UNIVERSITY OF KWAZULU-NATAL Title The South African Shipping Industry: BEE and Seaborne Trade By LAWRENCE NDIMANDE 203518440 A dissertation submitted in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION In the Graduate School of Business Supervisor: Prof. Trevor Jones 31 December 2006 (i) CONFIDENTIALITY CLAUSE Date 2006-12-22 TO WHOM IT MAY CONCERN RE: CONFIDENTIALITY CLAUSE Due to the strategic importance of this research it would be appreciated if the contents remain confidential and not be circulated for a period of five/ieH years ~ ediCt specified • .L . jP~"~~. Sincerely L. Ndimande (ii) DECLARATION This research has not been previously accepted for any degree and is not being currently submitted for any other degree at any other university. I declare that this Dissertation contains my own work except where specifically acknowledged Student Name and Number Lawrence Ndimande - 203518440 Signed ............~ ...................... Date ................3/..............1,)"/ Ofo ................. 116 058 (iii) ACKNOWLEDGEMENTS "The nature of work involved when working on a dissertation reqUIres that the individual involved receives a lot of support and encouragement from a number of people. The dedication that the research requires calls for an extra-ordinary effort and tenacity. Although it is difficult to enumerate the entire list of names there are, however, those people without whom completion seems a non-reachable destination. I would like to begin by thanking Professor Trevor lones who worked tirelessly guiding me throughout this dissertation. This work is a result of his dedicated support, concemand professionalism. All his energies and quality comments lifted me up during the entire course of my Master's Degree and more specifically during the course of this research work. Included is my late mother who passed on while I was doing my third level examinations. I thank her for her love, support and blessings. In addition, I would like to extend my sincere appreciation to my fiancee to whom I will be getting married within a month of completing this work. I thank her for her never ending patience, love, support and faith. Lastly, the directors and colleagues at Island View Shipping who played a major role during the data collection part of the research and their contribution will always be highly valued." (iv) THE SOUTH AFRICAN SHIPPING INDUSTRY: BEE AND SEABORNE TRADE ABSTRACT The South African Maritime Industry has, as well as other industry sectors, recently been exposed to the dynamics that have been brought about by the Broad Based Black Economic Empowerment Policy which has become law in South Africa. The nature of the policy has created a situation where it (the policy itself) needs to have attention apportioned to it. The attention has been directed towards the implementation of the policy by the shipping companies. In addition, there has been attention directed towards compliance with the legislation that polices Broad Based Black Economic Empowerment. The government's requirement that the South African maritime industry generates a strategy document led to the adoption, by the industry's major role players, of the Maritime Transport & Service Industry Black Economic Empowerment Charter. The purpose of this research work is to investigate and create an understanding whether the aspirations of the above mentioned charter are realistic and feasible to achieve when, the nature of the shipping industry and other maritime related businesses, is considered. Does the way in which the shipping business operates make it easy for Broad Based Black Economic Empowerment to be implemented in the way proposed by the charter? The qualitative theory generating approach is adopted on the research. In the design of this research work a case. study is done where a major shipping company, Island View Shipping was studied. The aim is to consider issues that affect the maritime industry as viewed from inside the business environment. Semi-structured interviews are also conducted with the individuals at Island View Shipping who have, for many years, played (working in different levels/positions and working for different companies almost all over the world) major roles in the company itself and in the industry in general. Data analysis is based on the inductive reasoning approach where themes are created and analyzed. The conclusions and recommendations are divided according to themes that are identified in Chapter Five. (v) TABLE OF CONTENTS Description Page Title Page Confidentiality Clause 11 Declaration 111 Acknowledgements IV Abstracts V Table of Contents VI List of Tables VU List of Figures V111 (vi) LIST OF TABLES 1. TABLE 2.1 : SOUTH AFRICA'S ECONOMIC INDICATORS: PAGE 39 2. TABLE 3.1 : CHINESE ECONOMY - STEEL PAGE 81 3. TABLE 3.2 : CHINA'S SEABORNE IMPORTS SUMMARY PAGE 82 4. TABLE 3.3 : EU'S TRADE WITH MAIN PARTNERS PAGE 89 5. TABLE 5.1 : INTERVIEWEE CODING AND PROFILES PAGE 100 (vii) LIST OF FIGURES 1. FIG. 2.1 : BUSINESS ANALYSIS MODEL PAGE 26 2. FIG. 2.2 : TOTAL VALUE OF SALES OF MANUFACTURE PRODUCTS PAGE 32 3. FIG. 2.3 : GROWTH IN REAL GROSS DOMESTIC PRODUCT AT MARKET PRICES PAGE 33 4. FIG. 2.4 : SOUTH AFRICA'S GDP GROWTH PAGE 34 5. FIG. 2.5 : SHARE OF V ARIOUS SECTORS IN GDP PAGE 37 6. FIG. 2.6 : LEVELS OF EXPORTS AND IMPORTS PAGE 38 7. FIG. 3.1 : SEA TRANSPORT SUPPLY PAGE 73 8. FIG.3.2 : WORLD BULK FLEET DEMAND FUNCTION PAGE 74 9. FIG.3.3 : CHINESE STEEL PRODUCTION PAGE 83 10. FIG.3.4 : DRY BULK INDICES PAGE 84 11. FIG.3.5 : SOUTH AFRIC'S TRADE WITH EU PAGE 88 12. FIG. 3.6 : EVOLUTION OF THE EU'S TRADE BALANCE WITH SOUTH AFRICA PAGE 88 (viii) Contents DISSERTATION TOPIC ..................................................................................................... 5 EXECUTIVE SUMMARy ................................................................................................. 6 Background ..................................................................................................................... 6 Objectives ........................................................................................................................ 6 Methods ........................................................................................................................... 6 Results ............................................................................................................................. 7 CHAPTER 1 : STATEMENT OF PROBLEMS AND RESEARCH DESIGN ................. 8 1.1 MOTIVATION ............................................................................................... 8 1.2 STATEMENT OF PROBLEMS ..................................................................... 9 1.3 OBJECTIVES ............................................................................................... 10 1.4 RESEARCH DESIGN .................................................................................. 10 1.4.1 LITERATURE REVIEW ............................................................................. 11 1.4.2 DATA COLLECTION METHODS ............................................................ 11 1.4.3 SAMPLE AND SAMPLING TECHNIQUE ............................................... 12 1.5 ENVISAGED CONTRIBUTION OF THE RESEARCH WORK ............... 13 CHAPTER 2 : KEY CONCEPTS ..................................................................................... 17 2.1 INTRODUCTION .................................................................................................... 17 2.2 THE SOUTH AFRICAN MARITIME INDUSTRY .............................................. 17 2.3 ISLAND VIEW SHIPPING ..................................................................... ;............... 20 2.4 BLACK ECONOMIC EMPOWERMENT ............................................................. 21 2.5 TERMS OF SHIPMENT - INCOTERMS ............................................................. 24 2.6 SHIP REGISTRATION .......................................................................................... 24 2.7 SHIP OWNERSHIP ................................................................................................ 25 2.8 AN ANALYSIS MODEL ....................................................................................... 25 2.9 CASE STUDY: ISLAND VIEW SHIPPING ......................................................... 27 2.10 THE DETAILED ANALYSIS OF THE CASE STUDY - ISLAND VIEW SHIPPING ..................................................................................................................... 29 2.10.1 Introduction ................................................................................................ 29 2.10.2 REMOTE ENVIRONMENT - STEEP ANALYSIS ................................ 30 2.10.2.1 The Social Factors ............................................................................... 30 2.10.2.2 Technological Factors ......................................................................... 31 2.10.2.3 Ecological Factors ............................................................................... 31 2.10.2.4 The Economic Factors ......................................................................... 32 2.10.2.5 Political Factors ................................................................................... 40 2.10.3 THE INDUSTRY ENVIRONMENT ........................................................ 42 2.10.3.1 Threat of New Entrants - Weighting Factor 2 .................................... 42 2.10.3.2 Threat of Bargaining power of buyers - Weighting