Forestry and Transformation: briefing

Water and Sanitation

25 March 2003
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Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
26 March 2003
FORESTRY AND TRANSFORMATION: BRIEFING


Chairperson:
Mr J F van Wyk

Documents handed out:

Measures taken to combat degradation of Natural Forests
Report on Restructuring of Forestry Assets (Appendix)

SUMMARY
Department of Water Affairs and Forestry reported on measures taken to combat degradation of natural forests. Issues around the granting of contracts to foreign purchasers by Safcol, as raised with the committee in a letter from the Eastern Cape Sawmillers' Association were discussed.

MINUTES

Mr J F van Wyk, the new Chairperson stated that the meeting of 19 March 2003 on the acceleration of sanitation delivery had been unfinished and would therefore be taken up again on 16 April 2003 when the committee would meet with the national sanitation task team and adopt the reports of the Eastern Cape and KwaZulu-Natal. The briefing on the African approach to water services was therefore cancelled. He asked for suggestions regarding the provincial visits in the period 12-16 May.

This was discussed but Mr DS Maimane (ANC) reminded the Committee that the meeting had discussed the matter before and that the agreement had been that members would visit a province after determining priorities and split up when in that province. It was agreed that the decision on which province to visit would be left to the following meeting.

Mr Michael Peter of the Department of Water Affairs and Forestry (DWAF) reported on measures taken to combat degradation of natural forest, after which he and Ms Linda Mossop, chief director of Forestry answered questions on this matter and on issues around the granting of contracts to foreign purchasers by Safcol, as raised with the committee in a letter from the Eastern Cape Sawmillers' Association.

Please refer to attached Powerpoint presentation.


A report on restructuring had also been scheduled, but time prohibited this and hard copies of the report were given to members to read at a later stage.


Discussion
Mr J Arendse (ANC) asked whether the Geographical Information Survey (GIS) was available to all, whether one could harvest a protected species if one had grown it oneself and if dagga was included in the R1.5billion mentioned as representing the sum annual worth of forest products per annum.

Mr Peter said that the GIS was in the public domain, except that certain types of sensitive information, such as location of San paintings and cycads was withheld. One would be given a licence to harvest a plant that one had planted oneself.

Mr Maluleke (DP) asked if the core management teams comprised partnerships between government and institutions or people and whether people living next to forests who gathered firewood were allowed to sell it.

Ms Mossop said that partnerships were with communities. Licences to sell firewood would be required but that an aim of the National Forestry Act NFA was for the economic benefits of forests to be spread as widely as possible.

A question about whether the Department of Water Affairs (DWAF) was strong enough to resist threats to forests by the departments of environmental affairs, public enterprise and agriculture.

A speaker asked for elaboration on the core functions of promoting community forestry and the number of staff and restructuring and to link the latter to the budget.

Ms Mossop said that DWAF was not fully capacitated and that the question of forestry management was only recently addressed. Initially it had been supposed that restructuring would take three years and after that there would be no need for a restructuring budget. This view was simplistic, it was acknowledged in retrospect and restructuring would probably take eight to ten years. Therefore DWAF was not strong enough to actively monitor commercial and indigenous forests and were seeking MTEF reappraisal. As DWAF could not enforce the National Forestry Act (NFA), alone a forum comprising other role players such as the housing department and public prosecutors had been established.

Mr McIntosh (DP) asked what defined a forest and when the Department would "do what it was elected to do" and get the illegal occupants of Dukuduku Forest off.

Mr Arendse objected to this because DWAF personnel were not political appointments.

Mr McIntosh rephrased his question to ask what the DWAF was doing to apply government policy. He asked about the illegal harvesters of yellow woods that Mr Peter had mentioned witnessing would be prosecuted if Department of Nature Conservation had initiated it.

Another speaker asked whose jurisdiction illegal harvesting fell under and how many staff monitored it.

Ms Mossop said that the DWAF shared Mr McIntosh's concerns but the matter was complicated by the ownership of the land in question being a matter for incomplete litigation but that the DWAF was trying to find a solution to the problem in conjunction with Land affairs and local inhabitants. She had recently been involved in a prosecution for illegal logging of yellow woods and the outcome was awaited with serious concern as it was a test case.

Ms R A Ndzanga (ANC) asked if people collecting medicinal plants for domestic use should apply for licences, and, if so, where?

Ms Mossop said that licences were available from local foresters and that it would always be granted for medicinal use. If the local forester denied this, one could appeal to the regional office. There was a licence Information management System which identified where licences would be needed and monitored how many were issued.

The chair asked for a breakdown of the total 530 000ha mentioned into private and state-owned categories and for details of the interactions between the different levels and different departments involved in forest management at the levels of provincial and local government.

Ms Mossop said that sometimes local governments made roads into forests despite being aware of the NFA but that the Department was proactive in training its own staff, magistrates and prosecutors.

A committee member expressed concern about the lack of capacity in the DWAF which would prevent local communities from benefiting from forestry and therefore prevent social transformation.

Mr Maimane said that the constraint was budgetary and that the committee should address it, as well as the incapacity to restructure. There should be contingency approaches. He understood that transformation would take time but reminded the committee of meeting an all-white business delegation which was supposed to report on its transformation progress to the committee in 2001.

It was generally acknowledged that inyangas, sangomas and other herbalists did not dissipate resources as commercial gatherers did. Ms Mossop offered to lend the committee copies of a documentary on bark harvesting which had recently been aired on local television.

A member asked what role DWAF played in state forests.

Ms Mossop said that DWAF had been asked to bid for Komati Forest. The Department of Public Enterprise was in charge of evaluating tenders but DWAF had representation on the evaluation committee with the Department of Land Affairs. Consolidated bids were now awaited.

Responding to the concerns expressed regarding budgetary inadequacies, Ms Mossop said that the DWAF had access to contingency funds to pay all staff in the short term (to the end of the year). Its Director-General was meeting with the Treasury and Environmental Affairs Directors-General to access more funds in the longer term. She was proud of her department's policy and legislation and was gratified that the committee shared her concern about its capacity to implement these as influential stakeholders with political will were needed. There should be a joint presentation with the DWAF and the Department of Public Enterprise on the beneficiaries of privatisation.

Regarding the matter raised about the Eastern Cape Sawmillers' Association, Ms Mossop said that the update was in her colleague, Mr Mahlangu's report, which would be given to members but that two leases had been concluded. Members of DWAF had met with SAFCOL on 10 March regarding the points raised in Mr Kennedy's letter - that there had been a change in the way that SAFCOL was disposing of pulp wood and that there had been a lack of fairness in identifying Eastern Cape Sawmillers. Ms Mossop said that there was a need to maximise revenue gain, that 4000 square metres was supplied to local sawmillers throughout the recent period and that there was a commitment to supply only two more foreign shipments until June 2003. Over the last 18 months, the local price had risen considerably. She would however, report in writing to the Committee on the follow-up meeting with SAFCOL.

The chair said that the object was to balance revenue with job creation and there was general agreement that SAFCOL's structuring should be closely scrutinised.

The chair summed up the three matters needing to be followed up: budgetary constraints impacting on functioning; a joint presentation to the committee by DWAF and the Department of Public Enterprise and the Eastern Cape Sawmillers Association.

The meeting was adjourned.

Appendix
REPORT ON THE RESTRUCTURING OF FORESTRY ASSETS IN THE DEPARTMENT OF WATER AFFAIRS AND FORESTRY

1. BACKGROUND AND POLICY CONTEXT

1.1 COMMERCIAL PLANTATIONS AND WOODLOTS

In 1994 DWAF became directly responsible for approximately 160,000ha of commercial plantations and community woodlots in the former homelands and self-governing territories. In 1998, government formerly approved an approach to privatise all its plantation assets (both those managed by SAFCOL and DWAF) in a single process. This involved a phased approach to the privatisation entailing dividing all plantations under its ownership into three general categories:

  • Category A- The entire SAFCOL estate (386 476ha) combined with distinct elements elements (amounting to about 70 000ha) of the former homelands plantations so closely associated with particular SAFCOL assets to make their combination logical.
  • Category B- The balance of the commercially viable plantations remaining under DWAF's management extending approximately over 70 000ha. These are generally smaller in size with an average of 1300ha and also linked to small sawmiller processors
  • Category C- Approximately 110 small scattered plantations extending over 17 000 ha established to provide communities with building material and fuel wood.

The generic restructuring objective for these plantations, as reflected the Government's White Paper on "Sustainable Forest Development in South Africa" (1996), is:

"to dispose of the industrial (commercial) forests and community woodlots in their most beneficial way, after full and proper consultation".

This process of disposal of plantations also provides an opportunity for Government to achieve a number of its other key policy objectives as outlined in the White Paper, namely:

  • Widening of ownership and access to forest resources;
  • Participation by the previously disadvantaged;
  • Inward investment in forest operations and downstream processing; and
  • Recognition of underlying land rights.

The implementation of the restructuring process commenced in earnest in 1998. Progress to date has related to the combining of 70,000 ha of DWAF plantations (known as category A) with those of SAFCOL. All these Category A DWAF plantations have either been sold to private sector companies or have been incorporated into SAFCOL and await on-sale.

1.2 INDIGENOUS FORESTS

Post 1994, DWAF inherited responsibility for all State forests previously managed under the jurisdiction of the former provinces, homelands and self-governing territories. This effectively trebled the area of State natural forest that DWAF became responsible for.

As a result of the amalgamation of these areas DWAF finds itself as the manager of a wide range of different State resources in terms of size, vegetation type and management purposes. Whilst taking responsibility for these areas, DWAF recognises that there are in some cases management agencies and institutions who are better placed to manage these resources.

Taking its lead from the White Paper and the Constitution, the National Forest Act (NFA, 1998) establishes DWAF as the central government body responsible for ensuring sustainable forest management nationally and creates the legal framework for the assignment and delegation of forest management responsibilities. The NFA also creates in DWAF the mandate to set, monitor and report on forest policy, and to create regulatory instruments for promoting and enforcing sustainable forestry. DWAF is developing its capacity to carry out these new responsibilities.

DWAF has a responsibility to make forestry more responsive to the needs of the people, and to ensure a greater representation, efficiency and relevance to the majority of South Africans. DWAF has the view that by bringing forest management closer to the people, DWAF can:

  • Promote greater participation in forestry and the forest products industry by people previously disadvantaged by unfair discrimination;
  • Promote the conservation and sustainable use of forests for their multiple benefits and equitable distribution;
  • Promote community forestry in which the state and communities jointly manage forests;
  • Ensure more efficient, effective and economic management;
  • Facilitate an integrated approach within bioregional and integrated development planning processes.

2. APPROACHES TO RESTRUCTURING STATE FORESTRY ASSETS

2.1 CATEGORY A PROCESS

The restructuring process for Category A assets was as follows:

  • Sale of assets: Government sought a once-off lump sum payment in return for disposing of the trees and other fixed and moveable assets. The combined SAFCOL/DWAF Category A forests were initially divided into seven packages which were later reduced to five after four original packages were combined to form two.

Investors were then invited to bid for a 75% shareholding, of which at least 10% needed to be black owned to ensure black empowerment, in any combination or all of the packages. Specially created companies known as "Special Purpose Vehicles" (SPV), one for each package were established to facilitate the sale of shares.

The Packages were dealt with as follows:

  • Eastern Cape North Package, 75 487 ha of lease area which was sold to Singisi Forest Products a consortium including two community Trusts, in August 2001.
  • KwaZulu-Natal package, 43 946 ha of lease area which was sold to Siyaqhubeka Consortium involving an empowerment group and community interests.
  • Komatiland(Mpumalanga and Limpopo) package, 209 372 ha of lease area currently on tender.
  • Amatola (Eastern Cape South) package, 25 417 ha of lease area, a preferred bidder appointed negotiations at the final stage.
  • Mountain to Ocean (Western Cape) 161 912 ha of lease area. A 20 year strategy established to withdraw forest production in the area. Viable forestry areas still subject to a tendering process.
  • Lease of the land: Government entered into long-term leases for the use of the land. DWAF's Sub-Directorate: Land Management is administering the leases. The successful bidders pay an annual market rent for the land. This rent is paid to DWAF and DWAF will then transfer it to the rightful land owner as soon as those are confirmed. The Department of Land Affairs and the Land Claims Commissioners will assist in determining the rightful land owners. Existing agreements with Traditional Authorities will be taken into account in this process.
  • Treatment of Human resources: Workers were transferred to the new employer based on the SAFCOL terms and conditions of employment after lengthy negotiations with Labour (unions). Government undertook to subsidise the salaries of the transferred workers for the period of three years. The subsidy was calculated and paid out directly to each employee in a form of a transfer package. Workers were given three choices, the transfer to the new employer, or redeployment within the department or to take Voluntary Severance Package(VSP) with a Social Plan. The Social Plan programme provided former employees with vocational and business skills to prepare them for life outside government.

2.2 CATEGORY B PLANTATIONS PROCESS

2.2.1 Category B overview

The Category B plantations comprise the remaining 70 000 ha of industrial plantations, which were not included in the SAFCOL restructuring process. These are a mixture of pine and gum plantations supplying a range of large and small-scale processors.


The Restructuring initiative for Category B essentially seeks a similar outcome to the Category A process, however it is envisaged that smaller, emerging, previously disadvantaged companies will participate in their own right as bidders.

      1. Approaches for Restructuring of Category B Plantations

The generic restructuring process for Category B assets is as follows:

  • Sale of assets: Government seeks a once-off lump sum payment in return for disposing of the trees and other fixed and moveable assets. The aim in this disposal process is to give an opportunity to smaller emerging investors and community structures who may have otherwise been excluded from the Category A process due to size of packages that were on offer. This will also present opportunities for promotion of local economic development and long-terms sustainability as in some provinces significant downstream initiatives and small business have been established and depend entirely on the continued existence of these resources.

Various approaches are therefore being explored to dispose of these plantations in a manner that will facilitate partnerships between provincial, local governments, communities, workers, small emerging forestry businesses and large established companies.

Government would, however, still seek to dispose of the assets for sale through a series of competitive tendering process.

  • Facilitating Community Participation: In order to facilitate meaningful participation of communities in the disposal process, DWAF in partnership with the Department of Land Affairs (DLA) and Regional Land Claims commission will embark on a community consultation process following the DLA methods of consultation process.
  • Lease of the land: Government will enter into long-term leases for the use of the land. DWAF's Sub-Directorate: Land Management will administer the leases. The successful bidders will be required to pay an annual market rent for the land. This rent will be paid to DWAF and DWAF will then transfer it to the rightful land owner. The Department of Land Affairs and the Land Claims Commissioners will assist in determining the rightful land owners. Existing agreements with Traditional Authorities will be taken into account in this process. In case where the land owners eventually become the owners of the assets the lease arrangements will not be applicable.
  • Treatment of Human resources: Workers will be given three choices , the transfer to the new company on the current salary, or redeployment or severance package according to the Public Service Framework Agreement on dealing with human resources in restructuring which was agreed to between government and public sector Labour Unions. Government will provide a subsidy to the successful bidders to cover those personnel costs, which would be over and above realistic industry norms as salaries are lower in the private sector and staff levels are also lower than DWAF's levels. In total there is approximately 2690 workers affected in the process.

2.3 CATEGORY C PLANTATIONS

2.3.1 Category C overview

The 71 Category C plantations were established for the purpose of supplying communities with building materials and fuel wood. They were planted directly for community benefit, rather than as a raw material for industrial processing. Government does not therefore seek to sell the woodlots but rather to transfer them to communities in line with the following mission statement:

"transfer of the management, control and ownership of Category C plantations to beneficiaries with underlying land rights or claims to such rights."

 

DWAF is not undertaking this process simply as a means of shedding an unwanted responsibility. DWAF's approach is that communities must make the decision concerning the future management of the woodlots. If communities wish to keep managing the woodlots and wish DWAF to continue providing technical support then DWAF will do this through its extension services. But DWAF does not intend to indefinitely manage each woodlot with all its operational and overhead costs as this is both inefficient and ineffective in terms of meeting people's basic needs.

This initiative of withdrawing from direct management is mirrored by the development of a more facilitative approach to community forestry. In future DWAF will assist communities to manage their own resources, and will focus on facilitating economic development through partnerships with the private sector, particularly around new afforestation on communal land.

2.3.2 Approaches to the Restructuring of Category C plantations

The generic restructuring process for Category C woodlots is as follows:

  • Stakeholder consultation: there will be extensive consultation to minimise the risk of conflict between interested parties and to ensure that legitimate, representative structures are created to represent "the community". Particular attention will be paid to ensure that land claimants are part of the representative structures.
  • Formation of Community Trusts: DWAF will facilitate the formation of representative trusts as the legal entity with whom DWAF will engage. Ten of these have already been created.
  • Community Forestry Agreement (CFA): CFAs may be entered into as a mechanism for joint planning and management between DWAF and the Community Trust.
  • Provision of technical support: DWAF will provide technical and financial support in advising communities about the most suitable long-term strategy for managing the woodlot. A business plan will be developed which may entail developing the woodlot as an SMME, continued management as a subsistence community resource, or conversion altogether to another land use. The type of support provided will be tailored to the particular business plan for each woodlot. There will be a strong emphasis on re-skilling existing DWAF staff to provide more relevant advisory services and linking this process to the services to be provided by the Forest Enterprise Development Office (FEDO).
  • Disposal of assets: Government should not seek a financial payment in return for disposing of the trees and other fixed and moveable assets. It is proposed that these should be transferred at no charge to the community.
  • Transfer of ownership: it is envisaged that eventually the underlying ownership of the land relating to each woodlot will be restored to the rightful land owner, either by way of a land claim or other tenure reform process. Where there are existing agreements with Traditional Authorities, these will be taken into account.
  • Treatment of Human Resources: DWAF will continue to pay all the workers on the category C plantations (woodlots) and they will remain in the Public Service. Workers will not be replaced as each leaves. All operational costs will however be transferred to the community. In total there are approximately 754 workers affected.


2.4 INDIGENOUS (NATURAL) FORESTS RESTRUCTURING

2.4.1 Indigenous Forests Overview

Compared to most other vegetation types in South Africa, the natural forests are a highly scattered and patchy resource. It is estimated that there are around 15,000 forest patches in the country and this has important implications on the way it has been protected and managed. Compared to other conservation agencies, the DWAF protected areas are the largest in number (1,500) but, on average, also the smallest in size (153 ha).


2.4.2 Approaches to the Restructuring of Indigenous Forests

2.4.2.1 Principles for the Devolution of Management of State natural

Forests

  • DWAF retains the ultimate legal responsibility for state forest land to ensure the sustainable management according to principles, criteria and indicators for Sustainable Forest Management;
  • DWAF remains a manager of last resort;
  • All State forest land shall remain as such if still required for forestry;
  • DWAF should be satisfied with the competency of the agency to which it intends to devolve, and the agency in turn should be willing to take over the management responsibility;
  • DWAF shall carefully monitor guide and support the responsible agencies where necessary to ensure that national objectives are met;
  • Where DWAF is contemplating leasing commercial forestry plantations, as much of any associated indigenous forests should be included in the lease area.
  • In the case of negotiations around delegations and assignments, DWAF will engage DEAT, Provincial Government Departments, communities and other potential private sector bodies.

2.4.2.2 Criteria for Devolving Management to Appropriate Agents

In order to implement its strategy, DWAF must determine those agencies most appropriate for the management of each State forest. To do this it will use a number of internationally accepted measures already in use by other national and provincial agencies:

  • National System Planning
  • Forest Reserve Networks
  • Institutional Capacity
  • Capacity to promote local development.
  • Demonstrated Management Capacity
  • Legal Capacity

DWAF will use all the measures to determine management needs of forest areas and to identify the best agency for managing the forest.

2.4.2.3 Potential Management Agents for State Indigenous Forests

DWAF has identified a range of potential management agencies to whom management of State indigenous forests could be transferred. These are listed below:

  • Provincial Governments
  • Department of Environmental Affairs and Tourism through the South African National Parks
  • Local Government Departments
  • Commercial timber companies
  • Community structures
  • Catchment Management Agencies
  • Private Land Owners
  • Hotel owners / eco-tourism operators

2.4.2.3 Role and function of DWAF during and after transfer of State

natural forest

Given that DWAF retains the ultimate legal responsibility for state forest land, it will still monitor and regulate for sustainable forest management. It also remains the manager of last resort. Furthermore, the Minister may (in terms of the NFA) provide technical and financial support to communities who manage forests through CFA's and for PPP's.

In order for DWAF to undertake these obligations, it will be required to retain sufficient human and financial resources to:

  • provide technical and other support to new agencies;
  • monitor, administer and report on the leases, delegations assignments, CFA's and contracts;
  • Manage residual land for which no appropriate agency is identified and forest which revert back to DWAF as a result of the termination of leases, contracts, delegations, assignments and CFA's.

3. SOME LESSONS LEARNT FROM THE CATEGORY A PROCESS

These lessons have already been discussed in previous sections, but to summarise and emphasise the key ones are as follows:

  • Set clear, politically acceptable objectives through consultation with key stakeholders and reference to sector and macro policy;
  • Communicate the objectives clearly and early to potential bidders and take feedback on their reaction to determine the feasibility of achieving an acceptable transaction;
  • Maintain dialogue with key stakeholders as the process unfolds, and as delays inevitably arise;
  • Use the various instruments within the transaction to achieve the multiple objectives:
  • Use the bid process as a market instrument and evaluate bids (transparently) to select a preferred bidder
  • Use the sale of business agreements to secure commitments to economic development including down-stream processing
  • Use the lease as the central instrument for transferring use rights over State forest land from the State to the private sector (and avoid loading the lease with other issues that can be covered elsewhere)
  • Use existing legislation to regulate. Do not over-regulate by encumbering the lease, try to allow the leaseholders to operate on a level playing field with other private companies, all of whom must operate within the law;
  • Provide incentives for sustainability rather than regulate for it. If you use the lease to provide the private sector with long-term security to yield a return on its investment and the right to trade its investment then it has an incentive to mange the resource to its full potential rather than deplete it;
  • A requirement for certification in the lease enables government to transfer much of the cost of monitoring and reporting on sustainability to the private sector operator;
  • Create adequate capacity to manage Government's residual responsibilities in terms of the lease and other transaction commitments.

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