companion to the draft forestry transformation charter ... · 4 acronyms abet adult basic education...
TRANSCRIPT
COMPANION TO THE DRAFT FOREST SECTOR TRANSFORMATION CHARTER
FIRST DRAFT FOR PRESENTATION TO STAKEHOLDERS
MAY 2007
Prepared by the Charter Steering Committee
Launched for public comment at the Forest Sector BBBEEE Indaba held on
25 June 2007
�
Table of ContentsAcronyms 2
1 Chronology of the Development of the Forest Sector Transformation Charter 3
2 Profile of the Forest Sector 6
3 Current State of Empowerment in the Sector 9
�.1 EquityOwnership 9�.2 ManagementControlandEmploymentEquity 10�.� OtherKeyElements 10�.4 Conclusions 11
4 Sector Challenges 12
4.1 Increaseroundwoodsupply 124.2 Sustainablesupplyandbetterutilisationofsawlogs 1�4.3 Localbeneficiationinandthroughthefibreproductionsub-sector 134.4 Equityintheforestryvaluechain 1�4.5 Empowermentandsustainabilityofsmallforestsectorenterprises 144.6 Linkingforestrywithpovertyalleviationandlocaleconomicdevelopment 15
5 Details on Undertakings in the Charter 16
5.1 Streamlineandexpediteafforestationlicensingprocedures 16
5.2 SawloggrowingstrategyandprogrammeforSouthAfrica 17
5.� Forestprotectionservices 18
5.4 CharterCouncil 19
6 Explanatory notes to the Charter 22
6.1 CalculationofoverallOwnershipProfilefortheSector 22
6.2 ComparisonbetweenScorecardfortheForestSectorandtheGenericScorecard 2�
6.� FurtherdetailsonSkillsDevelopmentStrategy/Plan 25
6.4 FurtherdetailsonIndustryCodesofConductonContractingandEmployment 27
6.5 Motivationtofundand/orsubsidisetheinterestburdentodevelopemergingforestry
enterprises ��
6.6 Motivationforseedfundingtodevelopfireinsuranceschemesforemergingforestry
enterprises �6
7 Financial requirements for Forest Sector Transformation 36
7.1 IndustryCosts �6
7.2 GovernmentCosts 40
8 Key Outcomes of the Forest Sector Transformation Process 44
9 Charter Implementation Plan 45
Appendix: Forestry Funding models
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Acronyms
ABET AdultBasicEducationandTraining
ASGI-SAAcceleratedandSharedGrowthInitiativeforSouthAfrica
B-BBEE Broad-basedBlackEconomicEmpowerment
BEE Broad-basedBlackEconomicEmpowerment
CEPPWAWU Chemical,Energy,Paper,Printing,WoodandAlliedWorkers’Union
CRLR CommissiononRestitutionofLandRights
DEAT DepartmentofEnvironmentalAffairsandTourism
DoA DepartmentofAgriculture
DLA DepartmentofLandAffairs
DoL DepartmentofLabour
DPLG DepartmentofProvincialandLocalGovernment
DoT DepartmentofTransport
DTI DepartmentofTradeandIndustry
DWAF DepartmentofWaterAffairsandForestry
EAP EconomicallyActivePopulation
ESMEs ExemptedMicro-Enterprises
FAWU FoodandAlliedWorkers’Union
FIETA ForestIndustryEducationandTrainingAuthority
GDP GrossDomesticProduct
IDC IndustrialDevelopmentCorporation
ITAC InternationalTradeAdministrationCommission
MOU MemorandumofUnderstanding
NSF NationalSkillsFund
NPAT NetProfitafterTax
NSF NationalSkillsFund
SALGA SouthAfricanLocalGovernmentAssociation
OSHA OccupationalSafetyandHealthAct
PGDS ProvincialGrowthandDevelopmentStrategy
QSE’s QualifyingSmallEnterprises
SAFCOL SouthAfricanForestryCompanyLtd
SALGA SouthAfricanLocalGovernmentAssociation
SANAS SouthAfricanNationalAccreditationSystem
SAQA SouthAfricanQualificationAuthority
SETA SectorEducationandTrainingAuthority
SFRA StreamFlowReductionActivity
SGB StandardsGeneratingBody
QSE QualifyingSmallEnterprise
WfW WorkingforWater
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1.ChronologyoftheDevelopmentoftheForest SectorTransformationCharter
Launch 18 April 2005
Charterofficially launchedby theMinisterofWaterAffairsandForestryatan indabaheld inMidrand.StakeholderspresentagreementtodevelopaB-BBEECharter,andestablishaCharterSteering Committee assisted by Working Groups to drive the process.The Minister acceptsnominationsandappointstheSteeringCommittee.
Working Groups 1st Tasks June/November 2005
Four sub-sector Working Groups established: Growers, Forestry Contractors, Sawmillers, Char-coal and Treated Pole Producers, and a group to examine the Sector delineation. Working Group tasks were to:
• DevelopaChartervisionforeachsub-sector;
• IdentifykeyprinciplestoguidetheCharter;
• Determinethecurrentstatusofempowermentineachsub-sector;and
•Determine the challenges facing each sub-sector and recommend solutions to thesechallenges.
Regional Public Consultation September 2005
ThefindingsoftheWorkingGroupspresentedatregionalpublicconsultationmeetingsinEastLondon,DurbanandNelspruit.InputsreceivedfromstakeholdersusedbytheWorkingGroupstoupdatetheirsubmissions.
Draft Charter – Preliminary Sections
WorkingGroupsubmissionsformthebasisforthedraftingofthepreliminarysectionsofthedraftCharter,withtheSteeringCommitteeplayinganoversightrole.
Working Groups 2nd Tasks October/November 2005
A5thWorkingGroup,theFibreWorkingGroup,established.TheSteeringCommitteedevelopsguidelinesfordevelopmentofScorecardsbyeachsub-sectorWorkingGroup.WorkingGrouptasksinclude:
• DevelopingScorecardsforeachsub-sector;and
• IdentifyinginstrumentsrequiredforachievingScorecardtargets.
Regional Public Consultation – 2nd Round November/December 2005
AsecondroundofregionalpublicconsultationmeetingsheldtoreviewthedraftScorecardsandinstruments. InputsreceivedusedtoupdatetheWorkingGroupsubmissions,whicharethenusedasabasisforcompilingtheremainingsectionsoftheDraftTransformationCharter.
First Conveners Retreat January 2006
Conveners of theSteeringCommittee andWorkingGroupsmeet to cross-check sub-sectorScorecardsanddevelopTORfortaskteamstoexaminecross-cuttinginstrumentstosupporttheachievementofScorecardtargets.
DWAF/DLA Workshop January 2006
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WorkshopwithDLAheldtoreachagreementonhowtofast-tracklandreformissuesinforestryareas.An action plan developed, and agreement reached onmodalities for DWAF/DLA co-operation.
Implementation Task Teams February 2006
Implementation Task Teams develop financial and non-financial instruments to support theachievementoftheScorecardtargets,takingintoaccountexistingGovernmentframeworks(B-BBEECodesofGoodPractice,skillsdevelopmentframeworks,landreformetc).
Refining Sub-sector Submissions March 2006
WorkinggroupsrefineScorecardsandinstruments,basedontheinputsreceivedandtheDTICodesofGoodPracticeforB-BBEE.Furtherregionalconsultationsheldtargetingthetwosub-sectors:Sawmillers,andCharcoalandPoleProducers.
3rd Round of Regional Consultations March 2006
Anotherroundofregionalconsultationstargetingthetwosub-sectors:Sawmillers,andCharcoalandPoleProducers,heldinfourprovincesinMarchtoelicitgreaterparticipationintheCharterprocessbythesesub-sectors.
2nd and 3rd Draft Transformation Charter April 2006
Transformation Charter revised to produce a 2nd and later a �rd draft, incorporating outputsfrom Working Groups and Implementation Task Teams. The document details governmentundertakingsandcommentsreceivedfromtheSteeringCommitteeandotherstakeholders.Keyissuesthatrequirefinalisationareidentified.Sub-sectorWorkingGroupsandtheFinancialandSkillsDevelopmentImplementationTaskTeamsaretaskedtoaddressthese.
Second Conveners Retreat May 2006
Conveners of the Working Groups meet to integrate the submissions on outstanding issuesfrom the Implementation Task Teams and Working Groups, and to review the consolidatedScorecard.
4th , 5th and 6th Draft Charter May/July 2006
TheCharterfurtherrevisedtoincorporateasubmissionfromorganisedlabour(CEPPWAWUandFAWU),outputsfromthesub-sectorWorkingGroups,TaskTeamsandtheconvenorsretreat.SubmissiontoSteeringCommitteeforfurtherinputsandfinalapproval.
Alignment with Final Codes of Good Practice
CabinetapprovesfinalCodesofGoodPractice inDecember2006.WorkingGroupmeetingsheldinJanuary2007toconsidertheimpactofCodesandupdatetheScorecardandCharterdocument.SteeringCommitteemeetingson8Februaryand7MarchtofinaliseCharter.
Launched for Public Comment June 2007
ThedraftfinalChartersubmittedtotheMinisterofWaterAffairsandForestry,whowilllaunchtheCharterasadraftdocumentforpubliccommentsatanationalstakeholderIndabaon25June2007.
Finalisation of the Charter and Gazetting
FollowingcommentsreceivedthedraftCharterwillbefinalisedbytheCharterSteeringCommitteeandanalysedbyanindependentpartyasprovidedforundertheCodesofGoodPracticeforthedevelopmentandgazettingofTransformationCharters.ThefinalCharterwillbesubmittedtotheMinisterofTradeandIndustryandCabinetforapproval,whereafteritwillbegazetted.
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2 ProfileoftheForestSectorTheForestSectormakesamajorcontributiontotheSouthAfricaneconomy.Thecommercialplantationresourceofsome1.33millionhectaresformsthebasisforawell-developed,highlyintegratedanddiversifiedforestproductsindustryinSouthAfrica(Figure1).
Thefibresub-sectorisdominatedbyasmallnumberoflarge,corporateenterprisesthatareinvolvedinthecapital-intensivepulp,paperandcompositeboardindustries.Theseindustriesarecharacterisedbytheirbackwardlinkagesintoplantationforestry,motivatedbytheneedtosecurereliableroundwoodsupply.These,togetherwithasmallnumberinvolvedinsawmilling,own58.8%oftheplantationforestresource.Alargernumberofmediumandemergingenterprisesislocatedinthesub-sectorsofgrowers,forestrycontractors,sawmilling,poletreatment,charcoalmanufacturingandpaperprocessing.
Contribution to GDP
ThecontributionoftheSectortoGDPfor2006wasaboutR14.0billion.Thisequatestoabout1%contributiontothetotalRSAGDP.
ContributiontoForeignTrade
Theforestproductsindustryranksamongstthetopexportingindustriesinthecountry.Onaverageoverthepastfewyears,sectorexportsamountedtoR11.0billionperannum,which,afterdeductionofimportsofforestproductsofR4.0billiongaveanetforeignexchangeearningtothecountryofR7.0billionperannum.TheForestSectorcontributed15.6%ofthecountry’stradebalance.
ContributiontoEmployment
TheForestSectorgeneratesemploymentformorethan170000workers,ofwhich6�%areincommercialforestry,whichincludesthesub-sectorsofgrowersandforestrycontractors.TotalremunerationamountedtoR4.6billionin2006.Mostofthejobscreatedareinruralandremoteareaswhereunemploymentishighandalternativeemploymentopportunitiesscarce.
Includingfamilydependants,anestimated870000peoplerelyontheSectorfortheirlivelihood.
Contributiontolivelihoodsubsistenceandinformaltrade
ThemajorityofSouthAfrica’sruralpoormakeextensiveuseofforestproductsfromwoodlandsandplantationsfordailyconsumptionandsmall-scaletrade.Firewood,buildingpoles,medicinalplantsandediblefruitsarecriticaltolivelihoodsofthepoorandprovideasafetynettothemostvulnerablehouseholds.
ThemajorchallengetogrowthandsustainableequityintheForestSectoristheshortageinroundwoodsupply,whichisnotkeepingpacewiththeincreaseinthelocaldemandforforestproducts.Ifthischallengeisnotaddressed,growthandemploymentprospectsandopportunitiesfortransformationintheForestSectorwillbeseriouslyconstrained.
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The forestry and forest product sub-sectors covered by the Charter and their linkages with downstream industries is illustrated in figure 2. Figure 2
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�.CurrentStateofEmpowermentintheSector
Thefollowingtablespresentanoverviewofthecurrentsstateofbroad-basedblackeconomicempowermentintheSectorwithregardtokeyelementscoveredbytheSectorScorecard.TheinformationintheTablebelowisfromasurveyofenterprisesineachsub-sectorduring2006.
�.1 EquityOwnership
Sub-sectorWeighted Average
Black Total Black Women
PlantationGrowers
- Corporate
- PrivateFarmers2)
- EmergingGrowers2)
8,0%1)
<5%
>95%
0,1%1)
<5%
>80%
Fibre[Pulp,PaperandCompositeBoardProducers]
10,5% 0,0%
Sawmilling
- LargeMillers
- MediumMillers
- SmallMillers2)
20,1%
5,1%
>80%
0,�%
2,1%
<20%
PoleProducers 7,6% 0,5%
CharcoalProducers
- Corporate
- SmallProducers2)
1,�%
>80%
0,0%
>50%
ForestryContractors �9,8% 6,7%
1) Figuresestimatedfromsurveydataoffibreandlargesawmillinggroups(i.e.integrated forestryandforestproductsprocessingcompanies)
2) Estimated
Note: The fibre sub-sector comprises a number of large groups with international share-holding and asset profiles (e.g. Sappi, Steinhoff, Sonae, Masonite). The sawmilling sub-sector has large sawmilling participants that are wholly or partly state-owned (SAFCOL, Komatiland Forests (Pty) Ltd, MTO Forestry (Pty) Ltd, Singisi Forest Products (Pty) Ltd, Siyaqhubeka Forests (pty) Ltd, Amathole Forestry Company (Pty) Ltd) or owned by a trust (Hans Merensky Holdings). All other sub-sectors mostly comprise medium-sized or emerg-ing enterprises in private hands.
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�.2ManagementControlandEmploymentEquity
Sub-sectors
Board LevelExecutive
Management LevelMiddle Management
Level
Black Total
Black Women
Black Total
Black Women
Black Total
Black Women
PlantationGrowers1) 2�,0%1) �,8%1) 1�,0%1) 2,7%1) 17,6%1) 4,7%1)
Fibre[Pulp,PaperandCompositeBoardProducers]
26,7% 6,7% 18,5% 0,4% 19,8% 2,1%
Sawmilling-LargeMillers
-MediumMillers
19,6%
8,6%
�,9%
2,5%
20,5%
5,7%
7,0%
1,2%
�0,5%
�0,7%
9,8%
1,2%
PoleProducers 0,0% 0,0% 1,6% 1,1% 4,7% 0,5%
CharcoalProducers 1,�% 0,0% 47,0% 15,8% 8�,8% �1,4%
ForestryContractors ��,0% 7,1% ��,8% 12,�% 52,9% 14,2%
1) Figures estimated from survey data of fibre and large sawmilling groups (i.e. integrated forestry and forest products processing companies)
�.�OtherKeyElements
Sub-sectorSkills
Development1
Preferential
Procurement2
Enterprise
Development3
Social
Investment4
PlantationGrowers 1,4% �1,0% n/a n/a
Fibre[Pulp,PaperandCompositeBoardProducers]
2,4% 19,8% 0,6% 4,2%
Sawmilling
- LargeMillers
- MediumMillers
1,0%
1,0%
n/a
n/a
n/a
n/a
n/a
n/a
PoleProducers 0,8% 7,5% 0,0% 0,5%
CharcoalProducers 0,5% 25,0% n/a n/a
ForestryContractors n/a n/a n/a n/a
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1) SkillsDevelopment:Investmentaspercentageofpayroll
2) PreferentialProcurement:Discretionaryprocurementspendonblacksuppliers
3) EnterpriseDevelopment:Investmentinenterprisedevelopmentaspercentageofnetprofit
aftertax
4) SocialInvestment:Investmentinsocial/economicdevelopmentaspercentageofnetprofit
aftertax
Note: The high level of ‘not available’ data is mostly a reflection of the inability by companies to access/ gather reliable data due to lack of systems and that the data provided in the survey forms is not compatible with the Scorecard definition. Only in the case of larger companies in the fibre sector can the data be regarded as representative.
�.4ConclusionsTheweightedaverage(accordingtosectorsize)BEEstatusfortheForestSectorasawholeisshownbelow.
Forest Sector Weighted Average BEE Score
EquityOwnership
BoardLevelMembership
ExecutiveManagementLevel
MiddleManagementLevel
SkillsDevelopment
PreferentialProcurement
15%
25%
20%
25%
1.8%
16%
EquityOwnership
BoardLevelMembership
ExecutiveManagementLevel
MiddleManagementLevel
SkillsDevelopment
PreferentialProcurement
15%
25%
20%
25%
1.8%
16%
Importantfindingsfromtheanalysisare:
q SignificantdifferencesareapparentfromtheuniquestructureoftheSector;comprising corporateenterprises,mediumsizedenterprisesunderprivateownershipandsmall producers.
q Participationbyblackpeopleisachallenge.
q Broad-baseparticipationisachallenge
q Smallproducers(growersandprocessors)intheSectorhaveasignificantBEEprofile; medium-sizedenterpriseshavelimitedBEEstatusandcertaincorporatesalready havemadegoodprogresstowardsgreaterBEE.
q BlackwomenownershipandemploymentequityintheForestSectorisatverylowlevels.
q Relativelyhighlevelsofspendbylargecorporatecompaniesinskillsdevelopmentand corporatesocialinvestment.
1�
4.SectorChallenges
4.1IncreaseroundwoodsupplyForestSectortransformationdependstoalargeextentongrowthoftheSector.Thisgrowthdependsinturnstronglyinincreaseddomesticroundwoodproduction.Themainlimitationtoincreasedproductionisthecurrentslowrateofnewafforestation.This,inpart,isowingtoslowgrantingofafforestationlicences.
MostoftheremaininglandsuitablefornewafforestationiscommunallyownedlandintheEasternCapeandKZN,whichoffersdirectopportunitiesforB-BBEE.
Key Challenge Requirements
Newafforestation
Expediteandstreamlineafforestationauthorisationprocesses
Securelandholdingrightsandstructuresoncommunalland
Communityfacilitation,extensionsupportandtrainingfornewentrants
Accesstofundsandfinancialservicesfornewentrants
Infrastructuredevelopment(roads,telecommunication,electricity)
Improvedyieldsinexistingplantations
Restorationandtransferofremaining(CategoryBandC)Stateforestplantations
Expediteapprovalprocessforriparianzone,jungleandspecies/genusexchangeorconversion
Improveforestprotectionservicestocombatplantationlossesthroughfire,pestsanddiseases
Ongoingproductivitygainsthroughimprovedsite-speciesmatching,planningandgeneticimprovements
Expeditethesettlementofrestitutionclaimsonprivateforestlandtoencouragere-investmentinforestassets
Ensurecontinueduseofplantationareasfortimberproduction
Secureagreementswithrestitutionclaimantsandotherbeneficiariesoflandreformonthecontinueduseofplantationareasfortimberproduction
Providepostsettlementsupporttolandreformbeneficiariestoensurecontinuedproductivity
EnsureaPropertyTaxregimethatsupportssustainableforestryoperations
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4.2SustainablesupplyandbetterutilisationofsawlogsWhileSouthAfrica facesashortfall in roundwoodproductionoverall, theshortageof sawlogs iscritical.Thelongrotationperiodforsawlogsmakesthislessattractivetotheprivatesectorthanotherroundwoodproduction,anduntilrecentlytheStateplantationshaveprovidedmostofthecountry’ssawlogs.WiththeState’sexitfromcommercialforestryoperations,measuresareneededtoensureasustainedandincreasedproductionofsawlogs
Key challenge Requirements
SustainablesupplyofsawlogsIndustrywideagreementonasawloggrowingstrategyandprogramme
Improvedutilisationratesbysawmillers
Focus on medium to small scale saw millers
Skillsdevelopmentandtraining
Capitalinvestmentinnewtechnology
Importingsawlogsasabridgingarrangement
4.3Localbeneficiationinandthroughthefibreproductionsub-sector
Substantialopportunitiesexisttosupporttransformationthroughtheestablishmentofbeneficiatingenterprisesinandthroughthefibreproductionsub-sector.
Key challenge Requirements
Maximisingopportunitiesforlocalbeneficiationofrawmaterials
Note that local beneficiation opportunities in the Forest Sector are subject to international market conditions
ImproveaccesstoventurecapitalandappropriatetechnologytosupportnewpulpandpapermanufacturingopportunitiesTightenanti-dumpingmeasuresinpulpandpaperproducts
Extendtheblackengineeringandartisanskillsbase
Expeditetheprocessingofwaterpermitapplicationsformanufacturingplants
Developopportunitiesforlocalmanufacturingofchemicalandtechnologyinputsprocuredbypulp,paperandfibreboardindustries
Improveaccesstoventurecapitalandappropriatetechnology
Extendtheblackengineeringandartisanskillsbase
Establishindustriesbasedonwasteproductsfrompulp,paperandfibreboardindustries
Improveaccesstoventurecapitalandappropriatetechnology
Extendtheblackengineeringandartisanskillsbase
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4.4EquityintheforestryvaluechainDespiterecentadvancesinblackownershipinthepulpandpapersub-sector,blackownershipintheForestSectorremainshighlyskewedtowardsthelowerendofthevaluechain(smallscaletimbergrowing and contracting). Moreover the number of black women who manage, own and controlenterprisesandproductiveassetsoutsidethesmallgrowersub-sectorisverylimited.Actionsarerequiredtopromotegreaterequityinallofthesub-sectors.
Key challenge Requirements
Equity ownership in the forest products industry
Increaseblackownershipofexistingenterprises
Saleofequityownershipacrossallsub-sectors
Growthinbeneficiationactivities
Newtechnologytosupportthedevelopmentoflow-volumeenterprises(paper)
Improvequalityofproductsamongstsmallerproducers(poles,charcoal)
Improvedpackagingandmarketingopportunities(charcoal)
Saleofbusinessassets Limitedopportunitiesasaresultofverticalintegration
Smallgrowerparticipationinforestryvaluechain
Applymechanismstoprovidegrowerswithashareofprofitsthataccruefromdownstreamprocessing
Equity ownership in the growers sub-sector
Increaseblackownershipofexistingenterprises
Saleofownershipshares,particularlyinlargeforestryenterprises.
Saleofbusinessassets Saleofplantationstoblackpeople
Growthinnewenterprises PromotenewafforestationinEasternCapeandKwaZulu-Natal
RestructuringofStateForests
Implementthe10%equityshareholdinginleasedstateforestlandearmarkedforblack-economicempowermentoflocalcommunities
Implementthe9%equityshareholdinginleasedstateforestlandearmarkedforblack-economicempowermentofworkers
Confirmland-holdingrightsandestablishlandholdingstructurestoenablethetransferofownershipandleaserentalstocommunitiesinrelationtoleasedstateforestland
Confirmland-holdingrightsandestablishlandholdingstructures,whereapplicabletotheremaining(CategoryBandC)stateplantations
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4.5Empowermentandsustainabilityofsmallforestsectorenterprises
Toensure long-termsustainability,growthandequity in theForestSector,attentionneeds tobegiventogreaterempowermentandprofitabilityofexistingsmallenterprises intheSub-sectorsofGrowers;ForestryContractors;Sawmillers;andCharcoalandTreatedPoleProducers
Key challenge Requirements
Empowermentandincreasedprofitabilityofsmall-scaleforestenterprises:
-ForestryContractors
-Growers
-Sawmillers
-TreatedPoleProducers
-CharcoalProducers
Strengthenrepresentativeorganisationswheretheyexist(Growers,ForestryContractorsandTreatedPoleProducers)andestablishthemwheretheyareabsent(Sawmillers,CharcoalProducers)
Regulatecontractingandemploymentrelationshipsthroughindustrycodesofpracticeandtheapplicationofexistinglegislativeprotections
Establishmechanismstosecureadequateandregularsuppliesofrawmaterials
Improveaccesstofinanceandinsurance
Improveaccesstoskillstrainingandtechnologyforimprovedproductivityandaddedvalue
Improveaccesstomarketsthroughcertificationandbetterinfrastructure
4.6 Linkingforestrywithpovertyalleviationandlocaleconomicdevelopment
Mostforestenterprisesarelocatedinruralareaswherethemajorityofthecountry’spoorlive.ThelongtermgrowthandstabilityintheForestSectorcanonlybesecuredifalignedwithinterventionstoaddressdeep-seatedinequalitiesandbridgethegapbetweenthefirstandsecondeconomy.ASGISA,Government’sPovertyAlleviationAgenda,RuralDevelopmentStrategyandLocalEconomicDevelopment(LED)strategyarekeyinterventionswhereintheForestSectorcanmakemeaningfulcontributions.
Key challenges Requirements
Toprovideimprovedlivelihoodopportunitiesfortheruralpoorinforestryareas
Assurefairandequitableconditionsofemployment
Promotelocaleconomicdevelopmentthroughimprovedviabilityofexistingenterprisesandestablishmentofnewenterprises
Ensurerestructuringofstateforestassetssoastobenefitlocalcommunities(refertopar.4.4above)
Promotelivelihoodopportunitiesforruralhouseholdsbyprovidingaccesstonon-timberforestproductssuchasfirewood,buildingpoles,medicinalplantsandediblefruits
Usebuyingpowerofforestindustryasacatalystfordownstreamlocaleconomicdevelopment
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5 Details on Undertakings in the Charter
5.1Streamlineandexpediteafforestationlicensingprocedures
Par. 1�.2.� (a) of the Charter contains the undertaking to streamline and expedite afforestationlicensing procedures to facilitate the establishment of a minimum of 100 000ha net increase inplantedareaovertenyears,basedonatargetaverageof10000haperannum,whileatthesametimeensuringthatforestry’swateruseisconsideredandweightedfullyagainstcompetingproponentsforwaterallocationinlicensingdecisions.Thiswillcomprisethefollowingmeasures:
(a)Createanenablingregulatoryenvironmentthatrendersthecostsofthewateruselicenceapplicationprocessaffordabletoemerginggrowers.
(b)Supportandadviseemerginggrowersinthewaterlicensingapplicationprocess,incompliancewithenvironmentalandotherafforestationauthorisationrequirements.
(c)Takestepstoensurethatlegislativeandregulatoryrequirementsdonotresultinforestryandtheplantingoftreesforcommercialandsubsistenceusebeingdisadvantagedinrelationtootherformsoflanduse.
(d)EnsurethatallapplicationsforafforestationareprocessedexpeditiouslybydevelopingaMemorandumofUnderstanding(MoU)withandratifiedbyotherpertinentauthorisingregulatoryauthorities.TheMoUshouldensurestrictenforcementoftheStreamFlowReductionActivity(SFRA)applicationproceduresandadherencebyallparticipatingpartiestothelaiddowntimeframesprescribedforrelevantinterventions,suchasinspectingsites,receivingandattendingtocomments,andprocessingapplications.
(e)Implementaproactiveapproachtoforestrydevelopmentinareasthathavesubstantialopportunitiesforafforestation,namelyaco-operativegovernmentinitiativetoauthoriseswiftafforestationlicensinginareas thathavebeenidentifiedanddemarcatedasbeingsuitableforafforestationintheEasternCapeandKwaZulu-Natal.ThiswillbeprovidedforintheMemorandumofUnderstandingreferredtoinpar(d)above.
(f)DevelopaprotocoltobeincludedintheMemorandumofUnderstandingreferredtoinpar.(d)abovetofacilitatelawfulconversionoftreegenusorspecies,specifiedasapermitorlicencecondition,wherethischangeshouldbeinformedbyforestrypracticeoreconomics.Thekeyprinciplegoverningsuchchangewillbethewateruseconditionoftheapplicableauthorisation.
(g)MakeprovisionforwaterusebysubsistenceandhomesteadwoodlotsbyprovidingfortheconsiderationofaSchedule1provisionand/orGeneralAuthorisationforsuchsmall-scalewoodlots.
(h)Facilitatethetransferortradeofawateruseallocationorexistinglawfuluseofwater,andtheissuingoflicencesintheeventofconversionofalandusefromirrigatedcropping(includingsugarcane)totimberplantations.
(i)Allowwaterusebydrylandsugarcanetobeallocatedtotimberplantations,basedonanequitablewateruseexchangeratioforthesecrops,providedthatsuchdrylandsugarcanehasbeenanexistinglandusepracticeforatleastfiveyears,andthatthisdoesnotcompromisetheavailabilityofwatertotheReserveandotherlawfulwaterusers.
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(j)Allowthewateruseattributedtowattle,pineandeucalyptusjunglesthatarerehabilitatedorconvertedandcorrectlymanagedascommercialtimberplantations,tobeallocatedthroughanSFRAwateruselicencetosuchtimberplantations.GeneralAuthorisationswillbeconsideredincatchmentswherethereissufficientavailablewatertoallowsuchconversion.
(k)Developanefficientandeffectiveframeworktoauthorisethere-allocationofwater,wheretimberasanexistinglawfulwateruseinariparianzoneisexcised,toalternativeplantationareaswithinthesamequaternarycatchmentsorelsewherewithinthewidercatchment.
(l)EnsurethatemergingtimbergrowerswhohavelawfullylicensedtimberplantationsareincludedinDWAF’sdefinitionof“resourcepoorfarmers”andsubjecttothesamebenefitsasotherssoclassified.
5.2SawloggrowingstrategyandprogrammeforSouthAfrica
Par.15.2.2oftheChartercontainstheundertakingtodevelopasawloggrowingstrategyandprogramme.Thisstrategyandprogrammewillincludethefollowingmeasures:
(a)EnsurethatemergingtimbergrowerswhohavelawfullylicensedtimberplantationsareincludedinDWAF’sdefinitionof“resourcepoorfarmers”andsubjecttothesamebenefitsasotherssoclassified.
(b)ReviewtheStateForestExitStrategyinSouthernandWesternCape.
(c)Createincentivesforemergingblackgrowerstoinvestinlongrotationsawtimbercrops.
(d)Developgovernmentconditionsonleaseofstateforestlandtoensurethecontinuedproductionofsawlogs.
(e)Promotegreaterinvestmentbythesawmillingindustryinrawmaterialsupply.
(f)Createlanddedicationschemesforlongrotationcropslinkedto,interalia,taxincentives.
(g)Developsectorprogrammesinvolvinggovernmentandtheindustrytocombatsoftwoodplantationlosses.
(h)Developappropriatespeciesselection,growingandharvestingstrategiesthatmeetthestructuredmarketrequirementsforadiversityofsaw-timberproductsinthecountry.
5.�ForestprotectionservicesPar.15.2.�oftheChartercontainstheundertakingtodevelopaforestprotectionstrategytoreducethecurrentlyescalatinglossesbeingexperiencedthroughfires,pestanddisease.Thisstrategyandprogrammewillincludethefollowingmeasures:
(a) Pestsanddiseases
a. Government,throughDWAF,andtheIndustryundertaketo:
b. ProfilepestanddiseaseissuesasaGovernmentpriority.
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c. Compileariskanalysisofthecurrentandpotentialthreatsfacingtimberplantationsandtomakerecommendationsastothebestwaytomitigatethese.
d. Developandagreeuponanintegratedstrategytoimplementtherecommendations,includingprovidingforincreasedlevelsofsupportthroughinfrastructure,humanresourcecapacityandfunding.
e. PrioritisepestanddiseaseresearchaspectsintheForestSectorR&Dstrategy.
f. NegotiatewiththenationalDepartmentofAgriculturetoexpeditetheproceduresforimportationofBiologicalControlAgentstoassistinthecontrolofpestanddiseaseoutbreaks.
g. EnhancephytosanitorymonitoringandcontrolatportsofentryintoSouthAfrica.
h. Enhancepublicawarenessaboutthethreatsposedbyforestpestanddiseases.
(b) Forestfires
Government,throughDWAF,undertakesto:
a. EnsurethatpoliciesandstrategiesareinplacetoensurecompliancebylandownerswiththeprovisionsoftheNationalVeldandForestFireAct,1998(ActNo.101of1998)asamended.
b. EnsurethatcapacityexiststoenforcetheprovisionsoftheNVFFA.
c. EnsurethatmeasuresareinplacetoencourageenrolmentandparticipationinFireProtectionAssociations.
d. EncouragetheprovisionofresourcestoFireProtectionAssociations,particularlythoseservicingcommunalareas,toenablethemtoprovideimprovedlevelsofservice.
e. AssistIndustrythroughtheprovisionof‘seedfunding’toimplementemerginggrowerfireinsurancecoverasoutlinedinpar.1�.2.5oftheCharter.
f. Implement,onanongoingbasis,NationalFireAwarenesscampaignswithparticularemphasisonhighfireriskareas.
g. Supportresource-poorFireProtectionAssociations.
h. EnhancecapacityofWorkingonFireprogrammetofightveldandforestfires.
Industry,inturn,undertakesto:
i. IncreaseenrolmentandparticipationinFireProtectionAssociations.
j. Increasecollectivesupportofequipment,personnelandtrainingforFireProtectionAssociations.
k. EnhancecooperationandsupporttotheWorkingonFireprogramme.
l. Provideaccesstofirefightingtrainingforemerginggrowers.
m.Implementanemerginggrowerfireinsuranceschemeasoutlinedinpar.13.2.5oftheCharter.
n. Implementfireawarenessprogrammesinforestareas.
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5.4CharterCouncilPar.16.1oftheChartercontainstheundertakingtoestablishaForestSectorCharterCouncilthatwilloverseeandfacilitatetheimplementationoftheCharter.Thefunctions,composition,constitutionandfundingarrangementsfortheCouncilareoutlinedhereunder:
(a) Functions
a. MonitortheimplementationoftheCharterandreviewtheCharterasoutlinedinpar.16.2oftheCharter.
b. ProvideinterpretationandguidancewithrespecttotheCharter.
c. FacilitatethecommunicationandpopularisationoftheCharter.
d. Facilitatecross-industryandgovernmentnegotiationstopromotetheapplicationandimplementationoftheCharter.
e. Provideguidanceonsector-specificmattersaffectingB-BBEEinentitieswithintheSector.
f. ShareinformationwiththenationalmonitoringmechanismandapprovedaccreditationagenciesthatarerelevanttotheSector.
g. ImplementprogrammestoensurethatsufficientindependentcapacityofverificationagenciesexisttosupporttheCharter.
h. InitiateprocedurestoconverttheForestCharterintoSectorCodes.
i. Issueguidelinesforsector-specificenterprisedevelopmentandsocio-economicdevelopmentcontributionsundertheScorecard.
(b) Composition
a. TheCouncilshallconsistof19members,withthefollowingcomposition:
oAChairperson,whoshallbeanindependentperson,appointedbytheMinisterofWaterAffairsandForestryinconsultationwithstakeholderconstituencies.
oAChiefExecutiveOfficer,whoshallberesponsibleforthedailyadministrationandoperationsoftheCouncilandserveontheCouncilinanex-officiocapacity.
oNine(9)membersrepresentingindustry,appointedfromthevarioussub-sectorsintheForestSector.
oTwo(2)membersrepresentingorganisedlabour.
oThree(�)membersrepresentingbroaderstakeholdersassignedbytheMinisterofWaterAffairsandForestryinconsultationwiththestakeholderconstituencies.
oThree(�)membersrepresentinggovernment,oneeachfromtheDepartmentsofWaterAffairsandForestry,TradeandIndustry,andLandAffairs.
b. ThecompositionoftheCouncilshallfairlyreflectthestakeholdersintheSectorandberaciallyandgenderrepresentative.
21
c. ThetermsofofficeformembersoftheCouncilshallbe3years,andmembersshallbeeligibleforre-appointment.
d. TheChiefExecutiveOfficershallbeappointedjointlybythepartiesthatfundtheCharterCouncilasoutlinedinpar.5.4(d)below.
e. TheChiefExecutiveOfficersshallmakeotherstaffappointments.
(c) Constitution
a. TheCouncilshallbeguidedbythefollowingfivebasicprinciples:
o Transparency
o Fairness
o CorporateGovernance
o Consultationandinclusivity
o Socio-economictransformation
b. DecisionsoftheCouncilshallbetakenonaconsensusbasis.IfonanyissuetheCouncilisunabletoachieveconsensus,therewillbeadisputebreakingmechanismasspecifiedintheConstitutionreferredtoinpar.ebelow.
c. TheCouncilmaycreatesub-committeestodealwithspecificmattersasandwhenrequired.
d. TheCouncilmayco-optexpertstoserveonoradvisesub-committeesascontemplatedabove.
e. AConstitutionoftheCouncilshallbetabledforadoptionatthefirstmeetingoftheCouncilandmustbeadoptedbyatwo-thirdmajoritywithin60workingdaysafterthegazettingofthisCharter.
f. TheCouncilmayamendtheConstitutionoftheCouncilfromtimetotime.
g. TheCouncilshall,inconsultationwiththeBEEAdvisoryCouncilandbyresolution,formulaterulestofurtherregulateitsproceedings.
(d)Funding
a. TheForestIndustryandGovernmentshallfundtheCounciljointly,withGovernmentcontributing60%andIndustry40%ofthebudgetrequirements.
b. Thefundingarrangementasoutlinedinpar.aaboveissubjecttoagreementbetweenthesepartiesontheinitialbudgetrequirementsfortheCouncilandanannualescalationofthebudgetbasedontheSouthAfricanConsumerPriceIndex,unlessotherwiseagreedtobytheparties.
c. TheCouncilshallprepareanannualbusinessplanthatwillincludeabudgetfortheworkoftheCouncil.
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6.ExplanatorynotestotheCharter
6.1CalculationofoverallOwnershipProfilefortheSectorReferencetopar.8.1oftheCharter
Expectedlevelsofoverallblackownershipfortheindustryasawholeintenyearstimeweredeterminedbyanalysingonlythegrower,fibreandsawmillersub-sectors,whichtogethercomprise95%ofthesector.
Forestry Ha % BEE by 2017
CategoryAplantations
CategoryB&Cplantations
Outgrowerschemes
MondiShanduka
Otherblackgrowers
Balanceofplantations
290000
70000
40000
�0000
20000
9�0000
40
75
100
40
100
25
TOTAL/WEIGHTED AVERAGE
1 380 000
34
FibreTurnover
(R billion)% BEE by 2017
MondiShanduka
MondiPackaging
Balanceofcompanies
1,0
�,0
16,0
40
40
25
TOTAL/WEIGHTED AVERAGE
20,0 28
SawmillingTurnover (R billion)
% BEE by 2017
Small-scalemillers
CategoryApackages
Balanceofcompanies
0,5
1,0
�,8
100
40
25
TOTAL/WEIGHTED AVERAGE
5,3 36
2�
Theweightedaverageexpectedlevelofoverallblackownershipfor2017fortheForestSectoristhusabout30%(weightingaccordingtosectorturnover;usingR5billionforthegrowersub-sector).Theapplicationofbonuspointstoincreaseblackownershipinexistingenterpriseswithablackownershiptargetof25%byafurther5%hasnotbeenincludedinthesecalculations
6.2ComparisonbetweenScorecardfortheForestSectorandtheGenericScorecard
ChangesfromtheGenericScorecardintheCodesofGoodPracticeandthejustificationforthesechangesarelistedbelow.
6.2.1QualificationsforESMEs
CompliancewiththeIndustryCodesofGoodConductisalsoappliedtoESMEs.ESMEsmust,whentheysubmitproofoftheirESME-status,alsosignacommitmentofcompliancewiththeIndustryCodesofGoodConduct.ESMEsthatdon’tcomplywilllosetheBEEstatusaffordedtothem,namelytheLevel�contributorforthosethatare50%ownedbyblackpeopleorbyblackwomenorLevel4contributorforotherESMEs.
6.2.2Bonuspoints
Additionalbonuspointshavebeenallocated(11insteadof7formediumandlargeenterprisesand10insteadof7forQSE)asanincentivetoachievehighersector-specifictargetsasfurtheroutlinedbelow.
6.2.�Medium/largeenterprises
Ownershiptargets
a)Thetargetforeconomicinterestinthehandsofbroad-basedblackownershipschemeshasbeenincreasedfrom2.5%to7.5%.ThisisjustifiedonthebasisthattheForestSector,asaruralbasedindustry,canmakeasignificantcontributiontobroad-basedBEEinthisregard.Thisdoesnotaffecttheoverallownershiptargets.
b)Twobonuspointshavebeenallocatedasanincentivetoachievehigheroverallownershiptargetsintermsofeconomicinterestinthehandsofblackpeople(�0%)andinthehandsofblackwomen(15%).
c) Therealizationpointsfornetequityinterestsforgrowersisbasedonfullpaymentinequaltranchesoverthecroprotationperiodandnotthe10-yearrepaymentperiodthatappliestotherestoftheSectorandtheeconomy.Thisreflectstherealityintreefarmingwherereturnoninvestmentisrealizedatharvesting.
ManagementControl
Theallocationofonebonuspointasanincentivetoappointnon-executiveboardmembershasnotbeenappliedintheForestSector.GreaterBEEimpactcanbeobtainedbyusingthisbonuspointasanincentivetosupportahigheroverallownershiptarget.
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EmploymentEquitytargetsandweightings
ThereisaneedtoensureequitableandsustainablecontractingandemploymentpracticesintheForestSectorthroughtheintroductionofIndustryCodesofGoodConduct.Thisisnecessarytoensurethatnotonlythequantitybutalsothequalityofblackparticipationintheindustryisimproved.CompliancewithIndustryCodesofGoodConductonemploymentpracticeshasbeensetasaminimumrequirementforscoringontheEmploymentEquityelementoftheScorecard.Notethatcontractingpracticeisdealtwithunderthepreferentialprocurementelement.
Preferentialprocurementtargetsandweightings
TheneedforIndustryCodesofGoodConducthasbeenhighlightedinthepreviousparagraph.Three(3)pointshavebeenre-allocatedtopromotecompliancewithIndustryCodesofGoodConductasitrelatestocontractingpracticesforenterprisesthatareengagedinforestrycontractingandcharcoalproductioncontractingandemerginggrowercontractingschemes.ForestenterprisesthatarenotinvolvedinanyofthesecontractingpracticeswillbesubjecttotheGenericScorecardweightingsforthepreferentialprocurementelement.
EnterpriseDevelopmentandSocio-economicDevelopmenttargetsandweightings
a)TheemphasisplacedintheGenericScorecardonpreferentialprocurementisbasedonthenotionofademand-driveneconomy.However,dueashortageofrawmaterialsupply,theforestproductsindustryinSouthAfricaislargelysupply-driven.ShortagesinlogandsawtimbersuppliesenableforestenterprisestoleverageB-BBEEthroughthesaleoftheseproductstoBEEenterprises.Forthisreasonthree(3)ofthefifteen(15)pointshavebeenre-allocatedtosupportthesaleoflogsandsawtimbertoBEE-compliantandblack-ownedenterprises.
b)Three(�)bonuspointshavebeenallocatedforadditionalspend(onebonusforevery0.25%NPATonsector-specificinitiativesinenterprisedevelopmentorsocio-economicdevelopment.ThisisaimedatdirectingB-BBEEinitiativestoaddresssector-specificchallengesfacingtheindustry,inparticular:
oTosupport,encourageandnurtureemergingblackenterprisesthatwillcontributeto:(a)increasedtimbersupply;and(b)beneficiationintheforestryvaluechain.
oToimprovethelivingconditionsandlivelihoodopportunitiesfortheruralpoor,includingForestSectorworkersandtheirfamilies,inforestryareas.Mostforestenterprisesarelocatedinruralareaswherethemajorityofthecountry’spoorlive.Thelong-termgrowthandstabilityintheForestSectorcanonlybesecuredifalignedwithbroad-basedpovertyalleviationandlocaleconomicdevelopment.
6.2.4QualifyingSmallEnterprises
Sector-specificmeasureshavebeenincludedinthisScorecardintandemwithwhatisproposedfortheScorecardformediumandlargeenterprises.TheneedforthisisunderscoredbythefactthattheQSEthresholdhassubstantiallyincreasedandthatamuchgreaterrangeofenterpriseswouldneedtobeadequatelycoveredbythisScorecard.
EmploymentEquity
TheneedtoensureequitableandsustainablecontractingandemploymentpracticesintheForestSectorthroughtheintroductionofIndustryCodesofGoodConduct(refertoinpar.9.2.�)alsoappliestoQSEs.Five(5)ofthetwenty-five(25)pointshavebeenre-allocatedintheScorecardtopromotecompliancewithIndustryCodesofGoodConductonemploymentpractices.Notethat
25
complyingwiththeseCodesislessdemandingformediumandlargeenterprisesandcompliancehasbeensetasaminimumrequirementforscoringontheEmploymentEquityelementoftheirScorecard.
Preferentialprocurementtargetsandweightings
Five(5)ofthetwenty-five(25)pointshavebeenre-allocatedtopromotecompliancewithIndustryCodesofGoodConductasitrelatestoforestrycontractingandcharcoalproductioncontractingandemerginggrowercontractingschemes.ForestenterprisesthatarenotinvolvedinanyofthesecontractingpracticeswillbesubjecttotheGenericScorecardweightingsforthepreferentialprocurementelement.
EnterpriseDevelopmentandSocio-economicDevelopmenttargetsandweightings
a)ShortagesinlogandsawtimbersuppliesenableforestenterprisestoleverageB-BBEEthroughthesaleoftheseproductstoBEEenterprises.Forthisreasonfive(5)ofthetwenty-five25pointshavebeenre-allocatedtosupportthesaleoflogsandsawtimbertoBEE-compliantandblack-ownedenterprises.
b)Aswithmedium/largeenterprises,threebonuspointshavebeenallocatedforadditionalspend(onebonusforevery0.25%NPAT)onsector-specificinitiativesinenterprisedevelopmentorsocio-economicdevelopment.
6.�FurtherdetailsonSkillsDevelopmentStrategy/PlanRefertopar.11.2.1oftheCharter
Keyelementstobeaddressedthroughaskillsdevelopmentstrategy/planfortheForestSectorincludethefollowing:
6.�.1Strengthenthenationalframeworkforskillsdevelopment
Theframeworkforskillsdevelopmentcomprisesofseveralelementsthatarenecessaryfortheoverallsystemtowork.Additionaleffortisneededtoensurethatthefollowingelementsareinplace:
a. Identifyscarce,criticalandcoreskills.Skillsdevelopmentgrantscanbeclaimedfortrainingthatmeetsidentifiedscarceandcriticalskills.ChambersneedtosubmitlistsofscarceandcriticalskillstotheDepartmentofLabourforthesepurposes.SomescarceandcriticalskillsfalloutsidethedirectinfluenceoftheFIETAe.g.1stlinesupervisionandLeadership/Managementdevelopment.ThesewillthereforequalifyasCoreskills.
b.Conductskillsneedsanalysisforeachsub-sector.ThestrategyandprogrammeforreachingScorecardtargetsneedstobebasedonananalysisofexistingskillsandskillsgapsforthespecifiedgroups.
c. DevelopmentofappropriateOutcomesBasedUnitStandards. Sub-sectorStandardGeneratingBodiestocontinuewiththeprocessofdevelopingandfacilitatingtheregistrationofUnitStandards,QualificationsandLearnershipsinaccordancewiththeirneeds.
d.QualificationstomatchtrainingneedsregisteredwithSAQA. RegistrationofUnitStandardsandQualificationsthroughSAQAhasbeenunacceptablyslow,aproblemcommontomostsectors.Theprocessneedstobeaccelerated.WithoutthisregistrationtheDepartmentofLabourcannot
26
registerLearnerships,whileregistrationalsoformsthebasisforthedevelopmentofcreditbearingshortcoursesandskillsprogrammes.
e. SectorwideABETinitiative. ABETisanationalimperative,andthereisaneedforadedicatedandsector-wideapproachtoensureeffectivenessandsustainabilityofsuchaninitiative.TheDepartmentofLabourhascommissionedaninvestigationintotheABETprogrammeandrecommendationsarenowavailable.Thisoffersabasisfordesigningasector-wideinitiativeonABET.
6.�.2Strengthensectorcapacityforskillsdevelopmentdelivery
a. StrengthencapacityofFIETA. Only10%ofSkillsLeviesmaybespentonAdministration.MoreandmoredemandsarebeingmadeonSETAsandthesmallerSETA’s,includingFIETA,arestretchedbeyondcapacity.MeasuresareneededtostrengthenthecapacityofFIETA,toenableittomeetitsstatutoryrequirementsinregisteringlearningprogrammesandtrainingserviceproviders.
b. Implementationmechanismsfortheadditionalskillsdevelopmentspend.Theskillsdevelopmentstrategy/planneedstoidentifyanddeploystreamlinedimplementationmechanismsfortheadditional�%skillsdevelopmentspendprovidedforinthisCharter.ItmustbenotedthatthisneednotbeimplementedthroughtheFIETAinthesamewayasthestatutoryskillsdevelopmentlevy.
c. Expandtraininginfrastructure.Thenetworkoftrainingserviceproviders,inparticularABETserviceproviders,needstobeexpanded.
6.�.�Promoteskillsdevelopmentopportunitiesforyouthandnew entrantsintheForestSector
SpecificmeasuresareneededtoattracttheyouthintotertiarystudiesinforestryandtoensurehigherpassratestoensureaflowofskillednewentrantsintotheSector.
a. Planforthepromotionofforestryascareerofchoice.ItisnecessarytoraisetheprofileoftheForestSectoras“EmployersofChoice”toprocurequalitystudentsandemployeesinthefuture.
b. Planfornewandenhancedbridgingcourses.Currentdropoutrateofstudentsfromsecondarytotertiaryeducationishighduetopoorsecondaryeducation.Bridgingcoursestopreparelearnersfortherequirementsoftertiaryeducationareneededtoreducethedropoutrate.
c. Enhancequalityofsecondaryeducationinmathsandsciences.ThequalityandquantityofMathematicsandPhysicalSciencelearnersatsecondarylevelneedsattention.WithoutqualitylearnersinthesesubjectstheSectorwillnotbeabletotraintherequirednumbersintotechnicalandmanagementfieldsspecifictotheSector.InitiativesinthisregardshouldlinkwiththoseunderASGI-SAandJIPSA.
6.4 FurtherdetailsonIndustryCodesofConductonContractingandEmployment
Refertopar.12.2.1oftheCharter.
TheForestCharterSteeringCommitteehaspreparedthefollowingguidelinesforthepreparationoftheIndustryCodesofConductfortheForestSector:
27
6.4.1Codesforforestrycontracting
TheaimoftheseCodesistoensurelonger-termstability,sustainablegrowthandequitablepracticesintheforestrycontractingsub-sector.TheseCodeswillcontrolanddirecttherelationshipbetweencontractingcompaniesandcontractors,andbetweencontractorsandsub-contractors.TheCodeswillprovideforlargerandlonger-termcontractsenablingcontractorstoimprovemarginsandinvestintheirbusinessesandstaff.Itwillalsoprovidefortransparentandaccessibletenderingsystemsandfairpricingthatwillsupportgoodgovernanceandfairlabourpractices.ThefollowingelementswillbedealtwithintheseCodes:
a. Contractualarrangements
• Theforestryindustrywilldevelopandfollowstandard(model)contractsthatspecifycontractterms,paymenttermsandcontractduration,risksharing,terminationandconflictresolution.
• ForestryenterpriseswillensurethatcontractconditionsenableandspecifycompliancewiththeCodesonemploymentpracticesintheForestSectorandthatmeasuresarestipulatedtomonitorandenforcecompliancewiththesecodes.
• ForestryenterpriseswillensurethatcontractconditionsenableandspecifycompliancewiththeCodesonhealthandsafetystandardsforforestrycontractworkandthatmeasuresarestipulatedtomonitorandenforcecompliancewiththesecodes.
• Forestryenterpriseswillsecureacontractingenvironmentthatisconducivetosuccessfulmeetingofcontractconditions(e.g.maintainingforestryroadstoreasonablestandard).
• Contractingpartieswillmaintainconfidentialityofcontractsandcontractterms.
b. Contractnegotiations
• Associationsrepresentinggrowersandforestrycontractorswillprovideaccesstoindustrydevelopedbestoperatingpracticesforstandardforestryoperations.Theseguidelinesareaimedatenablingcontractorstodeterminetheirmarketrelatedcostsintenderingforcontracts.
• Forestryenterpriseswillensurethatcontractorrateadequatelyreflectminimumstatutorylabourcostsandotherreasonableexpensestobeincurredinperformingtheworkandthatcontractorratesarenotestablishedattheexpenseoffairlabourandsustainablebusinesspractices.
• Contractingpartieswillprovideaccesstoperformancestandardsandunitpaymentinformationbyforestryenterprises,contractorsandworkers.
c. Tenderingandprocurement
• Forestryenterpriseswillestablishopen,transparentandaccessibletenderingandprocurementsystem.
• Forestryenterpriseswillincludeclearselectionandappraisalcriteriaintenderdocuments.
• Forestryenterpriseswill,whereverpossible,givepreferencetolocaloperatorsandcommunities.
• Theforestrycontractorsassociationwillestablishadatabaseofavailablecontractors(indicatingkeyskills).
28
d. Mediationandarbitration
• Associationsrepresentinggrowersandforestrycontractorswillformulateandimplementguidelinesforarbitrationandmediationintheforestrycontractingsector.
• Associationsrepresentinggrowersandforestrycontractorswillestablishanindependentdisputeresolutionmechanismand/orForestryContractors’ombudsman.
e. Safety,healthandenvironment
• Theforestrycontractorsassociationwillprovideaccesstobest-practicestandardsandworkmethodsforkeycontractingoperationsandequipment.Contractorswillcomplywiththesestandards.
• Theforestrycontractorsassociationwillprovideaccesstominimumacceptablestandardsforprovidingaccesstohousingfacilities(includingtransporttoandfromwork)andbasicfoodstuffforworkerswhohavetoliveon-site.Contractorswillcomplywiththesestandards.
• CertificationagencieswillensureadherencetocertificationrequirementsandimplementationofPrinciples,Criteria,IndicatorsandStandardsofSustainableForestManagement.
f. Industrygovernance
• AssociationsrepresentinggrowersandforestrycontractorswillsecureagreementthroughaMemorandumofUnderstanding(MOU)tojointlystabiliseandgrowtheforestsectorcontractingindustry.
• Thecapacityoftheforestrycontractorsassociationtoprovideadviceandsupporttosmallscalecontractorsoncontractnegotiations,labourlawsandallotheraspectsrelatingtotheeffectiveimplementationoftheCodesforestrycontractorswillbestrengthened.
• Theforestrycontractorsassociationwillimplementasystemofmembershipaccreditationandgradingofallcontractors.
g. Supportandtraining
• Theforestrycontractorsassociationwillestablishguidelinesformentorshipsupportandtraining.
• Forestryenterpriseswillmaintaincontractingconditionsthatfacilitateaccesstofundingsources.
6.4.2Codesforemergingforestgrowerschemes(EFGS)
ThepromotionofEmergingForestGrowerSchemesbycompaniesandcooperativesisanimportantmeanstosupportB-BBEEinforestry.Thereisaneedtoensurethatgoodpracticeisappliedinimplementingtheseschemesthatsupporttheaims,principlesandtargetssetoutintheForestSectorTransformationCharter.TheseCodeswillcontrolanddirectcontractswithemerginggrowersincompany-affiliatedschemes.TheCodeswillprovidetransparencyinthecostingofsupportservicesandmarketrelatedpricingarrangementsfortimberthatwillsupportsustainablebusinesspractices,goodgovernanceandfairlabourpractices.ThefollowingelementswillbedealtwithintheseCodes:
29
a. Fundingandcontractualarrangements
• TheorganizationpromotingEFGSmayinclude,amongthecontractingobligationsofthegrower,anundertakingbindingthegrowerto,inthefirstinstance,selltimberoranyotherproducttotheorganizationpromotingEFGS.Forestenterprisesnotpartytotheagreementwillrespectsucharrangements.
• Thepricepaidforthetimberorotherforestproductsmustbeafairmarketprice.Intheeventofapricedisputethematterwillbereferredtoanexpert.
• Ifrequiredbyanexternalfundingagency,theorganizationpromotingEFGSwillagreetoaminimumguaranteedpriceforthetimberandanyotherproductsatmaturityofthedevelopment.
• TheorganizationpromotingEFGScannotuse“statefundingagency’s”capitalaspartoftheirEnterpriseDevelopmentcosts.
• IftheorganizationpromotingEFGSguaranteesrepaymentoftheloansonbehalfoftheEFGS,thatportionnotrepaid–i.e.defaultby‘EFGS’canbeaddedtoEnterpriseDevelopmentcosts.
b. Transparency
•Allaccumulatedcoststobeincurredtodeterminethesellingpriceforthetimberorotherforestproductsmustbemadeknowninwritingandbeproperlyexplainedtotheemerginggrower.
•IntheprocessofimplementationoftheEFGS,theremustbetotaltransparencywithregardtothetermsofloansandanyotheraspectofthefinancialagreement.Effectivemeasurestoensureclearunderstandingamongstpartiestofinancialagreementoftheconditionsitcontainsandtheirimplications,needtobespelledoutintheEFGSCodeofConduct.
•Atharvest,afullandclearstatementofpricesandproductioncostsmustbecommunicatedtoallparties.
c. Plantationinsurance
• DuringthedevelopmentoftheEGFSandoverthefullrotation,the“promoter”mustensureadequateplantationinsurancecoverattheoptionoftheemerginggrowertomeettheemerginggrowers’plantationexpectationvaluethroughouttherotation.Ifthefundingagenciesrequireinsuranceasaconditionoffunding,theoptionwillfallaway,andinsurancebecomescompulsory.
6.4.�Codesforcharcoalcontracting
TheaimoftheseCodesistoensurelonger-termstability,sustainablegrowthandequitablecontractingpracticesinthecharcoalsub-sector.TheseCodeswillcontrolanddirecttherelationshipbetweensmallblackcharcoalproducersandthebrandnameproducersandindustrialusersofcharcoal.TheCodeswillprovideforjointventuresandpartnershipsbetweensmallscalesuppliersandlargescalebuyersofcharcoalandafair,transparentandstablepricingsystemthatwillsupportsustainablebusinesspractices,goodgovernanceandfairlabourpractices.ThefollowingelementswillbedealtwithintheseCodes:
a. JointVenturesandPartnerships
• Thecharcoalindustrywillprovideforjointventureandpartnershiparrangementsthatwillencouragetheestablishmentofviablecharcoalproductionenterprises.
�0
• Contracttermsandconditionsforjointventuresandpartnershipswillresultinthetransferofskillsandproductivecapacitytocharcoalproductionenterprises.
• Contracttermsandconditionsforjointventuresandpartnershipswillleadtotheestablishmentofindependentoperators(withoutlimitationsastoitsclientsandcustomers)withinadefinedperiodoftime.
b. Contractualarrangements
• Thecharcoalindustrywilldevelopandfollowstandard(model)contractsforprocurementfromsmallcharcoalproducersthatspecifycontractterms(suchasthesupplyofrawmaterialandequipment,transportofcharcoal,siteestablishmentandintellectualpropriety),paymenttermsandcontractduration,risksharing,terminationandconflictresolution.
• Thecharcoalindustryassociationwillprovideaccesstoindustrydevelopedbestoperatingpracticesforcharcoalproductionoperations.Theseguidelinesareaimedatenablingcharcoalproducerstodeterminetheirmarketrelatedcostsintenderingforcontracts.
• Largescalebuyersofcharcoalwillensurethatcontractorratesadequatelyreflectminimumstatutorylabourcostsandotherreasonableexpensestobeincurredinperformingtheworkandthatcontractorratesarenotestablishedattheexpenseoffairlabourandsustainablebusinesspractices.
• LargescalebuyersofcharcoalwillensurethatcontractconditionsenableandspecifycompliancewiththeCodesonemploymentpracticesintheForestSectorandthatmeasuresarestipulatedtomonitorandenforcecompliancewiththesecodes.
• LargescalebuyersofcharcoalwillensurethatcontractconditionsenableandspecifycompliancewiththeCodesonenvironmental,healthandsafetystandardsforcharcoalproductionandthatmeasuresarestipulatedtomonitorandenforcecompliancewiththeseCodes.
• Largescalebuyersofcharcoalwillmaintaincontractingconditionsthatfacilitateaccesstocapitalinvestmentincharcoalproduction.
c.Safety,healthandenvironment
• Thecharcoalindustryassociationwillprovideaccesstobest-practicestandardsandworkmethodstocomplywithsafetyhealthandenvironmentalstandardsforcharcoalproduction.Charcoalproducerswillcomplywiththesestandards.
• Thecharcoalindustryassociationwillprovideaccesstominimumacceptablestandardsinprovidingaccesstohousingfacilities(includingtransporttoandfromwork)andbasicfoodstuffforworkerswhohavetoliveon-site.Charcoalproducerswillcomplywiththesestandards.
• CertificationagencieswillensureadherencetocertificationrequirementsandimplementationofPrinciples,Criteria,IndicatorsandStandardsofSustainableForestManagement.
d. Industrygovernance
• ThecharcoalindustryassociationwillbestrengthenedwithkeycapabilitiesrelatingtotheeffectiveimplementationoftheCodesforestrycontractors.
• Thecharcoalindustryassociationwillimplementasystemofmembershipaccreditationandgradingofallmembers.
�1
6.4.4Codesforemploymentpractices:
TheaimoftheseCodesistoensureequitableemploymentpracticesintheForestSector.TheseCodeswillgivepracticaleffectandweighttofairlabourpracticesasprovidedforundertheBasicConditionsofEmploymentAct,1997,andotherlabourlegislationasitappliestoemployees,includingcontractworkers.ThefollowingelementswillbedealtwithintheseCodes:
a. Contractsandwages
• Employerswillensurewrittenemploymentcontractsforallworkers,includingcontractorworkers,thatcomplyingwithallrelevantlabourlegislationandregulations.
• Employerswillinformworkersoftheiremploymentrights,translatetheBasicConditionsofEmploymentActandtheSectoralDeterminationagreementintolanguagesunderstoodbytheworkforceanddisplaythesedocuments.
• Employerswillclearlyinformworkersofthetasksthatareexpectedfromthem.
• Employerswilladheretominimumwagestipulations.
b.LabourRelationsAct
• Employerswillrespectandpromotetherightofallworkerstojoinorganisationsoftheirchoiceandtocreateanenablingenvironmentfortheestablishmentandgrowthofworkerorganisations.
• EmployerswillinformworkersoftheirrightundertheLabourRelationsAct.
c. OccupationalInjuriesanddiseases
• EmployerswillregisterwiththeCompensationFundsothattheirworkerscanclaimcompensationforoccupationalinjuriesanddiseases.
• EmployerswillinformworkersoftheirrightundertheCompensationforOccupationalInjuriesandDiseasesAct.
d. UnemploymentInsurance
• EmployerswillregisterwiththeUnemploymentInsuranceFund(UIF).
• EmployerswillinformworkersoftheirrightundertheUnemploymentInsuranceAct.
e. OccupationalHealthandSafety
• EmployerswillensurecompliancewithOccupationalSafetyandHealthAct(OSHA),e.g.basicrequirementsregardingprotectiveclothing,noiseprotection,andquickaccesstoemergencytreatment.
6.5 Motivationtofundand/orsubsidisetheinterestburdentodevelopemergingforestryenterprises
Refertopar.8.2.1and1�.2.1(e)oftheCharter.
Thecost-of-capitalforemerginggrowerenterprisesisoftenprohibitivetotheenterprisebecause
�2
ofthelongcroprotation(oftenexceeding10years),andhencedeferredrevenue.Subsidisingthecost-of-capitalreducesthecashflowobligationoftheemerginggrowerenterpriseresultingfromcapitalloans.
Anumberofmodelshavebeenanalysed(refertoAppendix:ForestryFundingModels)todeterminetheeffectofinterestcostsonafforestationschemesandB-BBEEequitytransfersintheForestrySector.Alloftheseshowthat,ifinterestcostsaresubsidised,themodelsbecomesubstantiallymoreviableandarelikelytoimprovethechancesofsuccessofBroad-basedBlackEmpowerment.
6.5.1Rationaleforinterestsubsidisationforemerginggrowerschemes
a. Thesmallgrowerinitiativeisintendedtoprovideanincometopoorerpeople.Bytheirnature,povertyalleviationschemesaretargetedatpeoplewhodonothaveresourcestofundtheirlivingexpensesforthelengthoftimetimbertakestogrowtomaturity.Interestsubsidiesarerequiredtoimprovetheprofitabilityandcash-flowpositionforblackemerginggrowers.
b. Refertoappendedmodel1a(interestsubsidised)andmodel1b(interestnotsubsidised)forshort-rotationprojects(GumandWattle).Ifinterestisnotsubsidisedforemerginggrowers(2.4haperentity),suchschemesonlybecomeprofitableinyear16.Thismeansthatthecapitalandinterestrepaymentsareextendedto6yearsaftertherotationperiod.Itisunrealistictoexpectpeopletowaitthislongbeforethefullbenefitintheformofalivingwageispayable.
c. Refertoappendedmodel2a(interestsubsidised)andmodel2b(interestnotsubsidised)forlong-rotationprojects(sawlogs).Thesemodelsarebasedona25-yearrotation;400cubicmetresperhectareatclearfelling;anoverallpriceofR325-00percubicmetrestandingatmaturityorR125000netperhectarestanding;incomefromthinningscoversthecostofpruningandpartofannualmaintenance.Atthese(current)sawlogpricesthisrepresentsthebestpovertyalleviationmodel,butrequiresfundingat2.5timesthatofshortrotationcrop.
Withoutanyinterestsubsidybeingapplied(model2b)thisallowsdrawingsofR�500perannum(per2.4ha)fromyearfouronwards,withanadditionalR61855profitonclearfelling.Withinterestsubsidybeingapplied(model2a),thedrawingscanbeincreasedtoR6000perannum,withanadditionalR97739profitonclearfelling.Thismodelcouldworkwithoutinterestsubsidisation,butwiththecomplexitiesandriskassociatedwithraisingsuchalargeinvestmentoveralongperiod,wouldgreatlybenefitfromsomelevelofinterestsubsidisation.
d. Foremergingcommercialgrowers(40haperentity),theinterestratesubsidydoesnothaveasdramaticaneffectbutstillreducesthetimeperiodtobreakeven,andbringsthisclosertoafullrotation.Theeffectontheparticipantissignificantinthatitbringsthefullearningspotentialseveralyearsearlier.
Refertoappendedmodel�a(interestsubsidised)comparedtomodel�b(interestnotsubsidised),wherethebreak-evenincreasesfrom9yearsto12years.
e. Iftheinterestissubsidizeditwillreducetheriskcarriedbythefinancingbody,andwillpromotemoreoftheschemesthanwouldotherwisehavebeenthecase.
f. Finally,theneedforinterestsubsidizationisdemonstratedbythefactthatpresentout-growerschemesincludesubsidisationoftheinterestfactor.Theforestindustryhasacceptedtheneedbothinwordandactionforinterestsubsidizationtoensurethatemergingforestgrowerschemessucceed.
��
6.5.2Rationaleforinterestsubsidisationforemergingforestgrower schemes:
Existingsmallforestenterprisesintheformofacompanyortrustarenotlargeenoughtoaccessfavourablefundinginthesamemanneraslargegrowers(Corporates).Inaddition,theydonothavethemeanstoself-fundB-BBEEinitiativesanddonothavetheresourcestocarrytheinterestloadonloansovertherotation.TheconsequenceoftheseshortcomingsisthatsuchenterpriseswillbeforcedtoseekeliteBEEpartnerswhoarecapableofcarryingthecostoftheinvestment.ThishastheeffectofunderminingtheGovernment’sobjectiveofensuringthatownershiptransferisbroad-based.
Twomodelsofownershiptransferwereconsidered:
a. Outrightpurchaseof25%ofequityinenterprise
• Theappendedmodel4a(interestsubsidised)andmodel4b(interestnotsubsidised)showthatthebreak-evenincreasesfrom11yearsto16yearsifinterestisnotsubsidised.
• Theimplicationofthisisthatthe25farmworkers,whoareearningaminimalR1000perannumeachforthefirsttenyears,wouldnowearnR1000eachfor15years,whichstretchestherepaymentofcapitalbeyondtherotationage.
• TheabovetwomodelswerebasedontheassumptionthattheIDCPro-Jobschemeat5%belowprimewouldbeapplicableor,failingthat,asimilarschemeatthesameratewouldbeapplicable.
• Atpresent,however,theonlyfundingforthistypeofprojectfromtheIDCistheProForestryschemeatarealrateofreturnof2.5%.WiththecurrentlevelofCPI,thistranslatestoaneffective6.5%interest.Thebreak-evenfortheProForestryschemewouldbeinyear19(model4c)comparedtobreak-eveninyear11withinterestsubsidy(model4a).
• IfIDCfundingisnotavailable,thebestcommercialrateavailableis2,75%belowprimeandatthisinterest(model4d),break-evenextendsto24years,morethantworotations.
• Fromtheaboveitisclearthatwithoutinterestsubsidisation,theB-BBEE25%shareownershipmodelcannotwork.
b. PhasedtransferofB-BBEE25%participationinasmallcompanyortrustoveronerotation(10years)
Ananalysiswascarriedoutusingthismodel,andwasfoundtobecompletelyunworkableevenwiththesubsidisationofinterest.Thismodelisthusnotdiscussedfurther.
6.6 Motivationforseedfundingtodevelopfireinsuranceschemesforemergingforestryenterprises
Refertopar.1�.2.1(e)oftheCharter.
Thereisatpresenteffectiveplantationfireinsuranceavailable,whichiscurrentlyprovidingcoverforapproximately200,000hectaresoftimber.However,thereisaneedtoprovideseedcapitalforthedevelopmentofafireinsuranceschemeforemerginggrowers,tosupport10000haofafforestationannually,overtenyears.Theseedcapitalisrequiredtoreducetheinsurancepremium,requiredtocoverexpectedannualandcatastrophiclosses,toamoreaffordablelevel
�4
fortheemerginggrowersector.Growerswillcollectivelypooltheirrisk.Theseedmoneywillberequiredduringthefirst9years,whereafterthepoolwillbebigenoughtosustainthesebeneficialpremiumlevels.Forsuchaschemetobesuccessful,pre-planningandfireriskmanagementareessential.Pre-planningentailstheidentification,carefulconsiderationandmitigationoffirerisksbeforethetreesareevenplanted.Furthermore,thereisaneedforongoingfireriskmanagementafterthetreeshavebeenplanted.Pre-planningandfireriskmanagementarevitaltoensuretheviabilityoftheafforestationprojectandtoaccrueunderwritingprofitsforthebenefitoftheemerginggrowers.
7.FinancialrequirementsforForestSectorTransformation
7.1IndustryCostsThefinancialrequirementsforimplementingtheCharterbyIndustryareoutlinedinthetablebelow.
Cost item Cost calculation for Industry
Annual cost to the Forest Industry (R million)1)
Growing sub-sector
Fibre sub-sector
Other sub-sectors
Total for Sector
Ownershiptransformation
Costestimatedat7%ofvalueof
industry42
1546� 259
Skillsdevelopment�%ofestimated
payrollcosts�7,5
9042 169,5
EnterpriseDevelopment
�%ofNPAT 10,5 42 14,7 67,2
Socio-economicDevelopment
1%ofNPAT �,5 14 4,9 22,4
CharterCouncil40%oftotal
costofCouncilfunding
0,175 0,7 0,245 1,12
B-BBEEverification
Costsunknown
TotalknowCosts 9�,675 �00,7 124,485 519,22
Additional costs:
Bonus points of ownership
5% higher ownership target
8.4 30.8 12.6 51.8
Bonus points for sector initiatives
0.75% of net profit after tax
2,625 10.5 3,675 16,8
Note: 1) This is a total cost and is spread equally over 10 years to reflect an annual cost
�5
(a) CostcalculationforIndustrycontributiontoB-BBEEElementsoftheScorecard
ThefollowingassumptionsweremadeincalculatingthecontributionrequiredfromindustrytoB-BBEEElementsoftheScorecard:
i) Benchmarkfiguresfor10largeBEEdealsindicatethatthecostfor10%BEEshareholdingisequalto�%ofthemarketcapitalisationofanenterprise.Marketcapitalisationisthetotalvalueoftheissuedshares.Aslidingscaleappliesanditisestimatedthatthenetcosttogiveeffectto25%shareholdingwouldbe7%ofthetotalmarketcapitalisation.Thenetcosttogiveeffectto�0%shareholdingwouldbejustunder8.4%ofthetotalmarketcapitalisation.
ii) Analysisofavailablecompanyinformation(mainlyobtainedfromquotedcompaniesontheJSE)indicatesthatthemarketcapitalvalueofcompaniesrangesbetweenaratio1.0and1.�oftotalcompanyturnover.Thismeansifabusiness’sturnoverisR2billionitsmarketvaluewouldbebetweenR2billionandR2.6billion.
iii) Asageneralruleofthumb(basedonresultsofquotedJSEcompanies),netprofitbeforetaxisintheregionof10%–12%ofturnover.ThismeansifacompanyhasaturnoverofR1billion,pre-taxprofitwouldbeintheregionofR100milliontoR120million.Basedonataxrateof30%(rounded,ontheactualcompanytaxrateis29%),aftertaxprofitthenbecomes7%to8.4%ofturnover.
iv) EmploymentcostsintheSouthAfricanmanufacturingenvironmentaccountfor20%oftotalcompanyturnover.Thisobviouslyvarieswithcapital-intensiveindustriesatalevelof15%andlabourintensiveindustriesashighas25%.Aratioof20%ofturnoverhasbeenappliedtoestimatethecostofemploymentinenterprisesintheForestSector.
ThetablebelowsummarisestherelationshipsusedincalculatingthecostapplicabletodifferentScorecardelements.
Financial Factors Index
ßTurnoverßBusinessvalue(marketcapitalisation)ßProfitbeforetax(10%)ßProfitaftertax(7%)ß Labourcost(20%)
100100–1�0
107
20
Theseratiosarenowappliedtotheinformationobtainedforthevarioussectorsoftheforestryindustry,whichare:
SectorTurnover
(R billion)
Business Value
(R billion)
Profit before tax (R million)
Profit after tax
(R million)
Labour Cost2)
(R million)
Growersub-sector 5 6 500 �50 1250
Fibresub-sector 201) 221) 2000 1400 �000
Sawmillingandother 7 9 700 490 1400
ForestSectorTotal �2 �7 �200 2240 5600
�6
Notes:1) LHAestimates 2) Differentratiosassumed,i.e.25%forgrowers,15%forfibreand20%forsawmilling
EstimatesofaggregateturnoverofEnterprisesineachsub-sectorareasfollows
a. Growersector–annualharvest(2005)of20millionm³@R250/m³delivered=R5billion
b. Fibresector
ßPulpandPaper-PAMSAestimate: R14billion
ßBoardproducts: R�billion
ßChipexports: R�billion
c. Sawmillingandother
ßSawmilling(2,7millionm³@R1600/m³):R4,�billion
ßMiningtimber(0,8millionm³@R1200/m³): R1,0billion
ßCharcoal: R0,5billion
ßPoles(800000m³@R1000/m³):R0,8billion
ßMatches,other: R0,4billion
�7
(b) CostcalculationfortheForestSectorCharterCouncil
Thecostcalculationisbasedon:
i) AnestimatedannualrecurrentcostofR2786000andaonce-offcostofR250000overa10-yearperiodasoutlinedinthetablebelow.
ii) A40:60%fundingsplitbetweenindustryandgovernment.
iii) Sub-sectordistributionofcostbasedonturnover
DRAFTANNUALBUDGETFORFORESTSECTORCHARTERCOUNCIL
Budget Items
Salaries and Staff Costs Number Rate Annual Rand
ChiefExecutiveOfficer 1 680000
SeniorResearcher 1 �00000
AdministrationManager 1 200000
AdministrationClerk 1 80000
OfficeAssistant 1 55000
Independent Chairperson of theBoard
1R2400/dayx
�0days72000
Board members requiringfinancialassistance
9R1900/dayx
12days205200
Sub-Total
-R1 592 200
Other Operating ExpensesNo of Item
Cost RateAnnual
Rand
Accountingfees 20000
Annualreport 50000
Bankcharges 8000
Officeequipment(leased1)) 5 R6000 �0000
Consultancyfees 1 - 500000
Entertainment �0000
I.T.expenses 50000
Insurance 15000
Motorvehicleexpenses2) 50000km R�/km 150000
Officerental 200m² R40/m²/m 80000
Stakeholderliaison) 100000
�8
Photocopying, printing andstationery
25000
Publicity,circulars,etc 50000
Stafftravel R4000/ea 80000
Flights
Accommodationandmeals
CarHire
24trips
24nights
24cardays
R2000/trip
R600/night
R�00/day
48000
14400
7200
Counciltravel(GovtandIndustryAssociationspayforthemselves)
Flights(6meetingsX8flights)
Accommodationandmeals
Carhire
48flights
6meetings
48carhires
R2000/trip
R8000/meeting
R�00/day
96000
48000
14400
Telecommunication 65000
Sub-Total R1 480 600
TOTAL BUDGET R3 072 800
Notes: 1) Office establishment costs (once-off) are excluded. The following should be budgeted for:
- Officefurniture = R120000-00
- ComputersandITinfrastructure = R100000-00
- Boardroom,etc = R30000-00
= R250000-00
2)Assumenocompanyvehicles,onlyre-imbursementforownvehicletravelexpenses
7.2 GovernmentCosts
ThefinancialrequirementsforimplementingtheCharterbyGovernmentareoutlinedinthetablebelow.TheactualbudgetavailablewillbesubjecttoParliamentaryapproval.
(a) CostcalculationforGovernmentcontributiontoOwnershipTransformation
ThecalculationofGovernmentcoststoeffectownershiptransformationrelatestotherehabilitationandtransferoftheremainingDWAFplantations.ThisamountstoR716millionoveraten-yearperiod,basedonthefollowing:
i) Rehabilitationof46000haplantationsatatotalcostofR66millionoveraperiodoffiveyears.
ii) Costoftransfer(transfercostsfacilitationsupportandestablishmentoflegalentities)atR10millionpertransferpackagefor20packagesoverthe10-yearperiod.
iii)PosttransfersupporttonewownersatR90million/yearfromyear6-10.
iv)Theinterestratesubsidisationfor25%blackequityownershipin300000haof“small”forestry
�9
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7.00
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40
enterprisesamountstoR920millionover10years,basedonR2�744�per60hatransferred(R�957/ha)-refertoModel4a,par.6.5.2a.Itisfurtherassumedthathalfoftheemergingforestryenterpriseswouldnotparticipate insuchanarrangement.Governmentcontribution to interestsubsidisationisthereforebasedon25%equityownershipof150000ha,whichamountstoR148million.
(b) CostcalculationforGovernmentcontributiontoSkillsDevelopment
Thecostofskillsdevelopmentisbasedon�%spendofpayrollbyDWAF,basedonaforestrypersonnelbudgetofR195552000in2006-07(approximately4200posts)
(c) CostcalculationforGovernmentcontributiontoEnterpriseDevelopment
Thisisbasedonthefollowingcalculationsandassumptions:
i) Interestratesubsidisationfor100000hanewafforestationover10-yearsiscalculatedatR6234per2.4hafamilyfarm(refertoModel1a,par.6.5.1b.),whichamountstoR2597/ha,orR9557�per50hacommercialfarmingoperation(refertoModel�a,par.6.5.1d.),whichamountstoR2�89/ha.AtanaveragecostofR2500/hathisamountstoR250millionrequiredforthe100000ha.Itisfurtherassumedthat50%ofthiscostwillbebornebytheprivatesectoreitheraspartoftheirenterprisedevelopmentcontributionsorlinkedtocontractualagreementsforthesupplyofrawmaterial.GovernmentcontributiontointerestratesubsidisationthereforeamountstoR125millionover10years.
ii) ThecostofprovidingseedcapitalfordevelopingfireinsuranceschemesforemerginggrowersisestimatedatR16milliontosupport10000haofafforestationperyearfortenyears.Thisamountisrequiredtoreducethepremiumofinsuranceforexpectedannualandcatastrophiclossestoanaffordableinsurancepremium.Itisestimatedthattheseedmoneywillberequiredduringthefirst9years,whereafterthepoolwillbebigenoughtorequireapremiumofunder1.2%tosustainthepool.
iii)Thecostofcapacitybuildingandbusinesssupportforemergingblackentrepreneursisbasedon15%ofinvestmentcostsinnewafforestation.TheinvestmentcostsisestimatedatR15000perhafor10000haperannum.ThisamountstoR22.5millionperannum.Thisexcludescapacitybuildingandbusinesssupport foremerginggrowers thatwillbenefit fromthe transferofstateforest landwhich isalreadycovered in thecost calculationpresented inpar. (a)above. It isrecognisedthatsupportforemergingentrepreneursgoesbeyondnewafforestation.Atthesametimeaccounthastobetakenofthefactthatthatforestenterpriseswillalsocontributetocapacitybuildingandbusinesssupportthroughenterprisedevelopmentspend.
iv)Thecostofexpeditingtheafforestationauthorisationprocess[overandaboveexpensesnormallyassociatedwithSFRA(forestry)wateruselicensing]isestimatedatR10.7millionover5years.Thisbasedonthefollowing:
a. AdditionalSEAandareamappingstudies:KwaZulu-Natal,EasternCapeandMpumalanga=R�.0million
b. Streamliningsupport:R500000perannumover5years=R2.5m
c. RegionalSFRAunits’additionaloperatingcosts(forfourforestryregions):R200000/annumperregionfor5years=R4.0m
d. NationalSD:SFRA’sadditionaloperatingcosts:R200000p.a.for(5years)=R1.0m
e. DevelopingthevariousMOUsonafforestationauthorization=R200000.
41
v) ThecostofsecuringlandrightsandlandholdingstructuresfornewafforestationoncommunallandandthetransferofownershipandleaserentalsonStateForestlandstillneedstobecalculatedbyDLA.
Note: the cost of settling restitution claims on forestland has not been included as this is an existing statutory obligation of State.
vi)ThecostofWorkingforWater(WfW)ProgrammestosupportaccesstorawmaterialsupplythroughtheremovalofalieninvasiveplantsandtocreateassociatedblackenterprisedevelopmentopportunitiesisR48.75millionover10years.Thisisbasedonthefollowing:
a. Extensionprogrammetodisseminateinformationontheavailabilityofrawmaterialsources:R�50000establishmentcostperregionandR100000operatingcostperregionfor9yearsthereafterx5regions=R6.25million
b. Programmetopromoteandprovideincentivesforthedevelopmentnoninvasivetimberresources:R2millionperannumfor10years=R20million
c. ProgrammetopromotethedevelopmentofB-BBEEenterpriseslinkedtotheutilisationofwoodproductsfromtheclearingofinvasivealientrees:R450000perannumperregionfor10yearsx5regions=R22.5million
(d) CostcalculationforGovernmentcontributiontoIndustrySpecificInitiatives
Thisincludesthefollowing:
i) ThecostofR&Dtosupportthedevelopmentofasawloggrowingstrategyandprogramme.TheestimatedcostisR5millionperannum.
ii) Thecostsofinitiativestomanage,control,reduceandwherepossibleeradicatethethreatsandinfestationlevelsofpestsanddiseasesintimberplantations.TheestimatedcostisR5millionperannum.
iii)Thecostofinitiativestomanage,controlandreducetheriskofforestfires.TheestimatedcostisR7millionperannumandisbasedonthefollowing:
a. FireawarenesscampaignsatR�millionperannum
b. FinancialassistancetoFireProtectionAssociationschannelledthroughmunicipalfireservicesatR5millionperannum.
8 KeyOutcomesoftheForestSectorTransformationProcess
BasedontheSectorcommitmentsintheCharter,keyoutcomesoftheForestSectortransformationprocesscanbesummarisedasfollows:
(a)Aweightedblackownershipprofileof30%fortheSectorasawholewithin10-years.
(b)Aweightedblackwomenownershipprofileof12.6%fortheSectorasawholewithin10-years.
(c)Afforestationofaminimumof100000hanetincreaseinplantedareaoverthenexttenyears,mostlyintheEasternCapeandKwaZulu-Natalthroughblackownedforestryenterprises.Thiswillunderpinfurthergrowthinthetimberprocessing,value-addingandmarketingsector.
42
(d)Increasedparticipationofblackpeopleinforestryvalueaddingindustries,suchassawmilling,paperproductionandcharcoalproduction.
(e)Appropriatefundingmechanismsidentifiedtosupportforestenterprisedevelopmentinvolvingbothindustryandstatefunding.
(f)AnnualexpenditurebytheindustryofatleastR67.2millioninenterprisedevelopment.Thiswillresultinmorethan�90newjobsand�0to50newsmallbusinessesannually1.
(g)Rehabilitationandtransferof46000hastateplantationstoblackcommunities.
(h)Annualspendingonskillsdevelopmentsufficienttoaddabout1750newlearners2intothetertiaryeducationsystem,andmorethandoublethisnumberofothertraineesandlearnersatlowereducationallevels.
(i)ConcertedstrategytodevelopblackskillsintheForestSectortounderpingreateremploymentequityinandblackmanagementcontroloftheForestSector.
(j)Effectiveandrepresentativestructuresfortheforestindustry.ThisincludestheestablishmentofrepresentativeorganisationsforsawmillersandcharcoalproducersaswellasimprovedlevelsoforganisationandrepresentationofworkersthroughouttheSector.
(k)IndustryCodesofConductthatwillensuregoodpracticesincontractingandemploymentthroughouttheForestSector
(l)Asawloggrowingstrategyandprogrammethatwilladdresstheloomingshortageofsawlogsupplyinthecountryandensuresustainabilityofthelocalsawlogplantationindustry.
SincetheForestSectorhasaruralbase,theseoutcomeswouldmakeasubstantialcontributiontopovertyreductionandruraldevelopmentinthecountry.Furthermore,thetransformationprocessislikelytoinjectconsiderableenergyandinnovationintotheForestSectorandsecureitspotentialforhighgrowth.
1 Figures are based on new job creation costs of R100 000 in the growing sector and R200 000 in the downstream value-adding sectors, and 10 employees per SME. 2 Based on an annual of R100 000 per student; education in all disciplines, e.g. forestry, marketing, commerce, technical, legal, etc.
9 CharterImplementationPlanTheImplementationPlanoutlinedbelowdealswiththeimplementationoftheinstrumentstosupporttheB-BBEEtargetsandnottotheimplementationoftheScorecarditself.ThelatteristheresponsibilityofeachindividualenterpriseintheForestSector.
EachundertakinglistedintheImplementationPlanneedstobrokendownfurtherintostepslinkedtomilestonesandtimeframes.ThismustbedonebythepartieslistedasbeingresponsiblefortheundertakingsandmustbereportedontotheCharterCouncil.
Appendix:ForestryFundingModels
4�
PLAN FOR THE IMPLEMENTATION OF INSTRUMENTS TO SUPPORT B-BBEE TARGETS FOR THE FOREST SECTOR
Requirement Undertakings ResponsibilitiesTarget date1
1. Forest Sector Charter Council
EstablishmentoftheCouncil
1.1AppointmentofSectorrepresentativestoserve
ontheCouncil
Government(DWAF,DLAandDTI),Industryandlabour
2weeks2
1.2AppointmentofaChiefExecutiveOfficerforthe
Council
Government(DWAF)inconsultationwithstakeholders
1month
1.3Appointmentofstaff&procurementofoffices
andequipment
CEOfortheCouncil �months
Establishmentofsystems/pro-ceduresfortheCouncil
1.�FinalisefundingarrangementsforCharterCouncilfromGovernmentandIndustry
Government(DWAF)andIndustry
2weeks
1.4AdoptionofaConstitutionfortheCouncilCharterCouncil 4months
1.5PreparationofannualbusinessplanandbudgetfortheCouncil
CEOfortheCouncil 4months
2. Instruments to support Ownership TargetsAccesstofundsforpurchaseofequityownership&saleofbusinessassets
2.1Refertoundertakings5.�to5.5hereunder
RestructuringofStateforestassetsinsupportofB-BBEEtargets
2.2RoleofSAFCOL,includinganypossiblerolein
forestrydevelopment,reviewed
Government(DWAF&DPE)
�1March2007
2.�Planfortherestructuringofremaining(CategoryBandC)stateplantations,inaccordancewithpro-poordevelopmentagendaandbroad-basedblackeconomicempowerment,operational
Government(DWAFwithDLA)
1year
2.4Confirmland-holdingrightsandestablishland-holdingstructuresforstateforestlandtransfers–refertoundertakings5.11&5.12hereunder
Government(DLAwithDWAF)
5years
3. Instruments to support Skills Development Targets
Skillsdevelopmentstrategy/planfortheForestSector
�.1Skillsdevelopmentstrategy/planfortheForestSectoroperational.Toincludetargetsandtimelinesto:
• Strengthenthenationalframeworkforskillsdevelopment.
• Strengthensectorcapacityforskillsdevelop-mentdelivery.
• PromoteskillsdevelopmentopportunitiesforyouthandnewentrantsintheForestSector.
Government(DWAF&DoL),SAQA,industryandlabour,throughFIETA
1year
�.2EnsurethattheSkillsdevelopmentstrategy/planisbasedonaclearlydefinedtransformationandgrowthstrategyfortheForestSector
Government(DWAF&DTI)andindustry
1year
�.�EnsurethattheSkillsdevelopmentstrategy/planlinkswiththevariousPGDS’andNSFfundedprojectstosupportthePGDS’
Government(DWAF)andindustry
1year
3.4IdentifyspecificskillsdevelopmentprojectsforwhichbusinessplanswillbedevelopedandsubmittedthroughFIETAtotheNSFforfunding
Government(DWAF),industryandlabour,throughFIETA
1year
�.5DWAFfullyparticipatesasacontributingstakehold-erinallFIETAactivities
DWAF 6months
3.6Ensurethatwhenthe2005-2010NationalSkillsDevelopmentStrategy(NSDS)isupdated,specialat-tentionisgiventoskillsdevelopmentrequirementstosupportB-BEEsectortargets
DoL Unknown
44
Requirement Undertakings ResponsibilitiesTarget date1
4. Instruments to support Preferential Procurement Targets
Ensureequitableandsustainablecontractingandem-ploymentpracticesthroughIndustryCodesofConductfortheForestSec-tor
4.1CodesofConductforForestryContractingdeveloped
GrowerandContractingIndustry&Labour
1year
4.2CodeofConductforEmergingForestGrowerSchemesdeveloped
GrowerandFibreIndustry
1year
4.�CodeofConductforCharcoalContractingdeveloped
Charcoalindustry&Labour
1year
4.4CodeofConductforEmploymentPracticesdeveloped
Forestindustry&Labour
1year
5. Instruments to support Enterprise Development Targets
Accesstofundsandfinancialservicesforemergingblackentrepreneurs
5.1Diversityofenterpriseownershipandfinancingmodelsdevelopedandavailableforimplementation
Industry 1year
5.2Thedevelopmentofaccessibleandcost-effectivefireinsuranceschemesforemerginggrowerspromoted(linkedto5.6below)
Industry 1year
5.�FrameworkAgreementsnegotiatedwithbanksandotherfundinginstitutions.(FrameworkagreementsnegotiatedundertheFinancialServicesCharter)
Industry 1year
5.4FrameworkAgreementsnegotiatedwithdonorandpublicfundinginstitutionstoaccessfundinginstrumentsavailablewithintheseinstitutions
Government(DWAFinconsultationwithDLA,DoA,LandBank,DTI,IDCandothers)
1year
5.5Publicfundingmechanismtofundand/orsubsidisetheinterestburdenindevelopingemergingForestSec-torenterprisesinvestigated
Government(DWAFwithTreasury)
1year
5.6Publicfundingmechanismtoprovideseedfund-ingforthedevelopmentoffireinsuranceschemesforemerginggrowersinvestigated
Government(DWAFwithTreasury)
1year
Capacitybuildingandbusinesssupportforemergingblackentrepreneurs
5.7ContinuedcapacitybuildingandbusinesssupportforemergingblackentrepreneursbyIndustry
Industry(cooperativesandcompanies)
Ongoing
5.8Servicedeliveryagreementforforestenterprisedevelopmentsupportnegotiatedwithexistingenterprisesanddevelopmentagenciesoperationalforkeyforestryareasinthecountry
Government(DWAFwithDLAandDTI),inconsultationwithIndustry
18months
Expeditethewateruseauthorisationprocessforafforestationandpaper&sawmillingfacilities
5.9Streamlineandexpediteafforestationlicensingprocedurestofacilitatetheestablishmentofaminimumof100000hanetincreaseinplantedareaovertenyears,basedonaminimumtargetaverageof10000haperannum(specificmeasureshereunderlistedintheCharterCompanion)
Government(DWAFinconsultationwithDEAT,DLA,DoAandProvin-cialGovernment)
1year
5.10Publishedsetofproceduresandtimeframesformilllicenseapplications
Government(DWAFinconsultationwithDEATandProvincialGovernment)
6months
5.11 Licensing system under the National Water Act,1998 and the National Forests Act, 1998 applied topromotetheobjectivesoftheCharter
Government(DWAF) OneffectivedateoftheCharter
45
Requirement Undertakings ResponsibilitiesTarget date1
Securelandrightsandlandholdingstructuresoncommunallandfornewafforestationandrestructuringofstateforestassets
5.12MemorandumofUnderstanding(MOU)establishedbetweenDWAF,DLAandprovincial&localgovernmenttoensurethecontinuedandsustainableuseofexistingstate plantations areas for timber production and toprovide forpostsettlementsupport to thenewownersofsuchland
Government(DWAFwithDLA,ProvincialGovernmentandMunicipalGovernment)
1year
5.1� Necessary legislative framework, budget andprogrammeestablishedtoenablecommunitiestoconfirmtheirtenurerightsandestablishlandholdingstructuresfor the transfer of existing state plantation areas� andafforestationoncommunalland
Government(DLAwithDWAF,ProvincialGovernmentandMunicipalGovernment)
1year
5.14Programmeimplementedthatsecuretenurerightsandestablishland-holdingstructuresfor50%ofallnewafforestationprojectsintheEasternCapeand90%ofallstateplantationareastransferred
Government(DLAwithDWAF,ProvincialGovernmentandMunicipalGovernment)
5years
Emerginggrowersabletoparticipateinforestrycertification
5.15Appropriateforestrycertificationmethodologiesforemerginggrowersdeveloped
IndustryandGovernment(DWAF)
18months
Accesstorawmaterialsupplyforsmallscalecharcoalproducersanddomesticfuewood
5.16PolicyandservicesinplacetofacilitaterawmaterialsupplyandassociatedblackenterprisedevelopmentopportunitiesthroughtheWfWprogramme(specificmeasureshereunderlistedintheCharter)
Government(DWAF) 1year
6. Instruments to support Industry Specific Initiatives
EnsurethatForestSectordevelopmentformspartofintegratedprovincialandmunicipalplanning
6.1Forestdevelopmentneedsandopportunitiesareadequatelyincorporatedinprovincialandmunicipalplanningprocesses(PGDS’&IDP’s)
Government(DWAF) 1year
6.2IndustryparticipationinprovincialandmunicipalplanningprocessthroughtheDepartmentofTradeandIndustrysupportedRegionalIndustryStrategiesandWoodClustersinitiative:
o EasternCape,KZNandLimpopo
o Otherforestryregions
Industry
2years
�years
Secureandadequatesuppliesofrawmaterialforprocessingenterprises
6.�AgreementonaSawloggrowingstrategyandprogrammeforthecountry(specificissuestobeaddressedlistedintheCharter)
Gov(DWAF)&Industry 1year
6.4Initiativestomanage,control,reduceandwherepossibleeradicatethethreatsandinfestationlevelsofpestsanddiseasesintimberplantations(specificmeasureshereunderlistedintheCharterCompanion)
Industry&Government(DWAFandDoA)
1year
6.5Initiativestomanage,controlandreducetheriskofforestfires(specificmeasureshereunderlistedintheCharterCompanion)
Industry&Government(DWAF)
1year
46
Requirement Undertakings ResponsibilitiesTarget date1
Transportinfrastructuredevelopmentinsupportofforestrydevelopment
6.6IncorporateinfrastructurerequirementsintoProvincialGrowthandDevelopmentStrategiesandMunicipalIntegratedDevelopmentPlans
Government(DWAFwithDoT,ProvincialGovernmentandMunicipalGovernment)
1year
6.7Definethetransportinfrastructureneedsforforestdevelopment,forinclusionintherelevantProvincialFreightTransportPlansandLocalIntegratedTransportPlansformunicipalities:
o EasternCape,KZNandLimpopo
o Otherforestryregions
Government(DWAFwithDTI)andIndustry
2years
�years
6.8IndustryparticipationinprovincialFreightTaskGroupsandCorridorFreightCommittees:
o EasternCape,KZNandLimpopo
o Otherforestryregions
Industry
2years
�years
6.9IndustryparticipationinRegionalIndustryStrategiesandWoodClusterinitiatives
o EasternCape,KZNandLimpopo
o Otherforestryregions
Industry
2years
�years
Removeconstrainttoblackenterprisedevelopmentinthefibresub-sector
6.10RequestInternationalTradeAdministrationCom-mission(ITAC)tocommittodomore,withinitslegalconstraints,toprovidegreaterprotectionforSouthAfricanproducersfromforeigndumpers
Government(DTI) 1year
Accesstoinformation,appropriatetechnologyandinnovationtosupportB-BBEEandenterprisedevelopment
6.11ProcessestablishedtodevelopofaForestSectorresearchstrategywithclearlyoutlinedresponsibilities,fundingmechanismsandtimelines
Government(DWAF)withothersectorstakeholders
6months
ExpediteRestitutionclaimsonforestlandtoensurethecontinuedandsustainableuseofplantationareasfortimberproduction
6.12Acoordinatedstrategyforthesettlementoflandclaimsdevelopedthatwillensurethecontinuedandsustainableuseofexistingstateplantationareasfortimberproduction,andprovideforpost-settlementsupporttothenewownersofsuchland.
CRLR,DWAF,Industryandothersectorstakeholders 6months
6.1�Expeditethesettlementoflandclaims:settle90%ofalllandclaimsonforestland
CRLR 2008
Strengtheningrepresentativeindustrystructures
6.14Equitablerepresentationofemerginggrowersinindustrystructures,aswellasimprovedsmallgrowerorganisationatthelocalandprovinciallevels
Forestryindustry 2years
6.15Strengthenedandrepresentativetheforestrycontractors’organization
ForestryContractorsindustry
2years
6.16Anorganisationrepresentingallsawmillersinthecountryestablished
Sawmillingindustry 2years
6.17Anorganisationrepresentingallcharcoalproducersinthecountryestablished
CharcoalProductionindustry
2years
6.18ImprovedlevelsoforganisationandrepresentationofworkersthroughouttheSector
Labour(tradeunions) 2years
6.19Enhancedco-operationamongstsub-sectorsoftheForestIndustrythroughcoordinationandinteractionbetweentheirrepresentativeorganisations
Allsub-sectorsoftheForestIndustry
2years
47
Requirement Undertakings ResponsibilitiesTarget date1
Continuedviabilityofthetimbergrowingindustry
6.20Engagementwithlocalgovernmentstructuresinanattempttoproviderelieffrompropertyrateswherethisnegativelyimpactsonthesustainabilityoftimbergrowing
Government(DWAF)withSALGAandindividualmunicipalities
1year
48
Appendix:ForestryFundingModels
Model 1a: Small Scale emerging growers
Allocationof2.4Haoflandperpersonorfamily2.4Haundevelopedland@R800/Ha:landavailableunderrestitutionortenurereform,orpaidforbyLRADgrant
Livingwagecoveredbyplantingcostsinfirstthreeyears,thereafteradvancedtillrevenuestarts.
Interestisassumedtobesubsidised
PrimeOverdraftRate: 10.50% IDCRate: 5.50%IDCEffective
Rate: 5.64%Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
Year RevenueLivingWage Interest CumulativeCosts
InterestCostSubsidised
1 0 2,984
2 0 6,600 168
� 0 10,884 614
4 1,000 0 1�,484 761
5 1,000 0 15,812 892
6 1,000 0 17,869 1,008
7 1,000 0 19,97� 1,127
8 1,000 0 22,077 1,245
9 -20,000 1,000 0 4,181 2�6
10 -6,000 1,000 0 �,005 170
11 -6,000 1,000 0 245 14
12 -6,000 �,419 0 0
1� -6,000 �,888 0 0
14 -6,000 �,888 0 0
15 -6,000 �,888 0 0
16 -6,000 �,888 0 0
17 -6,000 �,888 0 0
18 -6,000 �,888 0 0
19 -6,000 �,888 0 0
20 -6,000 �,888 0 0
Totals -86,000 0 117,113 6,234
SUMMARY: 1)Landavailableatnocost 2)2.4Hectresperperson �)Interestcostsubsidised 4)Insuranceat15%value
RESULT: ParticipationshareofR1000perpersonperannumfor11years
ParticipationshareofR�900perpersonperannumthereafter
49
Model 1b: Small Scale emerging growers
Interest not subsidised
Allocationof2.4Haoflandperpersonorfamily2.4Haundevelopedland@R800/Ha:landavailableunderrestitutionortenurereform,orpaidforbyLRADgrantLivingwagecoveredbyplantingcostsinfirstthreeyears,InterestiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueLivingWage Interest CumulativeCosts
1 2,984 0 2,984
2 �,616 168 6,768
� 4,284 �82 11,4�4
4 1,600 1,000 645 14,679
5 1,�28 1,000 828 17,8�5
6 1,057 1,000 1,006 20,898
7 1,104 1,000 1,179 24,181
8 1,104 1,000 1,�64 27,649
9 1,104 -20,000 1,000 1,560 11,�1�
10 �,824 -6,000 1,000 6�8 10,775
11 2,240 -6,000 1,000 608 8,62�
12 2,��6 -6,000 1,000 486 6,445
1� 2,112 -6,000 1,000 �64 �,921
14 2,112 -6,000 1,000 221 1,254
15 2,112 -6,000 2,56� 71 0
16 2,112 -6,000 �,888 0 0
17 2,112 -6,000 �,888 0 0
18 2,112 -6,000 �,888 0 0
19 2,112 -6,000 �,888 0 0
20 2,112 -6,000 �,888 0 0
Totals 43,476 -86,000 9,520 168,758
SUMMARY:
1)Landavailableatnocost
2)2.4Hectaresperperson
�)Interestcostincluded
4)Insuranceat1%ofvalue
RESULT: ParticipationshareofR1000perpersonperannumfor14years
ParticipationshareofR�900perpersonperannumthereafter
50
Model 2a: Small Scale emerging growers (Sawlogs) Interest subsidised Calculationisbasedon2.4Haplantedinfullinyear0Assumelandavailableunderrestitutionortenurereform,orpaidforbyLRADgrantFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred Drawings Revenue InterestCumulative
CostsInsuranceValue/Ha
InsuranceValue
CostvsInsur.Value
1 10,478 0 0 10,478 4,�97 10,55� 75
2 �,�62 0 0 1�,840 6,718 16,12� 2,28�
� �,4�7 0 0 17,277 8,806 21,1�4 �,857
4 2,558 2,000 0 21,8�5 11,090 26,616 4,781
5 2,650 2,000 0 26,485 1�,621 �2,690 6,205
6 2,74� 4,000 0 ��,228 16,168 �8,80� 5,575
7 2,854 4,000 0 40,082 19,250 46,200 6,118
8 2,966 6,000 0 49,048 22,�71 5�,690 4,642
9 �,089 8,000 0 60,1�7 25,811 61,946 1,809
10 �,226 8,000 -9,648 0 61,715 29,60� 71,047 9,��2
11 �,242 8,000 0 72,957 �0,055 72,1�2 -825
12 �,40� 8,000 0 84,�60 �4,5�7 82,889 -1,471
1� �,571 8,000 0 95,9�1 �9,220 94,128 -1,803
14 �,758 8,000 -19,536 0 88,15� 44,�82 106,517 18,�64
15 �,799 8,000 0 99,952 45,566 109,�58 9,406
16 4,010 8,000 0 111,962 51,�76 12�,�02 11,�40
17 4,241 8,000 0 124,20� 57,780 1�8,672 14,469
18 4,495 8,000 -34,848 0 101,850 64,8�9 155,614 5�,764
19 4,490 8,000 0 114,�40 64,7�2 155,�57 41,017
20 4,771 8,000 0 127,111 72,500 174,000 46,889
21 5,078 8,000 0 140,189 81,06� 194,551 54,�62
22 5,419 8,000 0 15�,608 90,500 217,200 6�,592
2� 5,791 8,000 0 167,�99 100,882 242,117 74,718
24 6,202 8,000 0 181,601 112,285 269,484 87,88�
Totals 106,29� 154,000 -358,032 0
SUMMARY: 1)Landavailableatnocost 2)2.4Hectaresperperson �)Interestcostsubsidised 4)Insuranceat1.5%ofvalue
NoParticipationshareinfirstthreeyears PhasedparticipationsharefromR2000toR6000p.a.inyear8 ParticipationshareofR8000p.a.thereaftertillharvestinginyear25
FinalsurpluspaymentofR977�9inyear25
51
Model 2b: Small Scale emerging growers (Sawlogs) Interest not subsidised Calculationisbasedon2.4Haplantedinfullinyear0Assumelandavailableunderrestitutionortenurereform,orpaidforbyLRADgrantFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred Drawings Revenue InterestCumulative
CostsInsuranceValue/Ha
InsuranceValue
CostvsInsur.Value
1 10,478 0 10,478 4,�97 10,55� 75
2 �,�62 591 14,4�1 6,718 16,12� 1,692
� �,4�7 814 18,682 8,806 21,1�4 2,452
4 2,558 1,000 1,054 2�,294 11,090 26,616 �,�22
5 2,650 1,000 1,�14 28,258 1�,621 �2,690 4,4�2
6 2,74� 2,000 1,594 �4,595 16,168 �8,80� 4,208
7 2,854 �,500 1,951 42,900 19,250 46,200 �,�00
8 2,966 �,500 2,420 51,786 22,�71 5�,690 1,904
9 �,089 �,500 2,921 61,296 25,811 61,946 650
10 �,226 �,500 -9,648 �,458 61,8�2 29,60� 71,047 9,215
11 �,242 �,500 �,488 72,062 �0,055 72,1�2 70
12 �,40� �,500 4,065 8�,0�0 �4,5�7 82,889 -141
1� �,571 �,500 4,684 94,785 �9,220 94,128 -657
14 �,758 �,500 -19,536 5,�47 87,854 44,�82 106,517 18,66�
15 �,799 �,500 4,956 100,109 45,566 109,�58 9,249
16 4,010 �,500 5,647 11�,266 51,�76 12�,�02 10,0�6
17 4,241 �,500 6,�89 127,�96 57,780 1�8,672 11,276
18 4,495 �,500 -34,848 7,186 107,729 64,8�9 155,614 47,885
19 4,490 �,500 6,077 121,796 64,7�2 155,�57 ��,561
20 4,771 �,500 6,870 1�6,9�7 72,500 174,000 �7,06�
21 5,078 �,500 7,724 15�,2�9 81,06� 194,551 41,�12
22 5,419 �,500 8,644 170,802 90,500 217,200 46,�98
2� 5,791 �,500 9,6�5 189,728 100,882 242,117 52,�89
24 6,202 �,500 10,702 210,1�2 112,285 269,484 59,�52
25 6,660 �,500 -294,000 11,85� -61,855 125,000 �00,000 �61,855
Totals 106,293 70,500 -358,032 119,384
SUMMARY: 1)Landavailableatnocost 2)2.4Hectaresperperson�)Interestcostincluded 4)Insuranceat1.5%ofvalue
RESULT: NoParticipationshareinfirstthreeyears PhasedparticipationsharefromR1000toR2000p.a.inyear6
ParticipationshareofR�500p.a.thereaftertillharvestinginyear25
FinalsurpluspaymentofR61855inyear25
52
Model 3a: New Commercial growers
Interests subsidised
SingleFamilyAllocation:LRADGrantfunding2xR�000050Haundevelopedland@R800/HaAssume 40Ha suitable for forestryFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueLivingWage Interest
CumulativeCosts
InterestCostSubsidised
1 51,465 0 51,465
2 62,9�1 0 114,�96 2,90�
� 74,402 0 188,798 6,45�
4 29,067 �,000 0 220,865 10,650
5 2�,7�4 �,000 0 247,599 12,459
6 18,400 �,000 0 268,999 1�,967
7 18,400 �,000 0 290,�99 15,174
8 18,400 �,000 0 �11,799 16,�81
9 18,400 -333,325 �,126 0 0 17,588
10 6�,7�2 -100,000 �6,268 0 0
11 �7,��� -100,000 62,667 0 0
12 �8,9�� -100,000 61,067 0 0
1� �5,200 -100,000 64,800 0 0
14 �5,200 -100,000 64,800 0 0
15 �5,200 -100,000 64,800 0 0
16 �5,200 -100,000 64,800 0 0
17 �5,200 -100,000 64,800 0 0
18 �5,200 -100,000 64,800 0 0
19 �5,200 -100,000 64,800 0 0
20 �5,200 -100,000 64,800 0 0
Totals 736,797 -1,433,325 0 95,573
SUMMARY: 1) LandavailableforpovertyalleviationorpaidforbyLRADgrant2) 40Hectarespertwo-personfamily �) Interestcostsubsidised 4) Insuranceat1%ofvalue
RESULT: Wagescoveredbyplantingcostsinfirstthreeyears
ParticipationshareofR3000perannumuptobreak-eveninyear9 ParticipationshareofR64800perannumthereafter
5�
Model 3b: New Commercial growers
Interests not subsidised
SingleFamilyAllocation:LRADGrantfunding2xR�000050Haundevelopedland@R800/HaAssume 40Ha suitable for forestryFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate:
5.64%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
Year CostsIncurred RevenueLivingWage Interest
CumulativeCosts
1 51,465 0 51,465
2 62,9�1 2,90� 117,299
� 74,402 6,617 198,�18
4 29,067 �,000 11,187 241,572
5 2�,7�4 �,000 1�,627 281,9��
6 18,400 �,000 15,90� �19,2�6
7 18,400 �,000 18,007 �58,64�
8 18,400 �,000 20,2�0 400,27�
9 18,400 -333,325 �,000 22,579 110,927
10 6�,7�2 -100,000 �,000 6,257 8�,916
11 �7,��� -100,000 �,000 4,7�4 28,98�
12 �8,9�� -100,000 �0,449 1,6�5 0
1� �5,200 -100,000 64,800 0 0
14 �5,200 -100,000 64,800 0 0
15 �5,200 -100,000 64,800 0 0
16 �5,200 -100,000 64,800 0 0
17 �5,200 -100,000 64,800 0 0
18 �5,200 -100,000 64,800 0 0
19 �5,200 -100,000 64,800 0 0
20 �5,200 -100,000 64,800 0 0
Totals 736,797 -1,433,325 123,679
SUMMARY:
1) LandavailableforpovertyalleviationorpaidforbyLRADgrant2) 40Hectarespertwo-personfamily�) Interestcostincluded4) Insuranceat1%ofvalue
RESULT:
Wagescoveredbyplantingcostsinfirstthreeyears
ParticipationshareofR3000perannumuptobreak-eveninyear12
54
ParticipationshareofR64800perannumthereafter
Model 4a: 25% BEE equity transfer of exist. plantations Interests subsidised & no land acquisition grant AverageMediumGrowerFarm:240Haundertimberinrotation25FarmWorkersAllocation:AssumenoLRADGrantfundingPurchase of 25% share (60Ha) at R12 500/HaFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueParticipation
Share Interest CumulativeCostsInterestCostSubsidised
0 750,000 0 750,000
1 48,000 -150,000 25,000 0 67�,000 42,�06
2 50,400 -150,000 25,000 0 598,400 �7,962
� 52,800 -150,000 25,000 0 526,200 ��,754
4 52,800 -150,000 25,000 0 454,000 29,682
5 52,800 -150,000 25,000 0 �81,800 25,609
6 52,800 -150,000 25,000 0 �09,600 21,5�7
7 52,800 -150,000 25,000 0 2�7,400 17,464
8 52,800 -150,000 25,000 0 165,200 1�,�91
9 52,800 -150,000 25,000 0 9�,000 9,�19
10 52,800 -150,000 25,000 0 20,800 5,246
11 52,800 -150,000 76,400 0 0 1,17�
12 52,800 -150,000 97,200 0 0 0
1� 52,800 -150,000 97,200 0 0 0
14 52,800 -150,000 97,200 0 0 0
15 52,800 -150,000 97,200 0 0 0
16 52,800 -150,000 97,200 0 0 0
17 52,800 -150,000 97,200 0 0 0
18 52,800 -150,000 97,200 0 0 0
19 52,800 -150,000 97,200 0 0 0
20 52,800 -150,000 97,200 0 0 0Totals 1,048,800 -3,000,000 0 237,443
SUMMARY:
1) BorrowR750000
2) ParticipationShare:R1000perpersonp.a.untilbreak-even
�) Interestcostsubsidised
4) Insuranceat1%ofvalue
RESULT:
Break-evenafter11years
55
SurplusR97200p.a.thereafter(R�888perpersonp.a.)
Model 4b: 25% BEE equity transfer of exist. plantations Interests not subsidised & no land acquisition grant AverageMediumGrowerFarm:240Haundertimberinrotation25FarmWorkersAllocation:AssumenoLRADGrantfundingPurchase of 25% share (60Ha) at R12 500/HaFundingiscalculatedatIDCratesofprimeless5%PrimeOverdraftRate: 10.50% IDCRate: 5.50%
IDCEffectiveRate: 5.64%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueParticipation
Share InterestCumulative
Costs
0 750,000 0 750,000
1 48,000 -150,000 25,000 42,�06 715,�06
2 50,400 -150,000 25,000 40,�49 681,055
� 52,800 -150,000 25,000 �8,417 647,272
4 52,800 -150,000 25,000 �6,511 611,58�
5 52,800 -150,000 25,000 �4,498 57�,881
6 52,800 -150,000 25,000 �2,�71 5�4,052
7 52,800 -150,000 25,000 �0,125 491,977
8 52,800 -150,000 25,000 27,751 447,528
9 52,800 -150,000 25,000 25,244 400,572
10 52,800 -150,000 25,000 22,595 �50,967
11 52,800 -150,000 25,000 19,797 298,564
12 52,800 -150,000 25,000 16,841 24�,205
1� 52,800 -150,000 25,000 1�,719 184,724
14 52,800 -150,000 25,000 10,420 122,944
15 52,800 -150,000 25,000 6,9�5 57,679
16 52,800 -150,000 �6,000 �,254 -267
17 52,800 -150,000 97,200 0 -267
18 52,800 -150,000 97,200 0 -267
19 52,800 -150,000 97,200 0 -267
20 52,800 -150,000 97,200 0 -267
Totals 1,048,800 -3,000,000 401,133
SUMMARY: 1)BorrowR750000 2)ParticipationShare:R1000perpersonp.a.untilbreak-even�)Interestcostincluded 4)Insuranceat1%ofvalue
RESULT:
56
Break-evenafter16years SurplusR97200p.a.thereafter(R�888perpersonp.a.)
Model 4c: 25% BEE equity transfer of exist. plantationsInterests at higher IDC rate & no land acquisition grant AverageMediumGrowerFarm:240Haundertimberinrotation25FarmWorkersAllocation:AssumenoLRADGrantfundingPurchase of 25% share (60Ha) at R12 500/HaFundingiscalculatedatIDCratesof2.5%realreturnCurrentInflationRate 4.00% IDCRate: 6.50%
IDCEffectiveRate: 6.70%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueParticipation
Share InterestCumulative
Costs
0 750,000 0 750,000
1 48,000 -150,000 25,000 50,229 72�,229
2 50,400 -150,000 25,000 48,4�6 697,065
� 52,800 -150,000 25,000 46,684 671,549
4 52,800 -150,000 25,000 44,975 644,�24
5 52,800 -150,000 25,000 4�,152 615,276
6 52,800 -150,000 25,000 41,206 584,282
7 52,800 -150,000 25,000 �9,1�0 551,212
8 52,800 -150,000 25,000 �6,916 515,928
9 52,800 -150,000 25,000 �4,55� 478,281
10 52,800 -150,000 25,000 �2,0�1 4�8,112
11 52,800 -150,000 25,000 29,�41 �95,25�
12 52,800 -150,000 25,000 26,471 �49,524
1� 52,800 -150,000 25,000 2�,408 �00,7�2
14 52,800 -150,000 25,000 20,141 248,67�
15 52,800 -150,000 25,000 16,654 19�,127
16 52,800 -150,000 25,000 12,9�4 1��,861
17 52,800 -150,000 25,000 8,965 70,626
18 52,800 -150,000 25,000 4,7�0 �,156
19 52,800 -150,000 9�,8�� 211 0
20 52,800 -150,000 97,200 0 0
Totals 1,048,800 -3,000,000 560,167
SUMMARY: 1)BorrowR750000 2)ParticipationShare:R1000perpersonp.a.untilbreak-even�)InterestcostatIDC2.5%real,included 4)Insuranceat1%ofvalue
RESULT:
57
Break-evenafter19years SurplusR97200p.a.thereafter(R�888perpersonp.a.)
Model 4d: 25% BEE equity transfer of existing plantationsInterests at commercial rate & no land acquisition grant AverageMediumGrowerFarm:240Haundertimberinrotation25FarmWorkersAllocation:AssumenoLRADGrantfundingPurchase of 25% share (60Ha) at R12 500/HaFundingiscalculatedatbestcommercialinterestrateavailable
PrimeOverdraftRate: 10.50%BestComm
Rate: 7.75%EffectiveRate: 8.0�%
Calculationsaredoneannually,ratesadjustedtoallowformonthlycompoundingofinterest
YearCosts
Incurred RevenueParticipation
Share InterestCumulative
Costs0 750,000 0 750,0001 48,000 -150,000 25,000 60,2�5 7��,2�52 50,400 -150,000 25,000 58,888 717,52�� 52,800 -150,000 25,000 57,626 702,9494 52,800 -150,000 25,000 56,456 687,2055 52,800 -150,000 25,000 55,191 670,1966 52,800 -150,000 25,000 5�,825 651,8217 52,800 -150,000 25,000 52,�50 6�1,9718 52,800 -150,000 25,000 50,755 610,5269 52,800 -150,000 25,000 49,0�� 587,�59
10 52,800 -150,000 25,000 47,17� 562,��211 52,800 -150,000 25,000 45,16� 5�5,29512 52,800 -150,000 25,000 42,991 506,0861� 52,800 -150,000 25,000 40,645 474,5�114 52,800 -150,000 25,000 �8,111 440,44215 52,800 -150,000 25,000 �5,�7� 40�,61516 52,800 -150,000 25,000 �2,416 �6�,8�117 52,800 -150,000 25,000 29,220 �20,85118 52,800 -150,000 25,000 25,769 274,42019 52,800 -150,000 25,000 22,0�9 224,25920 52,800 -150,000 25,000 18,011 170,07021 52,800 -150,000 25,000 1�,659 111,52922 52,800 -150,000 25,000 8,957 48,2862� 52,800 -150,000 45,0�6 �,878 024 52,800 -150,000 97,200 0 025 52,800 -150,000 97,200 0 026 52,800 -150,000 97,200 0 027 52,800 -150,000 97,200 0 028 52,800 -150,000 97,200 0 029 52,800 -150,000 97,200 0 0
Totals 1,524,000 -4,350,000 897,764
SUMMARY: 1)BorrowR750000 4)Insuranceat1%ofvalue
2)ParticipationShare:R1000perpersonp.a.untilbreak-even
�)InterestcostatbestcommercialratesincludedRESULT:Break-evenafter23years
58
SurplusR97200p.a.thereafter(R�888perpersonp.a.)
(Footnotes)1 Target time period for completion after the signing of the Charter2 DWAF should start process 6 weeks beforehand3 Reference made to “state plantation areas” to distinguish this from “indigenous forests”