If we consider our history without the untidy and distorting packaging of vested interest, it may have some interesting nuggets for how we understand the economic shifts and opportunities arising from the Russia-Ukraine crisis.
Jan van Riebeeck, so the story goes, arrived at Africa’s southern tip with a mandate to set up a refreshment station for commodities traders on the sea voyage between the Netherlands and Asia. At the time, the cut-throat business of tea and spices was dominated by the Portuguese and the British, and the Dutch were determined to get in on the action.
So Van Riebeeck, with notions of a fertile Cape populated by warm and welcoming natives, set out to establish something of a paradise — a land of delicious fresh fruit, the finest cuts of meat, and a running supply of baked goods. Of course, the fruit was not to grow itself, nor was the bread to be baked by the waves of the Table Bay, and so began what we now know as SA’s labour market: a brutal and self-serving system.
Why this dwelling on the past, you may ask. There have been some interesting developments — albeit at quite the remove from Van Riebeeck thematically and chronologically — that could offer some useful lessons.
News agency Bloomberg recently published an opinion piece headlined “The Coming Russian Struggle for New Markets for Its Oil: Diverting Crude from Europe to Asia will Need Big Discounts and a Lot More Ships”.
In it, oil strategist Julian Lee observes that “flows of crude to Asian countries from Russia’s western ports have surged from zero in the weeks prior to the invasion to 875,000 barrels a day in the first full week of April”.
Russia is now sending to Asia each day almost as much oil as it did to Germany, France, Greece, Italy and the UK before the invasion. Of course, it takes 32 days to carry a cargo of crude from the Russian port of Novorossiysk on the Black Sea to Sikka in India — three times as long as it would take to deliver it to Trieste in Italy. Still, it means there is a new route for Russian oil and fresh demand, and it is outpacing the old trade, with Russia offering discounts to Asian refineries. It’s underpinning a new and booming tanker trade too.
Now, a year ago, a client asked my company to provide research insights on the bunkering industry in Africa, and bunkering opportunities for SA.
For those not familiar with the term, bunkering involves the supply of fuel to ships, and the servicing of these ships. The fuel is referred to as bunker, and the industry offering has grown to include services for sailors themselves, as well as replenishing their supplies.
It’s not unlike Van Riebeek’s intended refreshment station — with the added fuel. And it’s a particularly big business along the west coast of Africa.
Where is SA in these new shifts? Just sitting back and absorbing the costs of higher oil prices?
We have a vast coastline that can do far more than Van Riebeek thought possible — if we can but imagine it
Taking advantage of the ocean economy
Some readers may remember Operation Phakisa, launched enthusiastically by then president Jacob Zuma in 2014. Under the plan, the government committed to growing the ocean economy’s contribution to GDP by R127bn-R177bn by 2033 — a percentage increase of more than 300% on its current value.
If things were to work out neatly, the government projected that Operation Phakisa would create 1-million jobs over the same period.
Now, bunkering is one activity SA could work to support and expand, allowing for job creation in the country’s sea and coastal economies.
As a subsector of marine manufacturing and associated services, it feeds off ship and rig maintenance and repairs, the manufacturing of marine components, and the equipment industries in the upstream and downstream value chains. This is clear from the extensive work required by ships when they are refuelling, as they require components for repair and maintenance work.
We have a vast coastline that can do far more than Van Riebeek thought possible — if we can but imagine it.
Having risked international wrath to keep close relations with Russia, could SA not use this moment not only to explore oil resources off our coast, but also to grow refining capacity in a way that will protect SA and our neighbours from the economic shocks that will surely come as geopolitical tensions escalate?
There are opportunities in this crisis, as Asia has seen. SA needs to step up.
* Payi is an economist and founding director of Nascence Advisory & Research
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