Linking independent timber growers to markets

Submission to the Portfolio Committee for Trade and Industry

– Co-operatives Bill

15 March 2005

Vusi C Dladla

NCT FORESTRY CO-OPERATIVE LIMITED

Linking independent timber growers to markets

A Forestry Co-operative

• NCT Forestry Co-operative• Established in 1949

– Asset base: R 0.5 billion as at 1 October 2001– Annual turnover: R 1.4 billion

• Today has 2045 members of which 24% are Black• The Small Timber Growers have enjoyed benefits of Co-op

membership:

– Access to international market– Direct benefits from exchange rate

Mission: NCT Assist members to achieve their full forestry potential and thereby optimise financial result on a

sustainable basis

Linking independent timber growers to markets

Our sphere of influence

Linking independent timber growers to markets

Characteristic of NCT• Because of strong first economy, second economy benefits

from such strong base

• Making profits at farm level

Linking independent timber growers to markets

Evidence of working together

• NCT DWC plant • Big suppliers secured

the market, small suppliers get full access to the market

Maximum patronage benefit to all members

Linking independent timber growers to markets

Where is NCT coming from?

NCT Forestry Co-operative

• Supports the objectives and principles of Co-operatives Bill

BUTBUT

Does have two serious concernsDoes have two serious concerns

Linking independent timber growers to markets

Proposed Co-operative BillConcern # 1 Voting

• We cannot underestimate the role of

democracy in running organisations

• Section 14(1)(e) = 1 member: a vote

• Amount of business ≠ amount of say

Members participation differs by size and so is the financial risk they carry

Linking independent timber growers to markets

Challenges to NCT• Should the bill be approved in its current form:

– Members who are the backbone of the co-op might resign & form own marketing companies

– The co-operative will weaken and lose market share– Small timber growers will suffer as they are to a large

degree dependent on big growers for market access – The profitability of tree farming will plunge since

companies will offer low prices for suddenly available timber

– Up to 10 000 job losses possible

Linking independent timber growers to markets

SolutionTo conserve our member base, we propose:

• Make s14(1)e an optional provision for co-ops• Allow patronage voting for co-ops that are

either:– Above x member base or– Above y turnover or– Have an existing constitution that allows for patronage voting

• General issues of the co-op be decided on head count bases and financial/investment issues on patronage

Linking independent timber growers to markets

Proposed Co-operative BillConcern # 2 Access to information

• We accept the need to have access to information

• Section 22 (i) gives members access to minutes of the board meetings & other sensitive information.

• Members can make copies of this for their own use

Now we have both timber farmers and corporates (such as paper companies) as our members

Linking independent timber growers to markets

Challenges to NCT• Should the bill be approved in its current

form,– International pulp & paper companies who

compete with the co-op can access information to use it against us

• Marketing strategies• Co-ops members plantation information• Market prices

– Disclosure of sensitive information can do serious harm or disadvantage the business

Linking independent timber growers to markets

SolutionWe propose:

• Expand section 22 subsection 2 to capture restricted access to confidential

information as determined by the board of directors

• Mirror Companies Act: “Any minute book of a company kept under section 204 shall

be open to inspection during business hours by any member of the company, without

charge, at the registered office of the company or the office where it is made up,

subject to such restrictions as may be provided for in the articles or imposed

by the company in general meeting, but so that not less than two hours in each day

shall be allowed for inspection ”

• Access to information is captured in PAIA

Linking independent timber growers to markets

Summary

• The objectives and principles of the bill are supported by NCT Forestry Co-operative

• Two important concerns of large marketing co-operatives should be considered

• The experience gained to date by the bigger co-operatives will be valuable in mentoring the emerging co-operatives.

• Closure or conversion of these co-operatives will be a loss in the economic system of South Africa

Linking independent timber growers to markets

Conclusion

• We need a win-win situation

Where

• Co-operatives are equally benefiting their members without any fear of prejudice

But• Managed in the manner that is both

economically viable and sustainable

Linking independent timber growers to markets

Thank You