State mandates Safcol to devise new business model

Malusi Gigaba (Image: GCIS)

"The new model would include product and market diversification, the exploration of alternative export markets and the entry into vertically integrated industries. It would have to look at other products such as biofuels and biomass for Eskom," the minister said at a media conference after the annual general meeting of the group.

"The biofuels and biomass production off forestry residuals - and eventually dedicated plantations - is an opportunity that is a game changer for the sector," Gigaba claimed.

The mass manufacture of timber-framed buildings for schools, clinics and libraries and furniture within a special economic zone, as well as the further processing of saw logs, were identified as future business opportunities by an intergovernmental task team which Mr Gigaba established to review its future role.

The group, which employs about 4,000 people and indirectly supports about 20,000 rural dwellers, is seen as a key part of the state's rural development programme.

Community investments

Safcol invested about 10% of its net profit last year in communities around its plantations, specifically in skills development, job creation, enterprise development and infrastructure.

The minister noted there had been a steady deterioration in Safcol's financial position over the past five years and acknowledged that land claims on more than 61% of its land posed a major challenge to its future sustainability.

He hoped that a land claims framework could be worked out so that the government could protect Safcol's assets.

"Already Safcol has decided to pay rental on the leased land so that communities can accrue the financial value of the land and start their local economic development initiatives," he said.

Gigaba said the forestry industry had not been spared the global economic slowdown. Safcol's revenue of R855.6m declined in real

It made a net profit of R70m, compared with R205m previously, with the sale of an undisclosed property in Mpumalanga to settle a land claim helping to boost the bottom line.

The net profit includes the fair-value adjustments of the group's forestry assets, but these were not disclosed and will only become known when the group tables its annual report in Parliament. The operating profit of R177m in the 2011/12 financial year included fair-value adjustments of R155m.

Safcol supplies about 7% of logs in SA.

Source: Business Day via I-Net Bridge