21 November 2005

South Africa: 'Merger Threat to Small Saw Millers'

Johannesburg — THE proposed merger between Bonheur 50 General Trading and state-owned Komatiland Forests could lead to the demise of independent small-scale saw millers, lawyers for parties opposed to the deal said last week.

Bonheur is the consortium that government has chosen to buy Komatiland as part of its policy to privatise forestry assets. It will hold 75% of the merged entity.

Komatiland, a wholly owned subsidiary of forestry parastatal South African Forestry Company Limited, owns plantations mainly in Mpumalanga and Limpopo.

The deal, worth R396m, suffered a setback last year when the Competition Commission prohibited it, saying it was likely to lessen competition in the sawn timber market.

Bonheur is 70% held by Global Forest Products, a company with forestry interests in Mpumalanga.

The commission said the merged entity would have more than 75% of softwood saw logs.

Bonheur took the matter to the Competition Tribunal. Speaking during hearings at the tribunal last week, legal representative for entities opposed to the transaction, Martin Brassey, said, given its possible dominant market share, the merged entity could push smaller saw millers out of the market by either increasing the price of logs or reducing log supply quantities.

Brassey said the merged entity could also increase its presence in downstream operations.

Opponents to the deal have in the past said that it would lead to concentration of log supplies to one entity. Earlier this year, a group of small-scale independent saw millers failed to get contracts for log supplies from Komatiland, their source of saw logs.

The companies said, as a result of the failure to get saw logs, they faced closure.

Another legal representative, David Unterhalter, said the importation of logs was not a viable option for small-scale saw millers.

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