The global economic environment remains subdued and uncertain driven by the Euro-crisis and very slow growth in the USA, the two regions that are the primary markets for our exports and a decline in their consumption. This will lead to a sluggish growth of our economy and hence the South African Reserve Bank has revised the growth forecasts for our country which will have an adverse impact on the growth of the residential construction sector which is largely driven by growth in household consumption.
However, we remain optimistic that the upcoming public sector spending on economic and social infrastructure should lead to the recovery in the saw timber sector.
During the 2011/12 year, sales volumes and prices substantially increased since the start of the 2008 financial crisis. SAFCOL has benefited from the improved market conditions and it will take advantage of the infrastructure spending to strengthen its balance sheet.
In 2010, the New Growth Path identified the green economy as a critical growth area that would facilitate the exploration of new forms of production, the creation of new jobs and skills and would encourage innovation. In SAFCOL’s context, the renewable energy and carbon trading present an opportunity for the sector and competition for traditional forestry product markets. In this regard, we are pursuing collaborative programmes between SAFCOL, SAA and Eskom on biofuels and biomass.
We are aware that SAFCOL will confront competition from countries that have invested on research and development; however, I believe that the SADC region is a fertile market for SAFCOL to explore and the company could draw lessons from its Mozambique investments. This means that SAFCOL should continue to investigate other forestry-related business ventures with other countries within the Sub-Saharan region.
In this regard, IFLOMA remains the strategic hub to both South Africa and the SADC region and, therefore, SAFCOL must use this investment in Mozambique to improve regional integration and South Africa’s regional economic diplomatic relations. Consequently, I intend to develop a closer relationship with my counterpart in Mozambique to assist in government-to-government interaction so that we can optimise the value of this investment.
I further applaud the leadership of SAFCOL for an improved financial performance after years of stagnation and policy uncertainty on the future existence of as a State-Owned Company. The Company has recorded a profit of R209,610 m and received an unqualified audit opinion. This is great news!
I am also pleased that the business re-engineering processes have led to this positive outcome and should contribute to the improvement of internal operational processes and instil a new organisational culture. This will enable SAFCOL successfully to execute the proposed plans in the medium-to-long-term.
In the same vein, I acknowledge the constraints imposed by the current business model of the company. Horizontal integration has limited the growth of the company and I am therefore committed to the review of SAFCOL’s future role and strategy, as well as its institutional form, which is in its final stages and should be published before the end of the financial year. The review involves, inter alia, the assessment of the economic implications of SAFCOL’s vertical integration on the market; SAFCOL’s impact on existing downstream economic activities, and its implications on job creation and potential new economic opportunities and any other relevant economic considerations.
For now, the real challenge confronting the company is that a significant portion of forestry land is currently subject to land claims, which could lead to a further reduction in land under forestry, which has already been estimated to have dropped to between 9.1% and 14.9% since 1996. Both the forestry and agricultural sectors will be affected and this will require that both these sectors should review their current business models to include the potential land owners to ensure continuity, development and an inclusive partnership that considers the objectives of land reform.
I would also like to take this opportunity to congratulate Ms Nomkhita Mona on her new role as the SAFCOL CEO-designate and convey my sincere appreciation to the Board for their efforts in finding a suitable candidate for the position.
I thank you.
