ATC110201: Report on Oversight Visit to Grabouw for engagement with forestry stakeholders, dated 19 January 2011

Agriculture, Land Reform and Rural Development

Report of the Portfolio Committee on Agriculture, Forestry and Fisheries on Oversight Visit to Grabouw for engagement with forestry stakeholders, dated 19 January 2011

 

The Portfolio Committee on Agriculture, Forestry and Fisheries, having undertaken an oversight visit to a forestry project in Grabouw on 03 November 2010, reports as follows:

 

1. Introduction

The mandate of the government in the forestry sector is derived from the 1996 White Paper on Sustainable Forest Development, the National Forests Act 1998 (Act 84 of 1998) (NFA) and the National Veld and Forest Fire Act, 1998 (Act 101 of 1998) (NV&FFA).

 

The principle objectives of these policy instruments are:

 

·                     To promote economic and social development and utilise the developmental potential of forestry;

·                     To give the South African people greater access to the country’s state forests;

·                     To improve equity in the distribution of benefits flowing from state forest resources; and

·                     To address sustainable utilisation and management of state forests and conserve forest biodiversity.

 

The Portfolio Committee on Agriculture, Forestry and Fisheries is charged with overseeing the implementation of these policy instruments and ensure that government improves the living conditions of South Africa’s people, particularly the rural poor, through promoting sustainable forest development.

 

The delegation comprised the following members and staff:

Mr ML Johnson (ANC) Chairperson, Ms RE Nyalungu (ANC), Ms ME Pilusa-Mosoane (ANC), Ms NM Twala (ANC), Mr LL Bosman, Mr ND du Toit (DA), Mr RN Cebekhulu (IFP), Mr A Syme: Committee Secretary, Ms N Mafani: Executive Secretary to the Committee Chairperson, Ms N Mgxashe: Committee Researcher, Ms SPrinsloo: Research Intern.

 

2. Overview of forestry land matters in the Western Cape

The South African Forestry Company Ltd (SAFCOL) was established in 1992 to manage state owned plantations on a fully commercial basis and to report a profit. The state’s commercial plantations were accordingly transferred to SAFCOL in 1993.

 

In 2001 Cabinet took a decision to exit 45 000 hectares of plantation forestry in the Western and Southern Cape. These areas were to be converted to agriculture, housing and conservation. The main reason for the decommissioning was that the plantations were not economically viable.

 

Mountain to Ocean (MTO) successfully bid for the package in 2001 competing with over 7 other private entities that did not succeed. One of the conditions of the bidding process and purchase of MTO was that over 45 000 hectares were to be exited from forestry over time ending in 2020. This meant that the MTO asset was to reduce over time to about half its size in plantations. This necessarily meant also that the volume of logs available to saw millers in the area will reduce.

 

MTO as a major log supplier had inherited from SAFCOL and its predecessor what are called ever green supply contracts in favor of 2 sawmilling entities namely Steinhoff and AC Whitcher. These contracts stipulated that MTO had to supply a given annual volume to these parties.

 

Soon after the new owner took over the ownership and management of MTO, there were huge fires in the Tsitsikama areas that destroyed over 16 000 hectares of plantations which reduced the volume of available timber in the MTO area by 100 000 cubic meters per annum. This meant that there was to be a huge shortage of timber in the market for many years after the fires.

 

The combination of the 2005 fires and the lack of planting of clear felled areas combined to create a huge log shortage in the MTO area, directly threatening all the sawmilling and timber related business in the area.

 

From 2005 MTO made a series of representations to the government requesting the government to reverse the exit strategy of 2001. MTO pointed out to the government that commercial plantations are economically viable in the Western Cape, that the exit strategy will destroy jobs and make smaller rural towns poorer and stifle their economic growth generally. A huge potential was being destroyed as a national asset.

 

The government acceded to MTO’s request and commissioned a study to assess its assertions and advise it. The VECON report that was commissioned came back and recommended that of the identified original exit areas 23 000 hectares must be replanted back into forestry and the rest be taken to conservation. Based on the VECON report the government then partially reversed some of the exit areas.

 

3. Challenges in the industry

3.1 Currently 23 000 hectares are to be replanted. Of that 10 000 hectares have been clear felled but have not been replanted waiting for a government decision.

 

In 2007 MTO purchased the Borskor sawmill in Tsitsikama. AC Whitcher opposed the purchase and took the matter to court. The court referred the matter back to the Competition Commission for decision. To date the Competition Commission has not finalized the matter which is one of the reasons for conflict and infighting in the industry.

 

3.2 Due to the shortages of logs available because of the reasons stated above and the demand from black and Small and Medium Enterprise sawmills for a share of the available timber, MTO gave notice to both AC Whitcher and Steinhoff that it intended to terminate the ever green contracts. This notice of termination was provided for in the contracts. Both AC Whitcher and Steinhoff are fighting the notices which is another reason of conflict and infighting in the industry.

 

3.3 From the moment the government announced the reversal of the exit strategy and decided to plant the 23 000 hectares of identified plantations, the industry players began lobbying government to be allowed to plant these areas. Some of the players are threatening that if the government allows MTO to plant these areas they will oppose that decision in court. This is the third area of conflict.

 

3.4 The other area of conflict is the price of the logs and timber. The timber and log buyers are opposing and fighting every attempt by MTO to increase its prices. MTO has over 10 000 hectares of area waiting to be planted. This has been the case for the last 8 years. This is eroding the value of this asset and further threatening the future of the industry in this area.

 

4. Conclusion

 

The committee has taken note of the challenges faced by the industry and recommends that the Department of Agriculture, Forestry and Fisheries find the appropriate solutions. The solutions that must come from the government and DAFF are on the following:

 

·                     Decide who should be given the right to plant these areas

·                     Take and implement this decision speedily to prevent further losses

·                     The Competition Commission must finalize its work regarding the BORSKOR purchase review

·                     The issues of evergreen contracts must be addressed in line with competition laws of the country and the need to promote black economic transformation.

 

Report to be considered.