South Africa: State Forests to Be Put on the Market Again
10/25/99
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Title: State Forests To Be Put On The Market Again
Source: Business Day (Johannesburg)
Status: Copyright 1999, contact source for permission to reprint
Date: October 25, 1999
Byline: Robyn Chalmers
Johannesburg - A second sale process for a portion of the state's
commercial forests is on the cards after no suitable bids were
received for forestry packages in the Western Cape and the Northern
Province.
Government announced on Friday that five bidders were shortlisted to
buy the state's forest assets, but there were no international
forestry companies on the list. This is seen by state officials and
analysts as a big disappointment.
It was hoped that international companies like the US-based groups
Weyerhauser, Rayonier and Georgia Pacific or New Zealand's Fletcher
Challenge would bring their skills to SA.
Forest Owners' Association executive director Mike Edwards said it
was strange that big investments were being made in other forestry
markets, yet SA, which had excellent forestry resources, could not
attract foreign players.
Analysts said this could be because of the depressed timber market,
delays in the sale process and the demands made on new forestry
owners by the government.
Edwards also asked why government had released a second short list
instead of announcing preferred bidders. "The suspicion is that
government has not received the prices it was looking for," he said.
An early valuation of the assets indicated that government could
expect between R800m and R1,5bn.
Water affairs and forestry chief director Lael Bethlehem said at the
weekend that the state would look at the Western Cape and Northern
Province packages again. The two forestry parcels make up 36500ha of
the total 330000ha up for sale.
There could be other uses for the Western Cape land such as fruit
farming, wine growing or tourism.
Bethlehem said the state would also sell the remaining former
homeland forests. The current sale process includes all the assets of
the SA Forestry Company (Safcol) and half of the former homelands'
150000ha of forests.
Some other countries that have embarked on large forestry sales have
done so in phases, notably New Zealand where forestry packages were
offered for sale several times. SA and New Zealand's forestry
industry are roughly the same size and have similar production
capacity.
Analysts expressed concern that no bidders were shortlisted for the
asset as a whole. Two bids were originally received for the entire
asset, out of an original list of nine consortiums which submitted 14
bids for the various assets.
One analyst said that internationally, the forestry sector was moving
towards consolidation and the current bidding process meant SA's
forestry industry would become fragmented.
The short-listed bidders are the African Forestry Consortium in
partnership with Sappi; Siyaqhubeka, which includes Mondi; Singisi
Forest Products Eastern Cape Forestry; Amathole Timber Holdings and
the Thesen Consortium.
Mondi and Sappi hold about 25% and 19% of forests in SA respectively.
It is unclear whether the Competition Commission will probe the deal
should the two companies win their bids.