1. Presentation to the Portfolio Committee on Trade and Industry Colloquium 2 September 2014 Messrs Michael Peter and Norman Dlamini

2. Land Use in South Africa Total RSA land area – 122.3 million ha 1 273 357 ha

3. Commercial Plantations

4. Value of Roundwood Production Total – R6.7 billion

5. Value of Sales from Primary Processing Plants Total – R20.4 billion

6. Value of Sales from Paper and Paper Packaging R 17.4 billion (STATSSA 2012 PAMSA 2013)

7. Total Contribution to GDP R41.9 billion Manufacturing GDP 7.7% (excludes roundwood sales) Contribution to Agricultural GDP25.5% 65.1% (incl. pulp and paper) Employment in Agriculture 22.5% (146 000 jobs out of 650 000 in total) (DAFF 2009, FSA 2011, STATSSA, 2012)

8. Beneficiation potential Limited beneficiation in the primary sub-sector but provides the raw material for beneficiation in other subsectors which are largely vertically integrated 1 : 5.25 multiplier ratio –Pulp and Paper –Sawmilling –Particle board –Mining timber –Poles Myth surrounding roundwood exports Unresolved challenges for timber growers directly impact the potential for further beneficiation

9. What are these challenges? Shrinkage in plantations –Voluntary withdrawal 80 000ha – water and environment –Government exit from WC and Mpumalanga – Cabinet Memo not implemented – job losses and mill closures –Unproductive government plantations - failure to transfer these to communities as per Charter –Failure to meet even 2 000ha of the 100 000ha new afforestation target in IPAP I and II and Forest Sector BBBEE Charter – National industrial policy being sabotaged by junior bureaucrats –Increased regulatory burden when changing to more economical tree genera – directly threatens multi- billion Rand beneficiation investments

10. What are these challenges? No support for SMMEs –Private sector introduced over 30 000 new growers –Forest Sector BBBEE Charter committed DAFF to a dedicated Forestry Grant to overcome the investment hurdle and increase new entrants –Minister finally announced the grant in September 2012 but no fiscal commitment yet

11. What are these challenges? Forest protection –Rising impact of pests, diseases and fires –Government (DAFF) have been excellent recently in supporting the development and release of bio-logical control agents –DAFF have an approved forest protection strategy but again they have not been given fiscal support for implementation

12. International competitiveness SA was in bottom 25 percentile of global costs Now in middle 50 percentile and rising Competitors have been providing direct and indirect subsidies for three decades – Brazil, Chile, NZ, Australia Tariffs and non-tariff barriers internationally SA competitiveness has been based on –World leading clonal breeding –Excellent understanding of site productivity –Global leaders in pests and diseases

13. Plantation Area Comparisons 2011

14. Illustrative Costs Costs per ha over 10 years PlantingR7 000 Annual weeding + fire protectionR1 200 Finance charges for above over periodR13 496 Harvesting and loadingR38 600 Long haul to marketR26 248 TOTAL cost to raise a timber crop and deliver to market R86 544 Price paid per hectare R108 000 Net profit per hectare per yearR2 145 Adapted and modified from Wood and Timber Times August 2014

15. Small-scale grower challenges Much the same as large scale growers but more acutely felt and greater risk –Cost of capital – DAFF grant never materialised –Fire, pests and diseases = total crop/cash flow loss –Insurance – premium not subsidised by DAFF –Limited potential for economies of scale as widely dispersed in landscapes –Limited access to rail and PBS vehicle alternatives –Insecure tenure over crop –Vexatious water regulators pursuing unlicensed plantations - mining and agric carry on with impunity In spite of these over 30 000 SSG in KZN and Mpumalanga

16. Soaring administered pricing increases –Labour – with limited opportunity for mechanisation due to dispersed nature of SSG plantations –Fuel = transport costs Need for more business management skills Small-scale grower challenges

17. Private Sector Provide capital and jobs 30 000 self employed SSGs through JVs in last 30 years Promotion and education Research and forest protection Transformation (a leading sector in Land Reform and BBBEE)

18. Government Meet previous commitments –New afforestation –Forestry Grant for SMMEs –Transfer of state plantations back into productivity –Recapitalisation of exit areas State procurement to have mandatory levels of SA forest products –Paper and paper packaging –Timber and particle board in the built environment and furniture industries

19. Thank you