VZCZCXRO6308
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHWD #0021/01 0351607
ZNR UUUUU ZZH
R 041544Z FEB 10
FM AMEMBASSY WINDHOEK
TO RUEHC/SECSTATE WASHDC 0167
INFO SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 07 WINDHOEK 000021 
 
SENSITIVE 
SIPDIS 
AF/S PHAEDRA GWYN 
 
E.O. 12958: N/A 
TAGS: ECON FWS NMFS WA
SUBJECT: Namibia: Still Bullish on Fishing 
 
Summary 
 
 
 
¶1. (SBU) Fishing is one of Namibia's top industries, contributing 
between three and seven percent of GDP since 1990, and about 20 
percent of export earnings.  The fishing industry is trying to 
diversify both its markets and its products.  The Namibian 
government (GRN) has been largely successful in sustainably 
managing its fisheries.  The GRN has had mixed results with its 
program to "Namibianize" the fishing industry which has been 
dominated by foreign (mostly Spanish) companies.  Government 
incentives to increase Namibian participation have resulted in a 
proliferation of fishing companies and an overcapacity in onshore 
processing but they have also created jobs for previously 
disadvantaged (black) Namibians.  In addition, some black Namibians 
have become wealthy by acquiring fishing quotas and either 
exploiting their quotas themselves or "leasing" their quotas to 
other companies.  End Summary 
 
 
 
Contribution to Economy 
 
 
 
¶2. (U) According to the GRN national accounts, fishing is Namibia's 
third largest industry behind mining and agriculture.  The industry 
has contributed between three and seven percent to Namibia's GDP 
since independence in 1990.  In recent years, fishing's 
contribution to GDP has declined in real terms.  The latest (2004) 
labor force survey stated that 3.3 percent of working Namibians 
(between 12,000 and 14,000 people) are directly or indirectly 
employed in the fishing sector. Government sources state that an 
additional 400 foreigners work in the sector.  Approximately 90 
percent of Namibian fish caught are exported, representing 20 
percent of export earnings. 
 
 
 
¶3. (U) The past two years have been difficult for the industry. In 
2008, fishing generated 3.2 billion Namibian dollars (USD 420 
million at today's exchange rate).  The fishing sector suffered 
from high input (primarily fuel) prices in 2008.  The sharp 
reduction in fuel prices seemed to bode well for the industry in 
2009, but the strengthening of the South African Rand (to which the 
Namibian dollar is fixed 1:1) against the Euro eroded the 
industry's margins.  The industry suffered a further blow when the 
water system of Namibia's fishing capital Walvis Bay collapsed in 
the first quarter of 2009.  Without fresh water, fishing companies 
could not get steady supplies of ice, critical for both fishing 
vessels and on-shore processing. 
 
 
 
Table 1: Fishing Industry Revenues 
 
(Constant 2004 Prices) N$ millions 
 
 
 
 
Year 
 
Fishing And On Board Processing 
 
On-Shore Processing 
 
Total 
 
 
2000 
 
1,620 
 
623 
 
2,243 
 
 
2001 
 
1,558 
 
654 
 
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2,212 
 
 
2002 
 
1,528 
 
647 
 
2,175 
 
 
2003 
 
1,681 
 
852 
 
2,533 
 
 
2004 
 
1,564 
 
763 
 
2,327 
 
 
2005 
 
1,434 
 
723 
 
2,157 
 
 
2006 
 
1,308 
 
494 
 
1,802 
 
 
2007 
 
1,059 
 
640 
 
1,699 
 
 
2008 
 
1,003 
 
616 
 
1,619 
 
Source: Central Bureau of Statistics 
 
 
 
Table 2: Fishing's Contribution to GDP 
 
(2004 Base Year) 
 
 
 
 
Year 
 
Fishing And On Board Processing 
 
On-Shore Processing 
 
Total 
 
 
2000 
 
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4.71% 
 
1.81% 
 
6.52% 
 
 
2001 
 
4.48% 
 
1.88% 
 
6.36% 
 
 
2002 
 
4.19% 
 
1.77% 
 
5.96% 
 
 
2003 
 
4.42% 
 
2.24% 
 
6.66% 
 
 
2004 
 
3.66% 
 
1.79% 
 
5.45% 
 
 
2005 
 
3.28% 
 
1.65% 
 
4.93% 
 
 
2006 
 
2.79% 
 
1.05% 
 
3.85% 
 
 
2007 
 
2.14% 
 
1.29% 
 
3.44% 
 
 
2008 
 
1.96% 
 
1.21% 
 
3.17% 
 
Source: Central Bureau of Statistics 
 
 
 
 
 
Namibia's Seafood Products 
 
WINDHOEK 00000021  004 OF 007 
 
 
¶4. (U) Marine fish are the bulk of Namibia's seafood products.  The 
Ministry of Fisheries and Marine Resources (MFMR) breaks down its 
wild marine species into the following categories: 
 
 
 
Pelagic Fish -  Surface dwelling pilchard, tuna, sword and shark 
 
Midwater Fish - horse mackerel, juvenile hake 
 
Demersal Fish - hake and monk fish 
 
Deep sea Fish - orange roughy 
 
Crustaceans   - rock lobster, crab 
 
Other species - mullets, seals, guano and seaweed 
 
 
 
¶5. (U) Horse mackerel is the species that is caught in the largest 
volumes, but hake is the most commercially valuable fish resource 
comprising 26 percent of the fishing industry's earnings.  The hake 
industry is also the largest fishing industry employer.  There is 
also a fledgling aquaculture sector with approximately a dozen 
commercial mariculture (oysters and abalone) farms based in Walvis 
Bay and Luderitz.  The GRN has also promoted small fresh water fish 
farms as a means to support poor rural communities.  To date most 
GRN-supported farms have grown less than a ton of fish per year, 
considerably less than commercial farms in neighboring SADC 
countries (primarily South African and Zambia) that can produce 
several thousands of tons per year. 
 
 
 
Foreign Investments 
 
 
 
¶6.  On January 21, Spain announced a Euro 950,000 donation to the 
Namibian Fish Consumption Promotion Trust to encourage the local 
consumption of fish in rural areas.   Minister of Fisheries and 
Marine Resources Abraham Iyambo stated the funds would be used to 
train Namibians in the handling, marketing, and promotion of fish, 
as well as to establish new fish shops in the north of the country. 
Over the years, Spain has supported the Inland Aquaculture Center, 
Namibian Standard Institute, and scientific research activities. 
 
 
 
¶7.  During the same week, Vice Minister of Agriculture Niu Dun led 
China's first delegation to Namibia to discuss bilateral 
cooperation in the fishing sector.  In a meeting with Minister 
Iyambo, China reportedly offered Namibia student and information 
exchange programs as well as approximately USD 2 million for 
aquaculture development. 
 
 
 
Diversification Needed 
 
 
 
¶8. (U) Europe is by far the most important market for Namibia's 
fish exports, and Spain is the dominant European customer.  Spain 
receives over 70 percent of Namibia's hake. Fishing companies have 
embarked on a market diversification strategy over the past two 
years.  Two senior representatives at hake companies told Econoff 
that they are now shipping less than 40 percent of their product to 
Spain.  Previously, their Spanish customer would resell to Dutch, 
Portuguese, and Italian clients.  Now the two companies have cut 
out the Spanish middleman and are earning higher margins on their 
sales. 
 
 
 
¶9. (U) Companies are also focusing on product diversification. 
Fish processers are increasingly trying to expand their product 
lines into already prepared (primarily breaded) products. 
Processors with excess capacity have struck deals with fishing 
fleets that trawl the seas as far away as the Argentine coast. 
Econoff visited a seafood plant that was processing calamari caught 
in waters near the Falkland Islands. 
 
WINDHOEK 00000021  005 OF 007 
 
 
¶10. (U) Mariculture - primarily oysters - is another area that 
traditional fishing companies are eyeing for expansion.  Namibian 
oysters reach market size in half the time of oysters in other 
parts of the world and according to experts taste significantly 
better than oysters grown elsewhere as well.  Great taste and 
faster time to market should result in a mariculture boom, but 
oyster and abalone farmers argue that lack of access to high value 
markets like the U.S. (due to the lack of a qualified food lab), 
and a risk averse financial sector are their greatest challenges. 
Oyster farmers currently ship to South Africa and Asia (primarily 
China and Singapore).  Commercial farmers admit their business is a 
high-risk proposition, but claim their rewards are commensurate. 
The risks were quite evident in 2008 when a prolonged and severe 
red tide event wiped out most of Namibia's oyster crop.  Companies 
that survived 2008 state they are better equipped should another 
prolonged red tide threaten their crop again.  Banks however, which 
were already quite leery of lending to oyster farmers, have become 
even more hesitant to lend since 2008.  An alternative form of 
capitalization has come in the form of buyouts as some more 
deeper-pocketed fishing companies - looking to diversify - have 
acquired commercial oyster farms. 
 
 
 
Potential for Trade/Business with United States 
 
 
 
¶9. (U) Industry representatives from both hake and oyster companies 
told Econoff that they are keen on penetrating the U.S. market. 
Econoff suggested to INFOSA, (a SADC fishing industry advisory body 
that is part of the Global FISHINFO network and partners with FAO 
GLOBEFISH), and MFMR representatives that they consider sending a 
mixed public-private delegation to the Boston Seafood Show in March 
¶2010.  Seafood sales (depending on the type of product) could be an 
area where Namibia could further exploit the benefits available 
under AGOA.  However, one obstacle to exporting shellfish to the 
United States and EU has been the lack of a local biotoxin testing 
facility.  The Ministry of Trade and Industry (MTI) has budgeted 38 
million Namibian dollars (USD 5 million) over the next three years 
to add a biotoxin testing laboratory at the Namibian Standards 
Institute (NSI).   Although there are incentives against 
significantly automating onshore fish processing (companies that 
employ more Namibians are generally afforded larger quotas), there 
might also be export opportunities for U.S. equipment 
manufacturers. 
 
 
 
Fisheries Management 
 
 
 
¶10. (U) The MFMR is responsible for enforcing the GRN's fisheries 
policies.  The GRN is credited with reasonably managing the fish 
stocks it inherited from the apartheid regime, which had been 
vastly depleted by 1990.  The GRN actively controls its exclusive 
economic zone (EEZ) and has not shied away from seizing foreign 
vessels found to be illegally fishing the EEZ.  In the early 1990's 
many Spanish ships were seized, and their crews were frequently 
detained until requisite fines were paid. 
 
 
 
¶11. (U) The MFMR, through its surveys and stock assessment program, 
establishes its annual Total Allowable Catch (TAC) for each marine 
species.  The TAC for any given species is designed to allow for 
the maximum sustainable yield (MSY) - a delicate balance between 
maintaining adequate fish stocks and maximizing the landings 
available to fishing companies.   The MFMR divides each TAC into 
quotas for individual companies known as rights holders.  While 
industry insiders are generally positive on how the MFMR 
establishes the TAC for a particular species, some argue the TAC is 
allocated to too many rights holders, thus diminishing 
efficiencies. 
 
 
 
Namibianization of the Industry 
 
 
 
¶12. (U) Prior to, and shortly after, independence, foreign (mostly 
 
WINDHOEK 00000021  006 OF 007 
 
 
European) companies dominated the Namibian fishing industry.  Since 
1992 the government has introduced measures to achieve greater 
Namibian participation (also known as Namibianization), especially 
by previously disadvantaged Namibians, in the fishing industry. The 
MFMR's authority to issue quota rights and the costs (or levies) 
associated with quota rights is the primary tool the GRN has used 
to boost Namibianization.  The GRN has chosen to grant a large 
number of small quotas to allow Namibians who cannot afford to pay 
for a larger quota fees access to the fishing industry. 
 
 
 
¶13. (U) The MFMR can (and does) consider Namibian ownership when 
issuing quotas.  The MFMR charges significantly lower quota levies 
to companies that have over 51 percent Namibian ownership, operate 
vessels that are majority Namibian owned, fly the Namibian flag, 
and employ 90 percent or more Namibians.  The difference in levy 
charges between Namibian and foreign vessels has increased over the 
years, and in some cases foreign vessels pay three times that of 
Namibian vessels.  Firms with greater Namibian ownership are also 
granted longer quota rights. Firms that are 90% Namibian owned can 
obtain 10-year rights, while a majority foreign-owned firm (without 
significant investments in onshore processing) would only be 
entitled to 4-year rights. 
 
 
 
¶14. (U) To increase Namibian employment in the fishing sector, the 
government has also implemented a number of incentives to promote 
onshore processing.  Initially, the government granted rights 
holders substantial rebates on their quota levies if they processed 
fish on shore. Today, the MFMR requires companies to allocate up to 
70 percent of their rights to onshore processing (versus shipboard 
processing).  The government also encourages onshore processing as 
a mechanism to boost "value addition." There were concerns that the 
fishing industry was frequently sending whole (unprocessed) fish to 
foreign markets where "middlemen" were making profits on the 
processing of Namibian fish. Majority foreign-owned firms can 
obtain longer quota rights (similar to Namibian firms) if the 
foreign companies invest in onshore processing plants that provide 
significant employment opportunities (i.e., over 500 jobs) to 
Namibians. 
 
 
 
¶15. (U) The proliferation of rights holders, incentives for 
Namibian companies and vessels, and the rules and incentives that 
promote onshore processing have led to expanded employment 
opportunities for Namibians, but it has also resulted in over 
capacity throughout the industry.  While Namibianization has 
resulted in more Namibian-owned companies, foreign companies still 
dominate the industry as minority shareholders.  There are some 
(five) fully Namibian ventures (100% Namibian ownership and 
control).  The more common model is that Namibian partners have a 
controlling equity stake (51 percent or more), but foreign 
(generally Spanish) partners still control the day-to-day 
operations.   A small venture with a rights holding may be nothing 
more than a few Namibian investors who have formed a company to 
obtain a fishing quota.  Such firms may not actually have their own 
vessels, processing facility, or trained workforce.  As quotas are 
not legally transferrable, many larger companies (with foreign 
investors) feel compelled to partner with smaller firms -- to have 
access to the smaller companies' quotas -- to make their operations 
economical (i.e., decrease the likelihood of equipment 
underutilization). 
 
 
 
¶16. (U) MFMR officials have acknowledged to Econoff that 
Namibianization has not met all the objectives that government set 
out for it.  Reducing the number of rights holders might allow for 
consolidation in the industry and thus perhaps greater efficiency 
due to economies of scale, but it could also crowd out smaller 
Namibian players, warn MFMR officials.   Larger "fully" Namibian 
businesses would like to see their quotas increased, and some have 
minimized automation at their processing facilities to employ more 
Namibian workers. MFMR officials remarked to Econoff that Namibian 
companies that truly invest in the industry - both in equipment and 
employment - will be looked upon favorably by the Minister when 
quotas are reviewed. 
 
 
 
Comment 
 
WINDHOEK 00000021  007 OF 007 
 
 
¶17. (U) It is unlikely that the GRN will abandon or radically 
change its "Namibianization" policy any time soon.  The policy has 
clearly had mixed results.  Industry consolidation including the 
concentration of fishing quotas and processing capacity might make 
the industry more efficient (and therefore profitable), but it 
would likely lead to less overall employment.  Large numbers of 
smaller companies that are less mechanized ensure that more 
Namibians find employment from the fishing sector.  Furthermore, 
the large number of fishing quotas serves as a form of Black 
Economic Empowerment (BEE).  Critics argue that BEE partnerships 
that buy fishing quotas only to "lease" them to larger firms enrich 
a select few Namibians but do not benefit previously disadvantaged 
Namibians on a large scale.  Other incentives under the 
Namibianization program, however, appear to have resulted in 
greater employment opportunities for black Namibians.  Regardless, 
of what one feels about Namibianization, Namibians appear to still 
be bullish on fishing.  The Namibian Stock Exchange's (NSX) most 
recent public offering was for Bidvest Namibia a company that 
derives two thirds of its net profit from fishing.  The company 
raised USD $49 million.  End Comment. 
MATHIEU