Conference report

13-14 November 2008 Protea Imperial Hotel, Pietermaritzburg, South Africa

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Citation and acknowledgements The citation of this report should be: Macqueen, D.J. and Cotula, L. (Editors) (2008) Learning and growing together – proceedings of the forestry SME conference at the Protea Imperial Hotel, Pietermaritzburg, South Africa, 13-14 November 2008. IIED, Edinburgh, UK, The technical director of the workshop was: Rory Mack MZ Technical Services (Pty) Ltd 128 Lansdowne Road, Jacobs, 4052 South Africa PO Box 806, Merebank, 4059, South Africa Tel: +27 (0) 31 451 5815 +27 (0) 33 897 4071 Facs: +27 (0) 86 633 9727 Cell: +27 (0) 82 052 0221 E-mail: rory.mack@mzts.co.za The coordinator for the workshop was: Tanya Altshuler MZ Technical Services (Pty) Ltd 128 Lansdowne Road, Jacobs, 4052 South Africa PO Box 806, Merebank, 4059, South Africa Tel: +27 (0) 31 201 4382 Cell: +27 (0) 83 448 6474 Email: tanya@ahoypr.co.za The international keynote speakers and editors of the conference report were: Duncan Macqueen Lorenzo Cotula IIED, 4 Hanover Street, IIED, 4 Hanover Street, Edinburgh, EH2 2EN, UK Edinburgh, EH2 2EN, UK Tel: +44 131 226 6860 Tel: +44 131 624 7042 Email: duncan.macqueen@iied.org Email: Lorenzo.cotula@iied.org The editors would like to tha nk all of the participants for their time and active participation over the two days of the conference. Special thanks go to Tanya Altshuler for her coordination of the event. Sponsorship for this workshop came from Mondi Zimele (MZ), the Industrial Development Corporation (IDC), Forest Industries Education and Training Authority (FIETA), Forestry South Africa (FSA) and the Department of Water Affairs and Forestry (DWAF). The views within this paper are the editors’ own and do not necessarily reflect the opinions of MZ, IDC, FIETA, FSA or DWAF.

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Table of contents

Acronyms.....................................................................................................................................................4 Executive summary.......................................................................................................................................5

PRESENTATIONS - 13 NOVEMBER 2008 ....................................................................................................8 1. Viv Mcmenamin. Welcoming address. Mondi ..............................................................................................8 2. Lorenzo Cotula. Land reform – a global perspective. International Institute for Environment and Development (IIED) ................................ ................................ ................................ ................................ ...........................8 3. Duncan Macqueen. Global small and medium forest enterprise perspective. International Institute for Environment and Development (IIED).......................................................................................................... 10 4. Maurice Makhathini. Mondi experience with the restitution process – We can! Mondi .................................. 13 5. Carl van Loggerenberg. Sappi and SMEs. SAPPI ..................................................................................... 17 6. Vusi Dladla. Forestry SMEs – Is there any role you can play in the future of South African forestry industry? NCT Forestry Co-operative Ltd. ................................................................................................................... 20 7. Gumani Mbulaheni. SAFCOL group enterprise development strategy. SAFCOL.......................................... 23 8. Charlie Scott Community engagement. Hans Merensky............................................................................. 24

9. Chris Nicholson. The role of the Industrial Development Corporation. IDC.................................................. 25 10. M. Lubisi. The enterprise organization. Department of Trade and Industry (DTI) ........................................ 27 11. Michael Peter and Steven Ngubane. Forestry South Africa presentation – Forestry South Africa (FSA) ...... 29 12. Aubrey Nsuntsha. Forest land claimants support initiative. Amahlathi ....................................................... 31 13. Michael Hlengwa. South African Forest Contractors Association (SAFCA) ................................................ 32 14. Michael Underwood. South African forestry institutes of tertiary education – skills and challenges report. University of KwaZulu-Natal......................................................................................................................... 34 15. Sipho Phakathi. Enterprise Development – a view from Mondi Zimele. MZ................................................ 38 16. Msa Madlala. The perspective of an SME. Ikusasa Forestry Services ....................................................... 41 17. Richard Dladla. SME business support overview. MZ Technical services .................................................. 43 18. C. Mtoba. Presentation by DWAF. Department of Water Affairs and Forestry (DWAF) ............................... 44 19. Mnyamezeli Dlamini. Commission on Restitution of Land Rights-KZN. Land Claims Commission – KZN..... 45 WORKING GROUPS - 14 NOVEMBER 2008 ............................................................................................... 49 20. Working group methodology .................................................................................................................. 49 21. Summary of main challenges and possible solutions identified by working groups ..................................... 49 22. Tables capturing detailed group findings ................................ ................................ ................................ . 52 23. Ways forward........................................................................................................................................ 55 24. List of participants – alphabetical by surname ................................ ................................ ......................... 56

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Acronyms ACOFOP Asociación de Comunidades Forestales de Petén, Guatemala ASGISA Accelerated and Shared Growth Initiative for South Africa AU African Union BEE Black Economic Empowerment BBBEE Broad Based Black Economic Empowerment BDS Business Development Services CEO Chief Executive Officer CFJJ Centro de Formação Jurídica e Judiciaria, Mozambique CFM Community Forest Management CPA Communal Property Association CSI Corporate Social Investment CTV Centro Terra viva, Mozambique DED Department of Economic Development, South Africa DFI Development Finance Institution DTI Department of Trade and Industry, South Africa DWAF Department of Water Affairs and Forestry, South Africa FAO Food and Agriculture Organisation of the United Nations FIETA Forest Industries Education and Training Authority FS Financial Services FSA Forestry South Africa GDP Gross Domestic Product HIV Human Immunodeficiency Virus HM Hans Merensky ICT Information and Communication Technology IDC Industrial Development Corporation IDZ Industrial Development Zone IIED International Institute for Environment and Development JV Joint Venture KLF Komatiland Forests (Pty) Ltd KZN KwaZulu-Natal LED Local Economic Development MBA Master of Business Administration MOU Memorandum of Understanding NEPAD New Partnership for Africa’s Development NGO Non-Government Organisation NMMU Nelson Mandela Metropolitan University PDI Previously Disadvantaged Individual PMP Plantation Management Plan RSA South African Rand SA South Africa SAFCA South African Forest Contractors Association SAFCOL South African Forestry Company SARS South African Revenue Service SFRA Stream Flow Reduction Activity SME Small and Medium Enterprise SMFE Small and Medium Forest Enterprise SMME Small Medium and Micro Enterprises SPV Special Purpose Vehicles UKZN University of KwaZulul-Natal VAT Value Added Tax VPA Voluntary Partnership Agreement (within the Forest Law Enforcement, Governance and Trade –

FLEGT process)

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Executive summary This conference brought together a wide range of government, private sector and civil society groups interested in the challenges and opportunities for small and medium forest enterprise (SMFEs) in South Africa. A first day of plenary presentations from international experts, national industry, government and support organizations was followed by a second day of working groups. The aim of the meeting was to review the current status of SMFEs in South Africa, identify key challenges and plot a way forward that helps to address those challenges. Forest governance The widely supported South African land claim process, in which 60% of the standing timber may undergo a change in ownership in the next five years, represents a seismic shift for the forest industry. This comes at a time when there is a timber supply deficit to meet industrial demand that currently stands at 27% and is predicted to rise to 54% in 25 years time. Despite the allocation of 100,000 hectares of new planting in the Eastern Cape, almost double that area (~200,000 hectares) has succumbed to forest fires in the last two years. Good forest governance is critical for forest industries which are based on long-rotation crops and therefore disproportionately affected by policy change or instability. For better or worse, the potential impacts of the land claims process will be massive. Internationally, there has been a parallel trend towards greater devolution of control over forest resources to local community ownership or management (e.g. doubling to 22% of the total forest area in developing countries between 1985 and 2000). But international reviews of this general trend note that capacity building for responsible forest enterprise rarely keeps pace with the transfer in land use rights – to the detriment of income generation from the forest sector. The new Forest Sector Transformation Charter towards Broad Based Black Economic Empowerment (BBBEE) will clearly need to be resourced if the massive capacity building amongst new timberland owners is to be effected and the long term future of forestry in South Africa secured. Good forest governance invariable requires partnerships between government, private sector and civil society groups. The emergence of m ulti-stakeholder memoranda of understanding between institutions such as the Land Claims Commission and Amahlathi, or between the Commission and Sappi/Mondi, or between Forestry South Africa (FSA), the Department of Water Affairs and Forestry (DWAF), Department of Trade and Ind ustry (DTI) and Department of Economic Development (DED) is clearly a promising sign. Throughout the conference there were examples of various government incentive / investment schemes to support emerging SMFEs, for example those of the DTI and the Industrial Development Corporation (IDC), although participants drew attention to the lack of readily available information on these. At the same time many presenters noted the excessive regulatory burden that faces SMFEs and the rather variable pre an d post-settlement land claims processes. There is clearly work to be done to simplify and improve the implementation of policy requirements. Social and business organization for SMFEs A common point of concern across various presentations was the fact that new land claimants had little forestry or business experience – and few were linked to others facing the same issues. Moreover some claimants may not even have an interest in acquiring such experience, preferring to stick with traditional agricultural pursuits. If the priorities of such communities do not focus on forestry, a lack of short term benefits from timberland may lead to frustration / fires etc. Corporate industries expressed obvious concern that there is likely to be an emerging crisis in timber supply to mills if this situation is not address head on. It was encouraging that Amahlathi had begun to establish a Forestry Land Claims Support Initiative which will help to awareness of forest-based opportunities and help to represent land claimants in seeking support to make them of them. Widespread skill deficits in land mapping, business planning, technical management etc are probably best tackled on a group basis, so it will help to have representative bodies developed to tap into the multiple, but currently disparate support and training programmes. New land claimants have to establish trusts into which new revenues can be paid, but there was some concern at the fairness of benefit sharing which may require audits to ensure transparency / conflict reduction. In addition, understanding of how to make the transition from a simple trust structure to a more entrepreneurial business model is still in its infancy. The extent to which social engagement and capacity building is needed is just beginning to sink in across the sector. At the same time there were observations about the delivery of post-settlement support, the lack of grants and subsidies to effect

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the necessary transition, and a lack of incentives to encourage skilled forest operators to pass on their skills to new land claimants. Company-community partnerships Internationally, there are many examples of successful and unsuccessful company community partnerships. Within South Africa, a number of innovative models of company-community organization were presented (land leases, purchase agreements, outgrower schemes, joint ventures etc). There was widespread recognition of the need for broader livelihood packages within such models, e.g. livestock, mushrooms, fruit trees etc. There appeared to be widespread confidence about the technical aspects of such models, but less certainty with regard to social dynamics and benefit sharing mechanisms. Many presenters expressed concern that lessons from these models were not being analyzed and captured to stop initiatives making the same errors time and time again. The novelty of some of the new land lease and joint venture agreements is partly to blame for this lack of synthesis and lesson learning. But presenters noted how useful it was to be able to meet to discuss these issues at a national level in a conference such as this. Generic lack of data on the scale of outgrowers, independent producer SMFEs and new land claimants is hampering efforts to plan support initiatives. There are particular worried about potential conflicts between the employment needs of new land claimants and the role of the already hard-pressed contractor sector. The heavy nature of forest contracting work and the low wages in a hyper-competitive sector are making it difficult to attract and retain skilled workers. In addition, high levels of HIV / Aids are undermining productivity in a number of ways that will diminish the long term sustainability of the sector. Support services Internationally, there are widespread reports of the general isolation of SMFEs from each other, from markets, from service providers and from government decision making processes. Failure rates among small businesses are generally high, and South African SMFEs are unlikely to be any different. Presentations alluded to the high failure rates of new post-claim businesses for which 50% failure is believed to be a conservative estimate. The pace of change makes it all the more difficult to equip new land claimant businesses with the wherewithal to survive. Service provision to build capacity in the predicted five year time frame is going to be a huge challenge. Presenters highlighted several corporate-tied equity and training services as well as broader government and FIETA grant and training programmes. But the information about the existence and content of these services was noted to be patchy. There is no one-stop-shop to which SMFEs can turn to find a systematic registry of possible options. Financial services were put forward as a particular area of concern to SMFEs – especially financing to break into the more advanced value-added processing options. Established financial institutions are seen as unwilling to support SMFEs without corporate ties. The lack of well-organized SMFE representative bodies hampers their bargaining power and credibility with such institutions. At a more basic level there was noted to be a deficit in skills appropriate to the new challenges the sector is facing. Tertiary education and vocational training were reported to be both insufficiently available and poorly focused for multi-sectoral needs of new forest owners and SMFEs. Traditional forestry education was still weak in the social, conflict resolution, business management, climate change, energy, and agricultural diversification themes that will be key to addressing the emerging forest situation in South Africa. Both short term vocational training and longer term curriculum changes will be required. Working groups perception of key challenges On the second day of the conference, three working groups carried out a problem analysis to identify the main challenges that needed to be addressed in order to improve the situation for SMFEs. Five main challenges emerged, in rough order of priority:

• Capacity and skills within SMFES - Underlying causes pointed to the complexity of managing highly competitive forest businesses, lack of (and difficulty of acquiring) entrepreneurial skills, limited support

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services including due to a retreat of pre-existing services (training, extension, …), slow adaptation of curricula to changing contexts, and limited information about available support.

• Access to finance for SMFEs - On the one hand, this problem is linked to structural factors such as low

margins in forest business, and the limited familiarity of bankers with the forest sector. On the other, funding constraints seem at odds with the availability of funding lines provided by government (e.g. DTI) and development banks (e.g. IDC). Even in these cases, however, finance may be inaccessible due to limited information, rigid procedures and access restrictions (e.g. minimum size requirements). Limited capacity to develop commercially viable business plans is also an issue.

• Transformation of corporate mindsets towards SMFEs – Thee was still some progress to be made in line

with the Forest Charter and the BBBEE. While tools exist for implementing this transformation (e.g. the Equity Act), progress has been slow due to fear of power loss and competition, lack of real incentives (tax, market or other), and absence of clear vision on how the “new” forest industry should operate.

• More supportive and co-ordinated governance of land claim / SMFE issues – There was a perception of

weak capacity of government agencies, lack of coordination of the various authorities managing land claim and forest sector dynamics (with no institution emerging as a key coordinating body for SMFEs as yet), and the heavy regulatory burden on doing business (e.g. with regard to licensing, water licensing etc), and.

• Attracting and retaining skilled labour - The heavy work and low wages in the industry coupled with

HIV/Aids are making it difficult to attract and retain skilled labour. Minimum wages in the sector are equivalent to those in agriculture, despite the heavier and more skilled nature of employment in forestry. Low profit margins, concerns about competitiveness and limited consultation when minimum wages were determined are among the root causes of this challenge. HIV Aids was having a huge impact on worker productivity, absenteeism and ultimately replacement.

A synthesis of possible ways forward An analysis of working group suggestions, presentations and plenary discussions suggests some ways forward:

• Instituting a ‘one-stop-shop’ with pan-industrial funding to help build capacity of SMFEs / land claimants, linked sub -nationally to centres of excellence at provincial level, and internationally to a network of SMFE support institutions (e.g. the Forest Connect alliance).

• Assigning baseline data collection to a res ponsible institution to rectify the lack of data on (i) SMFEs

and; (ii) financial and business development service providers or programmes.

• Developing new government grants and incentives for best practice (e.g. to develop better business plans, create a ‘social label’ for fair partnerships between corporate industries and new land owners, tax breaks and subsidies for compliant companies, surety for SMFEs etc.

• Funding research and communication about successes and failures of different models developed by

and for new land claimants and SMFEs.

• Strengthening representative bodies that have legitimacy and can faithfully articulate the needs of land claimants and SMFEs such as Amahlathi, SAFCA.

• Vocational training (including part-time, short-course and adult education) which specifically targets new

land claimants and SMFEs.

• Changing the education curricula in schools and universities to include greater awareness of forestry and the many non-technical elements that are necessary to make the new forest industry structures work (e.g. social sciences, conflict resolution, business skills, climate change, energy production, agricultural and agroforestry basics, policy issues).

• Reintroducing forestry extension as a key role of DWAF.

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PRESENTATIONS - 13 NOVEMBER 2008 1. Viv McMenamin. Welcoming address. Mondi The participants were welcomed! Context

• Between 50-75% of forest plantation is changing hands through land claims and BBBEE out of a total 1.2 million hectares. For example, Mondi is subject to 101 claims covering 140,000 ha.

• The forest industry provides 8% of agricultural GDP and 3-4% of national GDP. What happens to the sector matters – but the patterns of change are also affecting fruit, sugar and other agricultural industries.

Setting the scene

• There is a need to secure fibre supply in order to keep the existing forest industry in tact. • Data on small growers is largely absent. Estimates suggest there are 30,000 small growers but we need

to have a more reliable information base on this sector. • It is important to manage labour displacement that will come from new claimants wishing to take on the

jobs of existing contractors. • New claimants are often not entrepreneurs or foresters – so there is potential for complete disaster if the

transition is not man aged well. • IIED accompanies many similar situations at international level and it will be good if they can accompany

South Africa on this journey. 2. Lorenzo Cotula. Land reform – a global perspective. International Institute for Environment and Development (IIED) Outline

• Setting the scene – Key trends in land rights reform • Using land rights for partnerships with the private sector

The drivers of change

• Land reform does not happen in a vacuum - it tends to be part of broader processes of social, economic and political change. Sub-Saharan Africa illustrates land reform is driven by various factors.

• Demographic growth has increased population density and competition for valuable land. Growing urban settlements encroach on agricultural land, attracting youths from rural areas, and fostering demand for food - which in turn boosts agricultural intensification. These changes foster evolution in local ("customary" but continually evolving) land tenure systems, namely towards greater individualization and commercialization of land relations. They may also prompt government action to reform land tenure.

• Recent acceleration of Africa’s integration in the world economy is also having impacts on land relations. As trade is liberalized, local production systems are becoming more integrated into the global economy, with export crops expanding into areas previously used for locally consumed products. Growing areas of land are being allocated to large-scale private investment, particularly in petroleum, mining and agribusiness (including, increasingly, biofuels). Several states in Africa have taken steps to streamline arrangements for incoming investors to gain secure access to land, while increased creates the need to secure the land rights of local people who may be dispossessed by large-scale investment.

• In addition, international migration generates major financial flows (remittances), which may affect local land relations in the home country - including through funding land purchases, leases or titling. Socio-cultural change driven by the cheaper communication technology and easier cultural exchange is affecting the way “tradition” is interpreted.

• Democratic transition in several African countries has been a major driver of land reform since the 1990s, and in many cases the new democratic constitution contained the fundamental principles of a new land policy. Similarly, the demise of the Soviet regime paved the way to major land reform programmes in Eastern Europe and the former Soviet Union.

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Improving tenure security

• Titling and the great land registration debate – the jury is out as to whether individual land titling is the way to go, or whether overlapping communal rights offer greater security. In different contexts the optimal model will vary.

• Tenure security is about securing diverse rights – for example use rights (in Ethiopia, Vietnam), “customary rights” (in Uganda, Mozambique, Tanzania, Niger), or collective rights (in Mozambique, Philippines)

• There have been particular approaches (and an established body of literature) which have dealt with tenure issues to do with gender, indigenous peoples and pastoralists

• Worldwide, state ownership is dominant in forestlands but with trends towards privatization and devolution

Shifting land ownership

• Redistribution – this has occurred where there has been excessive land concentration (Latin America, South East Asia, Southern Africa)

o Varying objectives – equity to agricultural development o Shift from state to market-led models, with some re-thinking o Demonstrated need for post-reform support (credit, training, extension, …), but limited success

• Restitution – this has generally accompanied major political changes (Eastern Europe; South Africa); or where indigenous peoples rights have been recognized

o To remedy “past injustices” o Highly differentiated approaches and experiences, significant shifts in land ownership in Eastern

Europe Partnerships between companies and new land owners – there is a diversity of models

• Collaborative production o Purchase agreements o Outgrower schemes o Joint ventures

• Other models (plus possible contracting) o Land leases o Social responsibility agreements

• Public revenue distribution (reinvesting sectoral profits for community benefit) Social responsibility agreements in Ghana

• These are legally required under the Timber Resources Management Act 1997 • What is required is a negotiated benefit sharing with customary landholders – which is limited to up to

5% of company revenues - for development projects • Challenges have emerged in

o Negotiation: who is involved, access to information, asymmetries in power o Content: poor standardization, vagueness of what is mandated, benefit capture by elites within a

community o Implementation: weak government capacity to monitor these agreements or enforce them

Community consultations in Mozambique

• These are a legal requirement under the Land Act 1997 • Currently what happens is usually a short meeting between company representatives and local elites for

one-off compensation – with long term land rights transferred in the process • Where ongoing support to landholding “local communities” has been available – there have been cases

of greater representativeness in these negotiations and enforceable joint -venture agreements e.g. in tourism (FAO/CFJJ; CTV) have emerged

• Challenges: to make it work there is a need for organizational support in order to address power asymmetries.

• The obligatory public revenue distribution scheme that channels 20% of forest tax revenues back to local communities has proved difficult to make operational and has provided an excuse for industries to minimize their own social investment.

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Smallholder integration in biodiesel production in Brazil • There is a national programme for biodiesel production and use in Brazil • Government has set biofuel consumption targets • A “Social label” is given to companies that buy between 10 to 50% (depending on region) of feedstock

(soybean, palm oil, …) from smallholders • This social label enables participation in PETROBRAS auctions and entitles compliant companies to tax

breaks • Smallholders enter into private sector contracts with price guarantee, technical assistance, clear

timeframes and delivery conditions • Despite its recent introduction, over 68,000 contracts have been signed with smallholders. Support has

come from big companies and trade unions with policy incentives key • There are some limitations: no environmental aspects; risk of benefit capture by better-off smallholders; • Source: Abramovay and Magalhães (2007)

A few lessons

• Legal rights and levers, for example policy incentives (tax, auctions…) are critical • Private sector commitment should not be underestimated • External support and facilitation is often essential (NGOs, trade unions…) • Building local organizational capacity for representation etc is both necessary and time consuming.

3. Duncan Macqueen. Global small and medium forest enterprise perspective. International Institute for Environment and Development (IIED) Structure

• Global trends in small and medium forest enterprises • Main challenges • Evolving solutions – from SMFEs, private sector, support organizations, government

What are we talking about with SMFEs?

• Two main ways of looking at this. Less satisfactory are attempts to distinguish based on size. More useful are attempts to distinguish social enterprise based on business model.

• A small and medium forest enterprise (SMFE) is “a forest business operation which profits from forest-linked activity, employing 10-100 full time employees (any business form)

• A community forest enterprise is “an enterprise whose production is overseen by a democratically managed organization suited to act as the certificate holder, that can claim legitimacy within a self-defining ‘community’ in terms of people or area” - (social business)

What do SMFEs produce? Product Detail

Energy Charcoal or fuel wood

Industrial round wood Plantation or natural forest timbers

Primary processed products Sawn wood Wood based panels Pulp for paper Paper and paper board

Secondary processed products Furniture and parts Builders joinery / carpentry Shaped wood

Non-timber forest products Fruits nuts and seeds, Oils and resins Fibre products, Ornamental plants, Medicinal plants

Services Tourism PES such as carbon, biodiversity, watersheds

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Why bother with SMFEs?

• Social impacts are large – more than 20 million people are employed formally worldwide by SMFEs (50% of the sector’s employment) with a further 140 million estimated to work in informal SMFEs

• Economic impacts are large – more than US$130 billion/year is the gross global value added by SMFEs • Envi ronmental impacts are large – US$ 2.5 billion is put into conservation by tropical forest communities

(greater than all aid funding) • Justice is key – in most contexts there has been a historic appropriation of forest resources by powerful

individuals who pay local people little How significant are they? SMFES in Brazil China Guyana India South Africa Uganda

NUMBER SMFEs as % of total

>98%. 87% 93% 87-98% 33-95% -

EMPLOYEES of SMFEs as % of total

49-70% 50% 75% 97% 25% 60%

REVENUE from SMFEs as % of total

75% 43% 50% 82% 3% 60%

Global trends in forest control

• Forest base increasingly owned locally - 22% owned or managed by communities – doubling between 1985 – 2000

• Tenure transition continues from 2002-2008 • Statutory reforms do not always result in more secure livelihoods; action to build capacity vital

Global trends more broadly

• Environmental o Carbon mitigation and adaptation is becoming widespread o Certification is now mainstream in procurement o Demand for low carbon housing favours wood versus other materials

• Economic o Financial sector to be more responsible o Big companies are shedding forest operations – and governments are decentralizing – both

open new space for SMFEs • Social

o VPAs / Lacey Act differentiate legal products in ways that might complicate life of SMFEs o Social procurement is emerging - fair trade forest products in pipeline

The central challenge

• SMFEs are isolated from: o each other o markets and market information o providers of business development services (BDS) and financial services (FS) o policy and decision-makers that shape the business environment

• Issues of geography, transport and communication infrastructure, informality, scale, staff capacity, language.

• Problem affects all aspects of SMFEs Internal solutions – forming associations

• They abound! (2-3000 in Uganda alone)

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• They offer broad benefits to their members and society e.g. they accrue wealth locally, secure resource rights, empower local entrepreneurship, create social safety nets, engender local environmental accountability and maintain culture

• From business perspective they can: o Reduce costs o Allow the pursuit of strategic upgrading o Strengthening bargaining power

Collaborative solutions – company community partnerships (source Mayers and Vermeulen, 2002)

• Outgrower schemes (Xylo Indah Pratama – 1800 farmers supply Astonia scholaris for pencils in Sumatra)

• Joint ventures (Iisaak joint venture logging between Nuu-chah-nulth Tribal Council and Macmillan Bloedel forestry)

• Purchase agreements (Payments to middlemen by Wanda Bamboo Products, Deqing County, China) • Land rental schemes (Tasman Forest Industries lease 20,000 hectares from 27 Maori land owners for

pulp – 11yr rotation) • Social responsibility agreements (Ghana as described by Lorenzo Cotula above)

Support solutions – market system development to competitive supply and demand for service provision

• Shift away from direct supply of essential services: o Financial Services (bank or group loans, equity finance, insurance, leasing) o Business Development Services (technical, ICT, business training, bookkeeping bureaucratic

advice, design etc). o Advocacy for policy change (fair business registration, forest resource allocation, taxes)

• Towards facilitation of the provision of these services by private suppliers: o Provision of information, catalyzing collective action, underwriting business linkage events,

benchmarking policy environments and training trainers etc. Governance solutions are essential too

• Guatemalan example. Political will emerged in 1980s following extensive pressure about fo rest conflicts and degradation. Twenty five years later the Guatemalan Government has given 560,000 ha to communities by 2005 conditional on FSC certification. US$ 109,000,000 was invested by many parties to make this happen

• Service provision was essential. In the 1990s USAID and CONAP with others trained community forest enterprises towards FSC certification and business management

• Social organization took time to emerge, but by 1996 ACOFOP had united 22 community organizations that then formed a dedicated forest processing company FORESCOM in 2004

• Responsible buyers played a key role through secure contracts for – parquet, planks, decking, folding chairs, specialist products etc designed for specific export markets

Learning from multi-country networks can help identify policy and business models

• Forest Connect alliance established in 2006 • Institutional hubs now established in Burkina Faso, China, Ethiopia, Ghana, Guatemala, Guyana, India,

Laos, Mali, Mozambique, Nepal • Diagnostics of SMFEs and their associations undertaken to map out sector • Service providers being mapped within and outside forest sector • Value chain analysis the next step to identify options for upgrading • National communication platforms are a challenge to establish • International networking site established (http://forestconnect.ning.com ) • Toolkit being designed by multi-country teams

A few lessons

• South Africa is unusual but challenges shared by many other countries • Organization and alliances of smallholders are critical (e.g. for example the Amahlathi emerging

entrepreneurs forum) • Facilitation by support organizations is central to getting the right mix of governance incentives,

corporate partnerships and local capacity

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• Pressure for reform creates opportunity for better ways of working • It is import to share approaches and tactics across countries if you do not want to reinvent the wheel.

4. Maurice Makhathini. Mondi experience with the restitution process – We can! Mondi Presentation Structure

• Introduction • Mondi position on land reform • Our experience with the process

o Trusts (Communal Property Associations - CPAs) as landholding entities o Transition from claimants to contractors

• The Kranskop groundbreaking agreements o The lease agreement o The settlement process

• The Mondi Partners Programme • Some ponderables

Introduction

• Since, and even before, the advent of land claims Mondi has accepted that: • Land was taken away from people through discriminatory laws and processes • Land reform generally and land restitution specifically is necessary to achieve national imperatives of

transformation • The interest of all is to ensure the continuation, and indeed expansion, of fibre production, maintain jobs

and create wealth for all in the value chain • It should be our collective conviction that this can only happen within a process of empowering claimant

communities to become independent future forestry companies themselves • The restitution process is therefore an opportunity

Mondi Position on land Restitution

• Land claims are against the current government as the heir to the previous one and its policies • The position adopted is that Mondi will not contest claims for the sake of it and will avoid referral of

claims to court proceedings • It is more about the maintenance of current fibre supply and empowerment of communities than about

who owns the land as a platform • In working with government and other forestry players Mondi has contributed to the continuous search

for models for the settlement of claims on commercial forestry land • It is within these models that Mondi is committed to operate and in addition propose suitable

empowerment interventions

Our experience with the process • Claimants

o Frustrated, suspicious and livid • Corporates

o Disbelief, denial and eventual acceptance with resultant: o Reduction in supply and investment o Decision making limbo o Efforts to contribute in the search for amicable settlement models

• Commission o Procrastination: Start with urban claims, experiment with private forestry land and now o Attempt to understand forestry o Grudgingly accept proposed models from industry o By the way consult with claimants

Our experience with the process

• Mondi approached by frustrated claimants and had to respond and start learning • Pre mature engagement with post settlement processes pre settlement

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• The result has been serious engagement, empowerment and learning which • Lead to the very first two commercial forestry settlement deals signed on the 13th of October 2008 • These early engagements and the precedent setting settlements have taught Mondi lessons to share

Trusts (CPAs) as landholding entities

• Both claimant communities at serious disadvantages: o Legal entities: CPA or Trust?: Pros and cons o Governance: social status, communication, continuous capacity building o The land: Mapping, modeling and business planning o Needs analysis and Socio econom ic analysis: use PRAs o Skills audit: PRAs also useful o Forestry business: cycles, value chain, compartments o Properties on the land: whose properties o Restored private land under forestry o Restored private land under other uses

Policy Issues for Trusts

• Deployment of income and distribution of profits from business in the face of diverse community needs e.g. Older folk

• Selection and prioritization community development projects where not all are claimants • Youth and women leadership and participation • Pressure from individual enterprises against a closed market • Cooperation with neighbouring others “How local is local” • Trustee incentives versus wages in the business entity

Transition from claimants to contracting entities

• Setting up business entities: Type of entity and future growth • Understanding the relationship with the Trust (CPA) • Compliance issues: Vat, safety • Start up capital: first wages, subsidies, equipment, vehicles • Cash flow: invoicing, insurance • Loans or grants • HR: policies, HR management • Managing expectations: start with easy and safe contracts • Procurement

Transition from claimants to contracting entities Progress to date

• Both business entities operational • Turnover of R150 000 monthly each • First weed control contract for completion in January 2009 • Silviculture contract for Feb 2009 • 70 jobs created (35 apiece) • FIETA training grants of R2,5m • Training in Weed control, Financial management, Safety etc • Mondi loans of R80 000 each • Mondi Subsidies =R1,1m • 2 Vehicles @ R980 000 purchased

Lease elements

• Lease: o 20 years or two rotations, whichever comes first o notice period of 5 years

• Rental o 7% on forrestable and o 2% on non forrestable land, o Upfront payment annually,

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o Escalation: linked to inflation o community decides expenditure

• Stumpage: o R10 per ton o Paid quarterly into trust account o Community decides expenditure

Handover

Empowerment clauses

• Mondi Bursary scheme • A bursary scheme linked to an existing one within Mondi will be extended initially to 2 students who want

to pursue careers in the forestry sector • The scheme covers tuition and expenses for students who qualify for admission at recognized tertiary

institutions • This will ensure sufficient home grown supply of black forestry management capacity to take over the

operations for the benefit of the claimant community • Students will have obligations to the claimant companies and will be guaranteed vacation employment,

mentorship and internships Contracting opportunities

• All contracting opportunities in operations will be offered to claimant companies • It is common practice that contracting and other business opportunities arising from a settlement

agreement with claimant communities should accrue to companies owned by communities • Mondi will be prepared to negotiate around this issue however complicated

Assistance with Residential development

• In circumstances where the claimant community is currently geographically settled as a single identifiable community, Mondi will assist the claimant community to realize their development needs in the area where they reside. This may involve Mondi assisting with planning, packaging and sourcing of

10 (TEN) YEARS 10 (TEN) YEARS

FIRST HANDOVER DATE

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government grants for infrastructure projects like water, roads, housing, electricity, waste disposal and community facilities like community halls, schools and clinics.

• This could be minimal interventions or proper town planning and development of residential areas where claimants reside.

Institutional support

• Mondi will provide administration assistance to the claimant community legal structure where this is needed. This assistance could range from assisting the Trust formalize itself to assistance with legal compliance and governance requirements. Assistance could cover administration support, financial management support and general business support where appropriate.

Institutional advisory services

• Where the claimant community, through its legal entity, requires assistance with advice on how best to conceptualize and manage their own programmes, Mondi can assist. This could be administering community bursary schemes, investments, and other local empowerment schemes

CSI targeting

• Mondi will allocate a fixed percentage of its CSI budget for projects emanating from and beneficial to, the claimant community. In this case the percentage or am ount and criteria will be negotiated and agreed upfront with the claimant community entity. The project would have to be related to claimed land.

Local business support

• Through its empowerment arm, Mondi Zimele, consideration will be given to local business support for local small businesses in the forestry value chain, ranging from silviculture to harvesting, transportation, sawmilling, bee keeping, mushrooms cultivation etc

Support for LED projects

• Local projects aimed at generating income for the community will be considered for support by Mondi where viable. This support can take the form of general capacity building, business planning and advice, business training and market identification.

Lessons from The settlement process

• No deal before the fi ner details have been sorted out: escalation, Vat, upfront rental and stumpage payment

• New issues at last moment • Complexity of legalese and verbal agreements versus reality of signing them • Need to align the suite of documents • Lease agreement (Mondi and community) • Sale agreement (Mondi and Commission) • Settlement agreement (All parties) • Need to sign all simultaneously • Real work begins after settlement

The Mondi Partnership Programme

• From experience gained in dealing with the claimants and experience from a visit to Brazil • Nascent initiative within Mondi • A section 21 company to provide support to claimant legal entities and their business operating entities • A CEO has been appointed and work has started on setting it up • It will be a repository of knowledge and experience, a custodian of knowledge and an empowerment and

support arm for new landowners and other partners • Partnerships will be the modus operandi • Some ponderables • What are the allowable deviations from the Ministers guidelines • Who will, and how, monitor the implementation of settlement agreements to be signed henceforth • How is knowledge management going to be dealt with • Balancing the rights of Land restitution beneficiaries and those of ESTA and Labour Tenant claimants • Beyond individual claimant companies and possible regional partnerships and JVs

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5. Carl van Loggerenberg. Sappi and SMEs. SAPPI Avenues for participation

• Private Growers • Align with Corporate schemes • Via Land Restitution • Via Land Claims • Outright Purchase

Expectations of SME owners

• Land Tenure • Poverty Alleviation • Job Creation • Contracts (Aligned with Corporates) • Sustainable Livelihoods

Evolution of partnerships

• Significant shift over the last decade in forest tenure • Driven by demand for wood products • Advantages to both parties i.e. processing company and growers.

Changes in community forest tenure (Source: White & Martin, 2002).

Partnership models

• Project Grow • CPA’s • Trusts • PMP’s • Leases • BBBEE Contracts

Scope of partnerships

• Free seedlings & technical support • Limited financial assistance – soft loans or advance payments

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• Successful schemes offer a broad range of advantages – technical support, as well as socio-economic and environmental advice

• SME partnerships with communities present greater challenges than individual agreements • Growers need empowerment in Business/financial skills

Nature of agreements

• Partnerships in which the growers are largely responsible for the production. Companies assure/guarantee to purchase the timber

• Partnerships where companies are largely responsible for production. Pay market related prices for timber

• Land lease agreements. Landholders have little involvement in management • Land lease agreements with additional benefits for the landholder

Issues and concerns

• Company carries market risk • Community carries production risk • Risks are seldom if ever shared equitably • Companies mitigate risk through insurance or by maintaining a broad base of outgrowers

Project grow

• Principles o Targets small rural farmers o Free seedlings o Interest free loans o Guaranteed market o Extension service

• Challenges o Water Licenses o Capital funding o Timber Leakage

• Mitigating Actions o Growers submit applications through DWAF o Partnering with Commercial banks/Corporate sponsoring o Negotiate with competitors

CPA’s

• Principles o Targets communities o Farm sales/restitution o Align with corporates

• Challenges o Management expertise o Markets o Working Capital/Resources Capital o Community Perceptions

• Mitigating Action o Align with corporates o Training – Committees & Forestry Economics

PMP’S

• Principles o Forestry asset transferred to community o Retention of fibre o Management expertise o Management fee o Guaranteed market

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• Challenges

o Financial/Forestry Expertise o Community perceptions o Profit sharing o Asset allocation

• Mitigating Action o Corporate to provide management/ mentor o Communication/Training o Independent auditor o Contractual supply agreements

Somhlolo Model

Leases

• Principles o Land claim settled amicably with claimants o Corporate leases land back o Corporate conducts business as usual o Agreement on access and NFP’s by claimants

• Challenges o No job opportunities for claimants o Control of funds

• Mitigating Action o Regular cash flow o Committee to decide on spending allocation o Corporate to “guide” funding of community projects o Train community members to do forestry work

BBBEE contractors

• Principles o Opportunity for PDI’s to participate in forestry operations

• Challenges o Forestry expertise

Land owner Somhlolo Trusts

Management Contractor Sappi Forests

PMP Agreement

Provides

Full Management Services / subsidized

Financial assistance

Subsidized interest

Free seedlings

Agrees

To sell timber to Sappi

Participate in the management

Allow Sappi access to plantation

10% premium on price

Guaranteed market

Training – Technical/Business

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o Business management o Cash flow management

• Mitigating Action o Assign to experienced forester o Provide business guidance o Manage cash flow during initial period o Business school

Key indicators of sustainability

• Mutual acceptance of each partner’s objectives • Fair negotiating process • Realistic prospect that all partners will derive some benefit from the agreement proportional to their

contribution & risk • That there are positive local structures in place for the support and development of the first three

principals • Partners have a willingness & capacity to contribute to the arrangements within the scope of their local

situation • Agreements are formal (have legal status) • Multiple benefits must be described • Partners have accurate, in depth & independent information on: • Likely short & long-term prospects, with contingency scenarios explored if agreements are nullified • Current & likely long-term viability of prospective partners • Likely long-term context for local forestry development

Conclusion

• Equitable partnerships with corporates must function on the basis of empowering smallholders/communities. Communication!

• Partnerships must be based on sound financial & business principals. Communication! • Very few households rely solely on forestry as an income resource. • Constraints are legislation & the rural nature of forestry – lack of infrastructure. • Communication! Listen to what the individual/community wants. Seek for mutual gains. • Threat - timber leakage. • SME partnerships are the future of forestry!

6. Vusi Dladla. Forestry SMEs – Is there any role you can play in the future of South African forestry industry? NCT Forestry Co-operative Ltd. NCT history

• Established in 1949 • Today has 2045 members of which 26% are Black • The SME’s 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 optimize financial result

on a sustainable basis SMEs according to NCT

• A member of NCT • A contractor supplying timber through NCT • A contractor rendering service in the value chain • A small processor adding value in the district

As a member of NCT, you receive:

• Market access • Support service in timber movement • Guaranteed payment irrespective of the market size supplied

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• Access to forestry technology – output from the research institutions • Upstream beneficiation – ownership of the processing plants • Land Transformation Beneficiary • Full NCT membership benefits • Farm management support • In house bridging finance • Mentorship

o Matriculants sent to Recognized Tertiary Institutions o Degree / Diploma in Forestry

NCT Tree Farming Division

• A subsidiary of NCT Forestry Co-operative Ltd • Established to manage farms at cost

On the ground farm management

• Employment of a team of well qualified and motivated staff. • Sound forestry practices in line with scientifically established methods. • Use of appropriate plants, optimally matched to sites and markets. • Productive use of forestry and transport contractors. • Timber marketing to our client’s best advantage, using the strengths and principles inherent in NCT

Forestry Co-operative. Financial and administrative services

• Tree Farming feasibility studies. • Preparation of monthly accounts and progress reports for all clients. • Preparation of budgets for our clients’ approval. • Benchmarking of costs, income and productivity. • Debtor and creditor control. • Payment of VAT. • Writing up of books of accounts and submission of all statutory returns.

Planning services

• Maintenance of up-to-date maps and growing stock information on a Geographic Information System. • Production of plans for harvesting, fire protection, natural area management and other purposes. • Where applicable, gaining Forest Stewardship Council (FSC) or other recognized certification of our

clients’ farms. In summary

• NCT Tree Farming aims to supply a total management package which includes the handling of all forestry operations, financial services, administration, marketing and the employment of suitable staff.

In transportation

• Grower Harvesting o Grower Transport (1 100 000 t) o NCT Transport (600 000 t) o Rail Transport (600 000 t)

• Contractor Harvesting • Delivery Documentation • Information Flow • Communication

As a special market

• Pine Saw logs • Pine Poles • Gum Saw logs • Gum Poles

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• Gum Mining Timber • Firewood • NCT family supplies timber to all such markets

What does the future hold?

• Wealth… o Through direct investment in the Pulp Mill o Through investment in other value addition processes o Through investment opportunities in other SADC countries

Participation

• Only limited to NCT members • Future members welcomed e.g. land reform beneficiaries • An investment vehicle created • Tackling opportunities within and outside of NCT • Remember, NCT membership is open to all private timber farmers and contractors.

As international players – global issues affect you

• How does the Wall Street situation affect your timber business? • Mill closures in the north - Faced with falling demand, rising costs, aging equipment, northern

hemisphere pulp mills are closing at an unprecedented rate… • 2.7 million tonnes closed 2005 and 2006 in North America • 1.6 million tonnes closed this year 2008 in Europe and North America • More to come next year • Investment in North America restricted to conversions (e.g. dissolving, fluff)

What then!

• Pulp will remain a volatile commodity, driven largely by macro-economic cycles, exchange rate movements, and a host of factors which are impossible to forecast (e.g. weather!)

• Market pulp supply will become more concentrated, but remain relatively fragmented • Competition for fibre will increase, as will trade • Logistics become increasingly important • Those without a secure source are highly vulnerable because pulp markets will remain structurally over-

supplied Shift to the South

• “Mozambique could have a paper industry within a few years” • “The Mozambican government plans to develop a paper industry in order to make use of its existing

natural resources and for that purpose has the support of Finland, the Mozambican agriculture minister, Soares Nhaca said in Helsinki Tuesday. An agreement was reached between the two governments during President Armando Guebuza’s visit to Finland. Radio Mozambique reported on the existence of two Finnish companies, Stora Enso and UPM, world leaders in forestry production, which are interested in studying the possibility of investing in the provinces of Niassa and Zambezia.

• (Source: the Mozambican Investor, www.clubofmozambique.com ) Your role

• “Zibambe ziqine, ubaba ulele kwethu” • Never allow the ‘divide a rule’ strategy to affect your business decisions • Timber mills without timber = SCRAP METAL • You are in control – use your power accordingly • Go beyond the weighbridge at the mill • Own a stake in the mill you are supplying with timber • Be independent • Seek opportunities to add value locally • There is a huge under supply of transmission poles • There is huge demand for mining timber

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• DEDT promised to offer support • When will Black timber farmers own their processing plant?

7. Gumani Mbulaheni. SAFCOL group enterprise development strategy. SAFCOL Agenda

• Group Corporate Structure • Vision and Mission • Forestry Enterprise Development • Progress • Challenges • Closure

Structure

• South African Forestry Company Limited • Sub-divided into: Enterprise development (Community engagement, new enterprises such as energy

and tourism); Komatiland Forestry; IFLOMA (including IFLOMA Mozambique) Aims of Enterprise Development unit

• Create economically vibrant forest communities, where people desire to live and return to, through extensively involving the communities in our multi-functional forestry business;

• Our mission : o is driven by an unwavering commitment to facilitate sustainable economic empowerment of

communities and eradication of poverty through: o Implementation of needs driven interventions o Becoming a partner of choice for land claimants

• “Our brand will be known globally for being a fully integrated world class forestry business operating internationally; which built its success through transformation, innovation, and mutual beneficial partnerships with shareholders, communities, customers, and employees; whilst maximizing value for all stakeholders.”

Community and enterprise development work

• Community Development Funding Strategy setting out potential funding vehicles, partnerships with Government organizations , local and international NGOs, and commercial organization with an interest in the area.

• Large scale enterprise development strategy considering the path forward for BEE partnership projects that offer significant job creation opportunities and require substantial funding. These include “water” bottling at source in Twee fontein, Tourism development in Limpopo, and Green Energy creation from forest by-products and waste material. Other ideas include setting up of a timber processing and carpentry apprenticeship facilities and programme in Blyde.

• Strategic focus o Design and implementation of appropriate funding vehicles. This may be the set up of a section

21 company, a trust or other tax efficient legal structures. Approach – a good foundation

• Land Claim Status Report – establish a base line information, input into engagements with communities. • Community Socio Economic Profile Study – establish the status of our community, agreed need driven

interventions • Social Compact – agreement of co-operation with our communities through their traditional governance

structures. Not limited. Progress on implementation

• Community Broom sticks manufacturing Plant o 500 000 sticks capacity o 12 sustainable jobs o Skills development (transfer to main mill) o Transfer to empowerment group - women

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• Silviculture Contractors o Entabeni o R3 miln contract pa o R400 000 funding loan o Woodbush, Tzaneen o R4 miln contract pa o R450 000 loan funding

• Specialized Harvesting Contractor o R2.7 miln loan funding o R3.45 miln contract pa over three years

• Fire Detection System o Investigation stage o Joint Venture with an empowerment group

• By Product Project – Sabie o R3.2 miln own funding o 49 contractors o Initial ten fully fledged contractors with contracts with KLF

Planned interventions 2009-2014

• Green Energy • Timber Processing – total utilization of timber • Water bottling • Eco tourism • Mushroom production

Challenges and constraints

• Finding the right partners o Involvement for the right reasons o Skills base, entrepreneurial drive

• Funding o IDC stringent conditions

• Management support o Right strategy and policy o Buy in from management on the ground

• Privatization and Restructuring o Terminal period, need not burden the “new” owner o Largely resolved

Closure

• Integrated approach by Forestry organizations as far as possible. • Land claim, restitution a good example • Eliminate confusion • The B-BBEE Sector Charter as a reference point. • It must add value to the organization.

8. Charlie Scott Community engagement. Hans Merensky Background

• Hans Merensky unusual in focusing on sawmilling now pulp – longer rotations are sometimes less economical

• 60,000 ha previously run by DWAF in ex-transkei. Poor condition, 60% under claim waiting for minister to sign. HM has helped to bring to completion.

• 126 communities are to be owners of land on which they do business – doing business in a sea of poverty is complex.

Participation not models

• The key is to get participation to meet the needs of all stakeholders – ever case is unique.

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• Land rights can lead to joint ventures which can lead to mutual benefits • Hans Merensky works to help communities to set up trust and then get dividends dependent on their

share of the land • A central premise is to develop a business that is fair • HM have a strong emphasis on management of benefit sharing within communities to avoid monopolies

by a few individuals. How to maintain commitment by both sides

• Make sure you understand the needs of the community and deal fairly with them • Combine forest benefits with other things e.g. if you have a long rotation crop you may need to support

agriculture in the short term to keep a flow of benefits to the new land owners • Try to maximize community involvement in these alternative ventures (e.g. mushroom production or

collecting bark nuggets for sale) Arrangements

• Training up BBBEE and subcontractors working with them in aspects such as fire control and road maintenance.

• Allowing 10% shareholding in the sawmilling business – with an intention to expand this to increase the stake that owners have in success of business

• Still many challenges to do with finance and water licenses 9. Chris Nicholson. The role of the Industrial Development Corporation. IDC IDC corporate profile

• Established in 1940, the IDC is a self -financing, State-owned development finance institution • Pays income tax at corporate rates and dividends to the shareholder (Government) • Independent Board of Directors • Reports on a fully consolidated basis, with its Annual Report freely available to the public • Follows normal company policy and procedures in its operations • Aims to maximize developmental and financial returns within an acceptable risk profile

Vision To be “the primary driving force of commercially sustainable industrial development and innovation to the benefit of South Africa and the rest of the African continent” IDCs Roles

• To support sustainable development, IDC invests in businesses showing economic merit; • Some businesses are not funded by commercial banks because of perceived high risks;

o IDC views this as a market failure; o IDC does more detailed assessments and funds investments which would not otherwise

happen; • IDC plays a critical role in assisting industries to develop, in ways which meet South Africa’s needs:

o ASGISA; o Supporting industrial policy development; o Investments in targeted sectors;

• Cooperate with national and provincial government, and other DFI’s; IDCs objectives

• Overarching objective: Sustainable job creation; • Regional development

o Rural areas o Provincial spread o Townships o IDZs;

• BBBEE; • SMEs; • Entrepreneurs;

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• Enhance balance of payments position by encouraging exports; • Support industrial development in the rest of Africa; • Achieve these goals while remaining financially sustainable.

Structure of IDC

• Ten sectors with wood, paper and the strategic business unit • Vision of this unit is “To be the key player in the generation of a balanced, integrated and internationally

competitive forest products sector within the Southern Africa region, and pro-active involvement by supporting emerging industries within the sector through partnering with entrepreneurs

• Total portfolio of R 1,2bn (cost of investments) • Strategic investments: York Timbers (29%) • Hans Merensky (42,6%) • 15 people control 1.2 billion Rand of investments

Three objectives

• Objective 1: Address the current and anticipated shortage of timber in South Africa, support transformation in the forestry value chain and development of SMEs

o Afforestation: Strategy: To support the development of new afforestation and transfer of ownership of existing plantations to BEE groups.

o Forestry services: Strategy: To support the development of emerging contractors in silviculture, harvesting, short haul & long haul.

o Impact / Output: BBBEE, BEE, SME, rural, poor provinces o Rest of Africa Strategy: To support the industry to grow and acquire resources in the rest of

Africa and to develop and participate in downstream value addition projects. o Impact / Output: Rural, strategic, social impact

• Objective 2: Support development of downstream beneficiation / value added industries in the forestry value chain.

o Beneficiation / Value adding Strategy: To facilitate the involvement of BEE groups and transition throughout the value chain via IDC’s strategic investments and to identify and develop other downstream industries.

o Impact/Output: BBBEE, Strategic investments, financial returns o Paper Products: Recycling: Strategy: Support initiatives towards a cleaner environment, by

providing business and financial support to entrepreneurs to achieve effective waste management in the paper recycling industry

o Impact/Output: BEE, SME, jobs, environment o Furniture: Strategy: To support local industry/entrepreneurs and government in developing a

viable model to support a sustainable furniture industry. o Impact/Output : SME, jobs, value addition

• Objective 3: Support development of renewable energy sector through clean development mechanisms in the sector

o Renewable Energy (Biomass) Strategy: To provide start-up capital and support the development of cleaner energy resources in the forestry related value chain through value addition and partnering with entrepreneurs.

o Impact/Output: Rural, BBBEE, value addition Challenges

• Lack of committed projects; o Land Claims o Water Licenses

• Limited opportunities; • Conflict between private players and government; • Skills transfer, technical and business support (community support and guidance) • Slow processes and progress;

o DWAF; o Provincial governments;

• Tenure

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o Long term funding structures with some profit sharing; • Availability and need for grant funding; • Funding of business support; • Limited or no security; • Complexity of transactions;

o Need for innovative funding structures; • Legal issues through existing structures;

Concluding remarks

• IDC plays an important role in the local industry through its current strategic investments and ability to provide long term finance for forestry development;

• Current focus is to provide finance for BBBEE’s & SME’s in rural areas for forestry development, mainly in poorer provinces ;

• IDC remains committed to explore and develop innovative funding structures and models to support forestry development;

• All strategies are aligned with our stakeholders (especially DTI and DWAF); • The IDC has a motivated team that would like to be your partner in developing the industry.

10. M. Lubisi. The enterprise organization. Department of Trade and Industry (DTI) DTI mission statement

• To stimulate and facilitate the development of sustainable, competitive enterprises, through the efficient provision of effective and accessible incentive measures that support national priorities.

Incentive schemes CLUSTER PROGRAMME

COMPETITITVE PROMOTION

Film and Television Production Rebate Support Programme for Industrial Innovation Technology for Human Resources and Industry Small Enterprise Technology Incubators

INVESTMENT PROMOTION Business Process Outsourcing and Offshoring Critical Infrastructure Programme Enterprise Investment Promotion

SMALL ENTERPRISE AND EQUITY

Black Business Supplier Development Programme - 80:20 Cost Sharing Incentive intended to improve core competencies, upgrade managerial capabilities and restructure black business processes to become more competitive. Cooperatives Incentive Scheme

TRADE FACILITATION Export Marketing and Investment Assistance Sector Specific Assistance Scheme South African Capital Goods Feasibility Study

Black Business Supplier Development Programme – who qualifies?

• Majority of shares must be black owned. • Its management team must be predominantly Black. • It must have a turnover not exceeding R12m. • It must be operating and trading for more than one financial year. • If an entity is registered less than a year and was operating previously proof of the registration with the

local municipality and VAT registration is required. • It must exhibit good growth potential. • Complying with commercial regulation e.g. SARS and CIPRO.

Qualifying projects

• Projects aimed at upgrading the capability of the management team of the enterprise through generic management training programmes.

• Projects aimed at improving the effectiveness of the management systems of an enterprise.

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• Projects aimed imparting specialized, enterprise specific skills to employees. • Projects aimed at assisting entry of the business into targeted markets.

Incentive benefits

• Max incentive amount of R100k. • Payment towards design of marketing material capped @ R30k excl VAT. • Payment towards printing of marketing material capped @ R10K excl VAT. • Payment towards skills training capped @ R15k excl VAT per individual per course, preferably group

training. • Payment towards Exec management training capped @ R30k excl VAT. • Training should not exceed 5 weeks or 160 hours and preference will be given to training that enhances

capacity development of an enterprise. MBA or long formal training will not be incentivized. Co-operatives incentive scheme

• To promote co-operatives. • To improve the viability and competitiveness of co-operatives. • To assist co-operatives to acquire start -up requirements. • To build the initial asset base for emerging co-operatives. • To support broad-based black economic empowerment.

Qualifying criteria

• Be incorporated and registered. • Owned by a historically disadvantaged individuals. • Rural and or semi-urban. • Operate in the emerging sector: agriculture, retailing, service and manufacturing. • Adhere to co-operatives principles: proof of members’ meetings and have a constitution (General

matters, Membership, Decision-making, Management, Finances, etc). Qualifying projects

• Feasibility studies/market research. • Technology improvement projects. • Plant and machinery. • Start-up requirements (at the discretion of the Adjudicating Board). • Working capital requirements (trading stock/raw material) up to a maximum of 60days.

Non-qualifying projects

• Activities already funded by other government schemes or parastatals. • Costs associated with tendering and tendering documentation. • Costs of acquiring a building. • Costs that the Adjudicating Board, in its sole discretion, deems as non-qualifying.

Incentive benefits

• It is a cost sharing grant. • 90:10 cost sharing. • 90% contribution from the dti. • 10% contribution from the cooperative (monetary or skills, assets). • A maximum grant of R300 000 per co-operative. • Once-off or multiple projects provided that the cumulative amount awarded to the co-operative does not

exceed R300K). • A minimum amount that a co-operative can apply for is R10 000. • The amount will be reviewed 12 months after inception.

Export marketing and investment assistance

• Compensates exporters for costs incurred in respect of activities aimed at developing exporting markets for South African products and services and to recruit foreign direct investment into South Africa.

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Who qualifies? • SA manufactures of products registered with SARS. • SA exporting trading houses. • SA commission agents • SA Export Councils and Industry Assoc.

Qualifying criteria

• Export readiness of the applicant. • Export/production performance of the applicant. • Export/marketing competence of person visiting the foreign country. • Potential accessibility of export/production capacity. • Extent of export marketing planning. • Type of product for export and local marketing performance. • Level of labour absorption, location & technology requirements. • Membership with an ex port council.

Incentive benefits INDIVIDUAL PARTICIPATION

AIRFARE ALLOWANCE TRANSPORT SAMPLES

EXHIBITIONS

Individual Missions HDIs:100% Max of R10000 SMME:80% Max of R8000

R800 p/day Max 5days

R200 p/day:-Vehicle rental Max 5 days

R10000 pa: Mrktg Materials

Individual Exhibition Assistance

HDIs:100% Max of R10000 SMME:80% Max of R8000

R1350 p/day Max 15days

R15000 incl. Forwarding & Clearing charges

80% Max of R45000

Primary Market Research and Foreign Director Investment

HDIs:100% Max of R10000 SMME:80% Max of R8000

R1350 p/day Max 15days

R1000 max per trip

11. Michael Peter and Steven Ngubane. Forestry South Africa presentation – Forestry South Africa (FSA) Objective

• Capture growing demand in ways that meet multiple objectives (including BBBEE and SMFE) • Continuously strong rising demand for 13 years (domestic and international) • 27% deficit currently - 54% in 25 years – sawlogs (DWAF – 2005) • Zero growth in the plantation resource • Loss of 15% over same period • Challenges/factors

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Number of mentions as a key constraint

Main constraints to SMFEs

11 Excessive regulatory environment 11 Insufficient land tenure security 10 Competition from other land uses 8 Insufficient grants and subsidies 6 Insufficient access to subsidised credit 5 Privatisation of state-owned plantations 5 Lack of extension services 3 Insufficient access to loan guarantees 3 Insufficient insurance 2 Inadequate research 1 Lack of provision of free seedlings 1 Lack of availability of market information 1 Insufficient education and training 1 Imposition of land taxes 1 Insufficient political stability 1 Insufficient national security (including timber theft and arson) 0 Insufficiently developed market Bottom line – is the industry looking left but turning right? Forestry South Africa – key focus areas

• Land Restitution and new farmer support • Policy and regulation • BBBEE • Forestry protection research and development • Marketing and communication

Land restitution and new farmer support

• First approved models in country (Jan 2009) • Wholly owned – equity partners • National tribunal • SPV – Industry -DWAF-NT (June 2009) • FSA-DWAF-LIBSA • FSA-DWAF-DTI-DED • Implement the SFE development and business support program (Toolkits and Training) • Establishment of fire insurance scheme with Government for small growers • Small grower certification standard

Policy and regulation

• Conclude EC Forestry Development Guidelines with DWAF • Finalize the Sec 27 guidelines • Support and improve the afforestation Licensing Assessment and Advisory Committees to ensure faster

processing of afforestation applications BBBEE Hot off the press! Findings from recent consultation meetings with SMEs

• KZN 3 meetings held • Limpopo – for 19th November 2008 • Mpumalanga • Eastern Cape • Three broad categoric outputs:

o Business support; o Forest governance; and o Centralized industry level support

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Business support needs • Business planning – from all fronts incl. information and operational; • Access to funding and associated support; • Access to Relevant Fire Schemes; • Access to Market Information; • Access to certain business services – incl. transport; and • Access to skills development.

Forest governance needs

• Land reform – particularly, redistribution & restitution; • Forestry development targets and associated challenges – SFRA Lic; • Code of good conduct – incl. trading; • Multi-disciplinary session for sharing ideas and lessons.

Centralized industry support

• Sustainable forest management; • Systems and standards, and services. • General economic information and guidelines; • Landscape approach into futur e dealings; • Monitoring and evaluation of impacts

12. Aubrey Nsuntsha. Forest land claimants support initiative. Amahlathi Introduction

• The forestry sector is undergoing fundamental changes in South Africa at the moment; • Growth and recognition of contribution in the economy – jobs, rural development, and so forth; • The need and urgency to enhance competitiveness of the sector and maintain its viability; • More importantly however – how to we manage the changes brought about by the change in ownership

through land restitution and land reform; The land restitution issues

• More than 60% of total plantation resource base under claim; • Need for a strategic approach vs comprehensive one (risks associated with fragmentation); • Non alignment of priorities; • Claimants fragmented, lack skills, not organized; • Process itself – time, and support programmes – finance (going concern); • Need to secure fiber vs need to empower claimants as strategic stakeholders; • Failing claims, issues with lease back agreements

Forestry Land Claims Support Initiative

• Was launched on the 12th of November 2008 – 3rd Forestry SMME Conference; • A voluntary initiative that brings together all forestry claimants in the country targeting 4 major forest

producing provinces; • Aim is to engage strategic stakeholders to reduce the potential of failures and ensure active participation

of claimants at a strategic decision-making processes; • Will ensure that claimants are organized nationally and provincially; • Linked directly to the Land Claims Commission through an MOU signed with Amahlathi (12/11/08); • Linked directly with the undertaking by stakeholders who are part of the Forestry Sector Transformation

Charter – to address the need for a nationally defined strategy; • Will ensure that the priorities of strategic stakeholders, e.g., to secure long term access to fiber, is

aligned with the priorities of claimants; • Will ensure that claimants have access to support e.g. legal support and so forth and that they can

negotiate at a strategic level; • It will provide business support and organizational development; • It will also ensure that there is certainty in the land restitution process; • It will contribute positively to the transformation objectives;

32

Conclusion

• Fundamental changes are taking place within the forestry sector; • There is an urgent need to change the manner in which the forestry business is done; • Based on the need to enhance the long term competitiveness of the forestry sector – the need to ensure

that the industries have long term secured access to fiber is an imperative that must be shared by all South Africans;

• However, the manner in which this is done will determine the extent to which the sector can address the challenges relating to the shortage of round wood;

• There is a need for a strategic approach to land restitution affecting forestry; • The recently established forestry restitution support initiative will make a positive contribution in the

above regard – address failures, fires, and possibly lobby for new plantations and contribute to promoting the profile of the forestry sector;

• Creation of a truly inclusive forestry industry that is sustainable and future oriented is possible; 13. Michael Hlengwa. South African Forest Contractors Association (SAFCA) The structure of the talk

• Who we are • Membership • What support we give • Challenges

Our aim is to develop contractors to be:

• Effective business managers • Shrewd financial managers • Sensitive worker managers

Membership

• 350 contractors • 1000 employees • Head office in Johannesburg • Four Regional elected bodies • One national body

Functions

• Plantation establishment and maintenance • Harvesting including mechanized operations • Haulage • Plantation security

What we do

• Liaise with FSA • Represent contactors at FIETA • Representation at national level • Negotiate public liability cover • Liaise with Forest Solutions • Business management training • Financial management training • Supervisor training • Disseminate information • Assist with job costing

Challenges

• The capitalist ideology • Not enough trained foresters

33

PPRROODDUUCCTTIIVVIITTYY

ABSENTEEISM

DEATH

FUNERAL ATTENDANCE

FAMILY RESPONSIBILITY

LEAVE

DEPLETED SKILLS BASE

TIREDNESS & FATIGUE

INCREASED WORKFORCE

REPLACEMENT

SCARCE SKILLS INCREASED

WAGES

TIME & RESOURCES FOR

TRAINING

SAFETY RISK ACCIDENTS

SICK LEAVE

DEPRESSION LOW MORALE

PROFITABILITY

• Forestry competes with other disciplines • Competition for skilled operators • Forest work is heavy • No social security at end of working life • Spiraling costs of living • HIV Scourge – productivity suffers

HIV impacts

Infection rates for different categories of worker

20.00

-20.00

20.90

35.50 36.80

-20.90

-36.80-35.50

-50.00

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

Management Sk i l led Semi-skilled Un skilled

Job Category

HIV

Infe

ctio

n R

ate

(%)

34

Successes • We have very successful women contractors • We keep the mills going • We did a significant HIV survey • We enjoy improved relations with growers

The future

• Labor intense will be challenged • We need to make work attractive • We need to train, train and train • Contracting is here to stay

14. Michael Underwood. South African forestry institutes of tertiary education – skills and challenges report. University of KwaZulu-Natal. Outline of Presentation

• Part One: Background to Tertiary Forest Education In South Africa • Part Two: The demands of a New Curricula, What? & for Whom? • Part Three: Contribution of Tertiary Forestry Education to New Curricula • Part Four: The Way Forward: The International Setting • Part Five: New Challenges for Forestry Curriculum Development

Part One – background to tertiary forest education in South Africa

• The Institutes: Nelson Mandel Metropolitan (Saasveld), Stellenbosch, KwaZulu-Natal, Venda, and Fort Cox College.

Education: Founding curricula that helped forestry develop

• Commenced in 1905. • More Formal Forestry Science Education at the University of Stellenbosch 1932. • Saasveld Commenced as a research and forest technology teaching institute, 1932.

Forestry Curricula in the Mid 20th Century

• Dominated by male students. • Very strong influence of “hard science”. • Pre-supposition that “guardians of knowledge”.

Part Two - The demands of a new curriculum. What? And for Whom?

• Changes in Role of Forestry • Despite success of forestry science and technology by 1990s there was a decline in enrolments. • Need for broader based curricula to meet the demands of all forestry stakeholders.

The Aim of New Forest Curricula

• Society demands the distribution of resources. • Resource poor people need technical support. • The state needs capacity building. • Decision makers need more than technical solutions. • Social factors such as HIV & AIDS need to be considered to ensure sustainability.

35

Method of Ensuring Sustainable Dialogue between all Stakeholders The New Forestry Process

• First & Second Economies • The First Economy is modern, - is integrated with the global economy. • The Second Economy (or Marginalized Economy) contributes little to the GDP contains a big percentage

of the population, and is incapable of self-generated growth • The concept of the “two economies” is to respond to the challenge of the Second Economy through the

First Economy. Forestry a major source of income in the SA Economy

• Plantation Rotation: 5yr–7y • 20 000 Contract Growers

First Attempt to Redistribute Forest Resources

• Privatization of State Forests under condition usufruct. • Forest land to be managed by Department Water Affairs and Forestry. • Sale to boost Black Empowerment by:

o Black owned companies taking an equity stake. o Communities taking an equity stake via trusts. o Remainder to be returned to natural forest.

2.512

6.176

11.302

11.203

19.278

0.751

6.705

9.089

9.92

13.567

1.580

7.568

9.611

9.022

15.606

0 5 10 15 20 25

Sugar

Fruit

Metal Ores

Forest Products

Coal

Billion Rand

2002 2003 2004

36

Result of the forest privatization of 2002 • Limited impact: • Typical breakdown: • Original company 55% shares • Black empowerment company 10% shares (more later) • Community trust 10% shares • National Empowerment Fund 10% shares • Department of enterprise & employee trust 15% shares

A New Equitable Solution

• Forest Sector Transformation Charter June 21 2007 #1 • Aims for next 10 years. • 25% of business owned by Black Ownership. • Incentives for a further 30% medium and large enterprises. • Of 25% Black Ownership 10% must be black women.

State Forestry needs Capacitating

• Sphere 1: Develop DWAF capacities in the National Office Directorates to fulfill the induction processes for new staff,

• Sphere 2: Where other management agencies are appointed in its place, DWAF will facilitate or provide training

• Sphere 3: DWAF will continue to develop relationships with tertiary institutions to ensure that forest policy and new approaches are reflected in curricula

Promising Forestry Transformation Models

• Community Owned Land –leased for 5 year to corporate forestry. • Joint Venture community lands and corporate trees in partnership = company to represent shareholder. • Hybrid Model – state buys land, corporate runs land for community. • But SA Forest Research needs to change: Clonal Forestry – “exported to Africa”

Part Three - Contribution of tertiary forestry education to new curricula

• Economic aspects of education (student/staff ratio!) • Labour market for graduates (graduates skills base) r • Globalization (e.g. Change of emphasis on role of Forestry) • Didactics • Problem based learning, responsible student, key qualification versus professional knowledge,

lifelong learning, facilitation of learni ng • Dynamic Curricula development

Does South African forestry education have critical mass??

• Fort Cox – 5 academics • NMMU – 6 academics • Stellenbosch – 6 academics • UKZN – 2 academics • Venda – 2 academics

New foresters face a number of challenges

• A broader range of forestry stakeholders • Increasing scope of activities relating to forestry • A new array of professional challenges • Perceptions that foresters are irrelevant to the new agenda • Impacts on education and job market

Balance of both technical and social syllabus content

• Fort Cox is currently offering three year Social Forestry diploma. There is a need to incorporate the missing element of forestry to its programme.

37

• Based on 2007 FSSDF launch recommendations, FCC initiated two processes : • i.e. whole day practical programme • Curriculum review project to address the identified gap. • Whole day practical programme comprises: 60% commercial plantation operations, 25% community

forestry and 15% environmental issues. Higher Enrolment by Meeting New Curricula

Part Four - The way forward: • Internationally the Global benchmark is the Millennium Development Goals; Forestry can play an

important part in achieving these. • In Africa the AU-NEPAD initiative supported by all the regional networks such as SADC • From these initiatives Forestry Role can be expanded and further utilized, i.e. more better trees for the

generation of income • Goal 1: Eradication of Extreme poverty and hunger: in sub -Saharan Africa it is estimated that half the

children under 5 are malnourished. • Goal 2: Achieve universal primary education: in sub-Saharan Africa, less than 60 % cent of children

goes to primary school due to lack of resources, buildings, staff money for uniforms and school fees. • Goal 3: Promoting gender equality and empowering women: women in the developing world and

particularly in sub-Saharan Africa generally lack access to income and sufficient access to jobs. • Goal 4: Reduction in child mortality: 30 000 children a day die in the world with the biggest number

remaining in sub-Saharan Africa • Goal 5: Maternal health: more than half a million women die during pregnancy or child-birth, often due to

poor facilities and sufficient daily nutrition and income to visit clinic on a regular basis. • Goal 6: Combat HIV/AIDS , malaria and other disease: AIDS is now the leading cause of death in sub-

Saharan Africa. • Goal 7: Ensure environmental sustainability: this requires greater attention to the plight of the poor,

through ensuring that farming practices are commensurate with the environmental limits of the area, and that the systems which are put in place are both bio-physically and socially sustainable.

• Goal 8 Develop a global partnership for development: the United Nations Millennium Declaration represents a global compact which promotes both own development strategies through local income generation, as well as support from developing nations

16

13

17

15

20

16

6

4

6

32

39

32

30

33

26

24

28

31

1

17

13

10

21

2

0

2 2

13 13

19

11

22

36

25

17

22

25

3

14

1

15

0

10

20

30

40

50

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

No. o

f gra

duates

Stellenbosch, BSc Forestry NMMU, National Diploma Venda, B.Sc. (For)Fort Cox, Diploma UKZN, B.Sc Agric (For) NMMU, BTech (For)

h\

38

CAADP Pillar III Response To MDGs And Food Insecurity • Following the Abuja Food Security Summit held December 4-7, 2006, the implem entation of AU-NEPAD

Comprehensive Africa Agricultural Development Programme (CAADP) Pillar 3 “Increasing food supply, reducing hunger and improving responses to food emergency crises”

• AU-NEPAD Food and Nutrition Security Workshop Pretoria, 20-23, May, 2008 • In recognition of the crisis caused by high food prices • AU/NEPAD convened a 4 day workshop • 18 African countries to identify food price induced needs and propose practical solutions. • Also participants included representatives of over 30 development partners, NGOs, farmer associations

and research institutions and Regional Economic Communities (RECs). African Initiatives

• What are the limits of the MDGs AU-NEPAD?: • Is there a division between forestry and agriculture? • What is the role of forestry in Urban Food Insecurity? • What is the Food Security “line” between Agriculture & Forestry! • New Areas for combining “food and trees” in -Urban areas. • the Accelerated & Shared growth Initiative of South Africa to push towards halving unemployment &

poverty in South Africa by 2014 – supported by JIPSA. Part Five - New challenges for forestry curriculum development

• Change the Image of Forestry • The FAO First Global Workshop of Forest Education, Nairobi 2007 Highlight Forest Image, problems: • Indigenous trees grow under plantations • Agriculture Irrigation = 50% of SA water (X 5 that of Forestry) and is only 20% efficient

New Forestry Curricula Developments: Climate Change

• Climatic change will alter forest management • More carbon dioxide raises temperature & rainfall • This impacts upon leaf phenology, nutrient cycling & • Will increase fire and pest outbreaks.

HIV & AIDS – v important for future forestry planning

• HIV infection is declining with declining income for males and the opposite for females. Thus, with better opportunities, increasing wages we should expect the situation to deteriorate except if female wages can increase quicker than male wages. Very interesting though, as a constant measurement females with higher levels of education also showed higher infection rates. HIV & AIDS

Agroforestry

• With increased community involvement in commercial forestry, foresters must learn about agriculture • In addition urban agroforestry demands forest skills to empower the urban food insecure

Tourism/ Recreation? 15. Sipho Phakathi. Enterprise Development – a view from Mondi Zimele. MZ Index

• Context • Model • Structure & Resources • Investments • Learnings

Context

• Challenges facing Mondi Limited • Land Reform

o Securing source of fibre and land rights

39

• BEE and BBBEE o Part of the empowering process

• Forestry Charter

o License to operate Anglo Zimele

• Concept o Creating and empowering viable (SME) businesses in the Anglo supply chain through o A hands-on approach, through strategic guidance and skills transfer……. Inputs include advice

on business principles, corporate governance and strategy • Exposure

o Paying tribute to the Anglo Zimele entrepreneurs in 2005, President Thabo Mbeki said, o "This effort has answered the question I have been asking about what it is that we can do to

assist in the expansion of the South African economy through SME development and BEE." • Successes

o 90% success rate o Should be replicated

Mondi Zimele model

Strategic objective

• Encourage long-term economic empowerment, by seeking and facilitating BEE deals in Mondi’s value chain

Value Offering

• Business Plan. • Guidance on corporate governance and good business practice. • Secretarial, administrative and legal assistance. • Strategic and financial skills. • Market development and expansions. • Technical capacity building.

The Mondi Zimele Model

Adding value

Development & Support

Skills transfer (forestry, engineering,

technical, legal compliance, Financial, secretarial, administrative and

managerial etc.)

Funding

Equity Loans

Bulk Procurement Contracts

40

The way it works

Investment Criteria

• Investment will be dedicated to Mondi’s value chain. • The investment should be made on commercially viable entities in order to ensure returns on

investment. • Investment will be focused on BBBEE compliant entities. • Investments should encourage job creation. • Investment should encourage black women and youth participation. • Investee companies shall comply with all the necessary SHE and legal requirements.

Operating parameters of the Fund

• The Fund will invest in; • companies that are linked to the Mondi value chain • South African entities with at least 25.1% Black ownership (preferably at least 50% black ownership) • commercially viable small and medium sized companies • Individual company investments will initially range between R100k and R5m.

Rules of Engagement

• Invest equity and loans on a commercial basis (minority equity position 20 to 49%). • Provide ongoing business support to investee companies through regular interface. • Ensure skills transfer (technical and business). • Create shareholder value. • Board representation. • Limited liability • Will have representation on the boards of investee companies with at least 3 board meetings annually. • Prepare business plans for submission to the Investment Committee (meets 4 times a year). • Investment committee approves business plans and the Mondi Zimele Board of Directors ratifies the

decision. • Implementation (within 6 months). • Maintenance and aftercare.

Modus Operandi

Investments

MZ Technical

Services All technical (including forestry), manufacturing , logistics, etc) and day to day management development and support Sourced from

MZ Business Services

Accounting, Tax, management

information, Payroll and Retirement funding

services

Mondi Zimele (company owned by

MSA) Investments / Loans Business Planning

Governance Statutory

Investments,

Employment contract

41

Investments - Investments already made • MZ Technical Services • MZ Business Services • Khulanathi Forestry • Impumelelo Forestry Services (Pty) Ltd • Paleti Palletts (Pty) Ltd & Sawmill • Springbok Trucking • NRB Engineering • Casblock • SIDCo – Skills Incubator • Iswepe Contractors • Thuthuka Forestry • Ivins Logging (Pty) Ltd • Property Development JV (Artic Sun)

Lessons learned (forestry investments)

• Entrepreneurship • Contracting is about entrepreneurship (risk taking)

o Success of businesses linked to entrepreneur o taking over business requires structured handover programme – skills transfer

• Mentorship o Assumption of willingness to impart skills!! o Willing partners o Incentives to mentor

• Access to funding o Financial institutions (commercial banks) – are they ready o credit profile of BEE partners (risk) vs the contract (security) o Turnaround times o Expectation between funders and beneficiaries.

• Financial and management skills o Low skills base o Skills assessment for partners and skills development plan

16. Msa Madlala. The perspective of an SME. Ikusasa Forestry Services IKUSASA corporate profile

• Three pillars of operation of IKUSASA forestry o Procurement o Timber resource production and ownership o Timber resource processing

• IKUSASA (a ‘Zulu’ word meaning future) • Interpreted to mean prosperity through excellence • IKUSASA was founded and established on March 2005 by: • Mr Msawenkosi Madlala (Durban) • Mr G.T. Nxumalo (KwaMbonambi) • Ms Puleng Monatisa (Nkandla) • The offices are located in Durban, Hillcrest and Richardsbay CBD.

Vision:

• …‘sustainable timber resource production, supply and processing’… • Achieved through a phased approach that combines prudent business principles with a more ambitious,

but step-wise, investigation of opportunities in the business environment Mission:

• Sourcing and marketing timber; • A marketing entity has been established

42

• Timber resource production and ownership; • Process of farms and equity shares acquisition has been started (negotiations held with different

stakeholders) • Timber resources processing – woodchips, chipboards and pulp • Establishment of formal relationship with market leaders in this field on acquisition of equity shares • Commissioning new processing plant

Procurement entity

• Forged partnerships with various businesses. • Procure timber from Independent Timber Grower. • Most of the timber is sourced around Zululand. • Satellite operation in the KZN South coast up to the Eastern Cape. • Supply timber to various processing facilities.

Timber resource production and ownership

• Ikusasa owns a reasonable portfolio in timber production land in various parts of KwaZulu Natal • Currently finalizing few farms acquisition transaction with individual farmers • Negotiating lease agreements with land owners in various parts of the province to enhance timber

production. Timber resource processing

• Investigating possibilities of shares acquisition, and/or installing processing facilities • Provisional agreement on shares acquisition in one processing plant (Sawmill) • Establish a formal relationship with current industry players in formalizing the processing project

Business opportunities for SMEs in the forest industry

• Implementation of BBBEE Forestry Charter • Provision of expert services to land claimants regarding the forestry business operation • Timber resource production and/or leases • Enter into farms lease agreement with a long-term markets agreement • Equity shares or partnership arrangements in existing timber farming entities • Timber resource processing • Provide the market and investigate the possible entity to take advantage of the existing opportunities in

forestry sector with the beneficiaries. • Leverages • BBBEE, value addition, good corporate ship, competitiveness, supporting SMME,

Challenges for SMEs

• Access to processing market • Availability of enough resource for SMME to be able to commission their own facilities. • Narrow scope of operation for SMME in the forestry industry. • Limited financial resources for SMME to compete with bigger corporate regarding the lease of

properties. • Frustrated financial assistance from financial institution to only fund SMME if they have bigger corporate

stamp of approval • Limited information dissemination regarding the proper opportunities in the industry • Overregulation and red tapes for expansion of business for smme • Thin DWAF technical staff to assist the smme • Lack of trust from government department towards smme • Lack of transparency regarding the projects that are currently under post settlements within the land

affairs ambit • Limited number of formally established business within the industry • Limited forums which really have smme agenda • Extremely high pace of reduction of human capacity in forestry manual operations • Ageing of SMME timber producers • High level frustration of timber producer with the whole value chain

43

• minimal capacity building and motivation towards new entrants especially those who can take over their family businesses

• High costs of doing business, but less returns 17. Richard Dladla. SME business support overview. MZ Technical services Presentation focus

• Nature of support • Case studies • Lessons learned • Challenges

Nature of support

• Independent BEE company established – July 2007 to provide technical support to Mondi Zimele investments across the value chain on forestry

• Focus on BEE timber contractor support and land restitution projects • Provision of specialist development linked consultation services in agriculture and forestry

Forestry contractor support

• Contractor assessment and auditing • Currently providing coaching support to BEE entrepreneurs:

o five commercial contractors producing 420 000t of timber per annum and silviculture work on o 10 000 hectares o three emerging land claimant community silviculture contractors employing 100 people

Land reform support

• assisting three claimant communities with comprehensive business plans on their farming and forestry enterprises

• project managing a livestock development programme for Mondi • provision of consultation services in developing land reform models

Case study 1 – Faranani harvesting

• mechanized harvesting timber contractor Mr Nhlanhla Khumalo • start up contractor – sourced funding via Ithala bank • production target 49000 t per annum • coach Mr Laird Mitchell • currently in month two of production • full support required from systems to • technical planning

Case study 2 – Mondi livestock development programme

• Cattle commercialization programme • Cattle owners are having 7000 head of cattle • Dipping and branding • Cattle forum • Auctions

Lessons learned

• support to emerging enterprise is essential – coaching, training, • financial (over extended periods of time) • land claimants have no forestry industry awareness induction • entrepreneur assessment and development is essential • contractor environment highly competitive in terms of high levels of • productivity required and good business management skills • land claims businesses are inclusive of agriculture and forestry • low availability of experienced and competent people to work in this

44

• development orientated environment • no structured support funding mechanisms for emerging entrepreneurs • new approaches needed to deal with unique developments

Challenges

• Institutions that expose young people at an early age to the holistic nature of agriculture and forestry • Communism vs capitalism • Politics vs business

18. C. Mtoba. Presentation by DWAF. Department of Water Affairs and Forestry (DWAF) Presentation overvi ew

• Policy context • Economic benefits from Forest Resources • Operating environment • Opportunities and Challenges • DWAF Commitments • Conclusion

Economic benefits of forest resources

• Commercial forestry employs about 170 000 people in the formal sector with a total remuneration of 4,1 million.

• About 868 000 South Africans are dependent on the Industry for their livelihoods. • These plantations produce approximately 22 million m3 of commercial roundwood and contribute R15,6

billion annually to the GDP (9% of agricultural output) • Forestry also contributes to education, infrastructure and health • Poverty nodes study notes that socio-economic indicators are higher in areas of forest activity, and

areas also have in particular those with natural forests and woodlands that present a range of opportunities (need to address blockages, SMME support, policy etc.)

• Net foreign exchange earnings of R7 billion (30% of net RSA earnings) • Many South Africans derive their livelihoods from natural forests and woodlands for their sustenance.

These forests, the so called informal sector, are critical for their contribution to primary health care, nutrition, fuel and building material.

• Estimated that the value of forest goods and services derived from the natural forests and woodlands is around R17 billion annually

• Over 80% of rural households depend on firewood as their energy source • 27 million depend on medicinal plants for health care • These forests also provide a safety net during hard times (however, little information on the extent, value

and sustainability of the resource use) • Context: Commercial plantations contribute R15, 6 billion annually to the economy

Challenges

• Forestry is highly regulated with numerous Acts of Parliament. o Net effect being the cost of doing business

• Sawlog shortage and high prices • Skills shortage-Business, entrepreneurial and technical Forestry skills • Land reform and community readiness as new owners of forest land

o 30% land claims on private land o 61% of Komatiland under land claims (180 000 ha)

• Transfer of M&M in KZN and Injaka in Mpumalanga o 100 000 ha of new Afforestation on communal land o Shift in resource ownership and implications for the processing industry that is globally

competitive and the need for sustainability • Financial support to SME • Access to information, technology, markets , raw material, new opportunities, institutional support

45

Opportunities

• Forestry BBBEE Charter implementation • New Afforestation

o Community facilitation and capacity building o Tree planting, management and protection o Value addition

• Rehabilitation of existing Forest assets • 1 million Tree Planting Programme • Re-commissioning of commercial forestry in the Western Cape (22 400ha)

DWAF commitments

• DWAF has taken its commitments in the charter seriously o A charter implementation plan has been approved o The charter implementation unit is being established - the unit will assist in ensuring proper

implementation of the charter by government. • DWAF is developing a 2029 strategy for forestry that will have five year milestones. • The following challenges have been highlighted in the strategy:

o Land Reform o Transfers o Licensing o Skills Development o Climate Change (s/s matching) o Raising the profile of Forestry

DWAF support to SMEs

• A strategy on how DWAF can support SMEs is being developed. • A process to establish a Charcoal Producers Organization is underway • Funding policy to support Forestry Development projects and Fire Protection Associations are being

developed. • Streamlining of the Licensing process through an MoU with the three Authorising Departments. • Guidelines on the Section 27 of the Water Act are been reviewed and streamlined

Conclusions

• Future of the sector lies in partnership between corporate, government and land reform beneficiaries • Government should provide an enabling legislative environment for sector growth • SME should exploit business opportunities presented by timber growing in neighbouring states and the

export market 19. Mnyamezeli Dlamini. Commission on Restitution of Land Rights-KZN. Land Claims Commission – KZN. Restitution of Land Rights Act,

• Act No 22 of 1994 (as amended) • One of the very first pieces of legislation that the new South African government promulgated • Aim of the Act: provide for the restitution of land rights to persons or communities dispossessed after 19

June 1913 as a result of past racial discriminatory laws or practices The Commission on Restitution of Land Rights

• Established in 1995 in terms of this Act to: • Provide equitable redress and restoration to victims of these dispossessions; particularly the landless

and rural poor. • Contribute towards equitable redistribution of land in South Africa. • Promote reconciliation through the restitution process. • Facilitate development initiatives by bringing together all relevant stakeholders, especially the Provincial

Government and Municipalities. • Restitution flows from Chapter 2 Section 25 (property clause) of the Constitution, Act 108 of 1996.

46

Land Reform

• Redistribution: to provide the disadvantaged and the poor with access to land for residential and productive purposes. Its scope includes the urban and rural very poor, labour tenants, farm workers as well as new entrants to agriculture (87:13% the White: Black land ownership ratio debate).

• Land Restitution: covers cases of forced removals, which took place after 1913. They are being dealt with by a Land Claims Court and Commission, established under the Restitution of Land Rights Act, 22 of 1994 (redress).

• Land Tenure reform: is being addressed through a review of present land policy, administration and legislation to improve the tenure security of all South Africans and to accommodate diverse forms of land tenure, including types of communal tenure (ownership).

Settled restitution claims 1995-date PROV CLAIMS Ha LAND COST R FIN COMP R GRANTS R TOTAL AWARD R E CAPE 16162 86998 203,336,128 1,016,604,757 244,341,526 1,464,282,412.36

F STATE 2588 44618 7,743,300 98,493,963 37,507,754 143,745,018.31

GAUTENG 13158 9431 112,483,195 633,160,713 72,540,441 818,184,350.68

KZN 14671 570537 2,215,421,545 1,115,719,671 919,235,835 4,256,744,051

LIMPOPO 2817 406345 1,799,066,014 94,762,879 479,931,280 2,373,760,174

MPLANGA 2571 289686 2,535,688,080 307,828,896 248,414,470 3,091,931,447

N CAPE 3635 416949 226,178,183 646,333,477 72,123,130 944,634,791

N WEST 3689 279474 911,173,180 230,574,010 374,378,526 1,516,125,716

W CAPE 15504 3217 22,298,287 760,453,260 310,120,492 1,092,919,039

TOTAL 74795 2107255 8,033,387,915 4,903,931,630 2,758,593,458 15,702,327,003

Generic restitution process

• Lodgment and Registration • Screening and Categorization - Initial and advanced screening, Preliminary option, feasibility and field

research Batching and Prioritization. • Determination of Qualification in terms of Section 2 of the Restitution Act. Notification and gazetting of

“prima facie” valid claims. • Negotiations - Project plan & representation for claimants, Valuations, Monetary Value, Verification,

Preliminary planning for land use and development, Preliminary case report and negotiation position. • Settlement - Agreements signed in terms of Section 42D Ministerial Approval or a decision made by

Land Claims Court in the form of a Court order. • Implementation of Settlement - Detailed Land Planning, Transfer of Land, Development Funds, Grants,

Post-award Support & Handover. Financial compensation or other redress. Challenges

• Untraceable claimants & surveying of unregistered rights • Use of Independent Professional Valuers-transformation of the profession • Exorbitant land prices (makes restitution expensive.) • Disputes with landowners (land prices, validity and resistance to restitution may lead to referral to the

Land Claims Court.) • Community disputes (boundary disputes, land use, chieftaincy.) • Protracted claimant verification process (unavailability of documents such as ID’s, birth certificates,

affidavits, family trees, etc.) • Establishment of legal entities (CPA’s and Trusts.)

Forestry claims

• Two categories affected by land claims:

47

o Public ( former Safcol known as cat A, B and C) o Private (Mondi, Sappi and individual or small scale growers)

• recent reports regarding quantum affecting private forestry land suggest: o 3 forestry companies in Mpumalanga and KZN face claims of more than half their land o Mondi -48% of land subject to land claims o the claimed land is worth R364 million o Komatiland Forests > 75% of their 125000ha under land claim o Value tree R4.5 billion o Currently approximately 17.5% of SAPPI’s 540 000ha of timber are subject to claim (gazetted

claims) Current verified SAFCOL claims PROVINCE COMMERCIAL FORESTRY PLANTATION NUMBER OF CLAIMS

CATEGORY A: § Langeni § Singisi § Amatole § Tsitsikama: mountain to sea plantations

28 EC

CATEGORY B: 16

CATEGORY A: § Siyaqhubeka § Komati § Singisi

4 1 1

KZN

CATEGORY B: 4

CATEGORY A: § Komatiland forests

1 Limpopo

CATEGORY B 5

Mpumalanga CATEGORY A or B 20

Claims on private forest land PROVINCE MONDI SAPPI

KZN 40 claims on 134 properties 31claims on 87 properties

Mpumalanga 45 properties subject to claims 64 properties subject to claims

THIS TABLE INDICATES AN ESTIMATE OF VERIFIED CLAIMS

Settlement of forestry claims – the model

• Memo submitted and approved by the Minister proposing options/models for the settlement of private forestry land;

• The model approved by Minister is premised on: o An analysis of the forestry sector; o Sustainability in the forestry sector; o Eventual ownership of forests by restitution beneficiaries; o Win-Win situation between all the stakeholders

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Forestry models

SAFCOL claims

• Close co-operation with SAFCOL and DWAF in: o settlement of Komatiland Forest; o distribution of Forestry shares;

• Participation in the finalization of the transaction guidelines; • RENTAL received by Communities in terms of Category A claims; • Finalization of Category B and C plantations with the possibility of ensuring technical empowerment to

communities in order to own the asset; • Ensuring sustainability in the Forestry sector.

Private partners

• MOU between the SAPPI, MONDI and the Commission to settle claims in an amicable manner; • Currently developing a systematic and coordinated approach to deal with sme • Advance discussions with other private parties to support beneficiaries in terms of tangible and realistic

beneficiation (skills, economic and organizational); Areas for future support

• Job Creation and creation of downstream opportunities in the forestry sector ; • Capacity building and mentoring for restitution beneficiaries • Ensuring Forestry compliancy in terms of the FORESTRY CHARTER; • Partnerships/JV with restitution communities; • Ensuring a sustainable Forestry Sector.

COMMERCIAL FORESTRY CLAIMS

Commercial Forest with downstream operations (example mills; pulp/ paper/woodchip etc)

Compensation and or

alternative land and or shares

Purchase land, forest and

production unit based on:

Area Based Forest Specific analysis to

determine fibre inputs other land reform impacts in area , markets analysis

+

Profile of all communities

Community’s profile (expertise, finance

etc)

+

Establishment of co-operatives

Strategic model to impact Forest sector based on DWAFS future visions and support (including finance as per Act)-Restitution influence the current sector and contribute to forestry charter

Commercial Forest

BUY LAND COMPENSATION

LEASE LAND

Hardwood:Pulp Softwood:Pulp Sawlog: Soft and

Hard-wood

1.First rotation ownership of trees remain with operating company including timber supply agreement (up to 6-10 years) and

2. Second rotation, new owners choice to establish own trees (own) but supply agreement remains with operating company

The same as Hardwood but rotation 12-15 years (+compensation >)

The same as Hardwood but rotation 20-30 years (++compensation > >)

Capacity building/formal training in all categories provided clearly spelled out in lease agreement with DWAF monitoring on individual forests

Creation of permanent employment based on needs analysis on forests

Non forestry areas for farming settlement,

Secure contracts for new contractors based on equipment purchased as part of compensation.

Social investment, schools, clinics, housing etc

Enterprise development e.g bee farming eco-tourism etc

Forest owner provides (SAPPI, MONDI, NCT etc)

ADDITIONAL BENEFITS

MODEL 1: FINANCIAL COMPENSATION

MODEL 2: BUSINESS UNUSUAL

MODEL 3: USUAL BUSINESS / STANDARD MODEL

Capital input ensures ability to participate

immediately in sector by acquiring

machinery for stripping/cutting etc

and or shares in downstream activity

Hardwood:Pulp (6-10 year rotation)Compensation:62% of forest land value

Softwood:Pulp (12-15 year rotation)Compensation:92% of forest land value

Sawlog: Soft and Hard-wood (20-30 year rotation)Compensation:186% of forest land value

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WORKING GROUPS - 14 NOVEMBER 2008 20. Working group methodology Building on the wealth of experience presented during the first day, the second day of the workshop was devoted to multi-stakeholder debate about the challenges facing the SMFE sector in South Africa, and about possible ways forward. To facilitate these discussions, participants divided into three working groups, with each group including a diversity of perspectives (corporates, contractors, support services, lenders, academics …). Working groups used the “problem tree" methodology, which entails brainstorming on main challenges, root causes and possible solutions, with the help of coloured cards posted on the wall; and discussing brainstorm outcomes and their implications. The methodology enabled time-effectiveness and facilitated contributions by all –reducing debate capture by few influential voices. The schematic outcome of working group sessions is illustrated by the diagram below. Detailed reports from the working groups are included in the annex. Rapporteurs from the groups reported back to the plenary. Building on the report backs, the final session of the workshop enabled participants to come together and discuss main challenges and ways forward. Figure 1. Diagram illustrating intended working group outcomes

21. Summary of main challenges and possible solutions identified by working groups a. Capacity and skills within SMFES Overall, lack of capacity in the SMFE sector emerged as a key challenge across the three groups and in plenary discussions. Underlying causes pointed to the complexity of managing highly competitive forest businesses, lack of (and difficulty of acquiring) entrepreneurial skills, limited support services including due to a retreat of pre-

Challenge 1 (card group)

Challenge 2 (card group)

Challenge 3 (card group)

Underlying causes

Solution 1

Solution 4

Solution 3

Solution 2

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existing services (training, extension, …), slow adaptation of curricula to changing contexts, and limited information about available support. Proposed solutions included more systematically assessing and taking stock of available skills and centres of expertise; more and better vocational training (including part -time, short -course and adult education); revising curricula to include “non-technical” (social, policy) issues; reintroducing extension programmes; attracting youth in forestry, and investing in them; developing “mentorship” programmes that match successful and emerging entrepreneurs; harnessing the full potential of communication technologies (e.g. using mobile phones for SMFEs to keep track of market prices and get a better deal for their produce); establishing a one -stop-shop for guidance on available support; including forestry in school curricula; raising awareness through TV and other means of communication; and creating an environment that nurtures entrepreneurial skills. b. Access to finance for SMFEs A second main challenge area identified by all three groups is access to finance for SMFEs, whether on a commercial or grant basis. On the one hand, this problem is linked to structural factors such as low margins in forest business, and the limited familiarity of bankers with the forest sector. On the other, funding constraints seem at odds with the availability of funding lines provided by government (e.g. DTI) and development banks (e.g. IDC). Even in these cases, however, finance may be inaccessible due to limited information, rigid procedures and access restrictions (e.g. minimum size requirements). Limited capacity to develop commercially viable business plans is also an issue. Solutions discussed in groups and in plenary included establishing government grants to complement commercial lending, providing support for SMFEs to develop better business plans, creating more effective incentives (tax breaks, subsidies), increasing forest expertise in commercial lenders, building on and replicating existing corporate models for support to SMFEs (e.g. Mondi Zimele), developing creative ways to provide surety short of tangible collateral, and disseminating information about available funding opportunities. Establishing a one-stop-shop for guidance on all support services, including finance, would also be a step forward. c. Transformation of corporate mindsets towards SMFEs Another issue raised by all three groups concerns corporate transformation along the lines indicated by the Forest Charter and the BBBEE. While tools exist for implementing this transformation (e.g. the Equity Act), progress has been slow due to fear of power loss and competition, lack of real incentives (tax, market or other), and absence of clear vision on how the “new” forest industry should operate. Suggestions in this regard include creating effective incentives for corporate transformation, within the context of the Forest Charter; advertising success stories, and "naming and shaming" unsuccessful ones; more monitoring of compliance and progress made; and better organization of the new forestry stakeholders. A partnership rather than confrontational approach is key in implementing all of the above. d. More supportive and co-ordinated governance of land claim / SMFE issues A fourth major challenge that attracted much attention across working groups and in the plenary relates to governance - including with regard to the weak capacity of government agencies, lack of coordination of the various authorities managing land claim and forest sector dynamics (with no institution emerging as a key coordinating body for SMFEs as yet), and the heavy regulatory burden on doing business (e.g. with regard to licensing, water licensing etc), and. Solutions discussed included changing the regulatory framework to make it more SMFE-friendly (e.g. setting up an independent agency for all licensing requirements, and introducing penalties to be paid by the agency to SMFEs for administrative delays); establishing a one-stop-shop for advice and support services to improve inter-agency co-ordination, funding opportunities and administrative procedures; improving communication across government and industry (including a continuation of these conferences); and building on successful experiences such as the one-stop -shop established in the Eastern Cape. As a workshop participant emphasized, these governance challenges are major, and no single actor can deal with them alone - due to issues of capacity, trust, and institutional mandates. This creates the need for all stakeholders to come together to develop a way forward for the industry as a whole. The solutions discussed above (e.g. the one-stop-shop)

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must be collaborative solutions rather than uncoordinated ones. Continued multi-stakeholder dialogue is key to taking this forward, including through making this conference an annual event. e. Attracting and retaining skilled labour A final challenge that emerged was the heavy work and low wages in the industry and the problem of HIV/Aids. Contractors are struggling to retain and attract labour. Minimum wages in the sector are equivalent to those in agriculture, despite the heavier and more skilled nature of employment in forestry. Low profit margins, concerns about competitiveness and limited consultation when minimum wages were determined are among the root causes of this challenge. HIV Aids was having a huge impact on worker productivity, absenteeism and ultimately replacement. No consensus emerged on how to tackle this issue. There was agreement on the need for strong education surrounding HIV / Aids. Improving pay to attract and retain workers, and provide them with a decent standard of living was widely recognized, but difficult to enact because of market forces. Participants also emphasized the need to maintain the competitiveness of the industry, which would require linking wage increases to increases in productivity, and "thinking outside the box” for increasing returns (e.g. through developing new products etc).

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22. Tables capturing detailed group findings Rank (if any)

Challenges Underlying causes Solutions

GROUP 1 6 Education and

training Slow adaptation by tertiary Include forestry basics in school curriculum

Non integration into school curriculum Use TV to advertise forestry issues - marketing and education

Inappropriate curriculum and delivery Public relations programmes

Lack of marketing of the industry to schools Open schools for communities and forestry industry

Non willingness to change Provide opportunities for new entrants

3 Burden of legislation Change policies to reflect developmental objectives

Commitment of policy

3 Access to finance Reform mandate of Treasury and Developmental Bank to support forestry (grants)

Subsidies, grants and tax rebates to support forest development

3 Lack of corporate transformation - BBBEE

Fear of power loss or competition makes for skepticism

Increase incentives to boost BBBEE transformation

Lack of tax incentives Market success stories or name and shame

Concentration of ownership and management in industry

Growth opportunities

No market or legislative imperative so far Support to land claimants

Limited knowledge on dealing with the new forestry entrants

Sector Charter

2 Health and HIV Education, education, education - built into the company information and vision

2 Growth in raw materials

Research site and species matchings to adapt to and mitigate climate change

1 Political changes to stabilize the sector

Land reform Land reform to provide support for land claimants

Fragmentation of the industry Vote for good government

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Uncontrolled access to forest land Industry public relations and communications

1 Land reform Industry-funded institutional centre to support claimants

Settle claims swiftly Outsource the programme with government with the

monitoring and evaluations 1 Environmental issues Genuine corporate commitment to social, environmental and

economic sustainability Finalize the framework which provides model and tribunal to

assess claims GROUP 2 Skills capacity and

business management

Forestry is a complex business requiring vast skills

Promote awareness of forestry

Difficulty in acquiring skills to operate business Advocate vocational training - NGO organizations (Timber Industry Manpower Services)

Previously were DWAF personnel offering technical skills

Part-time options for training - learnerships in terms of SETA

Lack of extension officers in forestry (other than FSA)

Extension officer initiatives

Education curriculum does not accommodate forestry

Promote entrepreneurial flair

Insufficient support Lack of information on forestry Lack of co-ordination

in sector Lack of co-ordinating body; weak government agencies

One-stop shop

Limited communication Multi-stakeholder dialogues Limited demonstration of successes Communication, communication, communication Low wages in forestry Limited consultation Transformation of

industry More monitoring of compliance

More organization for the new entrants - boost capacity for them

Need for partnership approach

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Access to finance Lack of understanding by banks of the industry Government grants Low profit margins given its long-term nature Boost forestry experience among financiers

Minimum ceiling for funding More advertising of the industry

No information on available funding Promote corporate models for capacity building GROUP 3

Skills Technical skills for communities Assess what skills are available

Management skills Incentives to providers Financial skills Partner emerging entrepreneurs with successful operators

Marketing skills Combined government/corporate industry forestry

Need for communication and education Co-operatives have cell phones to be able to check industry

information Reviving extension and related

Change agents - State, corporates, banks

Skills Mind shift to understand the role of SMFE

Understanding Streamlining of bank procedures

Value systems Imaginative motivational criteria

Surety and collateral Difficulties in obtaining start -up funds Creativeness in surety – e.g. re: proposal viability and track record

Broader base of institutions providing collateral without strings attached

Vision of youth Youth need to be introduced to advantages of forestry

Forestry to be seen as full-time career, profitable, benefiting community

Political issues Small scale and large scale political obstacles Tackling "political" conflict

Land access/utilization

Land claims frustrations One-stop shop

Increased levels of training

Boosted transparency

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23. Ways forward The interest shown in this conference confirms the importance of the issues facing the South African forest industry. The massive impending changes to timberland ownership raise huge challenges to do with capacity and skills development, financing to backstop that development, new mindsets and ways of working from established industry partners, more coherent governance and careful management of impacts on sector employees. Looking across these challenges and potential solutions suggested to them, there emerge the elements of an appropriate strategic response. This strategic response would involve a series of next steps which IIED (as independent observer at this meeting) recommend for action, divided to immediate and long-term categories: Immediate priorities a. One-stop-shop. A first priority might be the (pan-industrial) funding and establishment of an institutional hub to build capacity of SMFEs / land claimants – the widely agree ‘one-stop-shop’ – which is linked sub-nationally to centres of excellence at provincial level, and internationally to a network of SMFE support institutions (e.g. the Forest Connect alliance). Developing a platform of this kind is essential if the scale of capacity development needs of new claimants and SMFEs is to be addressed in a coherent manner.

b. Baseline data collection programme. The development of a routine programme of data collection that covers both (i) SMFEs and; (ii) financial and business development service providers or programmes is essential. Such a programme is essential if government, support agencies and industrial partners are to be kept aware. c. Government incentives. In order to incentivize best practice, it is widely agreed that there needs to be a better package of incentives in place. This might involve new government grants to complement commercial lending (for example, providing support for SMFEs to develop better business plans), the creation of a ‘social label’ for fair partnerships between corporate industries and new land owners, the introduction of tax breaks, subsidies for companies compliant with such a label, and creative ways for government to provide surety short of tangible collateral to SMFEs with programmes to improve conventional bank awareness of forest sector needs. d. Research and communication. As new models are developed to deal with the issues facing land claimants and SMFEs more broadly, there is urgent need to monitor and draw lessons from what is working and what is not – in order to improve the chances of success across he industry as a whole. e. Strengthen organization of claimants / SMFEs. Representative bodies that have legitimacy and can faithfully articulate the needs of land claimants and SMFEs clearly need strengthening. Complementary roles for groups such as Amahlathi, SAFCA, FSA need to evolve over time to ensure that diverse needs are met. Long-term priorities f. Vocational training. There is a pressing need for more, better and untied vocational training (including part-time, short-course and adult education). These should be developed specifically targeting new forest owners and SMFEs. g. Education. School and university curricula need to be revised to include greater awareness of forestry and the many non-technical elements that are necessary to make the new forest industry structures work (e.g. social sciences, conflict resolution, business skills, climate change, energy production, agricultural and agroforestry basics, policy issues). h. Forestry extension. The reintroduction of forestry extension programmes was widely advocated in this time of massive sectoral upheaval.

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24. List of participants – alphabetical by surname

Belwana, Kevin Masonite (Africa) Limited 0824482014 KBelwana@masonite.co.za Bothma, Martin Mondi Zimele 0828016016 bothma@mondizimele.co.za Burger, N. IDC 0829230275 nerinab@idc.co.za Cele, P. Dalifa Enterprice 0828359525 dalifa.enterprice@gmail.com.co.za Cele, G. N/A Cele, SP Silwe Ent Chapman, Chris SA Forestry chris@artworks.co.za Clarke, Jeanette Independent Researcher 0824539800 jclarke@gem.co.za Cotula, Lorenzo IIED lorenzo.cotula@iied.org Dladla, Richard MZ Technical Services 0829207408 richard .dladla@mzts.co.za Dlamini, Cllr T.C. Amazizi Community 0720170690 Dlamini, E. N/A Dlamini, M. DLA 0824195244

Dube, Gcina MZ Technical Services 0727228534 Frauenstein, Juan Babcock Equipment 0836440499 juan.frauenstein@babcock.co.za Geldenhuys, Corne Lion Match Forestry 0824551669 Gumede, Njabulo N/A Gumede, Zenzele Mondi SQF 0732665412 Hiemann, C. DPLG Hlengwa, Michael hlengwa@satweb.co.za Howe, Derek SA Forestry Training College 0823721310 saftc@mweb.co.za Khumalo, Thulani Mondi Shanduka Newsprint 0829404360 thulanikhumalo@mondishanduka.co.za Kraamwinkel, Eugene Lion Match Forestry 083 3260874 poplar@mweb.co.za Loynes, William (Bill) Skills Incubation & Development 0828098096 bill.loynes@mondizimele.co.za Lubisi, Mzwa DTI 0827852460 mlubisi@thedti.gov.za Maartens, Ronnie Tirhani Skills for Africa 0825708284 tirhani@worldonline.co.za

57

Mack, Rory MZ Technical Services 0820520221 rory.mack@mzts.co.za Macqueen, Duncan IIED duncan.macqueen@iied.org Madlala, Mr Madlala Community Madlala, M. Ikusasa Ltd Makhathini, Maurice Mondi Business Paper 0836298153 maurice.makhathini@mondigroup.com Matiwane, Nkosinathi Dept of Economic Dev 078 2703 753 Matsho, Jim Mondi 0833831770 jim.matsho@mondigroup.com Mbhele, Chris Skills Incubation & Development 0723266625 chris.mbhele@mondizimele.co.za Mbulaheni, David SAFCOL 0834888280 davidm@safcol.co.za McMenamin, Viv Mondi viv.mcmenamin@mondigroup.com Mitchell, Laird MZ Technical Services 0734611735 laird@futurenet.co.za Miya, Madla Mondi SA 0733865869 mandla.miya@mondogroup.co.za Mkhize, Mlawuli N/A

Mkhwanazi, VO N/A Mlotshwa, Khethiwe Mondi 0825637942 khethiwe.mlotshwa@mondigroup.com Mphelo, Christian Mondi Group 0834688813 christian.mphelo@mondigroup.com Msimango, Hlengiwe Masonite (Africa) Limited 0824107725 HMsimango@masonite.co.za Mthembu, Lungile Dept of Economic Dev 072 1537 492 Mthiyane, Bheki Sappi 0823240253 Naidoo, Ronnie FIETA 0826507022 ronnien@fieta.org.za Ndaba, Scelo N/A Ndlovana, Bheki Ilanga Newspapers 0833402348 bhekin@ilanganews.co.za Ndlovu, Mlu Umthunzi Wokuphumula Trading Ent. 0847003388 205516238@ukzn.co.za Ndlovu, Nomzamo Dept of Water Affairs & Forestry 0828796602 NdlovuN@dwarf.gov.za Ndwandwe, Lunga N/A Newman, Craig N/A

58

Ngcobo, Sabelo N/A Ngubane, Steven Forestry South Africa 0828807165 steven@forestrysouthafrica.co.za Ngubane, David Hansmerensky 0833209023 davidn@hansmerensky.co.za Nicholson, Chris IDC chrisni@idc.co.za Nkosispendule, Quvile DWAF 0828055984 QuvileN@dwaf.co.za Nsuntsha, A. Amahlathi Nxele, Mr AmaHhobe Community Peter, Michael Forestry South Africa 0838080425 mike@forestrysouthafrica.co.za Phakathi, Sipho Mondi Zimele 0837428020 sipho.phakathi@mondizimele.co.za Potgieter, Johan MZ Technical Services 0828205131 johan.potgieter@mzts.co.za Pupuma, Fikiswa Dept of Economic Dev 0827888330 pupumaf@kznded.gov.za Rampedi, Moshibudi Priscilla Water & Forestry 0784583605 rampedim@dwaf.gov.za Rosenberg, Chrystal Ventureworx 0824586321

Shezi, Michael Eyethu Harvesting 0832703924 shezi.michael@gmail.com Sithole, Zola DWAF Forest Enterprise Development 0828871530 sitholez@dwaf.gov.za Skosana, Sipho DWAF 0832331652 siphos@dwaf.gov.za Smith, Dutliff Sappi Forests (Pty) Ltd 083 661 7038 dutliff.smith@sappi.com Steenkamp, Jaap Nelson Mandela MU 0823777998 jaap.steenkamp@nmmu.ac.za Tembe, Solomon N/A Thanyani, A. DWAF 0829083202 azwitat@dwaf.gov.za Underwood, Michael UKZN (Speaker) 0833252884 0332606088 underwoodm@ukzn.ac.za van Aardt, Estell SA Forestry Training College 082 7817 156 van Aardt, Hannes SA Forestry Training College 084 5055 107 van Loggerenberg, Carl SAPPI 0823297115 carl.van.loggerenberg@sappi.com

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van Vuuren, Gary Ventureworx 0828890270 newventure@worldonline.co.za Zulu, Cindy N/A Zuma, Sannele 0823247548 Zwolinski, Janusz UKZN 0828898282 zwolinskij@ukzn.ac.za