In South Africa, Cherry Blossom’s detention fuels investor anxiety

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Port Elizabeth Light house

Port Elizabeth

As various countries in Africa recover from previous crises and build solid reputations as good places to do business, the champions of past times are losing their luster. That is the case for South Africa, previously seen as a reliable business partner for global trade, but which has been causing more and more concern from international investors. The unexpected intervention of Port Elizabeth in an international territorial negotiation may be the straw that breaks the camel’s back.

On the Northwest Atlantic coast, between Morocco and Mauritania, lies Western Sahara, a former Spanish colony. In 1967, Spain withdrew from the area, leaving it to its own fate. The desert strip remained inhabited by local communities, and Moroccan businesses which employ them. An armed separatist group, named the Polisario front, was created in 1973, which aimed at excluding Morocco from the land, making it a separate and sovereign nation. The United Nations classify Western Sahara as a “non-self-governing territory”, something the Polisario front would like to change.

The Saharawi people stretch across the area, all the way to the Algerian side of the border, where refugee camps are home to near 200 000 people, where NGOs decry the shortage of food, water, basic supplies and access to elementary services. Yet, there’s no lack of means, as Magnus Norell, Senior Policy Analyst at the Washington Institute for Near East Policy and the European Foundation for Democracy, points out. “The newly presented report from the EU corruption watch-dog — OLAF — about embezzlement of funds from the EU to Polisario, comes as no real surprise for those of us who have followed the confluence between organized crime and terrorism in West Africa”, he explains. According to Norell, “OLAF shows how Polisario leadership, in cahoots with Algeria, has inflated the number of refugees in the camps in Tindouf in order to increase aid-money and supplies intended for the refugees. Furthermore, good-quality foodstuff like Canadian wheat for example, intended for the refugees were switched to lower-quality provisions, selling the higher quality goods on the open market.”

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“Polisario has become even more entangled in various criminal activities, like smuggling and trafficking, says Norell. Even more worrying is the fact that militant Islamists have aggressively targeted the Tindouf-camps in efforts to recruit militants.” From this point of view, life seems better in the western part of the land, where Moroccan companies have heavily invested into the local mining economy, as well as in schools and proper housing conditions for workers.  However, the Polisario front claims that Saharawi people are being robbed of their natural resources and wish to gain complete economic control of the area. UN-held negotiations have been under way for years, and were recently reset in an attempt to find a solution to the dispute. The Polisario front therefore tried to find higher grounds for the negotiation.

Aware that phosphate ore from Western Sahara was transiting through the world on their way towards clients, the Polisario Front sent requests to several courts, hoping to have cargos seized, especially in April 2017. A Panamanian court temporarily held back a Vancouver-bound ship, but released it a few days later, as the case was for the United Nations to rule upon. But a local South African courthouse, in Port Elizabeth, did not declare itself incompetent and decided to judge the case on merits, despite the ongoing UN negotiation.

As a result, the Cherry Blossom, a Danish cargo boat, transporting 55 000 tons of phosphate on its way to New Zealand, has been held captive with 30 hapless sailors on board, for two months, with no solution in sight. The Moroccan government issued a formal complaint through its spokesman, M. El Khafi, describing the self-proclaimed competence of the local South African court as “contrary to international law”.

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The Polisario front, on the other hand, celebrated its temporary victory and threatened with further legal action: “The reputational risk for ship owners and charterers is that which results from knowingly participating in the export of resources from a territory widely referred to as Africa’s last colony. This entails possible rejection of trade by parties interested in an end to the occupation of Western Sahara, including commercial enterprise and governments throughout Africa and elsewhere”, as was reported by the Western Sahara Resource Watch, an international NGO favorably inclined towards the Polisario Front and opposed to Morocco.

It’s hard to say whether this initiative could have happened at a worse time. South Africa was recently set back by Standard & Poor’s into the BB+ category, known as speculative, which recommends that investors avoid dealing in the area. In fact, South Africa has been losing speed for some time, while neighboring Tanzania, Mozambique and Rwanda proudly display soaring development rates. Half a century ago, South Africa held a unique geographical position in international trade, with harbor facilities unlike any other in the area. In other words, international business which wanted to deal in the area had little choice but to plant their flag in South Africa.

But things have changed, now that the entire area is developed. In response to the Cherry Blossom caper, businesses who fear being dragged into international dispute they hold no stakes or interest in, have simply decided to stop for refuelling in other countries, in order to secure their activities.  Following the arrest of the Cherry Blossom in South Africa, New Zealand now makes sure the cargo ships refuel safely: “Since the ship was detained in South Africa, Balance Agri Nutrients and their shippers have been finding ways of evading the legal tactics used by the Saharan campaigners.  They and their shippers made sure the carrier, Common Spirit, travelled to New Zealand via Cape Horn, and so avoided South African jurisdiction”, reported Eric Frykberg for RNZ.

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South Africa didn’t need this: since 1980, the unemployment rate has more than doubled, hitting nearly one in four adults in 2016. The local currency has been in constant devaluation over that same period: when a rand could buy a dollar in 1980, with change to spare, nearly 16 are necessary to buy a green bill today. According to the IMF “Slow economic growth since 2008 has further aggravated unemployment, real disposable income is stagnant, and households are heavily indebted. […] Stress tests confirm the capital resilience of banks and insurance companies to severe shocks but illustrate a vulnerability to liquidity shortfalls.”, which is exactly what South Africa will likely experience, as businesses and investors avoid the area for fear of being held hostage. This is the price to pay for ludicrous political choices.

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