Post-settlement process between Safcol and the successful land claimants: DPE briefing, with Deputy Minister

NCOP Public Enterprises and Communication

09 November 2022
Chairperson: Mr Z Mkiva (ANC, Eastern Cape)
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Meeting Summary


In a briefing to the Select Committee, the Deputy Minister of Public Enterprises highlighted the importance of land claims and their impact on affected individuals and communities. It was stated that a good relationship with the departments affected by land claims and the claiming communities is being continually sought so that in the event of finalised claims, the South African Forestry Company Limited (SAFCOL) can continue its operations without being interrupted. Whilst considering those affected by the claims as part of the entity going forward.

SAFCOL was established in 1992, under the Management of State Forests Act (MSFA) No. 128 of 1992. The land distribution process was initiated in 1998 and as of the end of the 2021 financial year, 57 percent of SAFCOL's operational land has been affected by land claims. These land claims are still being investigated; the Department of Forestry is constantly in ongoing conversations with the relevant departments in this regard.

The land claims process has been one of the main challenges for SAFCOL as its land has not been settled since 2008, when the process was verified. This is causing a strained relationship with the claiming communities.

SAFCOL is implementing its pro-active community engagement and post-settlement business models to involve land claimants and adjacent communities across its value chain for mutual and sustainable benefit.

Meeting report

Deputy Minister input
Mr Phumulo Masaulle, Deputy Minister of Public Enterprises, expressed an apology for the Minister, due to a Cabinet commitment. The Minister expressed a predicament that prevents him from attending the meeting, due to a colleagues bereavement in Mpumalanga province.

A full delegation, both from the Department and SAFCOL, have prepared presentations to share with the Committee.

The Deputy Minister began his input on the issue of land claims, stating that it needed to be taken seriously because of its impact. A good relationship with the departments affected by the land claims and the claimants has been sought so that in the event of finalised claims, SAFCOL can continue its operations without interruption, whilst considering those affected by the claims as part of the entity going forward. A mechanism to facilitate this has been sought and the presentations will indicate this in detail.

DPE Briefing
Ms Mabena Keneilwe, Director: Forestry, Department of Public Enterprises (DPE), stated that the Department of Public Enterprises was managing SAFCOL-related land claims via collaboration with the Department of Agriculture, Land Reform and Rural Development. There have, however, not been any concluded post-settlement agreements.

SAFCOL was established in 1992 under the Management of State Forests Act (MSFA), with plantations in Mpumalanga, Limpopo, and KwaZulu-Natal provinces. The entity also has operations in Mozambique.

The process of land distribution was initiated in 1998. A study concluded in 2008 revealed that SAFCOLs operational land had been affected by land distribution initiatives at about 61 percent of its plantations. At the end of the 2021 financial year, SAFCOLs area of land affected was at 57 percent.

The land is currently under the custodianship of the Department of Forestry, which gets all companies to enter into long-term leases where they pay rental fees. The SAFCOL lease had been concluded in the previous financial year. The Company is using the land claims process as an opportunity to upscale the beneficiaries in the value chain and in the sector at large. SAFCOL also ensures a contribution to the forestry sector by integrating communities in the value chain using two different models. This includes the proactive community engagement model, which ensures a continuous relationship between the Company and surrounding communities; these are not limited to claiming communities.

The land claims process has been challenging for SAFCOL, as its land has not been settled since 2008 when the process was verified. This was causing a strain on its relationship with the claiming communities.

The Department advised SAFCOL to consider two settlement process models, the first being the long-term lease process, where government transfers land rights to the owners, whilst the Company continues using the land and trees alongside partnerships with communities. This program has a 70-year plan. During this period, there are two rotations, with each one based on a 35-year period. The rentals are paid to the Department of Forestry and once these are settled, they are paid back to the claimants.

The second option is the strategic partner model; these benefits both the Company and communities of the claimants; they participate in the value chain of their business. It is when SAFCOL looks at whether the communities or claimants will derive benefit. The Company can consider the social compact of the stakeholders. This is the process that is currently being used.

Out of the 46, one project has been transferred to communities, namely Tzaneen, Limpopo. And the four are being finalised in Limpopo.

In the post-settlement business models, the claimants participate in the value chains system within the sector; SAFCOL introduces these programs and guides the communities.

The Department monitors projects and checks if SAFCOL benefits communities surrounding the latter’s plantations.

SAFCOL briefing
Mr Tsepo Monaheng, Chief Executive Officer, shared that the mandate of SAFCOL relates to timber processing, eco-tourism and management. The plantation pre- and post-settlement of land claims, has SAFCOL paying the rental of both unresolved and resolved claimants. The land occupied by SAFCOL is leased through rental.

The land occupied by SAFCOL is leased through rental. The plantationspre- and post-settlement of land claims, have SAFCOL paying the rental of both unresolved and resolved claimants.

SAFCOL is implementing its pro-active community engagement and post-settlement business models to optimally involve land claimants and adjacent communities across its value chain for mutual and sustainable benefit.

The Company collaborates on projects that will enable communities to derive value from the land leased by SAFCOL. The following are some of the interventions:

• Establish and support Black-owned SMMEs that will provide services to SAFCOL, through the Enterprise and Supplier Development (ESD) incubation program;

• Provide procurement opportunities for land claimants within the supply chain through the Preferential Procurement Policy Framework Act (PPPFA);

• Participate in non-forestry projects on unplanted land, subject to legal and FSC requirements (e.g. vegetables, mushrooms, bee-keeping);

• Commercial partnerships in the forestry value chain (e.g. mobile sawmill, power generation).

Environmental, social, and governance impact of SAFCOLs business
Ensuring a successful and sustainable forestry business is SAFCOL's priority. This is done by ensuring the Company is fully certified for forestry management and chain of custody (FSC); this element focuses on sustainable operations. SAFCOL is in its twenty-fifth year of certification, making the Company the oldest Company in Africa to achieve that milestone. In this light, SAFCOL is talking with the Department of Forestry to manage the forests under the Departments care.

SAFCOL has managed to sign 13 social compacts with communities, two memoranda of understanding and one land lease agreement. SAFCOL is leasing the land from communities that have rightfully claimed their land. Accompanied by CSI initiatives where R5 million was spent on corporate, social responsibility initiatives in 2021. 106 sustainable job opportunities have been created, accompanied by 1 693 jobs created through Silviculture contracts that are renewed on an annual basis.

To ensure the beneficiation of forestry products, SAFCOL has partnered with the CSIR to establish more high-value products. These projects ensure community partnerships with SAFCOL and/or other forestry companies, to ensure meaningful economic participation of communities.

As it stands, 57 percent of the land operated on by SAFCOL is under land claims. It is in the interest of SAFCOL to ensure these land claims are finalised because it ensures certainty for the broader stakeholder framework.

There is a focus in both pre-and post-settlement, where SAFCOL integrates communities into their forestry value chain, irrespective of the claims success. Partnerships are key; these include land leasing from communities, ensuring the beneficiation of communities from forestry business operations, and providing them with opportunities that may arise.

SAFCOLs success is essential for the success of the forestry industry and the economic contribution of South Africa.

Mr L Bebee (ANC, KwaZulu-Natal) expressed concern regarding the lack of attention given to beneficiation by the Departments address. She asked if it was still a relevant strategy for the Department.

She also asked about the Auditor-Generals presentation two weeks ago on Public Enterprises and State Owned Entities, which found SAFCOL non-complaint as there was a lack of consequence management or disciplinary processes in the entity. She asked why this was the case.

Mr A Arnolds (EFF, Western Cape) stated that since the Committees last engagement with SAFCOL, there had been no progress on land claims. He acknowledged that this was due to no doing on SAFCOL.

He asked about the latest developments in the management of illegal activities and the impact thereof on operations.

On the 13 signed social compacts mentioned, Mr Arnolds pointed out a discrepancy with the 14 signed compacts mentioned in the previous Committee engagement with SAFCOL. He asked what the correct number of signed social compacts was.

The progress in community relations between the entities and communities is commendable as it will further improve the impact of SAFCOL on communities.

In closing, the Member said there was a need for a meeting with the Committee and the Department on land claims. It cannot be that there is still no progress on the land claims.

Mr M Nhanha (DA, Eastern Cape) asked about the rental paid by SAFCOL whilst awaiting finalisation of land claims and shares held by the entity on behalf of communities.

After a land claim has been finalised, do communities get the rent paid to the Department retrospectively from the Department of Forestry?

Are communities ever paid the money, and if so, in what form? Is it a monetary payment to communities or is it a project-based payment?

On supplier development programs, does this mean the programme gives business development opportunities to local suppliers so they may develop themselves? Or is it programmes such as training that seek to empower local entrepreneurs to enable them to run successful businesses?

He further commended SAFCOL on the emphasis the entity placed on communities, to safeguard resources. This begs the question, what is the situation when there are land claims on forests managed by SAFCOL and the communities are unhappy with the process of land claims? How prevalent are disruptions and vandalism in such forests?

Ms W Ngwenya (ANC, Gauteng) asked the following questions:

What was the cause of the delay in settlement of the land claims? What has the Department of Public Enterprises done to assist SAFCOL in this regard?

Are women, youth, and persons living with disabilities part of the successful land claims, in so far as the number of claims is concerned?

Does the Department and SAFCOL have any plans to engage with the communities on post-settlement matters, to assist them in achieving maximum economic value from forestry, and how communities can continue to benefit from partnerships with SAFCOL?

The Chairperson enquired whether the lease agreements are with the Department of Forestry. Are there any lease agreements with the Department of Traditional Affairs over communal land?

If so, what is the measurement of the specific pricing model for the leasing agreement?

On stakeholder relationships, is there a relationship with the Congress of Traditional Leadership of South Africa as most of these forestry-related issues are usually under the jurisdiction of traditional leaders?

On forestry production: What are the percentages of exports and local beneficiation? It is important to know if there is a balance of raw materials leaving the country.

Linked to that, as an SOE, is the clientele of SAFCOL inclusive, given the history of the country that prioritised and privileged people racially.

Is SAFCOL a transformed entity ensuring its clientele includes the South African people and communities? Have they been included in the main business of SAFCOL? To what extent has SAFCOL reached out and ensured inclusive participation of African people in their core business?

How is the financial health of SAFCOL looking? What is the entity’s financial medium to long term plans on the trajectory of sustainability, growth, and inclusivity to ensure the South African society's challenges?

Mr Mpho Makwana, Chairperson of SAFCOL Board of Directors, said the entity has been on a three-year turnaround journey. This is one of the SOEs that exhibits a semblance of normality.

A dividend of R1 million was paid this year into the fiscus.

The trajectory of SAFCOL for long-term sustainability is on track.

Equally, the entity has been on a clean-up journey for irregular expenditure.

Ms Keneilwe, DPE, stated that the Department currently has a challenge with the progress of lease rentals with the Department of Land Reform. This makes it difficult for SAFCOL to engage on why the process of land claims has been delayed.

The Department of Rural Development will best address the delayed finalisation of land claims; it was suggested that the Committee invites the Department in this regard.

On the beneficiation of the land claims processes, it is important to remember that land claims cannot be separated from communities and be made an individual process, as communities lodge claims.
An official who had not been introduced said the lease rentals paid by SAFCOL to the Department were invested in an interest-bearing account held by the Public Investment Cooperation until such time the claims are finalised and are paid retrospectively to communities that are beneficiaries of the finalised claim.

SAFCOL has been paying rentals from the year 2012. Once the land claims are finalised, SAFCOL will enter into direct agreements with the communities wherein market-related rentals will be paid out to them directly, and the land removed from the asset register of the Department.

The Department of Forestry’s release of  SAFCOL held shares to communities faces challenges; the beneficiary communities are still being identified.

Mr Monaheng confirmed to the Committee that SAFCOLs strategy includes beneficiation because the entity believes it must grow timber by increasing the arable land and more timber processing. This incorporates land claims communities and transformation companies with which the entity will partner. The first project in this regard was launched last week, where the entity will work with communities in building a plant that will beneficiate timber.

On issues of consequence management on irregular expenditure, this has been reduced to less than R1 million to date. An external company is currently investigating historical irregular expenditure. The report has identified the responsible parties for irregular expenditures and the recommendations include disciplinary processes. These are currently underway. All other irregular expenditures have been addressed.

On illegal activities in the plantations, the entity is going to partner with the industry to approach it as an industry initiative, alongside law enforcement initiatives. To have a long-lasting and sustainable impact on illegal activities, the CEO highlighted the importance of working with communities around forest plantations so that they also have an economic and commercial interest which will, in turn, assist SAFCOL in protecting the plantations and forestry-related activities.

The total signed social compacts are 13; the 14 was most likely a mistake.

In terms of the prevalence of dissatisfaction from communities, there have been no incidents of unhappiness. Instead, communities are usually calling on SAFCOL to partner with them. The entity is committed to improving its collaboration with communities.

On the question of the exportation of raw materials, SAFCOL supplies raw materials to the South African industry, and some of it is processed, albeit on a small scale. This is for local processing. SAFCOL exports products and not logs.

He further highlighted that the industry was historically untransformed. Currently, there is a move toward ensuring transformed processing in the country. SAFCOLs processing projects support the development of transformed companies, and to ensure these companies can raise and secure funds, SAFCOL grants them multi-year supply contracts alongside relaxed payment terms.

SAFCOLs governance is looking healthy, with knowledgeable officials. The entity is looking to create skills around high-value products as this is the direction the Company is taking.

SAFCOL is engaging both the Department of Forestry and municipalities so that there can be adequate raw materials for SAFCOL and the industry at large.

The Chairperson thanked the personnel at SAFCOL and encouraged them on behalf of the Committee to do good work so that the Company becomes one of the major contributors to South Africa’s GDP. This is one of the most strategic companies in the country as SOEs are critical as levers of a prosperous and well-managed economy, which will transform this country into one of the continent's major economies.

The Department of Public Enterprises was thanked for exercising executive authority oversight over SAFCOL.

The officials, Deputy Minister, and Committee Members were thanked for contributing to strengthening the Republic.

Minutes from the previous meeting with the South African Post Office were considered and duly adopted.

The meeting was adjourned.

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