Safcol briefing on progress regarding land claims, beneficiation and social responsibility

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Public Enterprises

07 August 2012
Chairperson: Maluleke, Mr P (ANC)
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Meeting Summary

The South African Forestry Company Ltd (Safcol) briefed the Committee on progress made regarding land claims, socio-economic development and enterprise development programmes. The delegation also gave Members an update on action taken on the Committee's recommendations following its oversight visit. The Department of Public Enterprises was supposed to brief the Committee on the future of Safcol; however, it had failed to prepare a presentation, telling the Committee that discussions about Safcol's future was still underway and it would brief the Committee at a later stage. The Committee ruled that it was unacceptable that the Department chose to come all the way to the meeting to say this when it could have communicated this to the Committee beforehand. Members were also greatly offended that the Department could not take the Committee into its confidence regarding the future of Safcol. They would take the matter up with the Minister.

The Committee continued with Safcol's presentation. The entity reported that approximately 61% of the land that it managed was under claims. Unresolved land claims were one of the strategic risks of the organisation. There were about 29 land claims recorded that affected Safcol's operations and some of these had more than one community grouping who lodged a claim on it. Most of the land claims were in Limpopo, Mpumalanga and Kwazulu-Natal and were in different stages of the restitution process – some cases were in the investigation process, some had been Gazetted, some were in the negotiation and stakeholder facilitation phase, and others have been settled.

Members thanked Safcol for a great presentation despite the uncertainty in which the entity was operating. Some of the concerns raised by Members included that land claims seemed to be taking an unbelievably long time to settle, that beneficiaries of timber frame houses would not be able to maintain their houses, that the CEO and Chairperson of the Safcol Board were not present at the meeting, and whether the DPE and other relevant departments supported Safcol in their efforts to function optimally.

Members noted that not much was said about Safcol's industrial activities. They asked Safcol to ensure that the timber houses were as fireproof as possible. The Committee wanted to know how much the timber houses would cost and if Safcol's contractors were ready to expand their operations to all of the provinces. They noted that the country would never catch up to the backlog in housing if the government did not find an alternative to low cost housing – this was why timber frame housing was so interesting. Members also wanted to know why the development and implementation of the generic commercial forestry model was so delayed.

The Committee thanked Safcol for responding to concerns raised previously during an oversight visit to the entity's operation in Mpumalanga.

Meeting report

Department of Public Enterprise Briefing on the future of Safcol
Mr Phahlami Mkhombo, Acting Deputy Director-General in charge of the South African Forestry Company Ltd (Safcol), informed the Committee that the Department of Public Enterprises (DPE) did not prepare a presentation on the future of Safcol. The work was still under way and the DPE anticipated that the deliberations on the matter would be concluded by the end of September 2012, after which they would approach Cabinet for approval. The DPE had written a letter to the Committee in June informing Members that the work was still under way. The Committee would recall that a decision was to be made as to whether Safcol had to be privatised. The DPE was still exploring all the options and it was mindful of the recommendations from the Presidential Review Commission, which had not been announced. This also had to be finalised before a determination could be made on the future of Safcol.

It would be premature to make any presentation on Safcol because the DPE had to approach Cabinet first before an announcement could be made.

Ms G Borman (ANC) stated that she was not sure if this was acceptable. Safcol was a State Owned Entity (SOE) that had to try to move forward. The DPE seemed to be “dilly-dallying”. She appreciated the entity’s thoughts on waiting for the Presidential Review Commission’s decision, but it seemed to be dragging its feet. How were companies supposed to proceed? This issue had dragged on for months. She did not find this acceptable.

Ms C September (ANC) shared the Members sentiments. She did not think it was funny for the DPE to come to the meeting and then inform the Committee that it could not present on the matter. The matter had to be put into context – the issue with Safcol had been coming along for almost eight years now. There was no such thing as saying the government was still thinking of privatising. This government took the decision to invest in its entities. If she took out the DPE’s Strategic Plan, she could show them what they said about Safcol. She proposed that the Committee not waste anymore time with the DPE officials. The Committee should send them back and write to the Minister to express its absolute disgust with the fact that DPE officials had come to the Committee in his name to say that they could not present on the matter. If need be, Members could rather engage with the Minister or Deputy Minister on the issue.

Mr A Mokoena (ANC) added that it was the Committee’s duty to perform oversight over these entities. He also expressed concern about the cost implications of bringing the DPE to Parliament, only for it not to present on the matter. The DPE had to inform the Committee what it was doing since Members last visited it. The DPE had to tell the Committee what was happening so they could assist it.

Ms N Michael (DA) said it was disappointing for Members to come to a Committee meeting, only to receive this type of response from officials. The Committee was there to be taken into confidence – it was a mechanism to be used to assist the DPE to find solutions to problems. It was disappointing when officials chose not to take the Committee into its confidence. In this meeting, the Committee was misled about the presentation that was supposed to be made today. This had now happened twice and she was worried that it was becoming a trend.

Dr G Koornhof (ANC) stated that it was unacceptable for the DPE to come to Parliament to say it was not ready to present. The Committee’s third term programme had been finalised towards the end of the last term. It was circulated to all Members and relevant stakeholders, including the DPE. To come on the day of the meeting to say it could not present was problematic and did not sit well with the Committee at all. Somewhere there was a breakdown in communication. At the same time that the DPE was asked to present to the Committee, Safcol was also asked to make a presentation on something else. It seemed that Safcol was ready. These two requests were made at the same time. The future of Safcol was a long outstanding issue, it was a work in progress and the Committee was working towards finding a solution together. He asked the Chairperson to make a ruling on the matter. The Committee could not afford to let a department or SOE come to a Committee and say it could not present.

Mr Mkhombo replied that the DPE noted the Committee’s concerns and to give Members some comfort he wanted to tell them that the work was being done and the DPE had an idea of what needed to happen with Safcol. However, there were certain issues that had to be addressed like land claims and the settlement model that the Department of Rural Development and Land Reform (DRDLR) was working on. There were a few things that the DPE was working on before it could say what was going to happen.

The Chairperson interrupted saying that there was nothing that the DPE could do now to comfort the Committee. The DPE already said that it could not give a presentation on the future of Safcol. The Committee programme was sent to the DPE quite a while a go and a follow up was made with the Department on 31 July 2012 as a reminder about what the Committee expected from it. The DPE did not say anything about the fact that it could not present on the matter. The Department undertook a very expensive exercise to come to the Committee to say that it was not going to present. This was completely unacceptable and the DPE’s actions could not be justified.  The Committee would take the matter up with the Minister.
Mr Mkhombo explained that the DPE communicated with the Committee through its Parliamentary Liaison Officer that it was not ready to present on the matter. In fact, a letter had been written to the Chairperson explaining the issue.

The Chairperson stated that the Committee would look at the communication issue after the meeting. But, there was still no justification for what the DPE said to the Committee.

Safcol Briefing on Progress Regarding Land Claims, Beneficiation and Social Responsibility
The Safcol delegation consisted of the Chairperson of the Audit and Risk Committee, Ms Ndumi Medupe, and Senior Managers, Mr Leslie Mkhombo and Mr Parmas Chetty.

Ms Medupe explained that the purpose of the presentation was to update the Committee on the progress Safcol has made in resolving land claims. It would also report on socio-economic development and enterprise development initiatives of the Safcol group and give updates on action plans taken after the oversight visit of the Committee to Safcol operations in Mpumalanga.

Progress on Land Claims Affecting Safcol
Approximately 61% of the land that Safcol managed was under claims. Unresolved land claims were one of the strategic risks of the organisation. There were about 29 land claims recorded that affected Safcol's operations and some of these had more than one community grouping who lodged a claim on it. Most of the land claims were in Limpopo, Mpumalanga and Kwazulu-Natal and were in different stages of the restitution process – some cases were in the investigation process, some had been Gazetted, some were in the negotiation and stakeholder facilitation phase, and others have been settled.

Out of 31 claims from the three provinces, three had been settled, 18 have been Gazetted, and the rest were being researched.

Safcol's key objectives were to become a partner of choice to successful land claimants, to ensure that forestry was the preferred land use option with clear benefits to land owners, and to educate claimants and made them aware of the nature of the forestry sector and empower them to participate in the sector.

Safcol had participated in inter-departmental task team meetings facilitated by DPE to discuss matters such as the settlement model and the Safcol lease. A Land Claims Division was established to focus on the resolution of current land claims affecting Safcol operations. Safcol had also initiated meetings with the Chief Land Claims Commissioner, as well as land claim regional offices to discuss individual claims.

Development of a Settlement Model
The generic commercial forestry model was developed by Forestry South Africa and approved by the then Minister of Land Affairs in 2008. In 2009, DPE facilitated a task team aimed at coming up with proposals to be considered for the development of the forestry model suitable for Safcol. The decision on the future role of Safcol and the privatisation or non-privatisation of Safcol's main operating entity, KLF, would inform the type of model to be adopted.

The task team recommended guiding principles that were deemed suitable for KLF. In 2011 the Department of Rural Development and Land Reform (DRDLR) announced that it would like forestry to align its model with the new thinking of the Minister of Rural Development and Land Reform. At the end, no decision was taken regarding the adoption of a model as this was interlinked to the future of Safcol and KLF.

Some of the factors that had to be considered in developing a suitable model for Safcol was whether Safcol would consider any form of partnership, whether shares would be issued to claimants, and whether a need existed for Safcol to attain the rights from the landlord to negotiate settlement directly with claimants.

Challenges included slow restitution processes leading to the illegal occupation of KLF land and threats from claimants. There were also community disputes. Another challenge was the lack of an agreed settlement model for settling claims on KLF land. Safcol also did not have the delegated mandate on the resolution of claims as the land was leased by the Department of Agriculture, Forestry and Fisheries (DAFF). This was because Safcol did not hold title deeds of the land it operated on, instead all KLF land was leased from DAFF.

Safcol continued to proactively engage the relevant roleplayers in an attempt to expedite the resolution of claims where its operations were based. The entity continued to engage with land claimants to clarify issues relating to land claims on Safcol-managed land.

Socio-economic Development Programmes and Enterprise Development Initiatives
Safcol established eleven social compacts with Redhill, Blairmore, Roburnia, Tshivhase, Mphephu entabeni, Mantjolo, Ngome, Mapulana, Hebron, Berlin and Palm Ridge.
From 2006 to 2011, most socio-economic development investment was made in infrastructure and land (68%) and education (16%). The rest was spent on water supply, environmental education, healthcare and small business and contract development. The total amount spent on socio-economic development since 2009 amounted to R 25 654 990. Infrastructure expenditure included building infrastructure needed to address the needs identified by communities such as the building of schools, early childhood development centres, libraries and community halls.


Socio-economic development spending for 2011/12 amounted to R8 115 480 with the bulk of the spending going towards infrastructure and land operations.

A budget of R6 000 000 was used to build timber framed classrooms, life centres, hospice rooms, a multipurpose centre, a community hall and arts and crafts market.

Large scale enterprise development aimed to develop high potential businesses that fell out of the normal scope of a forestry business or has the ability to extract additional value from the forestry value chain. It provided significant and sustained employment opportunities, offered apprenticeship facilities, and youth development initiatives that had the potential to create reasonable returns on investment. Safcol's large scale enterprise development projects included a charcoal project, beekeeping, green energy, and timber frame structures.

Safcol launched a timber frame structure initiative aimed at promoting timber frame structures as an affordable, quality alternative to conventional brick and mortar construction. The structures were easy to assemble and dismantle, did not detract in appearance or value when compared to conventional homes and posed no greater risk of fire than any other form of construction. The advantage of timber frame construction was the speed at which the building process took place. Timber frame housing as a cost effective alternative could meet the ever increasing demand for housing in South Africa.

Forestry Enterprise Development (FED)
It aimed to develop opportunities within the core related products with community involvement. They were usually smaller in nature and labour intensive rather than asset intensive businesses. Approximately R32 000 000 was spent on enterprise development since 2009. All FED functions strive for strong community involvement and for full or partial ownership of the created entity by beneficiaries.

Safcol committed itself to supporting the creation of an environment conducive to social and economic empowerment and development. The entity subscribed fully to the government's socio-economic development programmes.

Upgrades on Progress Made Regarding Recommendations of the Committee after their Oversight Visit
The Committee had raised concerns regarding the lack of certainty regarding the future role of Safcol, and recommended that the department resolve this urgently. The DPE's strategy for Safcol was still underway and had not been finalised.

The Committee acknowledged the development projects of the entity, but urged Safcol to engage more on developmental programmes in order to improve the lives of the immediate communities and its workers. The Committee proposed that there was a need for peaceful co-existence with the community. Safcol has been signing social compacts with communities; however, more needed to be done in the finalisation of land claims.

Discussion
Ms Borman thanked Safcol for a good presentation that seemed to address the Committee’s previous concerns. She noted that land claims matter seemed to be taking an unbelievably long time when research on the matter was started in 2008. She asked how much longer the process was going to take. She was worried that beneficiaries of timber houses would not be able to maintain their houses, especially since timber needed a lot of maintenance. She was impressed with their training and skills transfer programmes. Sanitation was a big issue. She saw that Safcol was looking at a few pilot projects and asked them to bear in mind the long term service of the structures and how beneficiaries would be able to maintain them.

Mr Mokoena noted Safcol’s excellent presentation. He also noted the absence of the chairperson of the Safcol board as well as the CEO from the meeting. The Committee expected the leadership of SOEs to come to Committee meetings. He was impressed that Safcol seemed to respond to concerns raised by the Committee at oversight visits. One of the problems he noted was that not much was said about Safcol’s industrial activities. He wondered why there was no SOE “intra-trading” – why Transnet was not buying wood from Safcol for its railway sleepers. Who was the authority that issued forestry licenses?

Ms Madupe explained that the CEO was on maternity leave and the chairperson was travelling.

Mr Chetty addressed the question on Safcol’s industrial activities. The entity’s main business was in the saw log market. Safcol also had a processing facility in Limpopo and there were a few cut operations in the highveld area. Safcol had been making a move towards processing its own logs. This was part of the assessment that the entity was going to be making in terms of the future role of Safcol. This had to be done in a responsible manner so the industry was not negatively affected. If Safcol could process logs in an effective manner then it would help the industry.

Mr Chetty said that he received a visit from a consultant employed by Transnet to look at its enterprise development to see how it could improve on their score. He mentioned the railway sleepers to them as an example.

Mr M Sonto (ANC) stated that Safcol did not know what its future was, but its presentation showed that the entity was operating like normal. He appreciated this and thanked Safcol for its efforts. He noted that Safcol wanted to “model itself into something” and it wanted certain departments, including the DPE, to come to the party. What was the DPE’s reaction and how long has this general commercial forestry model been in place? Safcol had been “quenching fires” in the forests, trying to stop communities from taking over forests by signing compacts with them and going into partnerships with them. He asked what the DPE and the DRDLR’s reaction was when Safcol was out there making all this effort.

Ms Michael thanked Safcol for the presentation. She noted that timber housing was a good idea in the right environment. She had seen projects where timber houses were in ready-made box formats that were delivered and the houses were constructed in three days. However, there were two things that worried her. The first thing Safcol and the Committee had to think of were veld fires that occurred all over South Africa. This was a big problem, especially along the highveld area. There were also so many shack fires because of the burning materials that are used, such as paraffin. Safcol had to look very closely at what should be done to make these timber wood houses as fireproof as possible. She noted that there was an Aids centre in a part of Pretoria that was made out of timber frame construction that was imported in a box set from Germany. It was basically a fully operational hospital that was set up. The great part was that if they needed to move it, they deconstructed the timber frame and moved it to another area. She asked if Safcol was looking at anything like this. Resolving land claims was one of Safcol’s challenges. The amount of land claims that were settled were quite low and it was the Committee’s duty to assist them. She asked where the hold up was happening.

Mr E Marais (DA) asked what the cost of a timber frame house would be. He noted that Safcol was mainly operation in Limpopo, Mpumalanga and KwaZulu-Natal. He wanted to know if Safcol’s contractors were ready to put up houses in the other six provinces. He commented that South Africa would never catch up to its backlog in housing if it did not change its strategy for low cost housing. So, he was very interested in timber frame housing.

Mr Chetty referred to questions concerning timber structures. Initially, in discussions with the DBSA, it highlighted that in the Eastern Cape for example, there was a need for putting up temporary houses. This was how the idea started. Safcol went to the Department of Human Settlements in the Eastern Cape as well as Cape Town. This proved to be time consuming and Safcol decided to start implementing the houses on its own. Regarding the fire hazard issue, Safcol had worked very closely with one of the finest architects in South Africa regarding this issue. The idea was that material was put in the walls that prevented fires from spreading into other rooms. If there was a fire, the fire would be contained in one room. Usually fires spread because there had not been special planning for it.

In terms of the quality of timber houses, Safcol worked with builders that had a substantial amount of experience in the area. The work that had been done had been very good. The houses were given an oil treatment for the first two years. It cost approximately R700 for the oil based paint. The houses could be constructed fairly quickly. A 200 square metre construction took Safcol about two weeks to complete. Costs varied according to the size of the structure. It was approximately R1500 per square metre.

He said that a lot more builders had to be trained if they were to set up houses in the other six provinces. All that was needed was basic carpentry skills.

Mr Marais sought clarity on whether the cost of R1500 per square included the sold foundation as well as costs for the kitchen and ablution facilities.

Dr Koornhof complimented Safcol on its socio-economic development programmes. The Committee had visited the entity and noted the passion it had regardless of its financial constraints. He was happy that Safcol reacted to the concerns the Committee had raised. He noted that the process for resolving land claims was very slow and there was a lack of an agreed settlement model, which was linked to there being no delegated mandate to Safcol. There was a commercial forestry model and Safcol had clearly spelt out its challenges regarding land claims. There were at least four government departments involved with Safcol – DPE, the Department of Agriculture, Forestry and Fisheries (DAFF), the DRDLF and the Department of Public Works (DPW). In its presentation this morning regarding land claims, Safcol said it had a general commercial forestry model and spoke about the challenges it was experiencing. So, what was the problem and where did it originate from? He deduced that Safcol was saying that there was a problem with the four government departments that could not coordinate and get the forestry model in place.

Mr Mudimeli addressed questions regarding land claims. He highlighted that there were landlords that held title deeds of the land and then there were shareholders that held shares of the companies. These were the two things that came into play with land. Shareholders wanted to know from the landlord side where their title deeds were and what the title deed value was. They also wanted to know how to make profit out of shares owned by the companies and how much of the profit they would receive. The landlord at this stage was the government through the DPW but it had given all rights to the forests to the DWAF who further leases the land to Safcol. This was a complication on its own that had to be unbundled.

The other issue he wanted to raise was that of conflicting legislation. The Restitution Act and the Land Tenure Act seemed to conflict with these pieces of legislation.

Ms September asked what legislation and policy prohibited the sector from getting to a height that the Committee wanted it to be. She noted that the current Act stated that the Minister had to have a national forestry action plan and had to report to Parliament every second year or so on the future of the forestry industry. The Committee needed to find out about this. If there were policies or laws that were not assisting the Committee’s cause, then they should be revisited. She imagined that the sector was due for a policy review. Perhaps the Committee could contribute to this. Safcol referred to DWAF. This entity no longer existed- it was now the Department of Water Affairs or the Department of Environmental Affairs.

Mr Sonto noted that Safcol was operating under a cloud of uncertainty. He wondered what timeline was supposed to be taken into account in order for the entity to understand where it was going to be and what it is going to be in the future.

The Chairperson replied that this was a matter that had to be referred to the Minister.

Consideration of Minutes
The Chairperson asked Members to deliberate on the minutes for 8, 22 and 29 May 2012 as well as 12 June 2012.

Members considered each minute. They noted a few minor errors and grammatical errors in the documents.

The minutes were adopted with amendments.

Consideration of the Report on the Oversight Visit to the DPE and SOEs
The Chairperson asked the Committee to comment on the report. He reminded the Committee that the trip was taken between 18 and 22 June 2012. The report was dated 13 July 2012.

Ms Michael noted grammatical errors throughout the document.

Dr Koornhof noted that the wrong tenses were used as well and also pointed out a few other issues. He was hesitant to approve a report that did not reflect what the Committee thought, especially if it was not included in the recommendations and resolutions.
The Chairperson noted that all the issues were captured in the report; however, they were not put in the recommendations. This would be corrected. He asked Dr Koornhof to give his corrected version of the report to the Committee Secretary so that the changes could be captured correctly.

The report was adopted with amendments.

The meeting was adjourned.


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