Fishing canned to 3% of GDP

By Confidente Reporter

FRAUDULENT Icelandic firm, Samherji transacted over N$47 billion between 2008 and 2019 yet in the years they have been active in Namibia, government only received an average of N$3 billion annually from the fishing sector, Confidente has unearthed.

Essentially the fishing industry has contributed a paltry 3% of GDP on average since 2007 suggesting that the money earned by Samherji from Namibian fish since 2012 – much of which appears to have been hidden in tax havens – could have been injected into the struggling Namibian economy instead.

An investigation by Confidente has also revealed that the fishrot scandal has cost the Namibian economy an eye-watering amount of money that goes far beyond the reported N.

5 billion siphoned off through alleged tax evasion, underpayment for produce, price transfer mechanisms and bribes.

The amounts of revenue lost – that would otherwise have been channelled to national development projects – were first noted in the value that Icelandic firm Samherji bought the fishing quotas for from Namibian players, compared to the price Samherji actually sold the fish for.

Indications are that new Namibian operators in the fishing sector apparently did not know the price of fish on the world market and in many instances these new quota holders were prepared to accept a cut of less than 10 percent of the actual value of Namibia’s fish on the global market.

“When Samherji came, they offered us N$1,600 per tonne of fish to acquire our fishing quota because they had the capacity (vessels) to fish. However, the true value of a tonne at that time was US$1,000 (N$15,000). So you can imagine how much money was lost by our industry through that avenue,” a fishing industry player who declined to be named told Confidente.

FINANCE MINISTRY INVESTIGATES

Finance Minister Calle Schlettwein this week also confirmed to Confidente that large sums of money have been lost through transfer pricing and tax evasion, adding that an investigation to recover some of the lost funds is underway.

“The fishrot saga has indeed confirmed our suspicion that there has been transfer pricing and tax evasion in the fishing industry and the ministry is busy with an investigation into this.
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We have on company basis already recovered some money as we continue to investigate.

“Owing to the fishrot saga, the Namibian economy has lost billions. This is through revenue lost by our fishing resources being moved out of the country and money going out of the country to other tax havens, like Mauritius… this money could have developed our country. We also lost direct income through tax that could have also contributed to our GDP,” Schlettwein said.

All indications are that the growth of the local fishing sector was hindered by former minister Bernhard Esau’s decision to take fishing quotas from Namsov (a subsidiary of Bidvest Namibia), which had been the highest contributor of tax and jobs in the fishing sector, and award them to BEE partners of Samherji.

Namsov, which later scaled down and shut down operations, also had a Trust that pumped millions of dollars annually into community development projects.

Bidvest annual reports show that in 2011 its fishing business generated N$473 million in profit; N$563 million in 2012; N$528 million in 2013; N$406 million in 2014; and N$368 million in 2015. But for the year ended 30 June 2017 trading profit had declined dramatically by 68 percent to N$92 million, with the fishing division contributing only N$39 million.

Bidvest Namibia, whose fortunes from its fishing unit had evidently dwindled considerably since government cut its quota, subsequently announced plans to dispose of the business, shedding in excess of 700 jobs.

“The re-allocation of fishing quotas from a private sector company to [Fishcor] a few years ago had impact on the profits of the private sector company and hence on the returns to the shareholders, which included pension funds. The company finally de-listed from the NSX, leaving Namibian institutional and private investors with fewer investment choices. The need for having a SoE fishing company needs to be reviewed since there are established private sector companies and hence no need for the State to get involved,” economist Klaus Schade said.
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“The reported scandals in the fishing sector should be used as an opportunity to review how fishing rights and quotas are allocated and alternative ways, such as auctioning of quotas, should be evaluated. These challenges are not confined to the fishing sector, but include other natural-resource extracting industries as well.”

Schade further explained that the tendency to sell to foreign companies fish quotas meant for Namibian companies has various deleterious impacts on jobs, on tax revenue and value addition. “If sold to foreign fishing companies that use their own fishing vessels and crews, the quotas deny Namibians job opportunities on board and hence income.”

Another economist, Mally Likukela, remarked that “At a time that Namibia is still trying to stave off a downward spiral in terms of competitiveness, the last thing we need is this scandal. The economic impact of the fishrot saga will be so severe that its cost in the long run will be very huge. This saga will reverse all the gains made by government’s international investor’s conferences. It definitely explains the main reason for Namibia’s slow growth.”

The vessels used by Samherji’s subsidiaries mostly employed non-Namibians as fishing crew, Confidente was also told. In a related development, the police confirmed this week that the trawler vessel, Heinaste was seized on 22 November and its Icelandic captain – said to be a former Samherji employee – arrested for illegally entering and fishing in Namibian waters.