29 August 2006

South Africa: Worries Over Sawlogs

Johannesburg — A BIG issue for businesses riding the growth cycle is to keep up the flow of resources to ensure maximum benefit before the inevitable lean times arrive.

So it is for forest-products group Yorkcor, which must view the growing shortage of sawlogs with a degree of apprehension.

Industry body Forestry SA warned last month of a shortage of forestry products, including the softwoods in which Yorkcor specialises.

Yorkcor said then it was irresponsible to speak of a long-term shortage, although the partial privatisation of state forestry operation Safcol meant long-term supply contracts, of which Yorkcor was a beneficiary, had to be dismantled.

Yorkcor fought this threat tooth and nail, but eventually had to settle for R37,5m in compensation in 2003. Now it acquires its logs on the spot market.

Yorkcor's appointment of Gay Mokoena as nonexecutive director must be seen as a strategic move. A development economist with a master's degree in business leadership from Unisa, he is a former Mpumalanga government official, where he at one stage headed the province's small-business desk.

Mokoena left the government job in 1998 and now runs a financial and consulting services company, Silulu Investment Services, which specialises in deal making for black empowerment consortiums. He put together the Londoloza consortium, an empowerment group that was the reserve bidder for the thrice-failed Komatiland privatisation.

Mokoena is also a director of Mpumalanga Housing Finance Company, the Greater Nelspruit Utility Company and secretary-general of the black business chamber Nafcoc in Mpumalanga.

Yorkcor MD Ivor Tucker said yesterday he expected Mokoena to play a critical role in the company's black empowerment strategy involving communities, but how that will help secure its saw-log supply is unclear.

The general view, certainly that of government, is there is no suitable land left for new plantations in Mpumalanga. Unless Tucker and Mokoena know something the rest of us don't about the review of Safcol and its Komatiland asset, Yorkcor may have to look beyond Mpumalanga to secure its sawlog supply.

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