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29 August, 2012

INTERESTING ARTICLE REGARDING FUTURE OF SAFCOL

Below is an article that appeared in the Business Day on the 24th August 2012, relating to the future of SAFCOL. Cori Ham of Stellenbosch University is undertaking a Report for the DPE on the matter.

Business Day: 24th August 2012

STATE-OWNED South African Forestry Company Limited (Safcol) is seeking to expand its operations beyond its current geographic footprint in SA and Mozambique, says Public Enterprises Minister Malusi Gigaba.


The company, which holds 80% of Industrias Florestais de Manica, a joint venture with the Mozambican government, has commissioned a review of its growth prospects from Stellenbosch University.

Mr Gigaba said yesterday that the study would be completed before the end of March, and would provide guidance to his department on the future strategic direction of the forestry business.

The Department of Public Enterprises had decided in 2009 to reverse an earlier decision to privatise the company.

Under consideration, apart from a desire to expand within the Southern African region either through acquisitions or services, was an investigation into the vertical integration of the business.

This may result in the company becoming more involved in milling, Safcol CEO Maureen Makole Manyama-Matome said yesterday at the company's annual general meeting in Pretoria.

Safcol reported an improved financial performance for the year ended March 31, with a 22% improvement in sales to R862,3m from a year earlier.

For the year under review, an operating profit of R51m was reported, a satisfying recovery from the previous year's R32m loss.

The turnaround in performance was due to interventions including a freeze on hiring while the business was being restructured; using debt to finance purchases instead of the company's former practice of paying cash; and a cut in capital expenditure spending.

Mr Gigaba said that the Mozambican investment could be a "beachhead" for Safcol making further investments in forestry in Africa.

He said closer intergovernmental relationships and interaction with Safcol's Mozambican partners were required to make the most of the investment opportunity.

"We have not serviced that investment as well as we should have in order to realise the value from it," Mr Gigaba said.

Department of Public Enterprises director-general Tshediso Matona said Safcol had world-class forestry stewardship and management skills that could be shared with other African countries where these skills were scarce or did not exist. This form of co-operation with SA's neighbours could assist Safcol by providing a soft entry into the forestry industries of other African countries, without it having to make acquisitions.

Safcol owns 18 forestry plantations which cover 187,320ha.