National Forestry Bill: hearings

Meeting report

AGRICULTURE, WATER AFFAIRS & FORESTRY PORTFOLIO COMMITTEE
17 August 1998
NATIONAL FORESTRY BILL: HEARINGS

Documents handed out:
Combined submission from Rance Timbers, Lentz Forest Products, Tekwani Sawmills, and Malenge Sawmills.
Submission from Madiba Mills
Submission from York Timber Organisation

SUMMARY
The Portfolio Committee heard hearings from Rance Timbers and associated companies, from Madiba Mills and from the York Timber Organisation.

DETAILED MINUTES
The chairperson welcomed all to the hearings. The drafters from the Department of Water Affairs and Forestry were present to make note of the submissions, and will respond at a meeting on the 19 August. Minister Asmal was present for a short while before he had to leave.

Mr. Rance was invited to make his submission. He read through the combined submission from himself and other timber companies. The members were invited to ask questions.

Mr Nel (NP) noted that the department had previously stated that they had consulted all stakeholders on the Bill. He asked Mr. Rance whether he had been consulted on section 28. Mr Rance stated he had not been consulted on this clause.

Mr. Ganinda (ANC) noted that the document stated that the Department believed the present contracts limited new entrants, and that the submission responded by criticizing the department. He requested an answer as to whether the contacts did limit new entrants. Mr. Rance responded saying that new entrants could be encouraged through the selling of SAFCOL and related activities in empowerment deals. Similarly there were opportunities if logs were sold in empowerment deals, and not exported by the department. He argued that opportunities were being wasted which could be used, rather than taking from the current contract holders.

Dr. Schooman noted that the submission made reference to the possibility that during privatisation, state run activities could be sold to export focused initiatives, rather than as a source of supply for local sawmillers. Dr. Schooman requested Mr. Rance to comment on how this could be prevented. Mr. Rance started by saying he was not suggesting tender processes be circumvented. Rather the tender process must prevent the buyers being export orientated.

Ms. Ntuli (ANC) noted the submission made reference to the companies commitment to the employees. She asked for information on the type of skills training that was undertaken. Mr. Rance replied that there was an industry program wherein 1 % of the payroll was given to the industry training board. Within his own company, Mr. Rance stated that skills were being transferred from mechanics and fitters and turners, through to management skills.

Mr. Mentz (IFP) asked Mr. Rance to elaborate on the wasted potential that was referred to in the submission. Mr. Rance responded, saying that there was poor Department of Water Affairs and Forestry management. 35% of the forestry area was unplanted and being encroached by alien vegetation. Fire damage due to bad fire management had occurred to forests. He argued that if the area was well managed, there could be an excess yield which could be made available allowing new entrants.

Ms. Ntuli (ANC) noted that the submission made reference to meddling in the organisations affairs by previous governments. She requested information on how the organisations had responded. Mr. Rance stated that when the Ciskei was created, barriers were drawn through the middle of the supplying forests. The boundaries split management units and there was little communication between the two new management authorities. The company had protested vehemently.

Mr. Masala (ANC) asked whether there were good relations between the workers and management in the companies, and whether the workers were in support of the privatisation of state owned forests. Further, Mr. Masala asked for ideas on where the previously disadvantaged would get finance to purchase resources when the privatisation occurred. Mr. Rance replied that relations with the employees were good, and that there was some conflict from time to time. As the assets that would be privatised were state owned, the state could aid the transfer through long term loans.

Mr. Nel (NP) asked about whether the company had considered any joint ventures. Mr. Rance replied that the company had been considering joint ventures, but had not made any firm plans as the conditions of the privatisation plans were not finalised.

The chairperson noted that companies were becoming bankrupt under the current conditions, and asked whether the three to five year period in section 28 was that crucial in terms of a company staying on its feet. Mr. Rance stated that the contracts did not guarantee the business would be successful, but reduced the uncertainty in the planning.

Mr. Motlana from Madiba Mills was invited to present his submission. He read out his submission, and the committee was asked for questions.

Dr. Schooman (NP) asked whether the acceleration of the privatisation would aid Madiba Mills and new entrants. Mr. Motlana agreed, stating that the opportunities for the previously disadvantaged would be immense.

Mr. Mentz (IFP) asked for clarity on why the whole of clause 28 should be deleted. Mr. Motlana stated that the clause as it stands should be deleted, but that it could be amended.

Ms. Ntuli asked for more information on the taking over of rights by agreement and with compensation, as mentioned in the submission. Mr. Motlana stated that it was not in any ones interest to take away rights without agreement, as it might one day happen to them.

Mr Ganinda (ANC) asked for details on the ownership of Madiba Mills, as it was claiming to be a black empowerment scheme. Mr. Motlana stated that there were 3 directors, 2 of which were black. The directors owned 81%, with 19 % being owned by York Timbers.

Ms. Ngwenya (ANC) stated that she thought black empowerment would be aided by section 28, and asked why it should be deleted? Mr. Motlana answered that the section could be amended and rehabilitated, but as it was in its current version, should be deleted.

Ms Ntuli (ANC) asked whether Mr Motlana thought that removing section 28 would aid capital lending. Mr Motlana said that removing section 28 would improve the access of new entrants to financing. It was difficult to pay off a loan on capital for a sawmill in five years, let alone the three proposed.

Mr. Masala (ANC) asked whether there was a good relationship with the workers, and whether the workers supported the privatisation of state forests. Mr Motlana replied that they had started off the company without a contract for supply, and that there were days in which the saw mills did not operate due to no wood supply. His workers understood the risks, and the need for a stable wood supply. The implications of privatisation were embraced by the workers, but there were a few concerns on the details.

The chairperson asked why the 3 to 5 year issue was the basis for objections to section 28 if it did not guarantee success. Mr Motlana agreed that there was no guarantee of business success, whether the supply contracts were for 3, 5 or 10 years. However the longer term contract security does give security and aids in access to financing.

Mr. Ligege (ANC) asked for specific details of which item in section 28 worried the speaker. Mr. Motlana stated that the principles were good, but the manner in which the section was worded was un-business like. His concern arose out of the possibility that contracts could be over ridden.

Mr. Mentz (IFP) noted that there were unions against the privatisation of state forestry, and noted that the speakers workers were in favour of privatisation. Mr Motlana stated that his workers saw the possibility within Madiba Mills for expansion. The union concerns originated in state employed sectors. His workers did have concerns on the privatisation, while supporting the general idea.

Judge Dobsen (Department of Water Affairs and Forestry) asked for clarity on the amendments which Mr. Motlana would like to see. Mr. Motlana undertook to get these to the committee within the next few days.

Mr. Tucker from York Timber Organisation was invited to present his submission. The submission was read, and the committee invited to ask questions.

Mr. Ligege (ANC) noted that the briefing included reference for compensation where contracts were cancelled. Mr. Ligege noted that previous governments had removed people from the areas now under forestry, from which the company had benefited. Was the company prepared to pay compensation to these people first, and let the government pay compensation to the company later? Mr. Tucker stated that the question highlighted what should not be tolerated. There is now democracy and a bill of rights, and the abusive nature of previous acts should not be allowed in the present democracy.

Mr Nel (NP) expressed a concern that the Bill would use legislation to do what contracts should do, and asked for comments from Mr. Tucker. The speaker agreed it was a concern, and added that the concern was extended when the legislation was used to break previous contracts.

Mr. Mentz (IFP) asked for Mr. Tucker to provide specific amendments to section 28. Mr Tucker agreed to send these to the committee.

Ms. Ngwenya (ANC) asked about the York Timber relationship to Madiba Mills. Mr. Tucker explained that his company had three sawmills, the smallest of which was made over to Madiba Mills. A financial interest was retained in the new company to share the risks. At the same time, Mr Motlana was made a director of Yorkcor to learn the business.

Ms. Ntuli (ANC) asked what attempts had been made in the last 25 years to get new entrants into the industry, and how Yorkcor had supported the initiatives. Mr. Tucker referred to his explanation on Madiba Mills.