446,000. The corresponding quantities offered by these bidders, with exception of monk fish, are small and are as follows: 100 MT out of 11 000 MT for hake and horse mackerel 1517 MT out of 72 000 MT. An additional N$76,000 was generated from application fees. The bidders that have fulfilled their payment obligations have started harvesting their respective quotas allocated to them.

Unallocated Quotas

Given the outcome of the auction reported above, there are still unallocated quotas for different species. These are as follows: Hake 10 900 MT, Horse Mackerel 70 483 MT and Monk Fish 92 MT.
Way Forward

The Technical Committee has been directed to plan future Government Objective Fish Quota Auction(s) for the next season for Hake and Horse Mackerel, starting in November 2020 and January 2021, respectively, taking into account lessons learned from this auction.

There might be a chance that one of the players may settle their payment obligations in due course, once that happened the public will be informed.

We have learned good lessons from this auction and that will be valuable going forward. In the future, punitive measures will be introduced including requirements for payment guarantees or bid securities before participation in the auction. This will ensure that bidders meet their financial commitments and mitigate the risk of speculative bids. In addition, more time will be given to bidders to arrange their finances. Further, bidders will be required to prove that they have access to fishing vessels.

Conclusion

I wish to conclude by emphasising that the main reason for auctioning the quota for Governmental objectives was to find better ways for Namibia to fully benefit from her natural resources, as well as to promote transparency. Although the first auction did not yield the desired outcome, we gained significant insight from the process. This knowledge will be used to ensure that future auctions will reach the set objectives.

In this regard, we appeal to fellow Namibians, the fishing sector, local and international players, to work closely with, not against, Government for the country to realize her noble objectives. Funds generated from natural resources are needed to support the socio-economic objectives of the country such as the provision of serviced land, housing, health, education, among others.

We look forward to effective cooperation and patriotism on this important national objective.

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