Fishing Industry Still Waiting for Incentives

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By Mbatjiua Ngavirue

WINDHOEK

The Namibian government has often stated that it wants to move the country away from being primarily an exporter of raw materials to a diversified economy with secondary industries.

A cornerstone of the government’s economic policies is to gradually transform the country to a manufacturing economy that creates employment by adding value to its natural resources.

To further these policies, the Ministry of Trade and Industry provides a number of incentives for investors to come and establish manufacturing businesses in Namibia.

These include incentive regimes such as the Export Processing Zone Status and another one called Manufacturing Status
Companies granted EPZ status can be exempted from paying corporate tax, import tax, sales tax, stamp and transfer duties.

It gives those approved for Manufacturing Status an 18 percent special tax deduction on the taxable income derived from manufacturing enterprises for a period of 10 years.

Government explicitly expanded the incentives to include the fishing industry in Namibia’s Marine Resources Policy adopted in August 2004.

The Ministry of Fisheries and Marine Resources formalised this policy in a document titled, “Towards Responsible Development and Management of the Marine Resources Sector.”

Paragraph: 6.3.1 specifically states, “Encourage and facilitate the fish-processing sector the same as any other value-added or manufacturing sector, in regard to income tax incentives.”

Based on these promises, some companies in the fisheries sector have made substantial investments in Namibia.

The investments have created many badly needed jobs in the country and increased the country’s foreign exchange earnings.

Some of these investors have, however, now waited several years for the promised incentives, with no signs yet they are ever going to see any.

They point out that there still seems to be a wide gap between the incentives promised by the government and what is actually put on the table.

“They seem to be policies on paper that don’t exist in reality. The people who promise the incentives are not the ones who approve the exemptions or deductions,” fishing industry entrepreneur Elliot Hiskia said.

The process seems to break down somewhere between the Trade and Industry and Fisheries ministries that promise the tax breaks, and the Ministry of Finance that has the final say on all tax matters.

The fishing industry has been in the doldrums for the past few years, with large-scale job retrenchments and disinvestments seen at many companies.

Even though the industry is going through tough times, some companies seem to thrive through a combination of smart business strategies and good management.

A good example is the company Hiskia is involved in, Merlus Seafood Processors (Pty) Ltd.

The company says it has multiplied its turnover seven-fold since starting operations in October 2003.

Merlus Seafood Processors also says it has created 125 well-paid permanent jobs – not the precarious seasonal or casual jobs that tend to be the norm in the fishing industry.

It specialises in the production of value-added Namibian seafood products, almost doubling the value between the semi-processed feedstock it processes and the finished export product.

This also translates into double the foreign exchange income Namibia earns from those products – compared to earnings from semi-processed products.
The company has so far invested N$ 59 million in its high-tech Walvis Bay harbour-front factory.

The company took the decision to go ahead with the factory project in 2002, with construction starting in 2003.

The plant became operational in October 2003, before then Prime Minister Theo-Ben Gurirab officially commissioned it on December 18, 2003.

Merlus Seafood is majority Namibian-owned, but through a joint venture it has gained rights to use the well-known European Mascato seafood brand.

The joint venture partners include the Namibian companies Helgoland Fisheries and Oryx Fisheries and Spanish company Mascato.

The way the white fish industry normally works in Namibia, is that fish is semi-processed at sea into a bulk product packed in large cartons.

Fishing companies only head and gut some, while they fillet, skin and freeze other fish for processing in other countries, or onshore.

Merlus Seafood plant says it is the first in Namibia – even southern Africa – manufacturing finished retail products of a well-known international brand outside the brand’s country of origin.

Normally, a recognised brand such as Mascato would place a factory producing its products smack in the middle of its main market, importing bulk products from abroad for value addition at home.

Hiskia said that in the highly competitive European seafood market it takes years to establish a new brand from scratch.

It requires a great deal of marketing and vast amounts of money that no Namibian company can afford.

“It is a marriage of raw materials ownership and ownership of access to markets, which works beautifully,” Hiskia said.

Further processing of white fish in export markets usually involves portioning, glazing, re-freezing and packing into brand-name retail packs.

Instead of doing this in Spain, Merlus Seafood now does final processing into Mascato brand retail packs in Namibia.

“We could have exported bulk fish, but then all you do is create employment in another country,” Hiskia added.

A unique aspect of the Merlus operation is that up to 33 percent of the fish used to create jobs in Namibia is caught in foreign waters, not Namibia.

When the local market cannot supply enough fish, the company imports up to one third of the fish processed in the factory as bulk fish from South Africa.

Companies within the wider Merlus Group supply 60 percent of the fish processed by Merlus Seafood, with another 10 percent supplied by non-Merlus Group Namibian companies.

The company has no off-season, where employees remain idle at home for several weeks or months at a time.

It keeps enough fish stocks in its cold store to keep the factory working throughout the year.

The Merlus Group includes Merlus Seafood Processors (Pty) Ltd, Merlus Management, which manages the fishing operations, and Merlus Properties.
Joan Peterson, Assistant CEO at Merlus Group, said the group is proud of the way in which it operates Merlus Seafood.

From the very beginning, the company adopted a policy of employing only grade 12 graduates and put a scholarship programme in place.

“We decided to target fresh grade 12 school-leavers because of the high-tech environment in the factory, with the idea that they use the company as a stepping-stone into future careers.

“We see ourselves as providing them with exposure from which they can grow into better careers in the future,” Peterson said.

The production lines at the factory are highly computerised, with continuous computer monitoring of the production process, from the time the factory receives the bulk product to dispatch of the finished goods.

The company says it invests a considerable amount of time and money in training, including both on-the-job and certified courses.

Merlus Seafood estimates it recorded 9,000 man-hours of training throughout the seafood processing company last year.

The company has trained all its supervisors, technical people, team leaders and quality controllers and microbiologists in-house.

Because their employees are comparatively well paid and receive training and study opportunities, staff turnover is very low and labour relations very good.
The bursary scheme gives two or three employees at a time the opportunity to go for further studies, with a bursary awarded to one new employee each year.

There are no strings-attached bursaries, with no obligation on the part of the bursary holder to work for Merlus Seafood after completing his or her studies.

This year the Merlus Group invested in the construction of a fully equipped training centre where it will conduct general as well as specialised training for the entire Group.

Every employee will have the opportunity to attend health and safety, and computer competency training and language courses, amongst others.

Twice a year employees will also attend HIV/Aids and first aid courses at the training centre, which should become operational in August.

Hiskia pointed out the irony in that companies such as Merlus Seafood Processing that provide well paid, high-quality jobs and education for Namibians struggle to get EPZ and Manufacturing Status incentives.

On the other hand, sweat-shop labour outfits such as Ramatex and the diamond polishing companies that provide mostly low-paid jobs, no benefits and poor working conditions receive these incentives at the drop of a hat.
He said that no other company in the fishing industry does more value addition than Merlus Seafood Processors.

The factory is based 100 percent on value addition with the company value-adding all the products it exports.

“The value-adding that we do should be looked at as benefiting the whole country. If Namibia wants to get the full benefit of its natural resources, the country has to achieve the highest level of value addition.

“Only then will it receive the full benefit of foreign exchange earnings, employment and skills development,” he said.

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