Restructuring of Forestry: briefing

Meeting report

WATER AFFAIRS & FORESTRY PORTFOLIO COMMITTEE
12 October 1999
NATIONAL WATER ACT AMENDMENT DRAFT BILL AND FORESTRY RESTRUCTURING

Document handed out:
Presentation on the Restructuring of State Forests

SUMMARY
The National Water Act Amendment Draft Bill was introduced to the Committee. The Portfolio and Select Committees would deliberate the Bill together to expedite the process. The Department gave a briefing on the progress made in the Forestry Restructuring Process.

MINUTES
National Water Act Amendment Draft Bill
Ms Janet Love, the Advisor to the Minister of Water Affairs and Forestry, stated that the draft Bill was with the State Law advisors. The NCOP Chairperson and the Speaker of the NA had agreed that the legislation needed to be passed as a matter of urgency. The Bill would be a Section 75 piece of legislation, and would therefore not follow the complete provincial route. As a result, it had been decided to discuss the Bill in a joint meeting with members from the NA and NCOP. The Bill would be published in the Government Gazette this week, and Ms Love hoped to do a full briefing on the 25^th October.

The Bill was urgent in that the registration of existing water use had started on the 1 October. Once users were identified, areas would emerge where the water resource was being overused, or in which competition for limited resources would occur. Once the allocation of water use in these areas had been decided, it was likely that the Water Tribunal would be called in to settle disputes.

Section 146 of the National Water Act (NWA) determined the composition of the Water Tribunal. The water industry involved billions of Rands worth of investment, and the stakes in water use allocation are high. Therefore any process that the Water Tribunal went through would likely be given legal scrutiny through some judicial process. As a result it was important that there were legally qualified members in the Tribunal. At the time the NWA was legislated, it was decided to have a non-political process of appointing members to the Tribunal. The Judicial Services Commission agreed to recommend people to the Minister for appointment.

The Judicial Services Commission has since received nominations and begun looking at the fine detail of the Act. The Commission has informed the Minister that they feel they have no basis in which to decide on the nominations for the Tribunal who qualify according to engineering, natural resource or community knowledge criteria.

The Amendment to the NWA therefore states that the Judicial Services Commission will now nominated two people based on the legal qualifications of the candidate. The other three members will be recommended by the Water Research Commission which is composed of people with water related expertise.

In response to general questions on the allocation of water and the rights of South Africans to water, Ms Love offered to brief the Committee on the overall provisions of the NWA, before the next meeting dealing with the Amendment Bill. The Portfolio Committee accepted the suggestion.

Questions by members
Mr Mathebe (ANC) asked whether there were rules governing the Water Research Commission's nomination process? Ms Love indicated that the Amendment Bill did contain rules that expanded on the criteria in the original act.

Mr McIntosh (DP) asked whether stakeholders had been involved in the process and had seen earlier drafts? Ms Love stated that there had been consultation with some of the affected organisations, such as the Commissions. However, for many this would be the first sight of the Bill, and the consultation process really begins with the Committee.

The Chairperson, Ms Sonjica, asked Ms Love to clarify the proposed process. Ms Love indicated that the Chairpersons of the Portfolio and Select Committees would decide whether the joint committee would hold public hearings. The advanced briefing had been given to try and facilitate the need for urgency verses the need for allowing the public participation.

State Forestry Restructuring
Ms Lael Bethlehem, the Director of Forestry in the Department of Water Affairs and Forestry, gave a briefing on the restructuring process.

At the beginning of the century, timber was needed in South Africa. The private sector at the time was not involved due to the nature of the timber industry. The timber took a long time to grow, and returns to investment may only arrive in up to 35 years. While the trees were in the ground, they were vulnerable to pests, drought and fires. Therefore government had to start investing in the industry.

In the 1970's, the private sector began to get involved in the commercial forestry sector. In the late 1980's the government decided to commercialise the timber operations operated by government. The South African Forestry Corporation Limited, SAFCOL, was formed in 1992.

In 1994 the assets of the former homelands and South Africa were united. The forests that had been part of the previous RSA were under SAFCOL, while the homeland forests were transferred to the Department of Water Affairs and Forestry. Often forests that crossed the previous borders were operated by the two different management structures.

The Department of Water Affairs and Forestry inherited a R300 million operating loss from the transferred forests. The loss resulted from excessive overstaffing at three times the industry level, and unrealistic supply contracts which were set up to favour the private buyers to encourage investment.

As a result, the Department has decided to restructure the state forests and privatise the leasing of the forestry asset. The restructuring was occurring on three levels.

Category A forests were those deemed to be commercially viable, and included all of SAFCOL's forests and half of the commercially viable forests currently operated by the Department. The Category A forests had gone through a bidding process, and bids for the various forests were currently being evaluated. The forests had been divided into seven separate units. The bidders could bid for an individual section, or any combination of the seven units. The combined area was the largest area of forestry put out for privatisation by any government in the world. Some other governments, such as New Zealand, had opted to release small areas separately over a longer period of time.

The land the forests were on was not being privatised. The land was being kept as government land, and only the forest resource was being made available on long term leases. This would allow the government to maintain an element of control, and allow for the process of land claims and tenure agreements. If there was a successful land claim, the new owners would be paid the annual lease amount that was negotiated with the bidders.

The human resource aspect of the restructuring had been very challenging. Many of the jobs were in remote rural areas with little other job opportunities. However, the leasing bidders would not want to employ three times as many staff as was required. Therefore extensive work had been undertaken with the unions to find solutions. A portion of the staff, roughly a third, had volunteered to be transferred to the new employers at a lower salary rate. The department would pay a one off transfer package equivalent to the difference between the two salaries for three years. All those wanting to transfer had been identified. Those not wanting to be transferred would be re-deployed within the Department. Some areas of the department's work, such as the indigenous forest sectors, were understaffed. The third option was for staff to accept the Voluntary Severance Package. A social plan involving retraining and counselling would be included with the severance package.

The category B plantations are those available for commercial use, but are also suitable for small and emerging business.

The Category C plantations were initially set up for fuel and building purposes, in addition to commercial farming. There are roughly 100 Category C plantations, most of which are in the Eastern Cape. The Department would transfer the land and plantations to the communities.

Questions and comments by members
Ms Taljard (DP) asked whether the new tax laws for provincial and local government rural taxation had been taken into account in setting the annual lease amount. Ms Bethlehem replied that the lease was a fixed amount that would not be reduced if there were additional taxes. The Department of Water Affairs and Forestry at the time of providing information to bidders had not had full information on the proposed taxes, but had alerted bidders to the possibility that new provincial land taxes may occur. The bidding company would have to take into account all expenses, including land and water taxes and fees, and factor these into their bids.
The unsustainable contracts were being renegotiated. At present there were three SAFCOL contracts and three Department of Water Affairs and Forestry contracts that the other parties to the contracts were refusing to negotiate on. The department had legal recourse as a result of the National Forest Act, and was investigating the options.

Mr Van Niekerk (FA) complemented the Department on a very good and comprehensive briefing.

Mr Sigwela (ANC) noted that identifying communities to receive land was difficult, and asked how the process was being undertaken in connection with the Category C plantations. Ms Bethlehem indicated that each of the roughly 100 plantations was being thoroughly investigated with the aid of the Department of Land Affairs. The process was long and complicated, and would still take a few years for all the areas to be finalised.

Mr Gininda (ANC) asked what the implications of the new contract negotiations were for addressing the exclusion of historically disadvantaged communities. Ms Bethlehem noted that the contracts were supply contracts, and that the new contracts all had cancellation clauses with a five year notice period. Therefore new entrants would be able to approach the Department, and over time would be able to access the resource.

Ms Ngwenya (ANC) followed up on other members' comments on the involvement of local government in the process. She noted that the local government authorities were key institutions in representing and empowering people. The rural masses still needed access to forest produce to gather wood and medicines. The process needed supervision, otherwise it was open to abuse. Local Government was the key institution in monitoring and supervising the process. Ms Bethlehem replied to the various comments by saying that Local Government had been a part of the process, in particular on issues of housing villages which were being transferred to Local Government.

The Chair, Ms Sonjica, thanked the department for the briefing. The process had made an attempt to be transparent, and to place the market within reach of all people. However, she had identified three general concerns from the committee. These were the inclusion of Local Government in the processes, the involvement and identification of the communities, and a review of the process with respect to the success of the bids and the role of the Committee.

These minutes have been supplied by Contact.