Offshore bunkering to resume: SA can finally take advantage of increased traffic due to Red Sea closure

The South African Revenue Service has promulgated an amendment to the Rules under sections 21, 60 and 120 of the Customs and Excise Act of 1964 which will come into effect from 30 November 2024.  The amended Rules will allow the resumption of offshore bunkering operations, particularly in Algoa Bay, more than a year after offshore bunkering was effectively shut down by SARS.  The move will be welcomed by shipowners looking to refuel while on passage around South Africa after most traffic that used to flow through the Suez and has been forced by the actions of the Houthi rebels to pass through our waters. 

The closure of the offshore bunkering operations in Algoa Bay in September 2023 was as a result of SARS levying import duty and VAT on fuel being supplied to foreign flagged ships passing our coast.  Refund of that duty and VAT was possible against proof that the fuel had been re-exported, but the resultant delays in obtaining refunds affected the bunkerers’ cashflow and made offshore bunkering unviable. 

The South African Maritime Safety Authority (SAMSA), which is responsible for issuing licences for offshore bunkering operations has resumed issuing those licences. 

The effect of the amendment to the Rules is to allow for offshore ships to act as floating bonded warehouses while they store the fuel temporarily on import before supplying it to passing vessels.  That change has been extended to storage facilities ashore to allow for those operators who do not have floating storage facilities to resume operations. 

With 85% of the ships that used to pass through the Suez now passing around Africa between Europe, the Americas, and the Middle and Far East, they will be able to refuel here rather than diverting to Mozambique, Namibia and our other neighbours for bunkering operations.  South Africa is in an ideal geographical location to take advantage of shipowners’ needs in this regard.  Proceeding to Maputo and other neighbouring states ports, meant additional steaming time and the costs of pilotage to enter those ports which do not offer offshore bunkering facilities.

The welcomed move will help restore South Africa’s damaged maritime reputation and revitalise the government and SAMSA’s attempts to grow South Africa’s blue economy.  Although some of the offshore bunkering operations were provided by global multi-nationals, many of the businesses that were hit by the SARS ruling were start-up companies with broad based black economic empowerment shareholders and employees. SARS attributes the delay in implementing the Rules to the need for three rounds of extensive consultations.  Although the delay is a pity, the implementation of these amended Rules could not come sooner for South Africa’s beleaguered maritime economy.