Safcol aims at exports to China, India to counter rising costs

Posted on : Saturday , 4th October 2014

 THE state-run South African Forestry Company (Safcol) aims to start exporting to high-growth countries such as India and China to counteract rising costs and the renewed land claims threat in South Africa.

Despite an 11% rise in timber sales in the year to March, Safcol reported a R24.5m operating loss before fair value adjustments and tax. Net profit was R511m, from R74m previously, though the difference was largely due to re-evaluations of its forests.

The company increased its cash reserves by 45% to R222m.

Interim chairman Somadoda Fikeni said that while the rise in revenue and demand for exports were positive, " operational costs are still very high and we will still be working very hard to contain them".

Operating costs were being driven by the rising cost of leasing sawmills, and high transport and labour costs.

Safcol supplies mainly the local market but it does also have operations in Mozambique.
Prof Fikeni said timber exports to new markets, and beneficiating Safcol’s products, including with vertical integration businesses such as furniture making, were key aspects of its diversification strategy.

About 61% of Safcol’s land in South Africa is subject to land claims, with some seen as more serious than others.

Prof Fikeni said Safcol "has embarked on pre-emptive engagements with the communities, and we have an aggressive community development programme as part of our corporate social responsibility".

Safcol was spending more than R22m on corporate social responsibility each year, with the focus on building schools but ensuring spending was directed at priority areas identified by communities.

Public Enterprises Minister Lynne Brown said despite Safcol’s best revenue performance in five years, its "recent adverse operational performances pose risks" to its sustainability and affect the cost of much-needed funding for projects.

"This is likely to negatively affect the cost of funding projects — which Safcol is in desperate need of."

She said the company required "a different way of doing things".

Ms Brown said the reopening of the land claims process until 2019 was likely to put the company under pressure and she advised Safcol to open two-way communication links with communities.