Transcript Presentation to Portfolio Committee of DTI 2 September 2014

Presentation to the Portfolio
Committee on Trade and Industry
Colloquium
2 September 2014
Messrs Michael Peter and Norman
Dlamini
Land Use in South Africa
Grazing
Arable
Nature Conservation
Other
Plantations
13.8%
9.6%
6.9%
1.0%
1 273 357 ha
68.6%
Total RSA land area – 122.3 million ha
Commercial Plantations
Pine
Eucalyptus
Wattle
9.3%
46.9%
43.9%
Value of Roundwood Production
Pulpwood
Mining Timber
Other
Sawlogs
26.6%
4.0%
2.1%
67.3%
Total – R6.7 billion
Value of Sales from Primary Processing Plants
Pulp
Chips
Lumber
Panels
Mng. Timber
20.8%
9.3%
9.9%
3.2%
4.5%
52.3%
Total – R20.4 billion
Other
Value of Sales from Paper and Paper Packaging
R 17.4 billion
(STATSSA 2012 PAMSA 2013)
Total Contribution to GDP
R41.9 billion
Manufacturing GDP
(excludes roundwood sales)
7.7%
Contribution to Agricultural GDP
65.1% (incl. pulp and paper)
25.5%
Employment in Agriculture
22.5%
(146 000 jobs out of 650 000 in total)
(DAFF 2009, FSA 2011, STATSSA, 2012)
Beneficiation potential
Limited beneficiation in the primary sub-sector but
provides the raw material for beneficiation in other
subsectors which are largely vertically integrated
1 : 5.25 multiplier ratio
–
–
–
–
–
Pulp and Paper
Sawmilling
Particle board
Mining timber
Poles
Myth surrounding roundwood exports
Unresolved challenges for timber growers directly
impact the potential for further beneficiation
What are these challenges?
Shrinkage in plantations
– Voluntary withdrawal 80 000ha – water and
environment
– Government exit from WC and Mpumalanga – Cabinet
Memo not implemented – job losses and mill closures
– Unproductive government plantations - failure to
transfer these to communities as per Charter
– Failure to meet even 2 000ha of the 100 000ha new
afforestation target in IPAP I and II and Forest Sector
BBBEE Charter – National industrial policy being
sabotaged by junior bureaucrats
– Increased regulatory burden when changing to more
economical tree genera – directly threatens multibillion Rand beneficiation investments
What are these challenges?
No support for SMMEs
– Private sector introduced over 30 000 new growers
– Forest Sector BBBEE Charter committed DAFF to a
dedicated Forestry Grant to overcome the investment
hurdle and increase new entrants
– Minister finally announced the grant in September
2012 but no fiscal commitment yet
What are these challenges?
Forest protection
– Rising impact of pests, diseases and fires
– Government (DAFF) have been excellent recently in
supporting the development and release of bio-logical
control agents
– DAFF have an approved forest protection strategy but
again they have not been given fiscal support for
implementation
International competitiveness
SA was in bottom 25 percentile of global costs
Now in middle 50 percentile and rising
Competitors have been providing direct and
indirect subsidies for three decades – Brazil,
Chile, NZ, Australia
Tariffs and non-tariff barriers internationally
SA competitiveness has been based on
– World leading clonal breeding
– Excellent understanding of site productivity
– Global leaders in pests and diseases
Plantation Area Comparisons
2011
China
46.670
India
32.578
Russia
17.340
USA
16.238
Japan
10.682
Indonesia
9.871
Brazil
4.982
Thailand
4.920
Ukraine
4.425
Iran
2.284
RSA
1.273
0.0
10.0
20.0
30.0
Million Hectares
40.0
50.0
60.0
Illustrative Costs
Costs per ha over 10 years
Planting
R7 000
Annual weeding + fire protection
R1 200
Finance charges for above over period
R13 496
Harvesting and loading
R38 600
Long haul to market
R26 248
TOTAL cost to raise a timber crop and deliver to market
R86 544
Price paid per hectare
R108 000
Net profit per hectare per year
R2 145
Adapted and modified from Wood and Timber Times
August 2014
Small-scale grower challenges
Much the same as large scale growers but more
acutely felt and greater risk
–
–
–
–
Cost of capital – DAFF grant never materialised
Fire, pests and diseases = total crop/cash flow loss
Insurance – premium not subsidised by DAFF
Limited potential for economies of scale as widely
dispersed in landscapes
– Limited access to rail and PBS vehicle alternatives
– Insecure tenure over crop
– Vexatious water regulators pursuing unlicensed
plantations - mining and agric carry on with impunity
In spite of these over 30 000 SSG in KZN and
Mpumalanga
Small-scale grower challenges
Soaring administered pricing increases
– Labour – with limited opportunity for
mechanisation due to dispersed nature of SSG
plantations
– Fuel = transport costs
Need for more business management skills
Private Sector
Provide capital and jobs
30 000 self employed SSGs through JVs in
last 30 years
Promotion and education
Research and forest protection
Transformation (a leading sector in Land
Reform and BBBEE)
Government
Meet previous commitments
– New afforestation
– Forestry Grant for SMMEs
– Transfer of state plantations back into
productivity
– Recapitalisation of exit areas
State procurement to have mandatory
levels of SA forest products
– Paper and paper packaging
– Timber and particle board in the built
environment and furniture industries
Thank you