NCT FORESTRY CO-OPERATIVE LIMITED Submission to the Portfolio Committee for Trade and Industry – Co-operatives Bill 15 March 2005 Vusi C Dladla

A Forestry Co-operative NCT Forestry Co-operative Established in 1949 Asset base: R 0.5 billion as at 1 October 2001 Annual turnover: R 1.4 billion Today has 2045 members of which 24% are Black The Small Timber Growers 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 optimise financial result on a sustainable basis

Our sphere of influence

Characteristic of NCT Because of strong first economy, second economy benefits from such strong base Making profits at farm level

Evidence of working together NCT DWC plant Big suppliers secured the market, small suppliers get full access to the market talk Maximum patronage benefit to all members

Where is NCT coming from? NCT Forestry Co-operative Supports the objectives and principles of Co-operatives Bill BUT Does have two serious concerns

Proposed Co-operative Bill Concern # 1 Voting We cannot underestimate the role of democracy in running organisations Section 14(1)(e) = 1 member: a vote Amount of business ≠ amount of say Members participation differs by size and so is the financial risk they carry

Challenges to NCT Should the bill be approved in its current form: Members who are the backbone of the co-op might resign & form own marketing companies The co-operative will weaken and lose market share Small timber growers will suffer as they are to a large degree dependent on big growers for market access The profitability of tree farming will plunge since companies will offer low prices for suddenly available timber Up to 10 000 job losses possible Sub bullet 1, add DWC example: Funding and market security Example 2: A members who does not do business through the co-op with unlimited right to vote.

Solution To conserve our member base, we propose: Make s14(1)e an optional provision for co-ops Allow patronage voting for co-ops that are either: Above x member base or Above y turnover or Have an existing constitution that allows for patronage voting General issues of the co-op be decided on head count bases and financial/investment issues on patronage

Proposed Co-operative Bill Concern # 2 Access to information We accept the need to have access to information Section 22 (i) gives members access to minutes of the board meetings & other sensitive information. Members can make copies of this for their own use Now we have both timber farmers and corporates (such as paper companies) as our members IPPC = International Pulp and Paper Companies. This provision is not even allowed in the companies act and it poses a serious strategic risk to the co-operatives

Challenges to NCT Should the bill be approved in its current form, International pulp & paper companies who compete with the co-op can access information to use it against us Marketing strategies Co-ops members plantation information Market prices Disclosure of sensitive information can do serious harm or disadvantage the business

Solution We propose: Expand section 22 subsection 2 to capture restricted access to confidential information as determined by the board of directors Mirror Companies Act: “Any minute book of a company kept under section 204 shall be open to inspection during business hours by any member of the company, without charge, at the registered office of the company or the office where it is made up, subject to such restrictions as may be provided for in the articles or imposed by the company in general meeting, but so that not less than two hours in each day shall be allowed for inspection ” Access to information is captured in PAIA

Summary The objectives and principles of the bill are supported by NCT Forestry Co-operative Two important concerns of large marketing co-operatives should be considered The experience gained to date by the bigger co-operatives will be valuable in mentoring the emerging co-operatives. Closure or conversion of these co-operatives will be a loss in the economic system of South Africa

Conclusion We need a win-win situation Where Co-operatives are equally benefiting their members without any fear of prejudice But Managed in the manner that is both economically viable and sustainable Do not spoil this successful recipe. It works well now

Thank You