Biomass, export-quality furniture, 100 000 ha of afforestation, thousands of downstream jobs – the list of possibilities and the potential for the forestry sector in the Eastern Cape and KwaZulu-Natal are material.

Forestry in the coastal region, generally, and particularly in the impoverished Eastern Cape, has been earmarked as a significant development sector with the potential for large-scale job creation, the implementation of broad-based black economic empowerment, the upliftment of the rural communities and the subsequent alleviation of poverty. For this reason, forestry, pulp, paper and furniture have also been earmarked as a so-called ‘lead sector’ under the newly unveiled National Industrial Policy Framework (NIPF), and the associated Industrial Policy Action Plan.

But while the promise is big, the challenges and constraints are equally daunting, with close observers arguing that translating this aspiration into tangible actions that move the vision from “pie in the sky to food on the table” will require hard work and coordination, not to mention some direct State support.

At the forestry and timber summit held in February, in Mthatha, Minister of Water Affairs and Forestry Lindiwe Hendriks lamented that, although a great deal of work had been done, the forestry sector had not been expanded significantly.

Since the summit, the Department of Water Affairs and Forestry (Dwaf) has been attempting to mobilise stakeholders, such as the district municipalities, the Eastern Cape Development Corporation, the Department of Land Affairs, the Department of Agriculture, the private sector, forestry consultants, traditional leaders, community members, and nongovernmental organisations, around the vision. These groups and authorities have come together to discuss issues that have been highlighted in the draft forestry development protocols for the Eastern Cape.

Adding further impetus has been the NIPF, with an associated commitment from government to expedite the afforestation licensing process, the confirmation of land rights for land-holding communities, and the extension of technical and financial support.

Dwaf deputy director for forestry development (Eastern Cape) Nkosipendule Quvile says that the aim of the protocols is to facilitate engagement between the private sector, investors and communities in a way that is acceptable to the various spheres of government that play a role, and is aligned with the developmental objectives of the country.

The draft protocols are expected to be signed by all the relevant stakeholders in a signing ceremony scheduled for September. Once the protocols are signed, roadshows, aimed at making communities aware of the protocols and forestry opportunities in their areas, will be rolled out in the local municipalities.

Quvile clarifies that the goals for the afforestation in the province are long term and are to be achieved over a period of 10 to 20 years. He adds that a study on strategic environmental assessment, commissioned by the department, has revealed that there is potential for new afforestation on about 100 000 ha of land in the region. However, this land is under the ownership of private farms and communities.

“The use of the land identified for potential new afforestation will depend on the willingness of both the private sector to invest, and the communities to release their land. The success of new afforestation in the province will be monitored by the number of licence applications, and the extent of the land required for new afforestation,” explains Quvile.

Currently, there are certain key role-players, from both government and the private sector, working towards the outlined goals for forestry in the region. Engineering News explores the progress being made.

IDC says it is a partner, not just A financier

State-owned national development finance institution, the Industrial Development Corporation (IDC), is championing progress in the forestry sector through its wood, paper and other industries strategic business unit (SBU).

SBU head Rentia van Tonder says that the unit is focused on the develop-ment of the entire value chain from the forest, through to the value-added, finished products. Its vision is to support entrepreneurs by funding sustainable projects and empower- ing them to manage and run their own operations.

The focus of the unit is not only on empowerment projects, but also on skills transfer, and the development of resources, in the form of new forests, and new opportunities. One such opportunity is a first-of-its-kind biomass project.

Eastern Cape Biomass (EC Biomass), situated in the Coega industrial development zone, manufactures fuel pellets that are used as a complementary fuel. The project will be commissioned next month and an offtake agreement has been signed with a company in Denmark. Van Tonder says that there is a huge demand for pellets from the renewable energy market in Europe, and the Danish company is already willing to up its current intake.

The biomass plant uses forest residue, sawmill waste and alien vegetation, in addition to some of the trees removed in line with the government’s Working for Water project, which is operational in the Eastern and Southern Cape. The community has access to about 2 000 ha of wattle jungle forest. Some 370 permanent jobs have been created through the project – 70 full-time with EC Biomass and 300 new jobs in the community.

The IDC has a 10% equity stake in EC Biomass, and an additional 5% is held by the community (which provides a portion of the raw material), and 5% by a staff trust. The remaining shareholders in EC Biomass are Willem Claasen, with 50%, and a black economic-empowerment (BEE) partner, with 30%.

PG Bison

Another high-impact project is PG Bison’s new board plant, located outside the town of Ugie. The project includes construction of the plant and new plantations in the North Eastern Cape forest, which supplies the resources for the plant. The first products are expected to be available by January next year, says PG Bison CEO Chris van Niekerk. The board plant will supply the furniture and building materials industries.

The project involves a total investment in the Ugie and Maclear areas of about R1,5-billion. About 103 houses are being built to accommodate the plant’s staff. Van Niekerk notes that some 2 700 permanent jobs, in the forest and the plant, are being created by the project. He adds that associated development in the region will raise this figure substantially.

The IDC is partnering PG Bison’s development mainly in the forest, and Van Tonder says that it is currently negotiating its role with a view to extend its stake into the listed entity.

The region’s 100 000 ha

In 2004, an intergovernmental forum commissioned a study that identified the potential for at least 100 000 ha of new forest plantation in the Eastern Cape, and at the summit this year Hendriks reinforced this figure.

There have been a number of research studies done on the actual figures available, and the figures differ based on the assumptions made. Department of Trade and Industry (DTI) chief director of resource-based industries (enterprise and industry develop- ment division) Masizake Zimela explains that some quoted figures have identified the total hectares suitable for new afforestation, and deduced from that (based on their assumptions) the hectares that will be used for other purposes.

In terms of the DTI’s figures, Zimela says that the Genesis Analytics Study commissioned by the department identified 100 000 ha in the Eastern Cape, and an additional 40 000 ha in KwaZulu-Natal not being used for commercial purposes.

The NIPF’s forestry sector strategy provides for the afforestation of 100 000 ha of new planted area in the Eastern Cape over the next ten years and 40 000 ha in KwaZulu-Natal. The NIPF says that this represents an investment of over R1,5-bil- lion in the sector, with additional investments in downstream processing industries. It estimates that the new afforestation has the potential to contribute R215-million to the gross domestic product (GDP) and create 26 000 jobs at plantation level, and 1 700 jobs at processing level, in the Eastern Cape. The areas in KwaZulu-Natal will contribute R500-million to GDP and create 15 000 jobs at plantation level and about 429 jobs at primary processing level.

The IDC is part of a steering committee driving the new afforestation, and Van Tonder says that it will play an instrumental role in supporting government and other industry authorities in achieving this goal.

She adds that there may be some difficulty in getting the buy-in of the communities owing to the long-term nature of forestry projects. To mitigate this, it is important to communicate effectively with all involved and to ensure local and national government involvement. The IDC endeavours to align all the stakeholders with one common purpose, that being to “get the trees in the ground as soon as possible”.

Besides the identified 100 000 ha in the region, Van Tonder notes that, according to current projections, South Africa will need to plant some 780 000 ha to cope with the expected demand. It is for this reason that the IDC is investigating the potential for afforestation in neighbouring countries.

The DTI to zero in on downstream development

Zimela says that the department has been working in close collaboration with the Eastern Cape provincial government, Dwaf, the Department of Environmental Affairs and Tourism, the Paper Manufacturers Association of South Africa (Pamsa), and Forestry South Africa.

The DTI was part of the intergovernmental forum that commissioned and funded, in conjunction with Pamsa, the 2004 study that investigated opportunities and constraints in the forestry sector. Besides the identified 100 000 ha of new afforestation, Zimela says that there is potential for the rehabilitation of Dwaf forests and the conversion of about 10 000 ha of wattle jungle into forests.

Zimela says that the Eastern Cape provincial government is in the process of finalising an implementation plan for the development of the sector.

“Once this has been completed, we will sit with the Eastern Cape provincial government, Dwaf and the Department of Labour, and look at the other stakeholders that are involved with regard to how we can accelerate the development of this potential.”

Zimela says that demand for timber has exceeded the current supply owing to a number of reasons; firstly, the high rate of economic growth which has not been experienced in the past, and, secondly, a decrease in commercially funded forestry plantation owing to, on the natural side, forest fires, and on the man-made side, a lack of investment.

“Demand has been met by importing wood products; however, the issue is that in some subsectors the timber is not imported – the finished products are – and so the activities to create that finished product locally are reduced. The downstream industries suffer when the finished goods are imported,” notes Zimela.

He adds that land claims have also played a role in slowing investment as companies are inhibited from actively investing in the land while the disputes are being settled. On the land claims issue, Van Tonder says that a significant portion of afforested land the IDC is involved in is subject to land claim.

“The Proforestry schemes of the IDC could be used by communities to acquire plantations in conjunction with land settlements to ensure sustainable broad-based forestry development,” says Van Tonder.

Previously, the DTI had only played a minor role in the forestry industry value chain.

It will now be directing its efforts in the Eastern Cape towards the development of downstream processing industries. This will result in the establishment of a furniture technology incubator, business support for small-scale sawmillers and the possible creation of wood clusters.

Furniture technology incubator

Zimela explains that the DTI will collaborate with the Small Enterprise Development Agency (Seda) Technology Programme, the district municipality, the Eastern Cape Development Corporation, and the provincial government to set up a furniture technology incubator. Its aim is to facilitate higher value-adding activities, specifically high-end furniture design.

The Seda Technology Programme has appointed Furntech to oversee and manage the renovations to the building that will house the incubator, and its establishment.

The incubator, which will be situated in Mthatha, should be up and running by March or April next year. Zimela says that one of the main objectives of the incubator is to fulfil the need to process as much of the raw material as possible in the region.

“It becomes economically unviable to transport timber beyond certain distances, so one needs to consider processing it closer to the origin of the resource,” he clarifies.

For this to be achieved, skills in the region need to be developed so workers are able to effectively perform the processing and related activities. Zimela encourages a move away from low value-added products, such as desks and chairs, and says that the department’s long-term end-goal for the sector is to upskill workers to such a level that they are able to develop export products that are of high enough quality to penetrate international markets.

Zimela points out that this will not be the initial focus of the incubator, but rather its long-term view. He adds that there is a sufficient flow of people into the industry to feed the incubator.

Small-scale sawmilling

The focus on small sawmilling businesses arose as part of the DTI’s general small business support. As the efforts in the Eastern Cape forestry’s sector will be the DTI’s first involvement, it is currently gathering information that will allow the department to create an effective support programme.

Zimela says that the DTI is looking at the conditions in which the existing businesses operate. These include where they source raw materials, what equipment they use, their locations, and the level of training of the operators and owners. The aim is not to have small sawmillers incorporated into larger companies, but rather to identify what technology, equipment and support can be provided in order to facilitate the growth and development of the small business.

Zimela comments that more often than not the small business owners are in survival mode rather than being profit-oriented and looking to grow their businesses. He adds that the DTI can help in creating a paradigm shift in these businesses, and the more income the businesses are able to generate, the further its owner and employees move away from the threat of poverty.

Hans Merensky Timber

Hans Merensky Holdings, through its Hans Merensky Timber (HM Timber) division, is one of the private-sector companies making an impact on the development of forestry in the Eastern Cape.

The company will be commissioning a new R130-million plywood plant in Kokstad this month. The plant is the first phase of a three-phase development that includes a sawmill and a medium-density fibreboard plant. HM Timber GM: panel products Bertie Venter says that the company intends to establish a bioenergy plant at some time during phase two (sawmill) and phase three (medium-density fibreboard plant).

The plywood plant will have a log intake of 60 000 m3/y and its products are intended for use as construction and building material and furniture. The plywood plant has been undertaken as a joint venture between Hans Merensky and the Spanish group, Finsa.

HM Timber has three sawmills in the Eastern Cape and KwaZulu-Natal, namely the Weza, Singisi, and Langeni sawmills. The Weza sawmill has a yearly intake of125 000 m3, the Singisi sawmill about 156 000 m3/y and the Langeni sawmill has an intake of 195 000 m3/y. The three sawmills employ a cumulative total of about 1 400 salary and wage earners.

HM Timber has about 57 000 ha of land, planted predominantly with pine, that is leased from the local communities, as it does not own land in the region.

With regard to future growth, Venter says that the company intends to plant as much area as it can get permits for.

HM Timber recently concluded a R260-million BEE transaction with the women’s empowerment group, Wiphold, Vuka Forestry Holdings, and its staff. The empowerment partners now own a 26% stake in HM Timber.

Alignment with the Forestry Charter

Van Tonder acknowledges that government is in the initial stages of implementing the charter, but says that, as a parastatal, the IDC is aligned with government’s objectives.

The IDC has been part of the funding subcommittee of the charter, and has provided advice on funding models based on its research and experience.

“The IDC has been crucial in informing the debate around funding forestry projects. We see ourselves as being instrumental in imple-menting the charter’s objectives, not only [the] transfer of ownership, but BEE procurement and all the elements, and facilitating growth throughout the value chain,” Van Tonder reflects.

The IDC is also currently in discussion with Dwaf regarding the proposal of a fund; the IDC can then facilitate coinvestment with the fund in community forestry projects.

“It is now a case of walking the talk; we are working on the implementation of all our strategies, aligned with the charter. It must become a real document with impact,” declares Van Tonder .

Towards true transformation

Van Tonder believes that forestry is one of the few industries that can achieve true rural development and upliftment, as the areas suited to afforestation are rural. The IDC’s Proforestry scheme is focused specifically on facilitating broad-based rural development and its preference is to empower rural communities to become partners in the value chain, not only by giving them finance, but also through models and schemes that sup- port the transfer of skills and technical know-how. The Proforestry scheme was initiated in November 2005 and has been extended to continue until December 2009.

The IDC has a budget in place to support these broad-based groups to develop viable businesses. Ensuring an effective skills transfer in the empowerment transaction is also important. To approve the funding of a transaction, the IDC requests a detailed plan of how the skills transfer will take place and defined milestones of what is to be achieved in the interaction. The IDC will also monitor the achievement of these targets and, on some occasions, penalties will be introduced, geared at ensuring that the skills transfer happens.

Van Tonder says that the IDC’s main objective is to ensure ownership, but this goes hand in hand with the skills and technical knowledge transfer and the operational involvement.

“We do not want the communities to only own a stake in the forestry project – we want them to play a part in the organisation and its operations,” she comments. “The group must also not remain dependent on the developer for support; the skills will empower them to carry out future business independently,” she explains.