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
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 S Prinsloo: Research Intern.
2. Overview of forestry land matters in the
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
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
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.