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June : FSA Annual Report 2017

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4 June, 2018

FSA Annual Report 2017

FSA Annual Report 2017

In spite of the lower than anticipated timber volumes recorded in 2017, there were many significant highlights for FSA and for the Industry in 2017.

Firstly, in the political arena, FSA participated actively in the national calls for political intervention to halt the further decline of the country into economic, social and political chaos, through the wholesale capture of the State. This had characterised the administration of the country for the last nine years and our previous Chairperson re-iterated FSA's calls for clean administration and a commitment to service delivery in her closing remarks during our 2017 AGM. Fortunately, at the ruling party's Elective Conference in December 2017 and as anticipated by FSA, we saw the beginnings of a possible new era for South Africa, in which we may yet reverse the decline we have experienced as a country and as an Industry. We are fortunate to have an Industry Association like FSA, which represents almost all timber growers, irrespective of scale or race in South Africa and which remains a powerful and credible voice among State and other stakeholders. Some of the positive changes in the political landscape in December 2017, however, were accompanied by negative ones, like the adoption by the ruling party, of a policy of expropriation of land without compensation. This has set in motion a Parliamentary process in which FSA has been closely associated. Given the importance of this issue and even though this Report confines itself mainly to the 2017 financial year, we have also reported progress on this and some other crucial matters, as at the time of writing this Report.

Other highlights in 2017 were the Gazetting of the revised Forest Sector Code for Broad-based Black Economic Empowerment in April and in which FSA had played a pivotal role. We believe that the revised codes will not only lead to accelerated transformation of the Sector but also to increased growth. The codes, in a first for any sector of the economy, bind Industry and Government commitments together in a shared scorecard. We believe that this will empower and compel the State to do more to address the binding constraints to the further transformation and growth of the Sector and we expect that other Sectors will follow our lead through this approach.

We are also delighted to note that our smallscale growers may, for the first time, be able to access DAFF support. FSA has consistently lobbied DAFF on the need for such support and in the DAFF CEO's Steering Committee meeting in November 2017, they advised FSA that some of their Comprehensive Agricultural Support Programme (CASP) funds would be ring-fenced to support small-scale growers in the Forestry Sector. FSA is working with the various CASP co-ordinators in the provinces, to develop funding proposals, which we hope will bear fruit for our members.

We are also delighted to announce that the dti approved two of our THRIP applications, in the amount of R4 591 668, which will support some of our research partners who depend greatly on this funding to augment their programmes. This will greatly reduce the costs to our members, who would otherwise have had to carry those costs themselves.

Similarly, DAFF continues to fund the Sirex Control Programme, through the MoU between FSA and DAFF and which funding also greatly reduces the cost to Industry of this crucial programme. The programme has been shown to save the Industry hundreds of millions of rands in losses, annually.

We are also pleased to note that following engagements between FSA and the Industrial Development Corporation (IDC), they have refined several of their funding instruments, which now offer very competitive funding and which will likely enable Industry to leverage additional, even more attractive financing into the Sector.

The FP&M SETA continues to distinguish itself as one of the lead SETAs in South Africa and they approved a R3 million grant to FSA, to support our growers' support initiatives.

Unfortunately, as mentioned, from a timber volumes perspective, 2017 offered no relief from the previous two years of lower than anticipated volumes. It is concerning to note that the tonnages in 2017 dropped for the third consecutive year to 15 098 000 tons. This was 262 000 tons lower than in 2016 and 601 000 tons lower than the budgeted tonnage of 15.7 million tons. This led to a severe cash flow problem for the Association, which necessitated an increase in the levy from R2.14 to R2.50 per ton in June 2017. Had such action not been taken, the Association would have become insolvent within 3 months. It is hoped that this decline will be halted during 2018 but if not, at least the change in FSA's funding model (discussed in this Report) should protect the Association from the financial strain, which the historical funding model, has regularly placed on it.

I would like to re-iterate what previous Chairpersons of FSA have noted, which is that we are most fortunate to have an Association like FSA, which achieves such major gains for the Sector, with such limited human and financial resources. Some of this achievement is only possible because our members also invest their time and intellect into the Association, in serving on its various structures. FSA is occasionally asked to justify to particular members, the value of the Association and their investment into it. I would urge all members to read this Annual Report, the reports regularly sent out by FSA, the Minutes of our Gencom and Exco meetings, the reports given to the nine FSA Regional Committee meetings and to visit our website. I would also encourage members, who are able to do so, to participate in the structures of FSA, where those of us who do so, see first-hand the powerful and positive influence FSA has on the environment in which our businesses operate. I do not believe that any members who read FSA's reports and engage in our structures, would have any difficulty in justifying their investment into the Association.

Thank you to our dedicated team under the leadership of Mike Peter and to our members for their continued financial support and investment of time, without which FSA would be much less effective and much more costly to run.

Thank you to all our partners in the public sector, research and academia, who support the transformation, growth and protection of the Industry through your partnerships with FSA and our members.

I wish all our growers and partners in the public and private sectors, the very best for 2018 and we look forward to a greatly improved economic and social outlook for the Industry and for the country.

Graeme Freese
Forestry South Africa

Download the full FSA Annual Report 2017

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