Pulp, paper and packaging group Mondi, which has dual primary listings on the Johannesburg and London stock exchanges, is confident that its commercial and strategic interests are not in any way threatened by the fact that some 48% of its South African land is still subject to claims by previously disadvantaged communities.

Mondi's forests occupied some 1,3-million ha mostly on the eastern side of the country, and the group harvests some 22-million cubic metres of timber yearly for use as pulpwood, sawlogs, mining timber and poles.

Speaking during a media tour of its Richards Bay facilities this week, CEO David Hathorn said that the company was working with more than 100 communities, the Land Claims Commission and government to resolve the matter as soon as practically possible.

He stressed that, while 48% of its title-deed area was affected by claims, that did not automatically translate into 48% of its actual land holdings. "That is because if a title deed is for 1 000 ha and a land claim is for 100 ha, the whole 1 000 ha falls into the claim. So, we simply don't know what the right number is, but it could be up to 48%."

He stressed, too, that the economics and sustainability of its vertically integrated business model, which embraced everything from tree breeding and growing through to the production of advanced paper products, was not at risk.

"We will receive full-value compensation for the land from the State and will still have the right to retain the trees," Hathorn explained, adding that Mondi had developed five settlement models which it was in the process of presenting to affected communities.

These five models were premised on variations on two main kinds of settlement:

• A sale and leaseback, whereby a community seeking an annual income flow, would take ownership of the land, while Mondi would be compensated for the value of the land and then pay rental to the community, which would also allow it to continue to grow trees;
• An alternative model could involve Mondi contributing its timber into a joint-venture company, with the community contributing the land. Mondi would get compensated for the land value, and would take up to 75% of the equity in the joint venture, owing to the fact that the timber was worth about 75% of the total costs. That also meant that it would continue to receive 75% of the timber at cost.

To date, the group had negotiated settlements with 15 communities, with these deals currently awaiting the approval of the Land Claims Commission.

"Therefore, we do not see it as a major commercial issue for Mondi, but as an opportunity to deliver a sustainable working model in engagement with communities that will enable us to grow timer on that land for a long time to come," Hathorn insisted.

However, he acknowledged that the process was absorbing much management time and attention. "Do we see it as a huge management commitment in the short term? Absolutely, it is very time-consuming."