Briefing by Safcol on CSI projects to develop surrounding communities; with Minister

Meeting report

Opening comments:
The Chairperson greeted and welcomed all participants to the meeting. He outlined the agenda for the meeting, and noted the absentees with apology. He asked the Secretariat how many Members were on the platform - there were four Members. The Chairperson suggested they proceed with the meeting and the other Members would join in due time. He looked forward to hearing the briefing from The South African Forestry Company Limited (SAFCOL). He was grateful that the Minister was able to attend the meeting despite having an ongoing Cabinet meeting. He handed over to him to give opening remarks.

Minister’s remarks
Mr Pravin Gordhan, Minister of Public Enterprises, greeted everyone and mentioned that the board would go through the details. He described SAFCOL as a stable entity that had achieved profitability and its responsibilities to the communities. With the departure of the CEO, the board would proceed with finding a new CEO for SAFCOL. Last year, SAFCOL paid a dividend of R1 000 000 to government; this was a first. This was an important contribution. He excused himself and left the meeting.

The Chairperson handed over to the board to introduce themselves and begin the presentation.

Mr Frans Baleni, Interim Chairperson, introduced the members of his team.

Mr Sibalo Dlamini, Acting Group CEO, introduced the members of the executive team.

Mr Baleni then took the Committee through the presentation on the projects carried out.

Summary of presentation by SAFCOL on projects carried out:
Supplier Development Support:
• Multiple projects involved Supplier Development Support through Short Learning Programmes with the University of Mpumalanga, indicating a focus on developing local businesses and entrepreneurs.

Forestry Mentorship:
• Several projects in Mpumalanga and Kwa-Zulu Natal focused on Forestry Mentorship, supporting businesses with mentorship programs. The budget for mentorship support was consistent across different projects.

Enterprise Development Support:
• Some projects focused on Enterprise Development Support, indicating a commitment to fostering economic growth in specific sectors.

Agricultural Projects:
• Agricultural projects, including agroforestry and beekeeping, were present in Mpumalanga and Limpopo, showcasing a commitment to supporting sustainable agricultural practices.

Social Infrastructure:
• The projects were spread across various municipalities and provinces, contributing to a more comprehensive and regionally balanced development approach.
• The community development projects covered a wide range of sectors, including education, health, agriculture, and showcased a diversified approach to upliftment.
• The projects included a variety of types, such as construction (footbridges, clinic, adult center), agriculture-related projects (agroforestry, beekeeping), and supplier development support

See attached for full presentation

Discussion:
The Chairperson thanked Mr Baleni for the presentation and invited Members to give comments.

Mr M Magwala (EFF, Western Cape) asked clarity-seeking questions. He recalled previously receiving a less detailed version of the presentation. He asked why Safcol operated mainly in the three provinces (Mpumalanga, Limpopo and KZN) and not all nine provinces. When would they expand into the other six provinces? He acknowledged the good work Safcol was doing in building bridges; this would surely benefit the school learners in the Eastern Cape who had to cross large rivers to get to school. Operating in only three of the nine provinces ensured that many people were left unattended; this was not right.

He felt he was disadvantaged because he did not have a physical copy of the presentation. He asked for clarity on the timber theft of R250 000 000. He asked for SAFCOL to elaborate on the fisheries plantation, as this seemed to have caught the attention of the rural areas. Does Safcol wish to expand its access with the relevant department?

Ms T Mamorobela (ANC, Limpopo) asked about a plantation on the N1 in Limpopo; did this fall under the ownership of the board? This plantation was on a farm near the rural areas. How did the board monitor its procurement system if it owned said plantation? She recalled a Black person who was participating in such areas and was in charge of transporting timber from one area to another. This was a mainly White-dominated era. Did the board monitor how many Black people they employed in the sector of transportation of timber? She was concerned about the Black people who were victimised in this sector.

The Chairperson asked about the operations being limited only to three provinces. Said provinces were well-endowed with forestry plantations. SAFCOL was a national body presiding over national assets. How did SAFCOL ensure that all nine provinces received benefits? Especially considering that the byproducts of the forestries were utilised by all provinces in the country. Was there a way to ensure that the Corporate Social Investment (CSI) impacted the whole country and not just selected provinces? The majority of the resources from the CSI should impact the immediate areas of operation. Did SAFCOL have a bursary scheme to finance local students interested in forestry and related industries?

To date, have any of the land claimants received their title deeds? Was compensation given to them in this regard? This was very important because there were communities who had waited for far too long due to issues with bureaucracy and red tape, and this was frustrating. If the claim was successful, it should have been expedited.

How far had SAFCOL progressed in terms of transformation? Had transformation assisted in the restoration of plantations to the African majority?

At the start of the presentation, it was mentioned that SAFCOL was a R1 200 000 000 entity. Was this the value of the plantations or was this the annual turnover? He asked for an estimate of the value of all the assets, including the turnover. It should definitely be more than R1 200 000 000. He handed over to the board for responses.

Responses
Mr Baleni responded by explaining why SAFCOL worked mainly with the three aforementioned provinces. The history of SAFCOL was what was left of what was privatised. All the other parts were sold off. They recently engaged with the Minister through the Department to discuss developing a concept note to consolidate state forestry. In the restructuring of State-Owned Enterprises (SOEs), SAFCOL was the home of forestry on behalf of the state.

 Mr Dlamini delegated questions to respective members of his team for responses. The ‘Komati’ land was the only main operating entity and was based in Mpumalanga. SAFCOL wished to expand its offering. They engaged with the municipality on this issue and were lobbying to re-build the portfolio.

Regarding the bridges, once SAFCOL operated in the (rural?) regions, they would be able to make an impact and support all initiatives. They were willing to collaborate wherever they could, provided that funding would be available.

Timber theft was a serious issue that they tried to quantify over a period of three years. He said law enforcement played a role here and tried to work from all fronts. They looked into ways of sharing the security resources so that they were cost-effective. Perhaps they could have a centralised control room wherein they shared information in a collaborative manner. They already did this with fires, they could use a similar approach with timber theft and they also worked closely with the universities.

They sold timber in an open manner, including Black-owned companies. They provided multi-year contracts to transformed companies (levels 1 and 3) and favourable payment terms. These were efforts to bring industrialists into the operations so they could later compete with large companies. They looked at value-adding initiatives such as ‘timber-dollar’ [uncertain] where they processed the whole tree and received 50% of the value. They had a lot of sawdust and residue, and they partnered with a company that would produce electricity from the residue. They also produced clean energy from the residue and this would produce value. They would call on the community to assist with transporting residue from the plantations into the processing facilities. They also looked at other high-value initiatives which would be long-term projects, thus creating more jobs.

Yes, they did have bursaries for students and they gave preference to those who worked within their industry. To date, many of those students were foresters.

Mr Klaas Mokobane, acting COO, responded about the plantations in Limpopo; the plantation belonged to the Department. This was not part of SAFCOL plantations.

Mr Calvin Chirwa, Land Risk Group Manager, responded to the land claims. The land claim was a challenge but also an opportunity to partner with the community. They engaged with the Land Claims Commission, they had a Proactive Community Engagement Model where they engaged with the communities on what the forestry business entailed, and they were involved in the CSI projects. They approved a Settlement Model which would be implemented once the land claim was settled and handed over to the community. On the slides, about six communities had 44 land claims affecting the land, and these were for those whose land claims were at an advanced stage- the transfer of land was imminent for them. With Entabeni, the land was not yet theirs but they were awarded a logistic contract. With the Mamahlola, the land was transferred in title only to the community. SAFCOL paid rent to the community every month, and they were awarded a civic culture contract where they employed 20 people from the community. They also built an Early Childhood Development (ECD) centre, and this was complete. In Mpumalanga, there were several communities which were at an advanced stage. The land claim process was completed; all that was required was the official transfer. SAFCOL had commenced with the negotiations of the lease of the land. The land would be paid directly to the community. In KZN, they had one claim which was affecting their petition. What was outstanding was the verification of the communities and the engagement on how to work with the community once the land was transferred. He then summarised everything that he had just said.

Ms Hazel Banda, Senior Manager: Transformation, responded by saying that transformation was a journey. They were currently on Level 2 which was the second-best level and an improvement from when they were on Level 5 years ago. These were the results they received in their latest audit report.
Regarding procurement opportunities at SAFCOL, they achieved shareholder compact and have done business work. More than 80% of the procurement spend was on Black-owned companies. There was room for improvement, but there was also great progress.

Mr D’Shorne Human, CFO, responded on the value of the company. The audited financial statements referenced in the slides indicated that they had a turnover of R1 200 000 000. The value of the biological asset was R4 600 000 000.

Mr Dlamini mentioned that the land was a huge issue for SAFCOL. They currently did not have their own land. Many of the assets were still under land which was under claim. This was a challenge. They developed a five-year plan to take SAFCOL up to R5 000 000 000 in terms of turnover.

The Chairperson thanked the team for their responses and acknowledged that there would always be more questions, but the Committee was happy with what they had so far. He suggested that Safcol ponders over the questions asked as they returned to their work (the issue of value and assets). They should also consider natural disasters and man-made disasters; the Committee would love to know the mitigating factors in such situations. He requested the precise costs of the spend regarding the CSI programme (the percentage ratio). The Committee liked specifics, not broad terms. He requested that the targets and achievements for each annual performance plan be assessed to assess improvement. He asked for something tangible to see what had been achieved. He was grateful for the presentation and looked forward to another engagement in the upcoming financial year. He dismissed the SAFCOL teams.

Committee minutes were deferred to the next meeting as the Committee did not form a quorum.

The Chairperson thanked the Members for their time and participation, and the upcoming meeting will be communicated to them soon.

The meeting was adjourned.