South Africa's revenue service has impounded five ships off the Eastern Cape coastline in a surprise crackdown that has alarmed the maritime sector and disrupted one of the country's busiest shipping routes.
Industry stakeholders say the move follows a stand-off between the South African Revenue Service (Sars) and bunkering companies operating offshore — and has put about 3,000 local jobs at stake.
The vessels detained include a visiting 228m oil-drilling ship in for repairs but now stuck in the Port of Ngqura (Coega) at huge expense. The others are fuel storage and bunker supply vessels linked to two of the world’s biggest offshore bunkering companies. They are detained in Ngqura or at anchorage in Algoa Bay.
Sars is insisting that offshore bunkering companies pay excise duties on fuel “imported” into South Africa for bunkering purposes. Bunkering companies say their fuel is simply transferred from one ship to another — not used on land. The process involves bunker vessels that refuel passing vessels at dedicated anchorage points within port limits in Algoa Bay.
The vessel detentions last Saturday came just days before Sars announced an expected R22bn shortfall in expected tax collection for the first five months of the fiscal year.
The move has prompted a rebuke from the Maritime Business Chamber (MBC) which claimed action by Sars was a potential disaster for the marine industry and fuel security in South Africa.
“Sars's actions appear to be at odds with the government’s mandate of advancing economic growth, job creation and foreign investment,” said MBC chair Unathi Sonti in a letter to the Presidency on Wednesday, requesting its intervention.
Sonti said Sars had not responded to bunkering company requests for clarity on customs, excise and VAT issues. By ignoring these requests, Sars “through its detention of vessels, paralysed the business and made South Africa unattractive”.
He warned of an imminent fuel supply problem without a resolution, noting that at one stage this month there were about 31 vessels lined up for fuel, which could not be supplied by a single operator.
Sonti said jobs that could be affected include seafarers, ship agents, ship chandlers, diver companies and numerous suppliers and their staff involved in the offshore bunkering value chain.
It is understood that VAT on fuel oil would amount to between R75m and R90m a month, while marine and diesel taxes and levies would be between R45m and R52m a month.
The South African Maritime Safety Authority confirmed the impounding of the ships.
“Samsa is aware that the tankers have been detained by Sars on the basis of matters related to noncompliance under the Customs and Excise Act,” the organisation said in response to queries.
“Samsa and the department of transport engaged Sars officials on September 15 to seek the correct information that led to the detention of the tankers.”
Sars spokesperson Siphithi Sibeko said Sars was legally prohibited from disclosing any information “acquired in the performance of its duties”.
Industry sources said the dispute stems from outdated legislation making no provision for duty-free fuel transshipments — standard practice at other global transshipment locations.
The Treasury has yet to update the 1964 Customs and Excise Act since offshore bunkering started seven years ago with the blessing of Samsa and Transnet National Ports Authority.
The detained vessels include two linked to global bunkering firm Minerva and two linked to TFG Marine and its local operating partner Heron Marine. The Deepwater Orion is owned and operated by deepwater drilling contractor Transocean. Sars issued notices saying the vessels are being detained indefinitely for investigation. It did not mention any money owed.
A shipping agent for the Deep Water Orion would say only that discussions with Sars were ongoing. Minerva and TFG were tight-lipped. A TFG marine spokesperson said: “We understand that Heron Marine is in dialogue with local regulators. Heron Marine is working with customers to manage their bunkering requirements.”
South Africa’s offshore bunkering is a flagship economic subsector linked to the government’s Operation Phakisa job creation programme. It was established seven years ago in Algoa Bay to create employment in the Eastern Cape. Algoa Bay is well suited to offshore bunkering due to its proximity to a major shipping lane.
The government has to date issued three operating licences to local bunkering companies, involving three major international bunkering companies.
Industry sources said the Sars crackdown could potentially chase companies away to other bunkering locations and knock ship repair and other services.
“It’s an attack on the shipping industry,” said one industry source. “What they are trying to do is detain vessels and cargo and try to seize it to score the money — they are like gangsters,” he claimed.
Another source said the intervention should be viewed in the context of a big increase in offshore bunkering volumes due to decreasing local refinery capacity. Sars was concerned that an increasing volume of fuel was escaping the Sars net.
“The chances are that a huge amount of this product might have found its way into the republic without paying the appropriate levies,” the source said.
Other sources say Sars is simply trying to make money off a legal technicality, and point out that duties can be charged only on product that is consumed in South Africa. By insisting that floating bunker fuel storage facilities in Algoa Bay are “imports” Sars claims duties are payable — a move that is likely to chase ships away to duty-free bunkering facilities.
Documents seen by the Sunday Times confirm the customs and excise duty has been under discussion for years. The matter was raised at an August 23 meeting and the minutes note that Sars advised there would be no concession for noncompliance and uncertainty regarding the Customs and Excise Act.
But in its discussions with industry, Sars concedes it is acting in terms of an outdated version of the act. A new act, the Customs Control Act, was approved by parliament in 2014 but has yet to be implemented.
The Transnet National Ports Authority and the transport department did not respond to questions.
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