The seizure follows a European Union Court of Justice ruling in December that said EU agreements on closer ties and trade with Morocco should not apply to the disputed Western Sahara region. Morocco considers Western Sahara as its "southern provinces" after annexing the former Spanish colony in 1975.
The independence movement has seen the EU ruling as a victory, saying the people of Western Sahara must have a say in deals that include the exportation of the mineral-rich region's resources.
The ship was carrying the phosphate cargo to New Zealand. The independence movement initiated legal proceedings in South Africa when it became clear that the cargo ship would call at Port Elizabeth during its journey.
Independence supporters have called the dispute over Western Sahara the last case of colonization on the African continent.
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Late last month, the UN Security Council unanimously approved a resolution backing the secretary-general's new effort to resolve the 40-year conflict over Western Sahara.
The independence movement estimates the region's population at between 350,000 and 500,000.