The South African Forestry Industry Trends Challenges and Opportunities SAFCOL INDUSTRIALISATION CONFERENCE 4 October 2017 Michael Peter Forestry South Africa

Land Use in South Africa Total RSA land area – 122.3 million ha

Plantation Area by Species 2016 Total – 1 220 726 ha

Plantation Area by Province and Genera 2016 Total – 607 815 ha (softwood) 70 000 less feedstock Total – 612 911 ha (hardwood) 24 000 more

Plantation Area by Ownership 2016 Total – 1 220 726 ha

Intake of Roundwood into Processing Plants 2016 Total – 16.4 million m3 Value – R9bn

Value of Sales from Primary Processing Plants 2016 Recovery Total – R25.5 billion

Total Contribution in 2016 Paper and Paper Packaging – R23.68bn Total Forestry Contribution: R58.2 billion (1.53% of GDP) Total Agric GDP in 2016 was R83.8bn Excluding P+PP = 41.2% of Agric GDP Almost all in rural areas of SA

Contribution to GDP 1980 to 2016 Increase in Forestry to Ag GDP over period from 4.5% to 10.2% Decrease in For. Prod. to Mfg GDP over period from 6.3% to 5.1%

Forest Sector Employment – RSA 2016 Sub-sector No. of employees Total Employment Direct Indirect Forestry 60,200 28,000 88,200 Pulp and Paper 13,200 10,800 24,000 Sawmilling 20,000 8,000 Timber Board 6,000 n/a Mining Timber 2,200 Other 10,000 Total 111, 600 46,800 158 400 22% of jobs in Agric

Exports of Forest Products 2015 vs. 2016 Exports in 2016 R3.322 bn or 13% up on 2015

No KPMG report on country performance for 2014-2015 Forestry measured in relative terms - 2013-14 KPMG report Above the country’s BBBEE average on almost every element In 2016 - R7,74 billion in black ownership of a single MLE Roughly extrapolated for all MLEs (73.6% of industry) = R17.6 billion in black ownership of MLEs Ownership is only 1 out of 7 elements of empowerment Revised sector code approved by DTI - will hopefully empower DAFF, other departments and the private sector to further advance Transformation

Constraints Water Competing land uses Hertzberg’s hygiene factors Lack of State support for new entrants and R+D Lack of organised labour Long rotation Perceptions about food security Conflicting and investor unfriendly policies Land – RALHB, Expropriation, Tenure security Water – GE, Water Use Licences Environment - AIS Tax – Land, Property, Wealth.

Trends Increased investments in efficiency esp. in processing Decline in feedstock will continue Conversion (macadamia avocado) Exit areas (S Cape facing collapse) Land reform (conversion or failure) Will lead to increase in prices May drive some new afforestation but not likely Further competition from alternates (LGS ) and imports Further capital migration to lower cost countries – 25%tile Further consolidation in processing sub-sectors Not good for SMME programmes Increased investments in efficiency esp. in processing Average recovery of sawntimber < 50% (CLT,OSB,etc) Bio-based products (MCC, NCC, Polymers, Green Chem)

Political maturation May lead to more certainty esp. around land Land prices set to rise for next 25-30 years Banks optimistic about forestry Carbon Tax if ever implemented will drive move towards timber SAFCOL- led timber promotion initiative Doesn’t crowd out private sector (ITC-FSA-SSA) Massive potential for transformation Massive potential for GDP and jobs Massive potential to increase timber demand Requires better collaboration among sawmillers

Michael Peter Executive Director FORESTRY SOUTH AFRICA mike@forestrysouthafrica.co.za 011 268 1104 Members