The cost of modern-day piracy

Maritime piracy hit world headlines in 2009 when Somali pirates boarded the US-flagged Maersk Alabama in what was the first hijacking of a US ship in 200 years. 

The dramatic incident focused attention on a wave of attacks off the coast of Somalia which severely disrupted shipping for several years, and inspired a popular Hollywood film, Captain Phillips. 

The shipping route around the Horn of Africa and the Suez Canal is a conduit for about 10% of the world’s trade. A concerted international response helped control the threat in that particular region.

But what the general public doesn’t know is that maritime piracy is flourishing across the world, from Latin America to Africa and Asia, costing the global economy billions of dollars every year. 

The latest statistics from the International Maritime Bureau (IMB), an arm of the International Chamber of Commerce, showed that although there was a dip in 2017, piracy surged in the first half of this year, with 107 incidents reported globally compared to 87 over the corresponding period of last year. 

The number of hostages taken in the first six months of 2018 shot up to 102, compared to 63 in the same period of 2017.

The geography of those attacks has significantly shifted – 45% were launched from sub-Saharan Africa, with the biggest hotbed the Gulf of Guinea along Nigeria’s coastline, where the number of incidents has increased threefold from 2014 levels. 

According to the IMB, 31 attacks were launched from Nigeria in the first half of this year, compared with just two off the coast of Somalia in the same period.

Experts warn that the real picture could be far worse, as many incidents are not reported due to the reluctance of private companies to damage their reputations by exposing flaws in their security systems. 

According to the eighth annual report of Oceans Beyond Piracy (OBP), produced by the US-based One Earth Future organisation, there were 321 piracy incidents around the world last year and 5 000 seafarers affected, with 17 crew members killed in Asia and two killed off West Africa. 

The report noted a “big increase” in those incidents in Latin America and the Caribbean.   

Modern maritime pirates target mainly bulk carriers to steal their cargo or kidnap their crew for ransom, boarding them with machine guns or machetes. 

Ironically, automation makes commercial ships much more vulnerable, since a large vessel can have as few as 15 crew.       

Nigerian pirates are often extremely violent – boarding ships quickly and engaging in fierce gun battles before snatching victims or setting them adrift, retreating into the Niger Delta’s maze of rivers where it is difficult for security forces to find them. 

According to the IMB, 65 of 75 crew members kidnapped in 2017 were taken in or around Nigerian waters. 

Research shows that the toll taken on crew is huge, both in terms of post-traumatic stress disorder after an attack, and the anxiety of sailing in a high-risk area.

The economic cost of maritime piracy is heavy given the range and complexity of variables involved, with some estimates hovering at around $6bn annually. 

According to the OBP report, total costs in East Africa alone amounted to $1.4bn last year, down from $7bn in 2010. But in West Africa they climbed to $818m from $719.6m in 2015. 

Levels in Asia were harder to calculate given the complexity of shipping patterns and in isolating dedicated counter-piracy patrols, but incidents of kidnap for ransom plunged by 80%, and overall incidents by 20% due largely to the effective cooperation by regional law enforcement actors, it said. 

However, 17 seafarers were killed, more than in any other region.   

In Latin America, piracy and armed robbery incidents at sea surged by 163%, with anchored yachts involved in about 59% of all incidents, the OBP report showed. It was again unable to calculate the total cost of piracy in that region.    

The cost of shipping itself has climbed globally as vessels try to avoid piracy hotspots, increasing the duration of their journeys, and hire armed security for protection. 

In addition, shipping companies are now compelled to take out insurance against the scourge – not only for loss of cargo or damage to vessels, but for their crew. 

Some insurance companies offer packages which include cover for interest on loans to meet a ransom; the fees and expenses of independent crisis negotiators, interpreters, and public relations consultants; and the costs of medical and psychiatric care, including cosmetic surgery for victims. 

All of these costs add to the prices of transported goods and are passed on to consumers. 

The latest IMB report urged a structured and more cooperative response from governments to address piracy, including improved patrolling of the sea, intelligence sharing, and the elimination of pirate safe havens on land. 

It also encouraged shipping companies to improve security on board their vessels – a precaution which is declining in some areas.

Mariam Isa is a freelance journalist who came to South Africa in 2000 as chief financial correspondent for Reuters news agency after working in the Middle East, the UK and Sweden, covering topics ranging from war to oil, as well as politics and economics. She joined Business Day as economics editor in 2007 and left in 2014 to write on a wider range of subjects for several publications in SA and in the UK.

This article originally appeared in the 11 October edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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