Safcol briefing on land claim settlement & Western Cape Forestry Sector Forum on transformation in the forestry sector

NCOP Public Enterprises and Communication

18 April 2018
Chairperson: Ms E Prins (ANC, Western Cape)
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Meeting Summary

Safcol briefed the Committee on land claim settlements.

SAFCOL faces a range of challenges to its business operations, the key one being delays in the land restitution process. In 2008, the Commission on Restitution of Land Rights undertook a verification study of land under SAFCOL, which confirmed the legitimacy of the claimed lands by the various surrounding communities. The claimants are getting impatient at the slow pace of the restitution process despite efforts since 2011 to fast-track the process. The company was heavily dependent on the Department of Rural Development and Land Reform (DRDLR) for land restitution and their relationship was crucial because delays would make the business to suffer and that would negatively affect the communities.

SAFCOL would not wait for the resolution of the land restitution process by DRDLR, rather would allow communities to benefit in the meantime, as part of its shareholders’ value mandate which aims to benefit communities directly and indirectly.  As part of that mandate, SAFCOL had signed 13 social compacts with the neighbouring communities and land claimants.

A summary of the affected claims, based on data from 2016, showed the claims were concentrated in only three provinces; Mpumalanga, Limpopo, and KwaZulu-Natal. A recent audit showed Limpopo had the highest number of claims despite most of SAFCOL’s business, based on hectares of forests under SAFCOL control, being in Mpumalanga.

SAFCOL was revisiting its existing Lease-Back model, which had been earlier agreed upon by all participants, to allow for the greater active inclusion of communities and land claimants instead of seating on the sidelines. This model proposed that the government transfers the title and rights of the land to the claimant communities for ownership. The community would then own the land, but lease it back to SAFCOL for two rotations of 70 years. SAFCOL would retain ownership of all trees on the land and pay a market rental fee for the use of the land. This is to allow the community to take part in SAFCOL’s value chain through procurement, integration of enterprise development initiatives for communities in the forestry value chain, and the prioritisation of land claimants. At the end of the second rotation, the parties could opt to re-negotiate new terms that could result in the increased ownership of the business by the claimants.

The Committee requested answers on what specific measures and internal controls had been put in place to prevent fraud, particularly in the procurement department of SAFCOL. Members were keen to obtain details on the status and outcome of internal investigations and the improvements that had been made since the previous briefing to the Committee in November 2017. Members enquired about how the lease rate was determined and from whom specifically, the land would be leased from.

A representative of the Western Cape Forestry Sector Forum addressed the Committee on transformation in the forestry sector, the plight of ex-SAFCOL workers, and security of tenure. She alleged that the communities living around the forest had been cheated out of the promised 10% of SAFCOL shares and how SAFCOL and DAFF ignored invitations from the community organisation to visit and hear their plight. She complained that SAFCOL had signed deals with companies that exploited the local communities living around forests and had contributed to the destruction of the indigenous forests.

Members said there ought to be additional efforts to contact shareholders and community members that had not claimed their SAFCOL shares yet and asked who was managing SAFCOL's provident fund for workers, as it had been reported that since 1982, people were not receiving their pensions. Due to the lack of time, there was a proposal that the representative be invited to another meeting to elaborate on her presentation and claims.

Meeting report

The Chairperson opened the meeting, introduced the members of the Committee present, apologised for technical difficulties with the presentation equipment, and remarked that the Committee was glad SAFCOL finally had a CEO.

At the request of the Chairperson, Mr Lungile Mabece, Board Chairperson, South African Forestry Company, SAFCOL, introduced the rest of the board members present, including CEO, Mr Tsepo Monaheng, and non-executive directors, Mr Maroale Rachidi, Dr Petrus Mahlangu, Dr Pulane Molokwane, and Ms Caroline Ngwenya.

Briefing by SAFCOL on the status of land claims

Mr Mabece briefed the Committee on the status of land claims and what had changed since their last briefing in November 2017. SAFCOL’s core business was the management of state forests of which 61% of the land has been affected by the claims, since 1998. This figure reduced to 57% over the last year (2017- 2018). It generated revenue through the sale of forest products, sawn timber and other value-added products.

SAFCOL was a participant in the land claims process despite not owning any of the land and had set targets to achieve, and would not wait for the resolution of the land restitution process by the Department of Rural Development and Land Reform (DRDLR). Instead, communities would be allowed to benefit in the meantime, as part of its shareholders’ value mandate which aimed to benefit communities directly and indirectly. 

The affected claims, based on data from 2016, showed there were 20 claims in Mpumalanga, 23 in Limpopo, and only one in KwaZulu-Natal. KwaZulu-Natal’s one claim would likely be easy to resolve. Of the 20 claims in Mpumalanga, 16 were still under investigation while the rest were under negotiation. In Limpopo, two claims were in the investigation stage while 18 were being negotiated and a further three were being settled. The three claims which were approved had not yet been transferred to the communities. Updated data for the year 2017/2018 was not yet available.

The audit report from 2016 showed that most of the land affected by claims was in Mpumalanga and Limpopo. The amount of forest land under claims was very little in KwaZulu-Natal, and that single claim was under negotiation.

SAFCOL was revisiting its existing Lease-Back model, which had been earlier agreed upon by all participants, to allow for the greater active inclusion of communities and land claimants. There had been various requests for review of the model. The existing model was being reviewed according to the following four principles:

- The inclusion of communities and land claimants in the business operations’ value chain.

- The process of assisting the community to participate and contribute to the SAFCOL value chain through procurement. This includes deliberate or intentional initiatives to exceed the PPPFA targets as set out in the regulations by conducting business with communities.

- Integration of Enterprise Development initiatives for communities within the forestry value chain.

- Prioritization of land claimants for beneficiation.

A list of 13 current social compacts with adjacent communities and land claimants to allow them to own the business and benefit, was developed, however, the list was not exhaustive. SAFCOL was content that the community was happy with the work it was doing.

Resulting from the 13 social compacts with the communities, 11 projects as outlined in the briefing documents, had been implemented, however, the list may also not be exhaustive. From the list, it was SAFCOL’s view that forestry and its associated business chain could be a key driver for South Africa’s economy as presently, the country was not doing enough to promote it. It wants the various projects to touch the lives of the people so they are beneficiaries of its success.

SAFCOL faced several challenges, the overall one being that DRDLR was the only government body with the responsibility of land restitution to the successful land claimants, through its agent the Land Claims Commission (LCC). The company was heavily dependent on DRDLR for land restitution and that relationship was crucial because delays would make the business to suffer and that would negatively affect the communities.

The challenge of time delays in dealing with SAFCOL and DAFF land despite it being state-owned land was dire. The restitution process at the Department took too long and that was the reason SAFCOL was requesting the Committee’s intervention to fast-track the process to allow greater benefit to the communities and other stakeholders. The multiple stakeholder nature of the process required more appropriate planning with timelines to be adhered to by all parties, without having to wait for risks to materialise. 

Considering the various challenges outlined, SAFCOL proposed projectisation of the land restitution process, which affected SAFCOL and DAFF state forest land. This would be in the form of a project plan framework with set timelines for finalisation of land claims and restitution, between SAFCOL, DRDLR, DAFF, and DPE. This project team’s main purpose would be to reduce the delays in the process.

SAFCOL recommended a cooperative framework between the various state organs and the relevant communities assigning stakeholders with responsibilities in the land restitution process on land claims on state forest land. The community would need to be involved since SAFCOL could not succeed on its own, as it was heavily dependent on all these organs of state.

SAFCOL was, therefore, requesting for support from the National Council of Provinces (NCOP) to achieve progress on the resolution of the land restitution process. It also requested support to get progress reports on the land restitution process and wished for regular reporting on land claims and restitution.

Discussion

The Chairperson complimented SAFCOL for reducing the number of claims on state land under its control from 61% to 57% over a period of less than a year and hoped there would be more improvement in the future.

Mr A Singh (ANC, KwaZulu-Natal) asked where exactly in KwaZulu-Natal, the one land claim was and when it would be solved. What percentage of procurement did the communities get, and how did they benefited from SAFCOL? What SAFCOL was doing to improve on matters raised in the previous briefing in November 2017?

Ms Z Ncitha (ANC, Western Cape) enquired what the progress was on restitution based on the slides presented. Where did the various entities dealing with land matters such as Alexkor intersect, how different were their roles and mandates and where could they work together to fast-track the process and reduce delays. What exactly were the issues causing all the bottlenecks? What was wrong in the Northern Cape whereby people should have been rich from their land holdings, but were not?

Ms Ncitha asked for an explanation on why it was necessary for the Committee to intervene to fast-track the slow progress with the resolution of land claims. The Lease-Back model used by SAFCOL was an outdated model. What was SAFCOL’s plans moving forward in reviewing the model? Now that SAFCOL had a new CEO, what was the approach with legacy reports and the problems highlighted in those reports, as well as the findings and outcomes of previous investigations from previous years? A detailing of the current state of business of SAFCOL was necessary. 

Ms C Labuschagne (DA, Western Cape) wanted to know how land was leased and which of the bodies and state agencies would lease out the land since SAFCOL did not own any land. There was a 2008 verification study to confirm the legitimacy of land claims. He asked whether the verification of that study was done by SAFCOL and whether it was certified that, the 57% of current claims are indeed legitimate.

Mr Labuschagne noted that out of the 11 community projects outlined in the presentation, only two had a direct economic benefit to the community. What was the possibility of SAFCOL incorporating more community projects soon? He requested a breakdown of what SAFCOL envisages in the land restitution process and what was meant by projectisation of the land restitution process.

Mr Lungile added that SAFCOL was experiencing impatience from the community because people were not seeing movement, despite all the talk, and they did not believe there was really an intention to finalise the land restitution process. If the government and all actors were to come together, and have timeframes and targets for investigations instead of open-ended timeframes, progress would be achieved. SAFCOL had outlined its ideas and proposals and hoped the committee would implement them.

He informed the Committee that SAFCOL was assisting communities to build businesses that would provide services back to SAFCOL. It was important for the people of South Africa to understand what the forestry industry business was as the country has tapped only a small fraction of it. It is in the best interest of the forestry companies in South Africa to involve the community in the entire value chain through vertical integration.

Mr Lungile indicated that many of the various benefits he had outlined, despite not benefiting the community in a clear direct manner, did benefit them indirectly. He gave the example of providing data in the form of free Wi-Fi to the community because according to the latest StatsSA data, data costs was one of the top things people spend money.

The land claims resolution did not form part of the shareholder contract. Investigations had been consolidated and about 29 court cases had been opened and were still ongoing. Management had recently been requested to provide a full detailed report on the status of the cases, and the report would be presented at the next company board meeting.

There had been progress in filling vacant management positions in the company except for the chief financial officer (CFO) position, whereby a recommendation from the board had already been sent to the Minister for consideration and appointment. The board of directors governed the company and were accountable to the shareholders. SAFCOL was also currently implementing its turnaround strategy and had achieved 60 % of its performance targets the past year.

In the 2016/17 financial year, SAFCOL’s revenue had grown by 40.7% and was able for the first time ever, to breach the R 1 billion turnover mark. Net profit was R 114.44m from a net loss in the 2015/2016 financial year of R 43m.

SAFCOL was collaborating with Mpumalanga government to valuate forestry resources and products, and to facilitate economic growth. It was important to fast-track claims for the business’ stability and guarantees, which would allow for future planning and investments.

Mr Tsepo Monaheng, Chief Executive Officer (CEO), SAFCOL, reported to the Committee that the delays were a threat to the future of the business. SAFCOL focused on the three provinces where they do business, but had been contacted by other provinces to help them better manage their forest assets.  SAFCOL had implemented centralised supply chain to make sure there were effective controls.

SAFCOL had a training seminar for business people and other interested persons so they could in the future participate in the business. The company was willing to learn from the experiences by other companies such as Alexkhor.

Mr Kgathatso Tlhakudi, Deputy Director General (DDG), Department of Public Enterprises, added that SAFCOL had done its part and it was now time for the Department of Rural Development and Lands Claim Commission to follow through. The government should be playing a greater role in community empowerment. Communities were unlikely to be receptive to long timeframes to settle land issues based on the current models, such as those upwards of 70 years in the current lease-back model. The Strategic Partnership model had been developed as an alternative model so that the communities had a greater and fairer access to the land.

There was not enough money to deal with all delayed claims, but since SAFCOL dealt with state land, it should be given priority. He was encouraged because the Minister was ensuring added focus to ensure public funds are not misappropriated particularly in the procurement state which was the area most misappropriated, and hence the need for centralised procurement which was fairer and more equitable.

Ms Ncitha recommended another meeting with the inclusion of other government bodies dealing with land matters to explain and harmonise especially with the new policy on land restitution. She requested that SAFCOL sends to the office of the Chairperson the latest investigation reports as soon as they are finalised.

Ms Labuschagne enquired about who determines the leasing and the cost of land, and why that could not be changed because the land under SAFCOL was registered at the Department of Agriculture.

Mr Lungile responded that the amount was determined by the lease rate and that there are companies specialising in land valuation based on the activities and infrastructure present on the land. The land was then leased from the department.

Western Cape Forestry Sector Forum (WCFSF) presentation

Ms Mary-Anne Mngomezulu, Secretary General, WCFSF, apologised for arriving late and not having a condensed version of her presentation. She recounted to the Committee how the Western Cape, particularly in the areas around Stellenbosch, had some of the most devastating fires in 2017. She outlined how she and her community had been cheated out of SAFCOL shares after the end of apartheid, and remarked that such conduct was expected from the apartheid regime but not the new government at the time. She narrated that her family hailed from Tsitsikamma, which was the backbone of the forestry industry in the area.

She alleged that the communities living around the forest had been cheated out of the promised 10% of SAFCOL shares and how SAFCOL and DAFF ignored invitations from the community organisation to visit and hear their plight. She complained that SAFCOL had signed deals with companies that exploited the local communities living around forests and had contributed to the destruction of the indigenous forests.

She pointed out that the community did not want to just own the land, but the forestry business as well. She appealed to the Chairperson to compel SAFCOL executives to visit the community on the ground and see the damage and exploration for themselves and get to see the better model that the community proposes.

She informed the members that the community would rather they own the land instead of the Municipality owning it. Her community organization was currently compiling a list of people who had been promised SAFCOL shares but did not get them.

Discussion

Ms Ncitha requested that another meeting be scheduled to allow Ms Mary-Anne Mngomezulu more time to outline her claim as she had only been allowed 10 minutes at the current session which was not enough time. She added that there ought to be additional efforts to contact shareholders and community members that had not claimed their SAFCOL shares yet.

Mr L Gaehler (UDM, Eastern Cape) asked who was managing SAFCOL's provident fund for workers, as it had been reported that since 1982, people were not receiving their pensions.

The SAFCOL officials acknowledged that there were serious concerns that had been raised, and that in the previous meeting in Parliament on 28 November 2017, a question was raised whether SAFCOL could investigate the possibility of reversing some of the privatization deals it had entered. The SAFCOL officials undertook to find out the name of the holders and managers of their provident fund and would give the answer in its next meeting with the Committee.

The meeting was adjourned.

 

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