Briefing by Safcol on future sustainability of the company and engagements with successful land claimants on post-settlement model, with Deputy Minister

NCOP Public Enterprises and Communication

08 December 2021
Chairperson: Mr T Matibe (ANC, Limpopo)
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Meeting Summary

The Select Committee convened a virtual meeting for a briefing from Safcol on engagements with successful land claimants on the post-settlement model and future sustainability of the company. The Deputy Minister of the Department of Forestry, Fisheries and the Environment (DFFE) joined the meeting as many of the issues raised and addressed concerned her Department. The Commission of Restitution of Land Rights (CRLR) also joined the meeting having anticipated giving a presentation as well but briefly highlighted key points due to time constraints.

Members were impressed by Safcols presentation and progress in terms of their turnaround strategy to ensure sustainability. However, one of the key concerns raised by the Members related to their efforts to mitigate risks, particularly their biggest risk which was theft and illegal activities at plantations.

A Member also highlighted the risk of the entitys aging infrastructure and inquired into their mitigation plans in this regard.

Members also wanted clarification of the R44 million loss reported by the entity and what this loss could be attributed to. One Member noted the entitys plans to increase their revenue by a large margin and asked how the continued issue of theft would affect this goal.

Members wanted to get more detail on what initiatives the entity was embarking on for community development and support as well as the level of collaboration between the entity and traditional authorities and municipalities.

The Deputy Minister expressed her satisfaction with Safcols presentation and emphasised that her Department was working closely with Safcol on their challenges. Safcol said they were continuously working on the issue of finalising land claims but emphasised that it was not an easy process particularly because of competing interest within communities.

They acknowledged that theft and illegal activities in their plantations continued to present a risk to their business operations and contributed to financial loss, but laid out the strategies they had been embarking on to mitigate these activities. These strategies included collaborating with the South African Police Service (SAPS), which was not always fruitful and working with private security and communities in protecting the plantations.

The posted net loss the entity saw in their financial statements was attributed to financial activities and other accounting considerations, but the Committee was reassured that some other areas of their business were making profit and there were plans in place to improve their financial position.

Safcol highlighted the educational and training initiatives they were running to contribute to community development including providing funding for education and supporting projects such as a furniture manufacturing initiative in Limpopo. There was also increased prioritisation of women and youth in these support initiatives. Safcol also reassured the Committee that they were working with traditional authorities in implementing their development plan as well as in addressing issues such as theft in plantations.

Briefly, the CRLR acknowledged the outstanding 8 000 land claims and outlined the reasons behind the delays, which were mainly attributed to communities not being favourable to the settlement models provided by the forestry sector. The CRLR made good progress with regard to their deliverables including the provision of post-settlement support which were under review and ongoing.

The Chairperson said that the Commission would come back at a future time to allow them to provide a more comprehensive presentation.

The Chairperson considered and suggested joint committee meetings in future due to the integrated nature of the issues raised in the meeting that involved several other departments.  

Meeting report

The Chairperson introduced the topic of the briefing to the Select Committee. He said that despite the fact that the topic was a matter that fell within the Department of Public Enterprises (DPE), it was requested that the Department of Agriculture, Land Reform and Rural Development (DALRRD) be present as the matter affects both departments. After the previous weeks meeting, an engagement with the DPE occurred in relation to the issues that were raised by Members concerning ministerial attendance and it was agreed that when the Ministers were available for meetings, they would attend. He requested for a verification that the South African Forestry Company Limited (Safcol) and the DALRRD were present in the meeting. He opened the floor for either of them to start with the presentation.

Ms Maggie Sotyu, Deputy Minister of the Department of Forestry, Fisheries and the Environment (DFFE), announced her presence in the meeting along with her officials from the Department. She greeted all the Members in the meeting. She said that the Department was working very closely with Safcol. For the last two weeks, they had thorough discussions about the presentation Safcol made to the Portfolio Committee in the National Assembly. She said that where the presentation highlighted issues that concerned the Department, she was accompanied by a team who would be ready to answer any questions relating to the partnership with Safcol. She said that the DFFE was making good progress with Safcol regarding the empowerment of small growers.

Safcols briefing
Mr Tsepo Monaheng, CEO of Safcol, presented to the Committee on behalf of the SOE. The presentation was dated November 2021 because it was sent a while ago and it was meant to provide a briefing of Safcols current position and future.

Highlights, Challenges and Lowlights
• 12% revenue growth amidst tough conditions, for example Covid-19
• Healthy balance sheet and cash position maintained
• Improvement in Shareholder Compact (SHC) performance
• Implementation of a proactive community engagement model
• Successful legal and law enforcement actions to address timber theft and other criminal activities

Challenges being attended to
• Implementation of strategic projects
• Modernisation of forestry operations through mechanisation and automation
• Timber theft and other crime

Low lights
• Revenue per head and EBITDA not achieved
• TUP South Africa not achieved

Performance against SHC targets
• See graph of comparison of quarterly and annual performance information for 2020/21 on slide 8
• Safcol concluded a SHC for financial year 2020/21 with the Minister of Public Enterprises which sets out agreed performance objectives, measures, and indicators in line with the Treasury Regulations issued under the Public Finance Management Act (PFMA)
• Despite Covid-19 and persistent rain, the Safcol Groups performance was measured on 21 Key Performance Indicators (KPIs), 14 of which were achieved. This equates to an achievement of 67% against target, which is higher than the 56% target achieved in the 2019/20 financial year

Audit Opinion
• The Auditor-Generals audit opinion on Safcol improved from a qualified opinion with findings in the 2019 financial year to unqualified for the past 2 financial years

• During the 2021 financial year there was a marked reduction in irregular expenditure from R52 million in 2020 to R9 million in 2021
• To date, R18 million of wasteful and fruitless expenditure has been recovered from employees.

Financial Performance in 2021 (see slides 14-15 for statement)
• Revenue increased by 12%
• Operating profit of R40 million
• Loss for the year amounted to R44 822 000
• Closing cash increased by 33% compared to prior year
• Cash remained above internal target of R250 million
• Cash reserves will be used to fund strategic projects

Key risks and mitigations
• Covid-19
Safcol adapted well in the 2020/21 financial year due to concerted efforts to protect employees, stakeholders and the overall business from the pandemic. Mitigation efforts are continually reviewed and improved.

Illegal activities
- Integration with surrounding communities on beneficiation opportunities, work with law enforcement authorities, deploy physical security and explore the latest technologies to monitor plantations

Aging infrastructure
- Making progress in securing strategic partnerships to expedite the upgrade of key infrastructure, to improve productivity and enable delivery of higher-quality products more effectively and efficiently to customers

Health and Safety
• Disabling injuries in Safcol employees saw an 18% decrease from 2016/17 to 2020/21 financial year
• Maintained a culture of safety compliance and safe behaviours across organisation

Post-settlement model
• Safcols board approved its position on the exiting minority shares held in SiyaQhubeka, Amathole, Singisi and MTO. Valuation of shares held in all four entities have been concluded
• Proactive community engagement and post-settlement models to build strong economic beneficiation relationships with communities

Socio-economic impact
• In the past financial year, more than 16 000 community members impact by corporate social investment (CSI)
• 17 small scale farming projects were established and supported in the various provinces with more than 440 beneficiaries

Way Forward
• 50/50 strategy: reduce dependence on log sales (80%) to 50% by developing diversified revenue streams from processed products (improved returns)
• Horizontal integration: accessing more plantations from DFFE and municipalities
• Partnerships with communities: create compelling value propositions for the increase of partnerships with small growers, land claimants and wider communities
• Revenue and efficiency improvement: the mechanisation and automation of operations to deliver efficiencies in current and intended value chain improvements including lumber processing
• Exit minorities: transfer the communities shares, in the minority associates, to the owner-communities

The Deputy Minister said that this presentation was already provided at a portfolio level. She noticed that there were a few new slides that were added. She saw that these slides were in response to some of the questions raised by Members of the Portfolio Committee in the National Assembly. Overall, she was happy with the presentation because the land claimantsissue and the topic of opportunities that existed within Safcol for small growers were addressed.

Ms L Bebee (ANC, KZN) thanked the Chairperson for the opportunity to engage in the wonderful presentation. She said a few years back there were reports that land claimants who were frustrated by the slow process of resolving their claims had embarked on burning some of Safcols plantations. She asked whether this issue continues to persist or were the land claimants now on board. Had there been any reported cases where a Safcol employee succumbed to Covid-19? If so, how many?

Mr A Arnolds (EFF, Western Cape) said that the financial performance of Safcol demonstrated the success of their turnaround strategy. Safcol must continue to do more in terms of the sustainability of the entity. He expressed concern over the aging infrastructure of the company which was presenting a risk. He did not see the urgency from Safcol in doing all they could to mitigate the risk. He asked for feedback regarding what the entity was doing to attend to this risk.

On the 16,000 community members impacted by the projects done by Safcol, he knew that the previous time that Safcol came before the Committee, there was an amount in terms of the investment in community development programmes. He asked what this amount was because previous times it was more than R11 million of investment.

The presenter mentioned an ecotourism initiative or that they needed experts in terms of assisting them. The promotion of ecotourism was a very important element. How was ecotourism going to impact on their mandate? He asked for an update in terms of potential export markets. Had there been any progress made in this regard?

Ms T Modise (ANC, North West) welcomed the presentation. She listened carefully to the presentation and everything looked promising for the company and yet the presenter reported a loss of R44.8 million. To what factor could the entity attribute this loss? There was a mention of the involvement of the private sector on their beneficiation initiatives. Would one of those be furniture manufacturing?

Ms W Ngwenya (ANC, Gauteng) thanked the Chairperson for giving her the opportunity to participate in the meeting by asking questions, giving input and making comments. She welcomed the presentation.

She asked whether there were any current collaboration between Safcol, local government and traditional leaders. If yes, was the entity working in partnership with municipalities in terms of integrating their labour plan with the integrated development plans of these municipalities so that meaningful and sustainable relationships could be maintained in the long term? Did the entity have working relations with traditional authorities? If yes, could they unpack this? If no, why not?

During the Committees previous meeting with Safcol, it was reported that there were a number of illegal activities. Did the entity still experience illegal activities in some plantations such as illegal invasions, illegal mining and illegal grazing? The Committee believed that this challenge could be better managed if Safcol collaborated with communities. What was the current situation regarding these illegal activities? She asked whether there were any disputes on land claims that were referred to court. If yes, could the Committee get an updated on these disputes? What was the turnaround time to resolve land claims in the past? It was reported that land claims that were not resolved led to impatience of communities and riots. To what extent had women and youth benefitted from the entitys transformation programme that includes co-operatives?

Mr M Nhanha (DA, Eastern Cape) commented that the Committee represents provinces and it had always been their request that when presentations are made to the Committee, state-owned enterprises (SOEs) place focus on provinces. He therefore commended Safcol for being detailed and focussing on provinces. However, the entity seemed to have only zoomed in at length on Limpopo and Mpumalanga. He joked that the Chairperson and Mr J Nyambi (ANC, Mpumalanga) may have had a hand in this as they represent those provinces respectively. He said he was eagerly awaiting the next engagement with Safcol where they hopefully go into detail about the Eastern Cape as well.

He had an issue with one of the targets Safcol set for itself, specifically the target of growing Safcols revenue four-fold. This was a big jump and he was happy when people set themselves high targets. Nevertheless, he would be waiting to see if it would be achieved. With such a target, what impact would the theft timber have in achieving the target? He noted that the presenter glossed over the issue of theft, which was a serious matter. He asked what the scale of theft was. How much timber had been lost in Rands? What had Safcol done? He noted that their plans included involving law enforcement agencies, private security, and monitoring technology. However, those plans would be done going in the future. His interest was what the company had done in mitigating the risk of theft of timber in plantations. How many Safcol employees had been caught in the act insofar as theft is concerned and what happened to them? What was the relationship between Safcol and environmental organisations, particularly those who were opposed to deforestation and wood harvesting? What did the entity mean by “disabling injuries” in their presentation? Did this mean people who got paralyzed or died?

He took note that the presenter mentioned the beneficiation project that they have. But again, the presenter glossed over this issue, which can be debated another day. But he wanted to understand exactly what kind of activities local communities were involved in, particularly in so far as the value chain is concerned. Because it really did not make sense to him when people get tenders to chop trees or guard against fires. He said that the real money lies in the value chain. They may not respond to this question but through the Chairperson, they could probably arrange another engagement with Safcol to get a detailed presentation into how communities benefit in particular with regard to value. He was sure that Safcol would agree that one of the key strategies to a sustainable business plan was to invest back to the communities that surround those plantations. He was interested in how much of that investment was made towards educating children from those communities through training and university support until they become experts in various sectors of the industry. How much of an investment was being made to those communities in ensuring that these plantations are sustainable going into the future?

He wanted to know what the current status of the dividends that were derived from community shares was. Who holds those dividends and what was being done about them? Because, as the presenter said, those shares were yet to be transferred to owner communities. Could Safcol commit in the meeting as to when the transfer of these shares would be concluded? He apologised for the long questions.

Safcols response
Mr Monaheng responded to the question regarding the slow process of land claims and whether it was a risk to Safcol operations. He said it was a big risk and the sooner the entity concluded these claims, the better and the more certain they would be about the future of the company. At the moment they were working well with land claimants and the communities, but they knew that there were other forces that have competing interests with the entity, so they could not expect to win every time. They hoped that working with the Commission and the support of the Department, they would be able to reach finality of the land claims.

Another problem was that sometimes the community thought it was the entity holding up the process. They did not understand that the entity does not drive the process. Instead, the entity was told when claims had been concluded, land had been transferred, and it then engaged with the land claimants on those processes. They supported where required by the Department or the Commission. On the question of reported cases of employees who succumbed to Covid-19, one employee passed on due to the virus and Safcol tried by all means to educate and inform employees on Covid-19. So far, they had managed to protect the employees.

On Mr Arnolds question about risk mitigation for Safcols aging infrastructure, he said the entity had decided to make sure that the company is commercially sustainable and financially sound first because they would be unable to invest in the upgrade of infrastructure unless the company generated cash. Thus, they were happy that the company was not generating cash. He said that the accounting in forestry was very complex because one would expect that if they generate cash, it was because they realised net profit. However, they had an operating profit but a net loss due to financial activities. The Chief Financial Officer (CFO) would expand on this. The entity was investing in the mechanisation of the forestry operations. They were working with financial institutions and were advanced in terms of financing. Some activities were being financed using their own balance sheets such as replacement of equipment that was not too expensive. He said that big-ticket items such as the sawmill require in excess of R500 million to R1 billion. In this regard, the entity was looking into either raising funding through financial institutions or partnering with a company that would bring technical solutions and financial solutions. They were also looking at the possibility of partnering with a local entity that would bring in funding. But he recognised that this was an urgent issue because they realised that a lot of their sister companies had the problem of infrastructure collapsing. They did not want to end up there and were working on the issue.

Regarding how ecotourism would impact the mandate of the entity, he said that their mandate of the commercial management of forests could not be done in isolation of ecotourism because it was part of the forestry activities. The entity would be able to make sure that the assets were managed properly if they managed ecotourism well. If the ecotourism business was successful, the entity got opportunities to involve the communities so they could benefit too. The value chain also extended to the supplier base.

In the past financial year leading to the current financial year, Safcol was looking at export opportunities to the east, specifically China and India. But in both cases, the biggest problem was that they proposed to put Safcols products at a much lower price than the entity was offering. Another problem was that Safcol could not meet the local demand for raw material. So as a responsible state-owned enterprise, they would not want to export raw material at a price lower than local price whilst the local saw millers were struggling to get raw material. So Safcol postponed these export plans in order to supply the local industry so that they could compete on processed products, which was better. At the same time, the entity believed that they should export processed products not logs because if they exported logs, most of which contain water, once they reach the other side, the price would be lower because the weight had dropped due to water loss.

In response to Ms Modises concern about the R44 million loss, he said that operationally they posted a profit of R40 million. But there were other accounting considerations that were factored in that resulted in the net loss. Other areas Safcol was working to turn around were profitable including the Mozambique operation that was put under care and maintenance for many years. The areas of the business that were loss-making were the processing plants in Makhado and Timbadola Sawmills and ecotourism. This was why they were focussing on these two areas so that they could contribute to the bottom line of the business.

In terms of furniture manufacturing, they were looking at this area in partnership with communities and consortiums as Safcol lost the capability long ago. The entity had a project in Limpopo where they trained youth in furniture manufacturing. This project was doing very well and producing a range of products and even looking into supplying retail chains. The entity was looking into furniture manufacturing at a larger scale because there is a gap in the market to manufacture local furniture as opposed to importing.

In response to Ms Ngwenyas questions, he said the entity did have collaborations with traditional authorities. They were starting to look at a project of alternative housing solutions in collaboration with local government. On illegal activities in plantations, the activities were still happening, and it continued to be one of the entitys risks.

They were partnering with communities using a two-pronged strategy. One strategy was to partner with communities so that they were economic beneficiaries of the plantations and could help protect the plantations. The second strategy was to partner with law enforcement agencies to combat illegal activity. The turn-around time to resolve land claims was long and the Commission would address this issue. He said the issues were quite complex, even though Safcol would like to see the processes run quicker. As part of the entitys execution of the business strategy, they gave priority for opportunities to women, children and people with disabilities to address the bigger problem in the country. They had a slide they had presented to the Portfolio Committee on the opportunities that they had to date delivered to the enterprises owned by women and youth but his colleague would speak on this further.

In response to Mr Nhanhas comment on only two provinces having been focussed on, he said that Safcol was not operating in the Eastern Cape because their exit occurred around 2002 when the Eastern Capes Safcol business was privatised. Although they were not longer operating that side, they had been engaging with communities in the Eastern Cape and revisiting their expansion of operations. They wanted to help communities and contribute to the management plantations where those communities were unable to. Safcol was approached by a district that had challenges with wattle trees growing uncontrollably. They wanted to see how they could turn this challenge into an economic activity instead of a burden.

He admitted that the target of increasing their revenue four-fold was a big jump and that they could only achieve it by moving beneficiation or processing from 50% to 90%. These areas were high value products so the target was achievable if they could implement the strategic projects they were working on. Safcol was advanced in terms of identifying partners to collaborate with. They concluded work with Stellenbosch University on the cross laminated timber and research work with CSIR. These projects, if implemented successfully, would turn the tide for Safcol. Timber theft had a huge impact on the entity, but he was not sure the exact value of the loss. He said that the industry as a whole was affected by theft and there was thus a 10-20% impact. His colleague would speak on this further.

On employees caught in theft, he said they do catch employees and they follow the legal processes and their own internal process.

He also responded to the question of what was meant by disabling injuriesand said that disabling injuries are not fatalities or complete incapacitations, but employees may be injured and absent from work for some time.

On whether communities were involved in value-addition, he said Safcol was working with communities in different arrangements. They were also working on ensuring that as they work with different strategic partners, communities had to be shareholders so that they participated in the equity part of the business, not only on a lower level. In other words, shares must be given to the land claimants in projects (such as a power generating plant project).

Regarding how much had been invested in educating and training communities, he said that they spent a lot of money on training across the board, from learnerships to bursaries for tertiary education in the current financial year and listed the following figures for:

• Siniculture: 22 beneficiaries in total, five from KZN, two from Limpopo, one from the Free State, 12 from Mpumalanga and two from the North West.
• General education training (NQF level 1):  20 beneficiaries in total, 14 from Mpumalanga, two from KZN and four from Limpopo.
• Wood processing (NQF level 2): 22 beneficiaries all from around Thohoyandou, Limpopo.
• Furniture making: 40 beneficiaries all from Hazyview and Redhill in Mpumalanga.
• Short skills programmes such as chainsaw-operating to help skill workers when contracting and applying for other job opportunities: 25 beneficiaries all around Sabie, Mpumalanga.
• Apprenticeships: 11 beneficiaries from Limpopo.
• National Diploma in mechanical engineering: four beneficiaries, one from the Western Cape, two from Mpumalanga and one from Limpopo.
• Advanced Diploma in Forestry: three beneficiaries, two from the Western Cape and one from Mpumalanga.
• Honours in Marketing and Communication: one from Gauteng.
• Diploma in Human Capital: two beneficiaries from Mpumalanga and the Western Cape.
• Diploma in Business Management: One beneficiary from Gauteng
• Diploma in Information Technology: One beneficiary from Limpopo.
• Degree in nature conservation: One beneficiary from Mpumalanga.
• Bursaries in centres of higher learning: two awarded to students from Mpumalanga.
• Degree in finance and accounting: two beneficiaries from Gauteng and Mpumalanga
• MBA: two beneficiaries, one from Gauteng and one from Mpumalanga.
• Diploma in Human Capital: two beneficiaries from Mpumalanga.
• BTech: one beneficiary from Mpumalanga.
• Degree in Risk Management: one beneficiary from Limpopo and one from Mpumalanga.

On the question relating to exit minorities, Safcol had four companies that they had privatised which were MTO in the Western Cape, Amathole in the Eastern Cape, Singisi around Kokstad and SiyaQhubeka in the Northern KZN.

Of all the four companies, the only company that was paying dividends was SiyaQhubeka and the dividends were ring-fenced for the communities. Singisi and MTO had diluted the shares, for which Safcol had an intervention and said that this could not continue. For this reason, it was important that they exit and then transfer the shares so that when they talk about increasing the asset value, then the communities are part of increasing the asset value, hence the ring-fenced dividends. As soon as the communities received their shares then the dividends would come through. When the land was claimed as well, there had to be a benefit for the communities who own the land because it was not only about the leasing of the land but also the dividends that come from operating on them.

Mr DShorne Human, Safcol Chief Financial Officer, unpacked the contributing factors to the loss seen on financial statements. It was recognised that they have an operating profit of R40 million of the 2021 financial year. This amount already took into account the significant account adjustment called the “fair valuation of the biological asset”. This requirement was their biggest financial asset that they had in their books, so it swung any direction quite a lot when they revalued it at the end of the year. The R39 million already included this but the other big thing that was resulting in a R44 million loss after tax was the fact that they had to bring in finance lease costs relating to the DFFE lease. Besides the fact that it was quite a significant amount monthly on its own, it also spanned a very long time period. The lease was calculated over 70 years and then that full lease had to be brought onto the balance sheet. Every year there was an accounting adjustment where the interest included in that calculation was reversed. Nevertheless, that R150 million that was displayed as lease finance costs was the main accounting entry that was contributing to the overall loss. So, it was not a cash expense of a realised loss, it was mainly coming from the accounting side.

Ms Hazel Banda, SAFCOL Head of Transformation, responded to the question on the 16 000 community members that had been impacted. Safcol had invested in high impact projects through the provision of social infrastructure through small scale farming, health care facilities as well as education. The 16 000 figure meant the support that had been given to community members through the various projects that the entity had embarked on with the CSI programme. Safcol had spent over R10.8 million in the financial year 2019/20 and in the financial year 2020/21, R4.3 million was spent. Therefore, over the two years Safcol had spent R15.192 million for community projects.

On the relationship between Safcol and traditional authorities, Safcol did have relationships with almost all the traditional authorities where they operate in. Safcol had signed a social contract with communities and had established joint community forums (JCFs) where they met on a quarterly basis along with traditional authorities. Safcol believed that they could not continue operating if they did not have those relationships with the traditional authorities. Safcol had also collaborated with the local municipalities in the same JCFs. They had the LED managers that sat and discussed the projects, and discussed and prioritised the entitys Integrated Development Plans (IDPs). Communities were also represented at these various JCFs. In terms of the furniture manufacturing, they had established co-operatives and supported co-operatives in the past years. The co-operatives that had been doing extremely well was the Limpuma co-operative which is based in Limpopo. A group of young people from various villages had embarked on a learnership programme at Safcol as part of the exit programme. Safcol had assisted them in establishing a co-operative and after supporting them they did extremely well. The local municipality, the district municipality, and social services had also come on board to support this co-operative. They were doing extremely well and producing products like household furniture and coffins. Safcol was extremely proud of them. On the question relating to benefits to women and youth, through Safcols procurement opportunities, they had promoted women and youth. From the 11 contractors that had been appointed in the civic culture space, about 80% were owned by women and youth. Therefore, Safcol prioritised women and youth through preferential procurement opportunities. In the CSI space, most of the projects they supported in small growers were actually women-owned co-operatives.

Ms Christell Marais, Safcol Chief Risk Officer, responded to the concerns about timber theft. She said that over the last year Safcol had been focussing on quantifying what was physically lost to timber theft. They had seen some trends relating to the age of specific plantations and the vulnerability of certain genera. The numbers that they had were provisional at this point but it looked like R1.5-R2 million per year per plantation was lost.

She apologised if their presentation came across as security interventions they were planning to do in future. What they were currently doing to address this was to establish personal relationships and continue to maintain relationships with the police commanders at each of their plantations. At a national level, through Business Against Crime and Forestry SA initiatives, engaging with the SAPS and the NPA in provinces to make sure they aligned on the type of evidence they may require for successful legal action. They had also taken successful legal action around communities and interdicting specific areas in their plantations. Unfortunately, in some instances they had to interdict the police itself for not acting on cases that they had laid. They also engaged with communities, municipalities, other security providers, the forestry sectors and various industrial risk information centres to build their intelligence around possible syndicates operating in the forestry sector. They were also in the process of increasing their ability on forensic activities and responses to whistleblowing.

Safcol had an ethics programme to encourage their employees to come forward with information that they may have. They have had one or two cases where employees were caught to be involved in illegal activities. Those had been treated through criminal cases being laid and internal disciplinary processes.

On physical security, they had armed response and were working on electric fences and strong rooms where they saw trends, for instance at one stage, chainsaws were targeted for theft. They then aligned their insurance programme to that to make sure Safcol had cover where they were specifically vulnerable.

On specific protection of the forests, Safcol was working very closely with communities and tribal authorities through the JCFs and the communal property associations. They were also busy with a piloting project in terms of which they would like to explore drone technology. They could see whether there were activities under the canopy in the forest where there should not be.

On the question around deforestation and their relationship with environmental organisations, Safcols FSC certification was very strict around deforestation, so they are not allowed to let deforestation happen in their forests. The requirement was to replant within 12 months of having harvested any particular area. One area on the environment that they had a bit challenge on was the allocation of mining licenses by the Department of Mineral Resources and Energy. They had requested assistance from DPE to help them resolve this.

On the question of disabling injuries, she confirmed that in the previous and current financial year, Safcol had not had disablement cases on a permanent basis. All employees had fully recovered from injuries, and it was time lost that was recorded in the figure in the presentation.

Mr Sibalo Dlamini, Safcol Chief Operating Officer, said the Disabling Injury Frequency Rate (DIFR) is an industry standard that helps monitor safety in Safcols plantations and operations. The figure represented in the presentation was derived from industry standard in terms of the number of hours worked and how many employees were booked off as a result of not being able to perform their work. Safcol was well within the industry norm and were continuously improving in terms of safety.

The Deputy Minister thanked Safcol for responding to the questions raised by Members. She said that one area that they should have indicated was the issue of the Forestry Sector Masterplan (FSM) that was approved by Cabinet in November 2020. It responded to most of the issues raised by Members, particularly those relating to timber theft that affect the entire industry.

Government, in establishing this master plan, wanted to avoid the entities working in silos and encourage working with other sister departments like SAPS and traditional authorities. Everything that Safcol had said was being addressed in the FSM. She hoped that the DFFE would be given time to come to the Committee to take them through the FSM because it had just started with the second phase of implementation. In order to understand what was happening in the industry, it would be good to have a report that showed that the DFFE was working together because the challenges and responses that they were giving, especially on issues of timber theft, do not affect Safcol only, they affect the entire industry. She thanked the Chairperson for the invitation to the meeting as the DFFE was working very closely with Safcol and she was happy with progress so far.

Ms Pumeza Nodada, Deputy Director General: Forestry and Natural Resource,DFFE, said they were working very closely with Safcol and DPE on the matter of minority shares because from the beginning when the land was privatised in the late 90s, there was an understanding that these shares would accrue to the communities. There had been some challenges with the identification of communities and certain government structures, and this was a process that the DFFE started to embark upon to make sure that those identified community representatives were legit. It was working on this with the DALRRD to assist the DFFE in ensuring that  government structures were in place. The DFFE has had some preliminary discussions between themselves and the DPE and they were in the process of roping in the DALRRD to make sure that when it looks at, for example a pilot that they would like to start with in KZN where the President had transferred some land in late 2018, they can then rope in that community and pilot that project there.

Safcol had finalised all the valuation of the shares and everything that was required. So, the DFFE was working with the DPE and DALRRD to make sure that the shares were transferred to the right people in the communities and if there was a need for capacity-building, it could be done so that these community shareholders know what their responsibilities are in terms of managing those shares and making sure that the dividends accrue to the right people in the end and not necessarily at the top structures.

Ms Nomfundo Ntloko-Gobodo, Chief Land Claims Commissioner, said the Commission had prepared a presentation as requested but was unable to present due to time constraints.

Mr Nhanha said he was happy with the responses from the Deputy Minister and Safcol. He was pleased and strongly recommended that the Committee entertain the invitation to listen to the presentation of the FSM. He said it was worrying that the Safcol had to interdict the police because SAPS were not taking action on cases that were reported by the entity. He suggested that the Committee consider holding a joint session with the Select Committee on Police along with Safcol so that these issues could be ironed out.

Comments on the Presentation from the Commission of Restitution of Lands Rights
Ms Cindy Benyane, Deputy Chief Land Claims Commissioner, briefly highlighted the key points in the presentation.

Two lodgement phases:
• First phase (pre-1998): under 8 000 claims outstanding
• Second phase: after court interdict, Commission had about 160 000 claims

Of the outstanding claims before the 1998 cut-off date, about 13% fall within the forestry sector. Disclaimer: about 40% which is mixed which includes forestry and a host of other sectors. About 35% of claims are mixed use.  Safcol and other forestry entities may refer to numbers that have increased quite significantly due to their own research, linking to the complexity of the outstanding claims. Most of the outstanding claims are in KZN, Limpopo and Mpumalanga.  The CRLR had achieved all their targets in the Forestry Sector Masterplan. In relation to the seven-step business process within the land claims process itself, there is a lot of delay in implementing the settlement models with claimant committees due to a number of reasons.

• Firstly, the CRLR has a settlement model which is currently being reviewed (for instance, pilot of Kaapsehoop); they found that claimant communities were not favourable to some of the recommendations that the forestry sector provided. The forestry sector mostly wanted the Commission to provide financial compensation and some lease agreements. The presentation illustrates a combination of potential models addressing this.

• Secondly, the CRLR had a host of issues in that as much as they are trying to settle land claims, land claims committees were raising issues not related to the land claimants themselves, which was delaying the resolving of the issues

On the question of the acknowledgement of the delay of settlement claims, it was acknowledged that the outstanding claims were under 8 000 but it affected the forestry sector quite significantly. There were a number of sector policy related issues that had also come up in the settlement models that the CRLR wanted to refer to.

The critical difference between a settled claim and a finalised claim was highlighted in slide 8 of the presentation.

The total number of claims lodged per provinces as of January 2020 were shown in slide 14.

She concluded that she hoped the Commission would be given an opportunity to go through the presentation in detail in future.

Closing remarks
The Chairperson thanked the Commission and said that they tried their best to respond to the issues on delays.

The presentation was received by the Committee and if there were any follow-up questions in relation to the presentation, they would be made in writing and would be responded to in writing.

He thanked the DM, Safcol and the Commission and noted that there were a number of outstanding issues that they may be called back to the Committee to address and engage with. Most of the issues were not focussed on one department; they were in different departments, such as the issue of theft which also affects the Department of Police and other issues which affect the National Prosecuting Authority and Department of Justice. Working together with the administration of the Committee they would try to find a way to establish a team that deals with issues in collaboration with other departments.

The Deputy Minister would be called again to deal with the FSM so that the Committee could be briefed on it and find a way to factor in different areas that needed to be explained. Even though there were a few gaps here and there, he said it was refreshing to see entities doing well and doing their best to ensure that they were sustainable on their own.

He thanked the teams. 

Mr Nhanha suggested that the Department of Mineral Resources must be on the Chairpersons radar going forward because Safcol had mentioned illegal mining on their premises and Ms Cindy had suggested that these people were given mining permits by the Department.

The Chairperson acknowledged Mr Nhanhas comment and reminded the Committee that entities that were doing well had to be given support in areas in which they were facing challenges.

The minutes dated 1 December 2021 were adopted.

The meeting was adjourned.

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