Bigger is better for SA hake fishing companies: winning Honours thesis

CAPE TOWN: A study into the structure of the South African hake fishing industry, which finds that keeping the industry serviced by bigger companies is less environmentally hazardous, has won an economics student at the University of Cape Town this year’s best Honours level thesis in the School of Economics.

Diederick Ferrandi, who completed his Honours year with the UCT Environmental Policy Research Unit (EPRU) in 2015, won the Faculty of Commerce Award for Excellence for his Honours-level study.

‘The paper argues that the nature of hake trawling means that large-scale, integrated and capital intensive production is preferable from a consumer and producer perspective, as well as environmentally,’ explains Ferrandi.

Ferrandi’s work models the economies of scale and the economies of scope of the sector, and concludes that ‘large-scale, vertically integrated and diversified production’ is better. This is contrary to what the South African government is currently pushing: an industry that is fragmented into smaller, and ‘inevitably less efficient companies’.

This finding has significant policy implications, argues Ferrandi.

‘Competition amongst many smaller firms typically has immediate appeal, since in theory it often leads to lower prices for consumers and a more efficient allocation of resources. However this does not hold in the hake trawling industry. The higher risks that smaller firms face, the importance of coordination to manage the resource sustainably, and the economies of scale present all mean that larger producers are preferable.’

Ferrandi, who was supervised by EPRU associate professor Tony Leiman, is currently finishing a philosophy Honours at UCT, before heading to Oxford this September to begin his Masters’ degree in Economics.

His paper - titled Industrial Organisation in the South African Deep Sea Hake Trawl Sector: A Taxonomy - won him the EPRU’s Honours Award for Excellence in June 2016, and came with R2 000 in cash. Ferrandi was joined by EPRU Masters student Hafsah Jumare, who received the award for the best Masters thesis in her year, for her paper on the role of risk in the uptake of farming practices amongst small-scale farmers in the Western Cape.

News | 2 August 2016