safcol activities and transformation initiatives as at...

SAFCOL ACTIVITIES AND TRANSFORMATION INITIATIVES

As at 31 March 2012

Parliamentary Portfolio Committee for Agriculture, Forestry and Fisheries

- 19 June 2013 -

Presented by : SAFCOL Group CEO – MS NOMKHITA MONA

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GROWTH THROUGH PARTNERSHIP

• Strategic Objectives

• Safcol Group Operating structure

• Safcol Management Structure

• Transformation Interventions

• Minority Shareholding (Privatised Entities)

• Land Lease Rentals

• Land Claims

• Enterprise Development

• Socio-Economic Development

• Community Development

• Training and Skills Development

• Risks and Challenges

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Strategic Objectives

Financial and commercial sustainability

Sustainable forestry

management

Enhanced

developmental

contribution

•To achieve returns which are acceptable to the shareholder;

• To manage the business and engage in projects that preserve the gearing and liquidity ratios.

•To manage South African forests in a sustainable manner consistent with the requirements of the South African law and international independent certification;

•The retention and expansion of the amount of land used for forestry plantations.

•To play a leading role in contributing to the transformation of the economy as envisaged in the forestry charter;

•To implement marketing policies that improve access to supply SMMEs, B-BBEE firms and new entrants;

•To continue with current and new community development and investment projects in rural communities close to our operations.

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Group Structure

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Komatiland Forests Operations

• In South Africa the Group has forestry assets in Mpumalanga, Limpopo and KwaZulu-Natal provinces.

• The South African operations are called Komatiland Forests (KLF) and consist of 18 plantations, managed as 15 operational units.

• KLF is spread over 187 320 hectors of land.


SAFCOL Operating Entities

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Komatiland Forests – Processing Facilities

• Komatiland Forests owns 1 processing sawmill called Timbadola sawmill situated in Limpopo province. The sawmill is designed for an intake volume of 120 000 m3 per annum (2013). We are currently upgrading the mill to increase capacity to 130 000 m3 Per annum.

• KOMATILAND Forests has 2 custom cut processing operations in Mpumalanga. Combined intake volumes for the two operations is about 170 000 m3 per annum (2012).


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• IFLOMA is a subsidiary company of SAFCOL (KLF owns 80% of IFLOMA), operating in Mozambique in partnership with the Mozambican government (20% ownership).

• The operations are located in

Manica province, near Messica. • IFLOMA also consists of

processing facilities at Messica, three plantations at Penhalonga, Bandula and Rotanda, as well as a warehouse in Maputo.

• The current IFLOMA plantations cover 16 411 ha

IFLOMA OPERATIONS


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IFLOMA SAWMILL- MOZAMBIQUE

Sawmill

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• Financial and Commercial Sustainability

• SAFCOL reported an Operating Profit of R177 million


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GROUP CEO

NOMKHITA MONA

CFO (ACTING)

CAROLINE REDDY

COO

FRANCOIS DE VILLIERS

HCM EXEC

JULIA MPHAFUDI

GM: FORESTRY

GOODMAN GCABA FEMALE PLANTATION

MANGER

THEMBI NKWANA

SAFCOL’s Transformation Interventions • SAFCOL IS A SIGNATORY TO THE FORESTRY TRANSFORMATION CHARTER

• SAFCOL MAINTAINED A LEVEL 2 B-BBEE RATING - YEAR-ON-YEAR IMPROVEMENT: 85.77 POINTS (2011) TO 89.2 (2012) AND RECENTLY 93.25 (2013).


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Element Weighting 2013 2012 2011

Management control 15 15.00 14.63 15.00

Employment equity 15 11.49 10.27 7.93

Skills development 20 14.35 15.50 15.71

Preferential procurement 20 19.92 15.99 20.00

Enterprise development 15 14.49 14.82 9.13

Socio-economic

development

15 18.00 18.00 18.00

Total Score 100 93.25 89.21 85.77

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The SAFCOL minority shareholding was allocated in the

following manner:

An allocated portion to be disposed of to the Employee

Share Ownership Plan (ESOP)

An allocated portion to be disposed of to the National

Empowerment Fund (NEF) on behalf of communities

A residual portion which can be allocated to an acquiring

entity or retained by Government

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Package Current Status

KwaZulu-Natal Implemented the transaction with the SiyaQhubeka Consortium

on 1 October 2001. To date have sold 75% of the shares in

SiyaQhubeka Forests (Pty) Ltd. The remaining 25% is earmarked

for disposal.

Eastern Cape

North

Implemented the transaction with Singisi Forest Products (Pty)

Ltd on 1 August 2001 and to date have sold 84% of the shares.

The remaining 16% is earmarked for disposal.

Eastern Cape

South

To date have sold 84% of the shares in Amathole Forestry

Company (Pty)

Ltd. The remaining 16% is earmarked for disposal.

Southern and

Western Cape

To date have sold 84% of the shares in MTO Forestry (Pty) Ltd.

The remaining 16% is earmarked for disposal.

9% of the shares at Singisi, Amathole and MTO has been utilized in the creation of ESOP’s (Employee Share Ownership).

16 % is currently retained by SAFCOL as minority share, earmarked for disposal as non-core assets.

Minority Shareholding – Privatized Entities


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Minority Shareholdings % Shareholding

Fair value of the minority

shareholdings

Singisi Forest Products (Proprietary) Limited 16.4% R 114 309 312.00

Siyaqhbeka Forests (Proprietary) Limited 25.0% R 154 436 000.00

Mountains to Oceans Forestry (Proprietary) Limited 16.0% R 64 070 616.48

Amathole Forestry Company (Proprietary) Limited 16.0% R 4 971 613.70

R 337 787 542.18

The fair value of the above investments measured as a percentage of the net

asset value of the individual companies and amounts to R338 million.

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The transfer or sale of the minority shareholdings is awaiting government’s decision •The Shareholder Department (DPE) in discussion with the Department of Rural Development •Exploring a special-purpose vehicle to house shares •Process taking longer than anticipated •Costing the State more money to keep the integrity of the shareholding – DPE does not wish to dilute value •Governance Issues – SAFCOL represented on the Board of a ‘competitor’

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• SAFCOL already started paying LEASE RENTALS • Paid up to/and including the period 31 December

2012 • Provision made to pay MARKET-RELATED RENTALS • Approximately R46 million per annum – hope to

negotiate • Huge impact on the SAFCOL business going forward

• DAFF handles the rentals issue (Trust set up for Community Benefit)

• Department of Rural Development to Identify Beneficiaries

Land Claims


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Unresolved land claims: a key strategic risk of the business

It is SAFCOL’s vision to be the preferred partner of choice for successful land claimants - hence their inclusion in the social compacts signed with communities

Only 18 of the 29 claims were gazetted by March 2012

Slow progress with regards to the settlement of land claims affecting 61% of the state land managed by KLF

Only one claim settled - Shannon plantation, SAFCOL-owned

Slow progress in settling land claims attributed to overlapping land rights - due to conflicting legislation and the lack of an approved settlement model with respect to state forest land operated by SAFCOL

Forestry Contracts :

• Depending on the nature of the work and the capital requirements of the new enterprise, an SMME contract is established from rural communities for a period of three to five years, wherein the development contractor does not need to tender for new work.

• At the end of March 2012, the Group created and sustained 290 jobs through the establishment of forestry contractors.

Bee Keeping Cooperative:

• SAFCOL has established a Bee Keeping cooperative which has created permanent employment to about 25 people from adjacent communities

• The cooperatives have fully expanded into providing pollination services to neighbouring farmers. This project is going from strength to strength, and harvesting has taken place

SAFCOL EXPLORING HIGH-IMPACT/HIGH LEVEL ENTERPRISE DEVELOPMENT

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Socio-Economic Development Initiatives

• R8.1 million spent on SED projects (31% year-on-year increase);

• 73% of the R8.1 million was spent on infrastructural projects;

• Timber-frame structures launched by SAFCOL (school classrooms and accommodation dormitories);

• 11 projects completed during the 2012 financial year (41 infrastructural projects since 2006);

• Enhanced partnerships/cultivated relationships (DBSA; MMI foundation; Penreach; I-Consult engineers; FIETA etc.);


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Community projects


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• SAFCOL had signed 11 Social Compacts with communities in the following areas:

1. Redhill Cluster in the Albert Luthuli Municipal District surrounding Jessievale plantation.

2. Blairmore Cluster in the Albert Luthuli District surrounding Blairmore plantation;

3. Roburnia Cluster in the Mkhondo District surrounding Roburnia plantation;

4. Mphephu Entabeni Cluster in Makhado and Thulamela Districts surrounding the Entabeni, Hangklip and Roodewal plantations;

5. Tshivhase Cluster in Thulamela District, including all communities surrounding ThatheVondo;

6. Mantjolo Cluster in the Albert Luthuli District near Nelshoogte plantation;

Community projects


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7. Ngome Cluster covering all communities and claimants adjacent to and involved with Ngome plantation

8. Palm Ridge Cluster covering two communities adjacent to the seed orchard;

9. Berlin Cluster covering the communities and claimants involved with and adjacent to Berlin plantation;

10. Hebron Cluster covering the communities and claimants adjacent to the Wilgeboom and Bergvliet plantations; and

11. Mapulana Cluster covering the communities and claimants adjacent to the Tweefontein, Blyde and Morgenzon plantations.

Two more clusters were added in the 2013 financial year (Greater Tzaneen and Belfast).

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• One of the Group’s objectives is to promote Forestry as a career of choice

• Invest in education and skills development of employees, communities adjacent to our plantations, and women and youth from previously disadvantaged communities

• In-house training Centre, Platorand , close to Sabie in Mpumalanga.

• The training centre offers Forestry-based functional and technical courses and other as identified by management to employees and the public.

• 22 new internal bursaries were awarded • SAFCOL forestry chair was launched at the University of Pretoria • 18 students enrolled (4 from SAFCOL Group) for masters programme in forestry • 1 325 learners were trained at Platorand • 759 learners attended external training • 240 employees enrolled for ABET



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Skills Development and Training First Female Plantation Manager

Establishment of forestry programme

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• SAFCOL has been driving this initiative as a sustainable green form of housing • To date, SAFCOL has already built various structures with its timber resources

These include health care facilities (i.e. clinics), school classrooms, dormitories and community halls and houses

Benefits

• Speed,

• Quality,

• Insulation and

• Cost effectiveness


Risks and Challenges


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• Unresolved land claims

• Loss of productive land and competition for land use

• Not being the preferred partner of choice for successful land claimants

• Failure to expand the existing land area

• Market demand for product (reduced sales)

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