FAO 1 MR. MIKE EDWARDS JUNE 2008 1
SOUTH AFRICA - WHERE ARE WE? FAO 2 2
FAO 3 FORESTRY PRE-1994 Inward looking focus intent on self-sufficiency sufficiency Exclusion from global economy Impacts of afforestation of little concern Environmental and social concerns not an issue Land readily available for planting trees Politics favoured the privileged Unlimited government support (education, research, infrastructure) Conservation focus, exclusion of people from the forest 3
FAO 4 FORESTRY POST 1994 Outward looking focus intent on globalization Highly regulated operating environment Limited government support Politics ensures that South Africa part of global dictates Global competition driver of business Impacts of afforestation a major concern Limited land available for forestry Focus on sustainable development and participatory forestry 4
LEGISLATIVE CONTEXT FAO 5 South African forestry governed by two acts, The National Forests Act (1998) and the National Veld and Forest Fires Act (1998) The cornerstone of the National Forests Act is sustainable forest management All the provisions are interpreted and applied within the framework of SFM The NFA defines principles to guide decisions affecting forests and also provides for the Minister to promote and enforce SFM through regulation and/or certification The Minister is obliged to monitor and report on the state of the forest resources at least once in three years. The National Veld and Forest Fires Act 1998 was put in place to prevent and combat veld, forest and mountain fires throughout South Africa. A variety of institutions, methods and practices are provided for under the Act for achieving 5 the purposes of the Act.
CLIMATE: RAINFALL: LAND USE: SOILS: IMPORTANT SOUTH AFRICAN CHARACTERISTICS Generally temperate (e.g. Warm and Dry) Annual Average ± 460 mm 65% of country less than 500 mm/p.a. Erratic and unreliable Frequent droughts 13% only suitable for cultivation 60% semi-desert (Western parts). Generally poor and unstable FAO 6 POPULATION : Estimated current population 48 million 57% urbanised L.T. growth rate 1.5% p.a. (i.e. double in 40 years) Unemployment rate 30% 46% of population live below poverty datum line 6
FAO7 COMPONENTS OF THE FORESTRY SECTOR Non-Commercial (1): Indigenous Forests (2): Woodlands TOTAL LAND COVERAGE Ha s 500,000 42,000,000 42,500,000 % to Total 0.5% 35.0% 35,5% UTILIZATION Recreation Conservation Education Conservation, subsistence, fuel wood Commercial (1): Plantations 1,281,519 1,1% Industrial production fuel wood 7
FAO 8 Woodlands contribute the bulk of wooded land area of South Africa The potential area is in the region of 42 million hectares. Approximately 9,2 million people live around these areas and depend on them for goods and services 8
SOUTH AFRICA S FOREST RESOURCES FAO 9 Indigenous Forests cover about 470 000 hectares. Almost three-quarters of this forest type is conserved either as declared State forests or within formal protected areas Access and harvesting of products was typically restricted for decades, until significant policy shifts post 1994 when more participatory policies and programmes came into being 9
FAO 10 THE COMMERCIAL FOREST SECTOR IN SOUTH AFRICA 10
Structure of the Forestry, Forest Products and the Downstream Sectors FAO 11 Primary Level A FORESTRY -Tree Growing -Harvesting -Log/fibre supply Non-Forest Products -Honey -Ferns Firewood, Etc. Log Supply Secondary Level B Pulp and Paper Timber Board Products Sawmilling Mining Timber Poles Charcoal Chips Paper Board Writing and Printing Papers Industrial Timber B3 Structural Timber b4 Packaging Printing Furniture Furniture Building Timber Gold Mines Fencing Domestic Exports Tertiary Level C Filing System Office papers Doors Pallets Platinum Mines Stationery etc. Shelving Joinery Transmission Industrial 11 Boxes/crates
FAO 12 THE FORESTRY SUB-SECTOR SECTOR 12
FAO 26 Availability of suitable land. Competition from Agriculture. Land reform imperative. Water licensing restrictions. Environmental consideration. No tax or afforestation incentive schemes 13
S.A s entire timber production comes from plantations of fast growing exotic tree species. Much of the timber estate is now planted with genetically improved material. High growth rates, high stocking rates produce higher levels of tree stress. S.A. is a semi arid country with lower than average rainfall. Most plantations are situated in areas of rainfall of less than 1000 mm/p.a with periods of drought being common. Fire damage is severe. Global trade is increasing, hugely escalating threats of importation of undesirable pests and pathogens. Biocontrol and monitoring at ports of entry lacking. Movement of timber and timber products internally is 14 uncontrolled. FAO 27
PESTS AND DISEASES It is estimated that at least 50% of Plantations are affected. Frequency and intensity escalating Lose up to 20,000/p.a. as result. 15 FAO 28
DAMAGE TO PLANTATIONS BY FIRES 1980 TO 2007 70 Thousand Hectares 60 50 40 30 20 10 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 Years 1998 2000 2002 2004 Total area damaged to 2006-733,000 ha Total area damaged by fire to 2006-387,000 ha (53%) Average fire damage 1980 to 2006-14,300 ha p.a. THE ABOVE SAYS IT ALL FAO 29 2006 16
(3) CLIMATE CHANGE FAO 30 CLIMATE CHANGE IS NOT A MYTH, IT IS A REALITY Recommendations from S.A. Forestry Climate Change Study. (1): Seriously consider mixing species. (2): Match species to site for both soil and climate reasons. (3): Include climate change predictions in species selection. (4): increase research into temperature tolerant and drought resistant hybrids. (5): Increase research efforts on climate change. BUT REPORT SAYS (1): Hybrids more robust than commonly planted species. (2): Pinus family is most robust to climate change 17
FAO 31 THE PULP AND PAPER SUB-SECTOR SECTOR 18
CONTRIBUTION TO SA ECONOMY FAO 32 1. Value Addition Sub-Sector Operating Profit Plus Labour Cost Gov. taxes (incl. VAT).:. Net Value Addition R 3,191m R 2,123m R 685m R 5,999m 2. Contribution to GDP Sector GDP Total R Million Pulp & Paper P.P. as % Total RSA GDP 1,248,730 R 5,999m 0.5% Manufacturing GDP 219,234 R 5,999m 2.7% 19
CONTRIBUTION FROM A SOCIAL PERSPECTIVE ESTIMATED PULP AND PAPER EMPLOYMENT FAO 33 Type of Employment Permanent Employees Informal Waste Paper Collectors Total Employment Total Remuneration Employees & Dependents Corp Social Investment Numbers 13,200 10,781 23,981 R2.1 billion/p.a. 95,924 R56.7 mill/p.a. 20
Item ENVIRONMENTAL IMPACT OF PULP & PAPER SUB-SECTOR Electricity Energy (fossil fuels) Water Quality : Chemical Oxygen Demand : Total Dissolved Solids Landfill Waste Air Emissions Total Environmental Cost FAO 34 Cost/Impact (R million) 138.4 720.6 157.7 48.0 77.7 486.9 1,629.3 Note: The total Environmental cost of R1,630 million accounts for 91% of total FTPP Environmental Cost 21
NET CONTRIBUTION OF PULP & PAPER SUB-SECTOR SECTOR FAO 35 Benefit / cost contribution Value addition ex production - Environmental Impact Cost Net Economic Contribution Value (R million / p.a.) R 5,999 R 1,630 R 4,369 Net Foreign Trade Balance R4.9 billion Pulp & Paper Industry a significant contributor 22
FAO 36 THE SAWMILLING SUB-SECTOR SECTOR 23
CONTRIBUTION TO SA ECONOMY FAO 37 1. Value Addition Value of Production Less: Input Costs Plus: Remuneration.:. Net Value Addition / GDP R3,218 R2,190 R 304 R1,332 2. Contribution to GDP Sector GDP Total R Million Saw- Milling Saw. as % Total RSA GDP 1,248,730 1,322 0.1% Manufacturing GDP 219,234 1,332 0.6% 24
CONTRIBUTION FROM A SOCIAL PERSPECTIVE Estimated Sawmilling Employment FAO 38 Estimated Employment Estimated Remuneration Employees Plus Dependents 20,000 R304 million / p.a. 100,000 Environmental Impacts Item Energy Usage Landfill Waste Air Emissions Water Quality Total Environmental Cost Cost/Impact (R mill/p.a.) R 34.5 R 92.2 R 7.2 Not Quantified R 133.9 25
FAO 39 OTHER SUB-SECTORS SECTORS WOODCHIPS BOARD PRODUCTS MINING TIMBER TREATED POLES CHARCOAL 26
OVERVIEW OF FINDINGS FAO 40 Benefit/Cost Contribution Value addition ex Production Less: Environmental Impact Cost Net Economic Contribution/GDP Value (R mill./p.a.) R2,055 R 807 R1,248 RSA GDP 1,248,730 1,248 0,1% Manufacturing 219,234 1,248 0,6% Net Foreign Trade Earnings R 2 billion Estimated Employment Estimated Remuneration Employees Plus Dependents 19,200 R532 million / p.a. 96,000 27
FAO 41 ALL SUB-SECTORS SECTORS COMBINED 28
OVERVIEW OF FINDINGS - ALL SUB-SECTORS SECTORS 1. Net Economic Contribution FAO 42 Benefit/Cost Contribution Value addition ex Production Less: Environmental Impact Cost Net Economic Contribution Value (R mill./p.a.) 12,274 2,352 9,922 2. Contribution to GDP Sector GDP Total R Million Sector Sector % to Total RSA GDP 1,248,730 12,274 1,0% Agricultural GDP 39,473 2,921 7.4% Manufacturing GDP 219,234 9,353 4,3% 29
OVERVIEW OF FINDINGS - ALL SUB-SECTORS SECTORS (Cont.) FAO 43 3. Contribution to Employment Total Employment Creation Total Remuneration No of persons Dependent on Industry for their livelihood 170,025 R 4,136 million 867,924 4. Forex Earnings Net Foreign Exchange Earnings R 6,960 million 30
CONCLUSIONS FAO 44 (1): The FTPP cluster makes a significant contribution to the S.A. economy. (2): Pro-poor development potential is inherent in the cluster and BBBEE opportunities are considerable. (3): Growth in downstream processing is dependent on growth in plantations. (4): Economic and socio-economic benefits far outweigh environmental costs. (5): Inequities in the water regulatory environment in particular are impacting on development potential of the cluster and need to be reconsidered. A sector growth and development strategy must be 31 developed and implemented
FOREST SECTOR CHALLENGES 1. Greater equity in the entire value chain 2. Increase in the local supply of roundwood to underpin growth throughout the value chain 3. Sustainable supply and better utilisation of limited sawtimber resources 4. Increased local beneficiation 5. Greater empowerment and profitability of existing small scale forest enterprises FAO 45 6. Linking forestry as a rural based industry with poverty eradication and local economic development 32
OPPORTUNITIES FAO 46 Forestry Transformation Charter Sector agreement on Charter as medium term strategy for forestry Growth and transformation charter Addresses sector challenges Growth of sector Roundwood shortage Land reform Skills shortage Access to finance for emerging entrepreneurs Forest protection Research and innovation Local beneficiation Empowerment of emerging black entrepreneurs 33
FAO 13 34
FAO 14 100% plantation based Genera & species planted Pines: P patula, P elliottii, P taeda, P radiata Eucalypts: E grandis, E nitens, E macarthurii Acacia: A mearnsii Rotation lengths Pines: Sawlogs (25-28 28 yrs) Pulpwood (12-18 18 yrs) Eucalypts: Sawlogs (25-28 28 yrs) Pulpwood (7-10 yrs) Acacia: Pulpwood (8-11 yrs) Yields (m 3 /ha/yr) Pines: 16 18 Eucalypts: 18 35 Acacia: 8-11 35
FAO 15 Pine Eucalyptus Wattle Other 8.2% 0.8% 37.3% 53.7% TOTAL 1,281,519 ha 36
FAO 16 Pulpwood Sawlogs Other Mining Timber 3.0% 5.6% 38.4% 53.0% TOTAL 1,281,591 HA 37
FAO 17 Private Companies State (incl. Safcol) 13.8% Individuals/Partnerships/Trusts Municipalities 23.1% 0.3% 62.8% Total 1,281,519 hectares 38
FSC Certified Forests By Ownership: September 2007 Private Co's DWAF Safcol & Ex Safcol Individuals FAO 18 76.6% 11.6% 2.4% 9.4% Certified Area 1,443,416 ha (incl. planted & non-planted areas) 39
Product Sawlogs Poles Mining Timber Pulpwood Other Production M³ tons 5,778,023 6,159,976 478,793 345,210 911,007 634,592 15,182,720 12,046,402 476,648 386,829 % to Total m³ 25,3% 2,1% 4,0% 66,5% 2,1% Total 22,827,191 19,573,009 100,0% (82% of total comes from, privately owned plantations) 40 FAO 19
CONTRIBUTION TO THE S.A. ECONOMY FAO 20 1. Value Addition Value of Production (i.e. output of Plantations) Less: Input Costs (Excl. Labour Cost) Plus: Adjustment for VAT.:. NET VALUE ADDITION/GDP 2. Contribution to GDP R5,100 m R2,434 m R 255 m R2,921 m Sector GDP Total Forestry For. as % of Total R.S.A. GDP R 1,248,730 m R 2,921 m 0.23% Primary Sector GDP R 121,708 m R 2,921 m 2.40% Agricultural GDP R 39,473 m R 2,921 m 41 7.40%
CONTRIBUTION FROM A SOCIAL PERSPECTIVE Contribution to Employment Type of Employment Direct (e.g. Co. employment) Indirect (e.g. contractors) Small Growers - owners - employees Total Employment Total Remuneration Employees & Dependents Numbers 37,469 30,000 31,500 7,875 106,844 R1,2 billion 576,000 42 FAO 21
ENVIRONMENTAL IMPACT OF PLANTATION FORESTRY FAO 22 Impact Stream flow reduction (CSIR assessment) Plantation waste Carbon sequestration Air emissions :Forestry transport Biodiversity Water quality (as affected by fertilizer use) Soil (fertilizer) Soil erosion Total Benefit Estimated net cost (R) Fully internalised Not significant +R89,3 million -R34,8 million Not quantified. Lower than annual agricultural crops Not significant Not significant Not quantified. Lower than annual agricultural crops +R54.5 million 43
(1): THE NEED TO INCREASE ITS PRODUCTION. (2): THE NEED TO PROTECT PLANTATIONS FROM PEST AND DISEASES. (3): THE NEED TO REDUCE LOSSES THROUGH FIRES. (4): THE NEED TO UNDERSTAND IMPACTS OF CLIMATE CHANGE 44 FAO 23
Five Year Period Total Supply (tons) Total Demand (tons) Surplus (+)/Deficit(-) (tons) (%) 2005-2009 20,550,761 23,249,214-2,698,453-13.1 2010 2014 20,087,199 23,932,910-3,845,711-19.1 2015 2019 18,609,931 24,650,053-6,040,122-32.5 2020 2024 19,454,356 25,448,516-5,994,160-30.8 2025 2029 18,666,332 26,372,899-7,706,567-41.3 2030 2034 18,134,701 27,501,409-9,366,708-51.7 Estimated sustainable supply: 19,250,547 25,192,500-5,941,953-23.2 45 FAO 24
FAO 25 Pine Eucalyptus Wattle/Other Total 50 40 30 Hectares 20 10 0-10 -20 1980 1984 1988 1992 1996 2000 2004 Years 46