SA unit’s BEE-plus makes it charter ready

30th November 2007 By: Chanel de Bruyn - Creamer Media Senior Deputy Editor Online

Black empowered Mondi Packaging South Africa (MPSA) - with Mondi and the Shanduka Group as its main shareholders- believes that the new forestry sector charter, which could be unveiled soon, will be aligned as far as possible to the generic broad-based black economic-empowerment (BBBEE) codes, as set out by the Department of Trade and Industry (DTI).

It is, therefore, convinced that its BEE efforts make it entirely ‘charter ready'.

MPSA is 55% owned by Mondi and 40% by Cyril Ramaphosa's Shanduka Group. Shanduka also owns 42% of Mondi Shanduka Newsprint in a joint venture with Mondi, who owns 50%. The balance of the shares are held by an employee share ownership programme (ESOP) that was launched in January 2006, with about 5 000 of Mondi's employees in South Africa participating in the programme, regardless of whether they work for MPSA or the group itself.

"The logic behind the ESOP programme, is that the employees were instrumental in building what is now Mondi and should, therefore, benefit," says MPSA CEO Theo van Breda.

The shares were issued at a nominal value of one cent a share, and were recently valued at multiples of that. A board of trustees is responsible for the management of the shares, which will vest in 2011.

But the alignment with government policy does not end with the empowerment deal, particularly given that Mondi operates within two of the four lead sectors identified for attention under the DTI's National Industrial Policy Framework (NIPF), and the associated Industrial Policy Action Plan. The sectors in question are paper forest products and plastics fabrication.

The NIPF sets out government's approach to industrialisation in the context of the Accelerated and Shared Growth Initiative of South Africa (Asgisa) and it targets halving unemployment and poverty by 2014 through accelerated growth of at least 6% from 2010.

The objective of the NIPF is to align the private and public sectors' efforts in its industrial policies, and to improve growth and employment conditions across the South African economy.

Van Breda says that Mondi is in agreement with government that there are real growth opportunities, in both forest products and plastics fabrication. "What we have done from an industry point of view, around the forestry charter, was to position it around government growth aspirations."

He reveals that a study, jointly funded by the industry and the DTI, was done about four years ago by Genesis Consulting to determine the potential of the industry. The outcome was that the industry was indeed worth investing in, and one that government should be supporting.

The priority of the government is both to increase afforestation and stimulate job-rich downstream activity.

Van Breda says that the charter should also unlock a commitment by government to expedite the afforestation licensing process. The confirmation of land rights for land-holding communities, the extension of technical and financial support for the industry and the development of strategies to boost downstream industry are other areas of priority.

Mondi is currently aligning its economic-empowerment initiatives to the BBBEE codes that were gazetted in February this year. The Forestry Charter, which was launched by the Minister of Water Affairs and Forestry, Lindiwe Hendricks, in June, has not yet been gazetted, but is in the finalisation stage.

"MPSA's scorecard in relation to the BBBEE codes is 69, which makes us a level 4 contributor. This means that people who procure from us can claim 100% of that spend in their preferential procurement," says Van Breda.

Meanwhile, the group is also pursuing plastics-fabrication growth through Mondipak Plastics, which is emerging as a major rival in the sector, particularly following its acquisition of the Lenco group.