Linda Ensor
8 November 2007
Cape Town — State-owned timber firm South African Forestry Company (Safcol) has forecast a reduction in its supply of pine sawlogs by more than 200000m' a year for the next 10 to 15 years.
It is affected by the devastating fires that ravaged its plantations in Mpumalanga in July and August. The industry is already suffering a severe shortage of soft wood saw-log supply because of higher demand.
Safcol CE Kobus Breed said prices were likely to increase to reflect the disparity between supply and demand. The price rises would not be as hefty as those over the two past years.
Safcol supplies about 1,6-million to 1,7-million cubic metres of logs annually, or about 40%-50% of the open market soft-wood sawlogs.
Breed told Parliament's public enterprises committee, during a presentation on Safcol's annual report yesterday, that the reduction in supply would negatively affect the saw-milling industry which is already suffering from overcapacity.
With fewer logs to saw, saw-millers would find it difficult to remain in business and keep hundreds of workers in employment. In total, 17399ha (14%) of the total planted area of 124417ha of Safcol's Komatiland Forests was burnt in the fire in the areas around Graskop, Sabie and Pilgrim's Rest. The fire resulted in an impairment of assets of about R500m, and added between R205m and R223m to Safcol's operating costs for the current financial year to end-March. However, Breed said Safcol would remain profitable and cash-generating and would not require any state assistance.
Safcol had budgeted a profit of R234m in the current financial year, which was higher than the R220m targeted on the basis of a benchmarked, real rate of return on assets of 7,83%.
Safcol generated a pretax profit of R1,1bn in the year to March, compared to R241m for nine months in the previous year.
Dealing with the aftermath of the fires, Safcol is also preparing to sell off its Komatiland Forests and wind down its operations before the cabinet deadline of end-March 2009.
The company believed it had a strong balance sheet with assets of R2,8bn and interest-bearing liabilities of less than R35m.
Its biggest outstanding debt is R575m in deferred tax.
One of the objectives of the privatisation stipulated by the cabinet was that it would contribute to a lowering of the level of concentration of sawmill production and increase investment in the industry. Land claimants, employees and local communities would also have to benefit.
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