L Hendricks: Forest Sector Transformation Charter launch

25 June 2007

Distinguished guests,
Ladies and gentlemen,

1. Introduction

It is with great pleasure that I welcome you all to this important event.
This Indaba represents the achievement of a key milestone for the Forest
Sector, namely the tabling of the draft Transformation Charter for the Forest
Sector that sets out the Sector's commitments and plans to speed up broad-based
black economic empowerment (BBBEE). Today we celebrate this important
achievement and are gathered to review and discuss the draft document and to
chart the way forward in finalising and implementing the Charter.

The importance of today is reflected by the gathering of people present
people from all walks of life and from across the country. There are captains
of industry in the forestry production and processing sectors and
representatives from a range forest industry bodies such as Forestry South
Africa and the Paper Manufacturers Association of South Africa, Amahlathi
Contractor's Forum and the South African Forestry Contractors Association.
There are also representatives of labour, Food and Allied Workers Union (Fawu)
and Chemical, Energy, Paper, Printing, Wood and Allied Workers Union
(CEPPWAWU), small timber growers, saw millers and charcoal producers; as well
as non-government organisations, researchers and academics.

I am pleased that political leaders from the various forestry provinces are
present to participate in today's event. The number of people and the variety
of organisations represented here today is a reflection of both the diversity
and importance of the Forest Sector in the South African economy and the role
it plays in the lives of millions of people in South Africa.

In going into this final phase of the charter, which has taken over two
years to come to fruition, we need to ensure that the objectives of why we need
to have broad based black economic empowerment is not lost. The Chairperson of
the Charter Steering committee officially handed over this document to me on
Friday, and during this handover informed me of the complexity of the process
to develop the charter and the difficult negotiations.

2. Broad-Based BEE

What is important is that this charter is comprehensive enough to ensure we
redress past discrimination; discrimination that left our people living in
rural areas in poverty. The South African forestry industry is a multi-billion
dollar industry that cuts across several industries and sectors, yet the people
on whose backs this industry was built still remain in poverty. Our aim through
this charter is to ensure that we continue to grow the forestry sector and that
it remains a globally competitive industry, while we ensure that there is
broad-based BEE.

Later this week the African National Congress (ANC) will be holding its
Policy Conference. One of the issues that will be high on the agenda for
delegates is the transformation of our economy and assessing if our existing
policies are sufficient in creating a better life for our people. Clearly there
is much to be done before we can confidently say that we have achieved our
goals; however through Broad-Based BEE we are making a significant contribution
to giving black people and women greater access to the economy, and thereby
reducing inequality in our society.

I believe that more than any other industry there is huge potential for
forestry to be very broad based and thereby creating opportunities for those
rural communities who were pushed into extreme poverty through Apartheid to
create a better life for themselves and their children.

To ensure that we are indeed broad-based there are areas that we must look
at during this consultation period to make this charter as inclusive as
possible. One such area that I have identified from my initial review of the
charter is the minimum of R5 million for qualifying small enterprises. While
this rand value takes its cue from the Codes of Good practice that were
Gazetted earlier this year, it is clear that the amount will exclude a
significant number of the companies in the forestry sector and is therefore not
practical. It is necessary for us to understand that the Codes of Good Practice
are there to guide us as well as for industries were no charter exists but do
not replace what is agreed amongst industry players in a sector charter.

Programme Director what is critical is the resolution of the land
restitution process; I believe restitution offers the industry an opportunity
to bring communities on board so that these communities are able to benefit not
only from accessing their historically disposed land but are also able to be
included into broad-based BEE initiatives. Through creative and visionary
responses to working with communities we can bring significant economic
benefits to rural areas whilst ensuring the long-term sustainability of the
forestry industry – what Minister Sonjica referred to in her address at the
start of this process as 'win-win' approaches to BEE.

3. Charter Steering Committee and Charter process

A lot of hard work and tough negotiations have gone into developing the
draft Charter over the past two years since the Charter Steering Committee and
its working groups were established to take on this mammoth task. I think that
none of us had expected that it would take so long to get to this point, but it
was not possible to finalise the draft until the national framework for
Broad-Based BEE was formally in place and the initial draft Charter could be
aligned with this framework. This happened with the gazetting of the Codes of
Good Practice on Black Economic Empowerment at the beginning of February
2007.

I must also say that this time was well used. Good progress has already been
made in establishing a firm basis for the roll-out of the Charter. During my
budget speech in Parliament in May 2007 I announced that a budget of R40
million has been set aside this financial year to start implementing the
Charter. This constitutes 8,7% of my department's forestry budget of R460
million. Plans are also well underway to give effect to a number of key
undertakings in the Charter, which I will address shortly.

Before I do that I want thank the Charter Steering Committee under the able
chair of Ms Gugu Moloi and its various Sub-sector Working Groups led by Messrs
Moses Qomoyi, Mike Edwards, John Hunt, Thami Zimu, and Angus Curry for the
sterling work they have done in developing the Charter. I know that this has
been done with inputs from various stakeholders from the different forestry
regions in the country. Much time and effort has gone into producing the
Charter and I wish to thank you all. A word of thanks also to Dr Themba
Simelane of the Department of Water Affairs and Forestry and the Charter
Secretariat, they ably supported the Steering Committee and Working Groups in
organising meetings, preparing documentation and presentations and arranging
the stakeholder consultation workshops.

Ladies and gentlemen, three months ago I had addressed the Annual General
Meeting of Forestry South Africa, where I noted that the process of developing
the Charter had been challenging and that that is a good sign: If it had been
'smooth sailing' it would not have been a meaningful process. It was important
for the various stakeholders to put their positions on the table in an open and
frank manner and to agree on how to achieve meaningful and lasting
transformation in the Sector. To be meaningful the Charter has to deal with
challenges facing the Forest Sector:

* The fact that it is historically white and male dominated and
characterised by large disparities in access to opportunities and benefits for
black people, especially black women;
* The fact that many small scale, mostly black owned, operators struggle to
remain afloat.
* The problem of wide scale casualisation of jobs and the reality that poor
employment conditions persist.
* The need to increase raw material supply to sustain growth and employment in
the entire forestry value chain.

I am pleased that the draft Charter addresses these issues in a meaningful
manner. However, it is not enough to have good intentions on paper. To be
successful the Charter needs to represent the shared commitment of all
stakeholders (industry, labour, government and communities) to a common vision
for the Forest Sector and practical strategies and plans to achieve this. The
vision presented in the Charter is that of:

* An inclusive and equitable Forest Sector in which black women and men
fully participate.
* A Forest Sector that is characterised by sustainable use of resources,
sustainable growth, international competitiveness and profitability for all its
participants.
* A Forest Sector that contributes meaningfully to poverty eradication, job
creation, rural development and economic value-adding activities in the
country.

The Charter will be both a plan for transformation, as well as, growth and
development for the Sector, because sustainable transformation and Sector
growth goes hand in hand. Already the draft Charter captures all the key
national priorities for the Sector reflected in the Accelerated and Shared
Growth Initiative for South Africa (AsgiSA), and the Joint Initiative on
Priority Skills Acquisition (Jipsa). What is important is that we align this
Charter to the broader vision of the whole forestry and forest products value
chain and work closely with the Department of Trade and Industry so that there
is an effective industrial strategy for the sector: an approach that President
Mbeki called for in his last State of the Nation Address.

Programme Director, the presentations that will be made during the course of
the morning will be the start of the consultation process and an opportunity to
discuss issues that concern us and there will also be a further opportunity to
comment on the draft Charter over the next few weeks before it is finalised and
submitted for gazetting.

4. Support to the Sector

Ladies and gentlemen, from the side of the Department of Water Affairs and
Forestry we have recently made changes to our structure so that we are better
placed to service the Forestry Sector more effectively and support the
implementation of the Charter. These changes have seen the different forestry
units that were operating across the department being consolidated into a
single branch in the department, and a Deputy Director-General has been
appointed to lead the Forestry Branch.

I believe that through this branch and other changes we will be better place
to ensure the planting of an additional 100 000 hectares (ha) of forest
plantations over the next 10 years, a measure that will support greater equity
and sustainable growth in the sector. Much of this planting will happen in the
poorest regions of the Eastern Cape where there are few other viable
opportunities for job creation and economic activity, and will support
broad-based empowerment as these forests will mainly be owned by the local
communities.

Programme Director our success in being able to increase the amount of land
under forests and the development of additional raw material resources will
attract greater processing capacity in the form of sawmills, board mills,
chipping plants and treatment plants and will contribute towards economic
growth. For example, through this afforestation programme, it is anticipated
that an additional R500 million per annum could be generated on the plantations
part of the industry, which had a turnover of R32 billion last year and add in
excess of R1,5 billion per annum in the value adding processes.

4.1 Unlocking Constraints

One of the constraints to unlocking the afforestation potential is the slow
pace at which water licences for new forests are issued. Because the issuing of
these licences involves several government departments and other role-players,
a co-operative initiative is required. My department has worked closely with
other departments on the process of reducing the administrative burden on
forestry development. Applications for afforestation have increased
dramatically from 800 ha in 2004 to 5 500 ha this year and under the Charter we
are aiming to process in the order of 15 000 ha per year for the next 10 years,
with the intention of getting a net increase in forestry of about 10 000 ha per
year. One of the options we are looking at is to undertake a much broader and
possibly countrywide Strategic Environmental Assessment (SEA) to confirm those
areas where afforestation could take place.

A priority for us is to work with the Department of Land Affairs to resolve
the outstanding tenure reform issues so that we can unlock the forestry
potential that exists in our rural areas. And we look forward to the transfer
of ownership and lease rentals on State forest plantations held in trust for
communities, as these transfers require the confirmation of tenure rights. I am
pleased that both the Department of Land Affairs and the Commission on
Restitution of Land Rights have actively participated in the Charter
development process.

Linked to the tenure issue is the fact that large tracks of forestland are
subject to land claims and the need to deal with this process expeditiously and
in a manner that will ensure that the new landowners continue with forestry
operations and as I mentioned earlier this finalisation of this process will
have significant implications for BBBEE.

The point has also been made that new landowners cannot be forced to
continue with forestry and that forestry must be made viable and attractive for
the new owners to ensure that the land remains under forestry production. It
cannot be expected from the Department of Land Affairs and the Land Claims
Commission to deal with this alone and stakeholders in the Forest Sector need
to support the process. Steps are underway to establish a task team to develop
a co-ordinated strategy for the settlement of land claims to ensure the
continued and sustainable use of existing plantation areas for timber
production. This includes post-settlement support to the new owners of such
land.

The Cabinet decision, which was reconfirmed in March this year, to transfer
Komatiland Forests to the private sector and to wind-up the South African
Forestry Company Limited (Safcol), will also contribute to BBBEE and increasing
the participation of rural communities in the forestry sector. Another
constraint is the matter of access to finance, which is a challenge for many
emerging entrepreneurs, and I am aware that the draft Charter makes proposals
for negotiating framework agreements with public funding and private banking
institutions and also creating a Forest Enterprise Development Fund.

I am aware that the Industrial Development Corporation (IDC) is committed to
being a key player in the transformation of the Sector and making it
competitive. They have identified opportunities in the primary and secondary
processing in the chips, pulp, paper, sawmilling and timber board and energy
products. I have been informed that they have a panel of specialist consultants
in the forestry business that can assist in the development and nurturing
business opportunities from emerging forestry entrepreneurs. They are keen to
partner my department and other stakeholders to meet their mandate of financing
activities with a maximum impact on job creation and rural development. I
therefore challenge the Sector to harness the opportunities and goodwill that
government is availing through the IDC.

5. Broad-Based BEE downstream

The issue of saw log supply to emerging black saw millers is a major
constraint and a challenge for my Department. I have received numerous requests
for assistance with getting access to saw logs as the inability to buy saw logs
is inhibiting greater participation by black companies and constraining growth
of the downstream industry. Government policy encourages the participation of
BBBEE companies across all aspects of the forestry and forestry products value
chain and we need to ensure that through the Forestry Charter we support these
enterprises and the entry of new BEE players into the market.

Another point that has been highlighted repeatedly during the Charter
deliberations is the need for meaningful participation of black people,
particularly black women in downstream forestry enterprises. I have alluded to
this before and I want to emphasise it again: We do not want to look back at
our efforts in 10-years time, only to find that empowerment has been limited to
the supply of raw material. The Forest Industry needs to work with other
players in the Sector to roll out a strategy that will ensure investment and
participation by black people in value adding enterprises. Government believes
that the restructuring of State forest assets is necessary for the forestry and
timber sector to contribute the maximum to the country's economic development
and socio-economic transformation.

It is important that our efforts lead to true BBBEE, not only in the Forest
Sector but also in the downstream processing opportunity. Hard work lies ahead
to ensure that this transformation happens.

6. Conclusion

To conclude ladies and gentlemen, the imperative of BBBEE is too important
to be left to chance and the Charter provides us with clear targets and
outcomes. While I have been assured that there is commitment from the industry
to keeping to these targets, I will also ensure that all the instruments
available to us are used to encourage BBBEE in both the forestry and forest
products industry. Under the Broad-Based Black Economic Empowerment Act, 2003
(Act No 53 of 2003), National Forests Act, 1998 (Act No 84 of 1998) and
National Water Act, 1998 (Act No 36 of 1998) my department has the
responsibility to ensure that the procurement, sale, licensing and other
authorisations are applied to advance BBBEE.

Finally, I believe it is necessary that there are well functioning and
representative structures in place for the Forest Industry. This includes the
strengthening of organisations representing the various Forest Sub-sectors, as
well as a mechanism to facilitate co-operation between the sub-sectors. This
will also facilitate engagement with government on matters of transformation
and growth in the Sector. In due course a Forestry Sector Charter council will
be established to facilitate co-operation between sector stakeholders and
oversee the implementation of the charter.

I thank you.

Issued by: Department of Water Affairs and Forestry
25 June 2007