What’s the Catch? A Review of the Fiscal Treatments of Fisheries in Sub-Saharan Africa

Abstract

Virtually no attention has been directed towards how tax policies shape fisheries development in Sub-Saharan Africa and to their contribution to government revenue. This is despite abundant evidence of fish stock depletion in the continent, and a longstanding interest by economists and marine scientists in the role of government regulation of fisheries. To help starting this discussion, the article provides an overview of the theoretical underpinning of fisheries taxation and of selected experiences of high-income countries. Following a presentation of fisheries economic contribution in Sub-Saharan Africa, the main debates on the fiscal treatment of fisheries are covered: Prioritising their welfare or wealth contribution; their co-management between local and central government; fishing agreements with distant water fishing nations; and the role of subsidies. The review shows that while fisheries revenue contribution is likely limited in the short run, fiscal policies can be central in promoting the sector sustainable development.

Introduction

Many low-income countries (LICs) ¹ in Sub-Saharan Africa (SSA) struggle to increase their domestic revenue mobilisation, a necessary step to achieve sustainable economic development. The role of fiscal policies as buffer in time of crisis was further highlighted by the recent COVID-19 pandemic, which also contributed to increase the strain on already stretched public finances. During the coming recovery, governments of LICs will be looking for new sources of revenue. However, it will not be easy to individuate them, as many structural characteristics of SSA economies makes it complex to individuate taxable productive activities (Moore & Prichard, 2020).

A potential avenue for LICs to raise more revenue would be the development of fiscal policies targeting the production of environmental goods or climate ‘bads’ (World Bank, 2019). In addition to an increased availability of domestic revenue, such policies will contribute to a more sustainable management of natural resources, reducing future impacts from their overexploitation and from climate change (World Bank, 2019). While much of the debate is focussing on carbon taxes (World Bank, 2019; OECD, 2021), forestry taxation has also seen a resurgence of interest (World Bank, 2021). One sector whose revenue potential has so far received limited scrutiny is fisheries. However, given that up to 25.4 million people are employed in fisheries across Africa (FAO, 2020), it seems important to understand if fiscal policies can play a role in increasing the sustainable development of the sector and its contribution to public revenue.

The taxation and regulation of fisheries in high-income countries (HICs) has been a subject of academic analysis since the mid-1950s, when economists questioned how their common-property nature could affect their optimal exploitation (Gordon, 1954; Scott, 1955). Attention towards the same issue in LICs seemed to emerge only following the establishment of exclusive economic zones (EEZs) during the third United Nations Conference on the Law of the Sea (Neiland, 2004). Since then, fisheries’ developmental role has received quite some attention, although the focus was placed more on their contribution to poverty alleviation and food security (Neiland, 2004; Béné et al., 2003; Béné et al., 2009; Béné et al., 2010; Béné et al., 2016) than on their potential for economic growth and revenue mobilisation (Cunningham et al., 2009). In fact, whether fisheries developmental role was best conceived as that of a source of economic wealth or as that of a social safety net constituted an important academic debate (Béné et al., 2010; Cunningham et al., 2009; Nunan, 2014).

The reasons for the relative lack of attention to fisheries fiscal contribution are multiple. First, even in HICs, fisheries’ specific taxes are usually conceived more as a mean to ensure their optimal exploitation than as a way to mobilise public revenue. In fact, fisheries need to exhibit a rent before warranting for specific taxes, and they generally do not show any as long as they are over-exploited, as most of those in LICs are (FAO, 2020; Gunnlaugsson et al., 2018; Gunnlaugsson & Agnarsson, 2019). Before the emergence of said rents, it is generally assumed that resources extracted specifically from the fishing industry through licensing or fees will be redirected towards the implementation of fisheries management policies. Given how costly and complex the latter are, even in many HICs cases, para-fiscal revenue from the sector is not enough to cover for the whole of its management cost (Arnason et al., 2000). That is, in the vast majority of HICs cases, fisheries contribute to revenue mobilisation through the same general tax handles of other industries, and not through industry-specific charges.

Furthermore, most LICs’ fisheries are usually characterised by the coexistence of two very different sets of actors. On the one extreme there are fleets from distant water fishing nations (DWFNs), and more generally industrial fishing fleets, targeting high-value species, usually destined to export markets, relying on advanced technologies and supported by subsidies from their home countries (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013). On the other, there are traditional and artisanal fishers, generally utilising less advanced gear, targeting species directed to the domestic markets and operating closer to the coast (Okafor-Yarwood, 2019; Okafor-Yarwood & Belhabib, 2020). While both these sets of actors are subjected to a range of diverse regulations, fees and taxes, these often both emanate from, and accrue to, different sources, that is, central and/or local government agencies, as well as dedicated management bodies (Béné et al., 2009; Nunan, 2014; Kaczynski & Fluharty, 2002; Horemans & Kébé, 2006). Data on the sector revenue contribution is generally hard to come by, an issue compounded by significant catch under-reporting (Belhabib et al., 2015; Zeller et al., 2016; Zeller & Pauly, 2018; Zeller et al., 2020) connected with the increasing relevance of illegal, unreported and unregulated fishing, currently one of the main dangers to the preservation of fish stock (FAO-, 2015; Vrancken et al., 2019; Witbooi et al., 2020).

What this introduction points toward is the complexity of the fisheries sector, with its many economic and institutional actors, as well as the diverse, and sometimes competing, objectives which its development aims to achieve. The scope of this piece is to provide an overview of the different debates surrounding the role of fiscal policies in promoting the development of the sector in LICs, with a stronger focus on maritime than on freshwater fisheries ² and on SSA more in general. The remainder of the paper is structured as follows. The Economics of Fisheries Regulation and Taxation section briefly covers the economic theory of fisheries regulation and taxation; the Fisheries Management and Taxation in HICs section presents selected case studies from HICs; the Economic Contribution of Fisheries in SSA section provides some key figures on fisheries economic contribution in SSA; the Taxation and Regulation of Fisheries in SSA: Key Issues section touches upon the most relevant issues in fisheries management and taxation in SSA, while the final section concludes.

The Economics of Fisheries Regulation and Taxation

The first studies on the economics of fisheries exploitation appeared in the mid-1950s, due to concerns with the consequences of their common-property and open-access nature on their optimal management (Gordon, 1954; Scott, 1955). In this state, every fisher can harvest as much as desired, and there are no incentive to use the fisheries conservatively, as there is no insurance that anyone could ever reap a benefit from such approach. Each actor will increase its catch until the average cost of the last fish caught is equal to its price and there will be no surplus accruing to the fishing industry – the equilibrium value of the catch is exactly equal to its cost of landing. This coincides with an over-accumulation of capital and labour in the industry, both of which would be more productive if employed somewhere else (Gordon, 1954; Scott, 1955). Apart from not being an economically optimal equilibrium, there is also no insurance that the equilibrium level of catch will be biologically sustainable. However, this was intuitively appreciated by regulators, who usually introduced control measures based on biological considerations. Limiting the total allowable catch (TAC), total effort ³ in the fisheries or the type of gears allowed were the most frequent solutions (Morey, 1980).

While these measures may help in maintaining a viable fish population, ⁴ they do not ensure that benefits from fisheries are close to their social optimum, as the maximum sustainable yield (MSY) generally exceeds the maximum economic yield (MEY). ⁵ The latter can only be obtained by introducing private or public control, that is, instituting some regulation, taxation or of property rights within fisheries. Hence, the basis for taxation is in the misalignment between the private and the social costs of catching any quantity of fish, which creates a negative externality, as the former ignores costs falling on other actors and on future generations (Morey, 1980).

Through the 1960s and 1970s, much focus was directed towards finding the economically optimal level of taxation and property right structure (Crutchfield, 1961; Crutchfield & Zellner, 1962; Turvey, 1964; Smith, 1969; Clark, 1971; Clark, 1973; Clark & Munro, 1975; Clark, 1976; Clark et al., 1979). Thanks to a closer collaboration between economists and biologists, it became apparent that each fisheries optimal management approach depended on its natural growth rate, its current stock size and level of capitalisation. Restrictions on gear, quotas and taxes – both applicable to either effort or catches – were all scrutinised. Initial work on the topic, aptly summarised by (Morey, 1980), determined that gear regulations is never an economically optimal solution, and that in abstract both quotas and taxes could be used to achieve the optimum. This could be obtainable by fixing a catch quota equal to the MEY/MSY, or by imposing a tax on catch or effort increasing the marginal cost of fishing to the point at which the equilibrium catch corresponds to the MEY/MSY.

However, the concept of ‘fishing effort’ is hard to operationalise as the terms describe a variety of different inputs, so that in practice taxes or quotas are applied on some specific inputs’ subset. Consequently, fishers could alter the amount of inputs other than those on which the tax is levied, achieving the same effort level at a higher cost. From this, it follows that regulation or taxation of effort is unlikely to lead to the social optimum. Similarly, while quotas on total catch are associated with the optimal biomass size, they do not limit overcapacity, requiring other forms of restrictions to avoid economic inefficiencies. Even when vessels’ number is limited, each vessel has an incentive to fish as much as possible as quickly as possible until the quota is reached, again distorting input decisions. This leaves taxes on catch, which are fully coherent with the social optimum when fixed at a level forcing fishers to internalise the difference between private and social cost of fishing.

However, while theoretically sound, two reasons make imposing such a tax problematic. First, the optimal tax rate is complex to calculate, as it requires knowing a variety of biological and economic parameters. Second, even if the optimal tax rate is known, political considerations often require the benefit from fisheries to accrue to the industry rather than to the treasury, making it politically unfeasible (Clark, 1980). Individual transferrable quotas (ITQs) are an alternative measure theoretically achieving the same efficient result (Clark, 1980; Moloney & Pearse, 1979) without presenting similar political obstacles. ⁶ With ITQs, the TAC of the given fisheries is divided amongst all vessels accessing it according to some criteria, generally grandfathering, ⁷ although initial auction is also possible. ⁸ As long as a market for the quotas exists and any of their portions can be reallocated, ITQs lead to an economically optimal equilibrium regardless of initial allocation.

While these two instruments are theoretically equivalent, in practice they have a very relevant difference (Clark, 1980): quotas directly establish a limit on TAC, and taxes only affect catches indirectly. Taxes’ impact on fishers behaviours depend on both fish price and on cost of fishing, so that changes in either alter the size of the optimal rate. As both of these are subject to fluctuation, ITQs are a stabler instrument than taxes. While this theoretical superiority under uncertainty has been challenged under various circumstances (Koenig, 1984; Anderson, 1986; Rosenman, 1986; Androkovich & Stollery, 1991), one of the main reasons for the superiority of ITQs was never questioned: the optimal tax rates for most fisheries remain politically unfeasible.

Fisheries Management and Taxation in HICs

Since the early 20th century, attempts to regulate fisheries needed to balance considerations on productive efficiency and employment and distribution effects which are often hard to square (Grainger & Parker, 2013; Crutchfield & Pontecorvo, 1969). In fact, the introduction of quotas in different fisheries of Australia and North America in the 1960s and 1970s was only possible due to the widespread fear of their impending collapse (Grainger & Parker, 2013; Wilen, 1988). Even then, excess licenses had to be granted for political reasons, leading to costly public buybacks (Grainger & Parker, 2013). Political preferences often favour the employment of more fishers than those required to catch the fish, especially when efficient vessels operating across several areas are perceived as outsiders by local fishing communities. Without the risk of collapse, it is unlikely that the heterogeneity of economic and political interests attached to fisheries would have led to the right incentives to change management practices (Grainger & Parker, 2013; Johnson & Libecap, 1982; Karpoff, 1987).

Relatedly, the determination of ITQs, let alone catch taxes, as the economically optimal regulation strategy has not been followed by their widespread introduction. As of late 2010s, it was estimated that only 5% of world fisheries had introduced some form of ITQs (Costello et al., 2008). Where they were introduced, they contributed to increase profitability (Grafton et al., 2000; Newell et al., 2005) and to the stop of stock decline (Costello et al., 2008). Opposition to ITQs are based on the same reasons as other economic rationalisation policies: they favour concentration of fishing rights in the hand of the economically efficient operators, reducing employment (Abbott & Wilen, 2010). Distribution of quotas amongst sectors – fish harvesters versus fish processors, commercial versus recreational fishing – can also further complicate the matter (Grainger & Parker, 2013).

Generally, fisheries’ contribution to public finances seldom had any political traction for two main reasons. First, although most fisheries’ management models include some forms of levies or fees, these are usually below what is required to cover their substantial management costs, which can be as high as 25% of landing value (Arnason et al., 2000). In fact, considering the many subsidies directed towards the sector (Sumaila et al., 2010; Sumaila et al., 2016; Sumaila et al., 2019; UNCTAD, 2015; Steinbach et al., 2016; Merayo et al., 2019; Arthur et al., 2019), fisheries are likely a net fiscal receiver in many contexts. Second, as long as fisheries management models do not create resource rents, there are few economic justifications to levy taxes other than those from general fiscal legislation, that is, corporate income tax (CIT) and value added tax (VAT) (Gunnlaugsson et al., 2018).

One of the handful of cases in which fisheries exhibit a rent is Iceland, which is generally considered to be the model country when it comes to fisheries management (Gunnlaugsson et al., 2018; Arnason et al., 2000; Holm et al., 2015). ⁹ In fact, Iceland was one of the first countries to introduce ITQs for selected fisheries in the early 1970s, a system which had been expanded by the 1990s to cover almost all national fisheries (Gunnlaugsson et al., 2018). The fact that ITQs contributed to the sector profitability is undoubted: catch per unit of effort tripled between 2000 and 2016, due to an increase in fish biomass of 50% between 1990 and 2016 (Gunnlaugsson et al., 2018; Gunnlaugsson & Agnarsson, 2019; Arnason et al., 2000; Gunnlaugsson & Saevaldsson, 2016), and said profitability led to the introduction of a ‘fishing fee’ in 2004. Initially presented as the evolution of the ‘supervision fee’ introduced to recover ITQs management cost, over time it moved much closer to a true resource rent tax, currently contributing around 1.2% of total tax revenue. Much care was taken to ensure that the fee was not going to adversely impact highly indebted or smaller companies, as well as its fair distribution between different subsectors. Currently, the 25 largest firm operating in the country contribute 88.6% of the revenue, with the following 25 paying an additional 10.1% (Gunnlaugsson et al., 2018), with the state capturing between 13% and 15% of the resource rent accruing to the industry between 2009 and 2016 (Gunnlaugsson & Saevaldsson, 2016).

Experiences from HICs highlight relevant lessons about fisheries regulation and taxation. First, paraphrasing (Grainger & Parker, 2013), there is no political constituency for economic efficiency. That is, the capacity of different groups to mobilise politically has always been important to determine what reforms are introduced, more so than how economically sound those reforms are. Reducing the number of actors involved in fisheries is one of the main goals of modern management strategies, but it is also politically unappealing. Modern fisheries management strategies are usually costly, as they require extensive bureaucracy to be effective, and the fees charged are rarely sufficient, with the difference covered by general tax revenue (Arnason et al., 2000). Fisheries-specific taxes are rare and only discussed in the few cases in which management practices have led to creation of a resource rent over long time periods, and actually introduced even more rarely.

The Economic Contribution of Fisheries in SSA

Most figures about economic contribution of fisheries in LICs are best described as general estimates. Recent ones indicate that around 59.5 million people were directly employed in fish harvest and aquaculture in 2018, a figure which has been steadily growing over time (FAO, 2020). The overwhelming majority are in Asia (50.4 million people), with Africa being a distant second at 5.4 million people. This figure about sectoral employment in Africa is roughly in line with previous estimation from the Food and Agriculture Organization (FAO, 6.1 million) (FAO, 2014), and the World Bank (7.8 million) (World Bank, 2012). When the remainder of the value chain (aggregation, processing and marketing) is included, employment estimates range from 11.3 million (FAO, 2014) to 25.3 million (World Bank, 2012). While different extrapolation processes lead to a substantial difference between the two figures, they clearly indicate that at least as many people are employed in post-harvest activities as they are in harvest. Furthermore, gender composition of employment is significantly different between the two: while only 3.9% of African fishers are female, they account for 58.9% of those employed in post-harvest activities (FAO, 2014). ¹⁰

Estimates of fisheries’ contribution to SSA’s gross domestic product (GDP) are subject to a similar variation. A World Bank study from 2012 estimated fisheries’ average contribution to GDP at 2.2% in SSA (World Bank, 2012), a less conservative figure than the 1.3% of GDP estimated by the FAO (FAO, 2014). Regardless, these averages hide some relevant variations across the region. Fisheries GDP share ranges from almost nothing in 6 landlocked countries to 9.4% in Sierra Leone for the World Bank (World Bank, 2012), and from 0.2% in Mauritius to 5.5% for the FAO (FAO, 2014), although the two studies cover a different set of countries. ¹¹ In fact, despite having been included amongst the indicators for achieving the Sustainable Development Goals, ¹² there is still no internationally agreed upon methodology on how to best calculate fisheries’ GDP contribution (Cai et al., 2019). Fish products also represent an important source of foreign currencies for many countries in the Global South, as they are one of the most traded food commodities – 38% of global fish production was traded internationally in 2018 (FAO, 2020). This is also the case for different SSA countries, as the continent is a net importer in terms of fish volume but a net exporter in terms of fish value (FAO, 2020). However, most of the produce exported from SSA is in its raw state, with filleting and packaging usually taking place in Southeast Asia or in Eastern and Central Europe (UNCTAD, 2015).

Data on actual catches for most LICs has long been scarce and was mostly constituted by official statistics communicated to the FAO by national bodies, often considered unreliable (Garibaldi, 2012). However, since the mid-2000s, the emergence of different academic projects contributed to change this picture. Specifically, official data from FAO statistic was complemented by estimates of both unreported catch (Zeller et al., 2016) and major discards to by-catch ¹³ (Zeller & Pauly, 2018). Augmentation of official statistics through modelling comes with associated uncertainties (Pauly & Zeller, 2017), but it has by now been recognised that this approach contributes to a better understanding of trends in global marine fisheries (Pauly & Zeller, 2019). This augmented data show that African catches increased monotonically from the 1950s until they peaked at 19 million tonnes in 1988, to then steadily decline to the current level of 13 million tonnes (Zeller et al., 2020). While there is variation across African large marine areas, the overall picture suggests that fisheries in the continent have been operating at best at peak, and very often beyond it, for quite some time (Zeller et al., 2020).

Given the wide range of estimates about fisheries contributions to both African employment and GDP, it is not surprising that public data on fisheries tax contribution is virtually inexistent. In fact, as recently as 2017, a report from the World Bank on global marine fisheries stated that ‘there is inadequate knowledge of fisheries sector taxes and subsidies worldwide to conduct true economic analysis’ of its net contribution’ (World Bank, 2017): 21). This can also be seen through an analysis of the data available from the Organisation of Economic Cooperation and Development database on Policy Instruments for the Environment (PINE). Out of 49 African countries covered in PINE, only 12 have an entry connected to tax, fees and charges specific to the fisheries sector, ¹⁴ and revenue figures are only available for 9 of them. Furthermore, the few available estimates are at time presented as ballpark figures: for example, Horemans and Kébé (2006) state that ‘taxes represent approximately 5 to 10% of the value added from fisheries-related activities’ in Western and Central Africa (Horemans & Kébé, 2006):4). However, this lack of fisheries’ revenue data has never stopped calls for fiscal policies to be put front and centre of sectoral reforms (Steinbach et al., 2016; Mohammed et al., 2018), especially with reference to the role of subsidies (Sumaila et al., 2016; Sumaila et al., 2019; Merayo et al., 2019; bib_da_rocha_et_al_2017Da Rocha et al., 2017).

What is known is that fiscal instruments for the fisheries sector are somehow varied across SSA. Virtually every country has a set of different vessel licences, whose value varies according to the type of boat, the targeted fisheries and the nationality of the boat owner. However, these are unlikely to provide a significant contribution to public revenue, as they account on average for 0.002% of GDP across 23 African states (FAO, 2014). Countries which entered agreements with DWFNs for exploitation of their EEZs often earn both a lump-sum tax and a royalty based on the value of the catch, which are assumed to be the most important contribution to public revenue (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013; Belhabib et al., 2015; FAO, 2014; Alder & Sumaila, 2004; Seto, 2017). Fisheries are also subject to general formal and informal taxes, which are especially important sources of revenue for local government (Béné et al., 2009; Nunan, 2014; Horemans & Kébé, 2006).

Finally, in a few highly concentrated industrial fisheries, revenues also accrue from catch share quotas such as ITQs, which have been established in a few African countries (Jardine & Sanchirico, 2012), such as Mauritius (Hollup, 2000), South Africa (Nielsen & Hara, 2006), Mozambique (de Sousa et al., 2006) and Namibia (Oelofsen, 1999; Kirchner & Leiman, 2014). A few considerations can be made. First, 3 out of these 4 countries have relatively higher institutional capacity than the rest of the continent, supporting the view that ITQs are more likely to be introduced where management efficiency is already present (Jardine & Sanchirico, 2012; Nielsen & Hara, 2006). Second, in all cases, ITQs only target high-value species rather than all fisheries (Jardine & Sanchirico, 2012), such as hake in South Africa and Namibia (Nielsen & Hara, 2006; Oelofsen, 1999; Kirchner & Leiman, 2014) or shrimps in Mozambique, which have historically accounted for up to 40% of the country earnings (de Sousa et al., 2006). Third, as in HICs, ITQs are more likely to be introduced in fisheries which are already fully exploited (Nielsen & Hara, 2006; de Sousa et al., 2006) or that show clear signs of overexploitation (Hollup, 2000; Oelofsen, 1999; Kirchner & Leiman, 2014). Finally, ITQs have also been used to attempt changing the ownership structure in the fishing industry (Nielsen & Hara, 2006; Oelofsen, 1999; Kirchner & Leiman, 2014), although they do not seem to have been particularly effective at achieving this aim (Nielsen & Hara, 2006), or they did so at an high cost in foregone revenue earnings (Kirchner & Leiman, 2014).

Taxation and Regulation of Fisheries in SSA: Key Issues

As we shall see, a careful reading of the fisheries management literature highlights several areas that should be taken into account when considering fiscal reforms of the sector in SSA. These include the role of fisheries’ co-management between central and local government, the competition between small-scale artisanal fishers and industrial ones – especially those from DWFNs – and the role of subsidies. Many of these aspects fit into a wider debate about the role of fisheries in the development process: to remain an employment of last resort for those without other opportunities, hence contributing through a welfare buffer effect, or to contribute revenue for national development through economically sound management. We turn to these different aspects in the next sub-sections.

Wealth-Based versus Welfare-Based Approaches

Proponents of wealth-based fisheries management support the view that the creation of a resource rent is the main gateway for fisheries to contribute to national growth (Cunningham et al., 2009; World Bank and Food and Agriculture Organisations, 2009). Addressing issues of weak governance and introducing economically rational management of both inland and high sea fisheries are the keys to increase fisheries revenue and livelihoods contribution (World Bank, 2004; Munro, 2010; Welcomme et al., 2010). The establishment of well-defined property rights and reliance on market-based mechanisms to reduce overexploitation constitute the bases of this approach, in order to stop ‘poor fishers contribut[ing] to their own poverty by destroying the fish resource and wealth on which they depend’ (Cunningham et al., 2009): 286). Thanks to a strong international support, a move towards wealth-based fisheries management was endorsed by the ‘Conference of African Ministers of Fisheries and Aquaculture’ in 2010 and made a pillar of the Comprehensive African Fisheries Reform Strategy in 2012 (Nunan, 2014).

However, a critique of this strategy quickly emerged, with Béné et al. (2010) proposing instead a welfare-based approach to fisheries management. Rather than their potential to generate rents, these authors stressed small-scale fisheries’ role of providing an income to households without access to alternative sources of livelihood. Following Jul Larsen (2003, the main contribution of small-scale fisheries is seen as their capacity to absorb surplus of rural labour, including seasonal or temporary one, a function which they also use to perform in HICs. By focussing on Norwegian fisheries, Béné et al. (2010) and Hersoug (2008) show that the fishing had long been a subsistence activity, and that the emergence of rents was connected to pull-factors from the country’s industrial development. These pull-factors are largely absent in the majority of LICs, where demographic dynamics lead to an increase in the number of fishers even where industrial growth is taking place (Béné et al., 2010; Armitage & Marschke, 2013). Given this lack of alternative employment opportunities, a strategy of limiting the number of fishers would lead to an increase in poverty rather than an increase in economic efficiency. Ultimately, these authors do not dismiss the principles of the wealth-based approach, but rather maintain that they would only be useful after a wider formalisation process in the rest of economy has happened. Until then, fisheries’ function of providing a social safety net to vulnerable populations should be preserved (Béné et al., 2010), and policymakers should focus on rationalising open-access fisheries (Wilson & Boncoeur, 2008).

The tension between fisheries management policies prioritising maximum sustainable catch and employment and those prioritising the creation of economic rent (Hillborn, 2007) is not unique to LICs. ¹⁵ This same tension characterised the development of fisheries policies in HICs (Grainger & Parker, 2013), where it still remains relevant even in the country considered to be the example of optimal management (Chambers & Carothers, 2017). ¹⁶ In practice, similarly to HICs, LICs often pursue a balance between wealth-based and welfare-based approaches. Nunan (2014) aptly demonstrates this point for Lake Victoria, where fisheries employ approximately 2 million people and still generate USD600 million per year. More than a thousand fisheries management units (FMUs) have been created in Uganda, Kenya and Tanzania, where they were given power to issue licences and charge fees in an attempt to rationalise resource use according to wealth-based models. While these instruments generate government revenue, the lack of alternative employment opportunities always made a cap on the number of licenses politically unfeasible. Consequently, the number of fishing boats in the lake increased by 50% between 2000 and 2010. Hence, while on paper the Ugandan, Kenyan and Tanzanian governments are following a wealth-based approach, in practice welfare considerations have stopped them short of introducing excludable property rights (Nunan, 2014).

Devolution of Fisheries Management

The creation of FMUs, in which the multitude of actors involved in fisheries management and use are brought together, has also been a key component of the devolution of fisheries management, a common policy across SSA. This has taken different forms, the most frequent being community-based and co-management of fisheries, in which resource users acquire rights and responsibilities on the resource; deconcentration, that is, transferral of decision-making capabilities to local level offices of the central authority; and territorial decentralisation, the transferral of decision-making authority from central to local governments (Béné et al., 2009). As the distinction amongst them is seldom made in the literature, the term ‘co-management’ will be used to indicate any of these forms of devolution in the remainder of the section. Examples of fisheries co-management in SSA receiving some attention in the literature are Cameroon, Chad, Nigeria (Béné et al., 2003; Béné et al., 2009), Niger, Zambia (Béné et al., 2009), Malawi (Béné et al., 2009; Nunan et al., 2015), Uganda, Tanzania (Nunan, 2014) and Kenya (Nunan, 2014; Cinner & McClanahan, 2015; Etiegni et al., 2017).

Fisheries co-management was promoted during the 1980s in the context of the wider push for decentralising reforms in LICs which aimed at empowering local communities by giving them more control over natural resources on which their livelihoods often depended (Aiyar et al., 1995). Local governments’ power to raise revenue from these resources was seen as important for fostering local democracy and to promote their sustainable use (Béné et al., 2003; Ribot, 2003). Often, this implied attributing a greater relevance to traditional management strategies based on common-property regimes controlled by local or traditional authorities (Béné et al., 2003). Where FMUs were created, their aim was to guarantee some balance in the representation of the interest of different groups. However, this balance is rarely achieved in practice, as more powerful actors enjoy a greater say about the overarching objectives and practices of the FMUs (Béné et al., 2003; Béné et al., 2009; Nunan, 2014; Nunan et al., 2015).

Revenue raising capacity is often shared amongst FMUs – which should use it to fund their management practices – and local and/or central governments, for which they contribute to general expenditure. Potential sources of revenue include boat, fishing and gear licenses, landing taxes and fees from fish traders (Béné et al., 2003; Béné et al., 2009; Nunan, 2014). Actual collection practices and distribution mechanisms have a strong impact on revenue final distribution. In Cameroon, all revenue from fisheries is collected by central and local tax administrators and transferred to the Ministry of Finance, which redistributes 70% of it to local representatives of the Department of Fisheries. In practice, this implies that no revenue accrues to final end-users (Béné et al., 2009). In Nigeria, agents from both the Federal and the State Department of Fisheries have been tasked with revenue collecting power, but the redistribution mechanism has not been stipulated in law, leading to institutional conflicts (Béné et al., 2009). Where traditional management systems are prevalent, such as in many community-managed fisheries in inland Nigeria and Chad, revenue is never remitted to the central government, and either accrues to traditional authorities or it is used to fund communal projects (Béné et al., 2003). Due to lack of human resources, FMUs or local government might outsource revenue collection to private agents, who are often perceived to withhold an excessive amount of revenue, a claim which is hard to substantiate due to a lack of data (Nunan, 2014). Furthermore, increased local revenue availability does not necessarily coincide with better development outcomes, as accounting practices are seldom transparent and private enrichment of FMUs’ executives through corruptive practices is all too frequent (Etiegni et al., 2017).

No clear answer on the impact that co-management reforms have had on the sustainability of fishing practices is yet available. Given the lack of taxation capacity that characterises local governments in many LICs, there is a tendency to see the devolution of fisheries management purely as a revenue raising opportunity (Béné et al., 2009; Nunan et al., 2015). This is as true for common-property and open-access fisheries (Béné et al., 2003) as it is for those theoretically managed through wealth-based practices (Nunan, 2014). However, positive examples also exist, such as those arising from the piloting of co-management practices in Kenya, where community-based protected areas allowed the charging of tourism fees to those coming for snorkelling or diving (Cinner & McClanahan, 2015). ¹⁷

What emerges from this literature is a complex picture of different institutional settings created by devolution reforms, which have sometimes created new management bodies from the ground up and others increased the relevance of traditional practices. While most of these reforms led to an increased availability of resources at the local level, this seems to have happened at the expense of fisheries sustainability and without necessarily leading to better development outcomes. Mostly, this is due to the scarcity of local revenue sources, which creates an incentive for local authorities to see licensing purely as a revenue measure.

Trade Agreements with Distant Water Fishing Nations

Notwithstanding the relevance of rationalising the management of domestic fisheries, it is fishing agreements (FAs) with DWFNs that currently contributes the most revenue, and poses the greatest risk to sustainability, across SSA countries. This is not surprising, as FAs are significant sources of income for Pacific Island Nations too, where they accounted for as much as 43% of Kiribati’s government revenue in 2013 (UNCTAD, 2015). What helped Pacific Island Nations to maximise the benefits from Fas was presenting a united front, that is, developing a common floor price for the right to access any of their EEZs (Kaczynski & Fluharty, 2002; Virdin et al., 2019). The capacity of SSA states to extract values from Fas is quite different. The FAO estimated in 2014 that African countries would earn 8 times as much as what is paid by DWFNs – around USD400 million in total – if they had the capacity to catch the same fish themselves (FAO, 2014).

Foreign fleets have been free to fish around Africa until the establishment of EEZs through the 1980s, and due to their geographical proximity, many European fishers had been exploiting easy access to Western African waters since colonial times (Alder & Sumaila, 2004). The establishment of EEZs was indeed connected to growing tensions about fishing rights around the world – ownership of fish resources is attributed to coastal states, but cooperation to achieve their sustainable exploitation is mandated (Neiland, 2004). This cooperation generally takes the form of a FA amongst two or more states, in which either unilateral or bilateral access to EEZs is granted in exchange for economic compensation (Gagern & van den Bergh, 2013).

FAs between African states and European countries did not take long to emerge after EEZs were created, as the first was signed between Senegal and the European Union (EU) in 1979 (Witbooi, 2008). ¹⁸ The first wave of FAs between the EU and various African countries (1979–1998) were purely commercial in nature and mainly aimed at easing the overcapitalisation in the EU fishing sector by redirecting existing overcapacity (.Kaczynski & Fluharty, 2002; Seto, 2017; Witbooi, 2008). The only developmental component of those FAs was a one-off payment into dedicated fisheries development funds, but little attention was directed to verifying how they were used (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013). These first FAs came under increasing scrutiny through the 1990s, as they were perceived to be misaligned with other EU policies directed at supporting fisheries development in LICs (Kaczynski & Fluharty, 2002; Witbooi, 2008).

This misalignment was due to multiple reasons. First, FAs were not preceded by any assessment of the health of the targeted fish stocks, a compulsory requirement for comparable expansions of fishing effort in European waters (Witbooi, 2008). Second, these FAs did not include catch quotas, simply stating the allowed number of vessels, their allowed tonnage and time-windows for operation. This gave signatory African countries virtually no control over European fishing effort, with vessels frequently targeting species other than those they were licensed for and reporting them as by-catch (Kaczynski & Fluharty, 2002). Third, agreements were negotiated separately with each state rather than with regional blocks, and over time their duration and compensation increased for countries whose waters remained rich in fish and decreased in the opposite case, despite the impact of EU fishing on the stocks themselves (Kaczynski & Fluharty, 2002; Witbooi, 2008). Finally, no explicit compensation was included for coastal communities bearing the blunt of increased competition in national waters, nor did they contain support for the development of post-harvest capacity (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013).

Following pressure by multiple internal stakeholders and an update in EU fisheries regulation, a second generation of more explicitly developmental FAs was created in the early 2000s (Seto, 2017; Witbooi, 2008). These new FAs included provisions for independent or joint stock assessment to take place before they entered into force, as well as a stronger focus on the utilisation of funds dedicated to fisheries management (Witbooi, 2008). However, they still lacked explicit compensation for coastal communities, support for the development of post-harvest capacity, the obligation for EU vessels to report the volume of fish caught to national authorities and an explicit catch quota (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013; Witbooi, 2008).

Some attempts at assessing the impacts of FAs in different Western African countries can also be found in the literature. Kaczynski Fluharty (2002) suggest that between 1995 and 1997, the total compensation received by Guinea-Bissau from its FAs with the EU was equal to 10.5% of European vessels’ catch value and 7.5% of the value of processed products. The cost of licensing an EU tuna boat was between 0.2% and 0.4% of the market value of harvested tuna, 25 times less than the 10% which would be required to license a similar vessel in the waters of Pacific Islands. Virdin et al. (2019), updating the previous analysis, showed however that Guinea-Bissau greatly improved its capacity of retaining resource rents from DWFNs over time, as the value of FAs had increased to 17% of landed catch value. ¹⁹ Nevertheless, the same was not true for three neighbouring countries – Guinea, Liberia and Sierra Leone – which earned respectively 2%, 5% and 8% of estimated catch values, significantly lower than the estimated 12% earned by Pacific Islands (Virdin et al., 2019). Again using examples from Liberia and Guinea-Bissau, Okafor-Yarwood and Belhabib (2020) also show that the EU seems to be rather selective in its application of regulation against illegal, unregulated and unrecorded fishing, prioritising commercial interests over sustainability when it sees fit to do so.

FAs with DWFNs clearly represent an important source of revenue across SSA. However, it is also clear that African countries could make FAs more profitable if they negotiated as a block rather than individually, a strategy already pursued by Pacific Island Nations. Much of the focus in the literature has been on FAs with the EU, as these are the only one whose terms are publicly accessible. These FAs received much criticism over the years, as they were perceived to be economically exploitative and to be contributing to unsustainable fishing practices. Some of the concerns expressed were tackled by the EU through second generation agreements developed in the 2000s. Third-generation agreements, developed through the 2010s, went a step further by including explicit quota setting, but they are seldom used in negotiation with African states. Finally, African countries should focus on obtaining support to develop domestic capacity in post-harvesting activities through FAs, as this is where most of the sector value-added lies.

The Role of Fisheries Subsidies

The level of subsidies received by fishers from DWFNs plays a significant role in the profitability of their activities. Kaczynski and Fluharty (2002) calculated that in the framework of first-generation FAs, the EU covered 85% of licensing costs of vessels operating in Mauritania, 92% of licensing costs in the Gambia, 90% in Senegal, 74% in Guinea-Bissau and 84% in Guinea. While fishers shouldered a higher share of licensing costs in second- and third-generation agreements, most would not find operating in distant water profitable without the remaining subsidies (Kaczynski & Fluharty, 2002; Okafor-Yarwood & Belhabib, 2020; Witbooi, 2008). Hence, subsidies play a direct role in both allowing LICs government to earn some revenue from FAs with DWFNs and in increasing competition between commercial fleets from HICs and artisanal one from LICs.

Subsidies towards fisheries have received significant attention in the literature, as they are seen as problematic due to their contribution to overcapacity and overfishing (Sumaila et al., 2010; Sumaila et al., 2016; Sumaila et al., 2019; UNCTAD, 2015; Steinbach et al., 2016; Merayo et al., 2019; Arthur et al., 2019). Subsidies figures are different across sources due to diverse aggregation technique, but a few of points are generally agreed upon. First, upper-middle income and HICs contribute to subsidisation much more than lower middle income and LICs, although the latter also dedicate significant resources in absolute term. Second, tax exemptions for fishing fuel represent the highest share of subsidies and the one without which high sea fishing would be unprofitable. Third, subsidies have a negative impact on equity of fishing outcomes, as a significantly higher share goes to commercial fleets of HICs than to the artisanal ones of LICs in which they operate (Sumaila et al., 2016; Merayo et al., 2019; Arthur et al., 2019).

The literature generally discerns between harmful subsidies – increasing fishing capacity or favouring illegal, unregulated and unrecorded fishing; beneficial ones – increasing monitoring capacity and scientific knowledge of stock status, or supporting the establishment of marine protected areas; and uncertain ones – which need to be evaluated in the specific context (Sumaila et al., 2010; Sumaila et al., 2016; Steinbach et al., 2016; Arthur et al., 2019). Harmful capacity-enhancing subsidies represents the vast majority of those granted by virtually all nations, with recent estimates evaluating the yearly disbursement in the 7 biggest DWFNs alone at USD20 billion (Sumaila et al., 2016; Arthur et al., 2019). However, it is important for reformers’ analyses to consider subsidies’ distributive effects, as, especially in LICs, those most beneficial for the environment might disproportionally impact lower income group in the short run – for better or worse (Merayo et al., 2019). The complex interrelation between subsidies’ environmental and social consequences is reflected in the landmark agreement reached under the World Trade Organization umbrella in June 2022 after more than 20 years of negotiation. While the treaty will curb subsidies to vessels involved in illegal fishing and to those targeting overfished stocks (Tipping, 2020; Tipping & Irschingler, 2021), the delegates could not settle on a broad rule to ban subsidies contributing to overcapacity exactly because no agreement was found on special and differential treatments for LICs.

Conclusions

Recovery from the COVID pandemic is putting more pressure on countries in SSA to increase domestic resource mobilisation, paying particular attention to how new fiscal measures will impact their sustainable development. Much of the current focus is directed towards carbon taxes and forestry management, with little attention paid to the potential role of fisheries. This review aimed to provide an overview of the role that taxes play in fisheries management, starting from theoretical consideration and then covering both HICs’ and LICs’ experiences with different types of instruments.

As it was shown, economics theory suggests that both taxes on fishing effort and catch could lead to sustainable fish harvest rates. However, taxes on effort are unlikely to be comprehensive enough to force fishers to behave sustainably, and the rate at which taxes on catch will do so is politically complex to justify. Therefore, ITQs have become the theoretically preferred solution, as they can over time lead to the efficient management of fisheries and to the creation of a resource rent, which could then become the objective of a dedicated tax. However, they present the same trade-off for policymakers as other tax instruments – given that most open-access fisheries are overcapitalised, a more efficient management equates to a reduction of their employment contribution. As various experiences from HICs shows, this trade-off has always been hard to navigate, and new management practices were often introduced only when fish stocks approached a severely depleted state. Even then, fishers forced out of the industry were generally compensated.

Fisheries employment contribution is especially important in SSA, where between 5.4 and 7.8 million people are engaged in fish harvesting, with a further 5.2 to 17.6 million engaged in post-harvest activities. The status of the fish stock is however extremely worrying, as the most updated estimates show that catch trends have been steadily declining for over 30 years despite an increase in fishing effort. What is virtually absent from the literature is a quantification of fisheries contribution to domestic revenue mobilisation in the continent, especially outside of payments made within the context of FAs with HICs or fees charged for vessels registration and other management activities. The latter, while negligible in terms of GDP contribution – estimated around 0.002% – might still represent a substantial source of income for local governments, which therefore tend to use them as a revenue source rather than a management tool.

On the other hand, FAs can be a substantial portion of government revenue, but often comes at the cost of increased competition between artisanal fishers and commercial ones from DWFNs. Most vessels from DWFNs are not subject to much scrutiny and enjoy significant subsidies from their home countries, which hence importantly contribute to overcapacity in global fisheries, which the recent World Trade Organization agreement has failed to tackle. While developmental considerations have become more prominent in FAs – at least those entered by the EU – they still leave much to be desired, especially in terms of compensation to coastal communities, support for the development of a post-harvest sector and introduction of catch quotas and by-catch regulation. There is also increasing evidence that many of the vessels from DWFNs are involved in illegal, unreported and unregulated fishing, a practice which importantly contributes to overfishing and loss of revenue.

The scarce economic valorisation of fisheries in the continent has led some scholars and practitioners to push for a wealth-based approach to their management – that is, the widespread adoption of modern management practices, aimed at reducing access and increasing profitability. However, there are also others who support policies focused on their contribution to employment and livelihoods, strongly connected to the common-property characteristics of traditional management – the so-called welfare-based approach. While in theory many African governments subscribes to the first approach, in practice there seems to be a lack of political incentives to push through with the required reforms – that is, to start limiting access of small-scale artisanal fishers. The emergence of co-management practices through the 1990s has only made the above conundrum harder to resolve, as local governments now also have an incentive to keep emitting licenses to collect more revenue.

To conclude, it seems clear that there are few straightforward avenues to increase fisheries’ contribution to revenue mobilisation in Africa in the short run. However, this does not mean that the focus on the topic should wane, as more exist in the longer term – all of which are connected to the creation of a resource rent through improvements in their management. Hence, for now, the focus should lie in increasing fisheries viability and sustainability, so to promote their economic valorisation through dedicated industrial policies. This could, for example, be done by building capacity in the teams negotiating FAs, so to increase their contribution to level closer to those of Pacific Island Nations (Kaczynski & Fluharty, 2002; Gagern & van den Bergh, 2013; Virdin et al., 2019), and by including support for post-processing activities (Witbooi, 2008), whose subsidisation is still allowed by the World Trade Organization. Continuing the work started by different institutions to increase the quality of available catch data (Pauly & Zeller, 2019), as well as expanding it to cover the dimension of artisanal fleets (FAO, 2020), will also contribute to provide the necessary information to implement better management practices. This would also in and of itself start increasing their revenue contribution through normal fiscal charges, hence providing more incentives for their rationalisation.