FOREST SECTOR CHARTER COUNCIL Department of Agriculture, Forestry and Fisheries Portfolio Committee 19 June 2013 Ms Zodwa Phakedi: Executive Director 1

PRESENTATION OUTLINE Forest Sector Charter Forest Sector Charter Council Functions of the Charter Council Progress in the implementation of the Charter -Monitor & report on implementation of BBBEE Status. -Structure of the Industry -Progress made within the Sub-sectors Challenges 2

Forest Sector Charter Originates from the BBBEE Act, No 53 of Launched in 2005, established a Steering Committee draft Charter developed by working groups & Steering Committee. FBBBEE draft Charter gazetted for public comments in May Published as a Sector Code in June

Forest Sector Charter (cont) Main objective - “To extend economic opportunities and benefits of Forest Sector to the previously disadvantaged black groups”. Scope of application -Growers -Contracting -Fibre -Sawmilling -Pole & -Charcoal sub- sector 4

Forest Sector Charter Council Also “Council” launched in May A section 21 Company. Composition: 19 Board members -Industry, Government, Labour, Communities, FP&M & an independent Chairperson. Main responsibility - To facilitate, oversee, encourage, monitor & report on the implementation of the Charter. 3 strategic session, highlighting strategic objectives & quarterly meetings per annum. 5

Forest Sector Charter Council (cont) Foresight exercise in 2011 to craft preferred future for sector. Reporting: -The President’ BEE Advisory Council, -Minister of Trade & Industry & -Minister of Agriculture Forestry & Fisheries. Currently housed at SAFCA offices, Isando Secretariat - Executive Director, Researcher & Office Administrator. 6

Functions of the Charter Council Encourage, support and facilitate implementation of charter -Review yearly priorities. -Identify new activity areas. -Define work programme and & role of task teams. -Review & prepare business plan and budget highlighting prioritised activities. Monitor and report on Charter undertakings -Solicit progress reports from industry & government on Charter obligations. -Monitor progress. 7

Functions of the Charter Council (cont) Monitor and report on Charter undertakings (cont) -Identify potential & emerging issues & -Tabulate actions and adjustments required. Monitor and report on the BBBEE status -Solicit scorecard information from verified enterprises. -7 Scorecard elements namely; Ownership (O), Management Control (MC), Employment Equity (EE),Skills Development (SD), Preferential procurement (PP), Enterprise Development (ED) & Socio-economic Development (SED). 8

Functions of the Charter Council (cont) Monitor and report on the BBBEE status -Scoring differs depending on size of enterprise. -Exempted Micro Enterprises (EME), turnover < 5M no elements scoring. -EME automatically assume a level 4 status. -EME can assume level 3 if 50% black owned & comply with industry Codes of Good Conduct. -Qualifying Small Enterprises (turnover R5M- R35M) any 4 of the 7 elements. 9

Functions of the Charter Council (cont) Monitor and report on the BBBEE status (cont) -Medium & large enterprises (MLE) turnover > R35M scored -7 elements. -Scorecard information valid within the financial year. -Third transformation report issued. -Fourth report on progress. -Data determines B-BBEE status & used in tabulating recommendations & necessary actions. 10

Structure of the Forest SectorSectorStructure Forestry Nine large groups Mondi Forests, South African Forestry Company, Yorkor, MTO Forestry, Masonite (Africa), Sappi Southern Africa, Hans Merensky Holdings, Amathole Forestry Company Balance is made by government, medium/small scale timber growers. Contractors Estimated 300 forestry contractors 150 Medium and some large enterprises 150 EMEs Pulp & Paper Companies Two large groups Sappi & Mondi Board Producers Three large groups PG Bison, Masonite (Africa), Sonae Novobord Chipping Plants Three large groups NCT (Chincell), NRB Fibre & Durban woodchipping, Mondi (Silvacell), TWK (CTC) 11

Structure of the Forest Sector (cont)SectorStructure Sawmills About 250 operating swamills Large sawmilling groups York Timbers, Hans Merensky Holdings, Cape Timber Resources, Komatiland Forests, Rance Timbers, Sappi Balance are QSE & EME Mining Timber Companies Two large groups Reatile Timrite & Bedrock Mining systems Pole Treaters Few large companies Woodline Timber industries, Harding treated Timbers, Natal Forest Products Balance very fragmented Charcoal Three large producers E & C Charcoal, Charka & Braai & Barbeque International Balance very fragmented 12

BEE status - Large Forestry Companies 13 Data reflects total coverage. Seen improvements in almost all the elements. Lowest recordings seen in MC, EE & SED. Sub- sector currently at level 4, similar to 2011.

BEE status- Contractors 14 Coverage only for medium sized enterprises. Performance not varied due to the compliance to any 4 elements. Insignificant performance seen in SD and PP. A level 3 through out.

BEE status - Pulp & paper 15 Total coverage. Poor performance in MC, EE SD & SED. Sub sector improved from level in 2011 & 2012.

BEE status - Board producers 16 About 96% coverage. Poor performance in MC, EE, & SED. Improved from a level 6 in 2010 – 4 in 2012.

BEE status- Large sawmills 17 Good coverage of about 70%. Struggling in terms of MC, EE, & SD. Improved to a level 5 similar in 2011, but one level above compared to 2010.

BEE status - QSE sawmills 18 Average coverage. Insufficient data in Not variable performances within the elements, except for MC & SD. Improved from a level 5 in 2010 to a level 4 in 2012.

BEE status - Pole treaters 19 Low coverage about 10%. Average performance in 6 elements. Poor performance in SED in Achieved a level 4 status in 2012, just one level below 2011.

Average scores & BEE levelSector B-BBEE Score B-BBEE Level B-BBEE Score B-BBEE Level B-BBEE Score B-BBEE Level Large Forestry Contractors (QSE) Fibre Pulp and Paper Companies Board Producers

Average scores & BEE level (cont)Sector B-BBEE Score B-BBEE Level B-BBEE Score B-BBEE Level B-BBEE Score B-BBEE Level Sawmillling Large Sawmills Sawmills (QSE) Pole Treaters

Sector Performance BBBEE Status -F11/12 average score of 66.7, sector a level 4 contributor. -Score similar to score in 2010/11 but a level above 2009/10 score (level5). -Sector performing well in socio-economic development enterprise development, preferential procurement, and ownership. -Improvement -skills development,% of target score still 41%. -Poor performance on management control & employment equity. 22

Challenges B-BBEE status Insufficient in data collection e.g. no data for Chipping plants in Reports by most enterprises in the Charcoal sub-sector is a challenge. Some accreditation still through the generic scorecard. Weighted scores / allocation of one scorecard. Unprescribed methods for non- compliance. 23

Challenges (cont) Other Land availability for Forestry activities. The pace for settling Forestry related land claims. The models for distributing category B & C. The pace at which SMME are upgraded to large enterprises. The introduction of zero tariffs. 24

Challenges (cont) Other Insufficient funding for Charter undertakings. Inaccessible funding from funding institutions. Insufficient funds for Environmental Impact Assessment( though Dti & DAFF assisting). Water use licenses application process, (though Letsema project by DWA of great assistance). 25

Challenges (cont) Other Increase in Temporary Unplanted Areas (TUP). Exclusion of other key stakeholders in the Charter Council. The marginalised Forestry profile. 26

F2013/14 Business plan priorities Implement an in-house Web-site & Web-based reporting System. Facilitate the re-alignment processes of the Codes of Conduct. Conduct a Comprehensive Charter Review Process. Conduct a Comprehensive Study on Import Tariffs. Develop & Implement a Communication strategy & plan. Intensify the Outreach Programme- Awareness Campaigns. 27

Conclusion - Are we there? SECTOR IS WELL ON ITS WAY. 28

29 THANK YOU