20 March 2006

South Africa: State Halts Sale of Komatiland Forests

Johannesburg — THE sale of government's largest forestry asset, the Komatiland forests, has been halted, raising concern that the state is planning to backtrack completely on the privatisation of its forests in Mpumalanga and Limpopo.

The move comes after an earlier deal to sell Komatiland to the Bonheur consortium fell through last month.

Bonheur, which was made up of Global Forest Products and Imbokodva Lemabalabala, pulled out of the deal shortly before the Competition Tribunal rejected the proposed sale as anticompetitive.

The competition authorities said the R396m Bonheur deal would have created a huge private monopoly, which would lead to job cuts or the closure of small independent saw millers.

The withdrawal of Bonheur was widely expected to pave the way for government to then start negotiations with the reserve bidder, the Londoloza-Paharpur Consortium so that it could finalise the long-delayed sale of the forests. But the public enterprises department said on Friday that it would "not to proceed with the current transaction".

Kobus Breed (pictured), CEO of Safcol, which holds the Komatiland forests, said the decision was informed mainly by the length of time, six years, it had taken to finalise the deal.

This made any implementation of the transaction based on the asset as presented impossible.

In addition, a statement from Safcol said real concerns were raised during the competition approval process, affecting government's restructuring policy objectives. As a result, government needed to review these concerns before a decision could be made on the future of its programme for restructuring commercial forestry assets.

Breed said government was currently considering all alternatives before a decision would be made on the way forward.

"It will take into account the interest of the industry and the role of commercial forestry in the economy at large, specifically recognising the role it could play in the Accelerated and Shared Growth Initiative of SA (Asgi-SA)."

Department spokeswoman Gaynor Kast said the other factor that had led government to "reconsider" the future of Komatiland was the recent increased demand for saw logs in SA.

"Accordingly, a forward-looking strategy in the context of the 2005 Asgi-SA is being developed as a matter of priority," said Kast.

She would not be drawn to say whether government would cancel the sale of Komatiland altogether after failing to sell the company in two successive attempts.

The first R335m transaction was cancelled in 2002 after it was discovered that the then chief director of public enterprises, Andile Nkuhlu, had secretly received about R55000 from the then preferred bidder, Zama Resources.

Nkuhlu and his benefactor, Zama CEO Mcebisi Mlonzi, subsequently resigned from their positions.

Komatiland is a 130000ha plantation stretching across both Mpumalanga and Limpopo.

It has two saw mills, a veneer-slicing plant and export facility.

Komatiland has traditionally been regarded as the major cash generator for Safcol, the state-owned forestry holdings company.

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