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    Our mission is driven by an unwavering commitment to facilitate sustainable economic empowerment of communities and eradication of poverty through:

    Implementing needs-driven interventions Becoming a partner of choice for land claimants We are dedicated to growing our business in the forestry value chain and maximising stakeholder value, through:

    Ensuring technical and business excellence by attracting and retaining the best people Enhancing the asset value by continuously pursuing innovative solutions Embracing and leading an all inclusive equitable transformation of the South African forestry sector Commitment to meaningful partnerships with stakeholders Practising transparent and fair marketing Develop the downstream value chain Environmentally responsible

    Therefore providing a green heritage, growth and socio-economic justice

    A world class, global business engaged in multi-functional forestry, revolutionising the integration of forests and communities.


    Passionate about our forests, communities, customers and people A social and environmental conscience Trust founded on integrity and loyalty Equality, fairness and empowerment Respect for diversity Focus on innovation and excellence



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    6 Group Structure 8 Chairpersons Statement 12 Chief Executive Officers Report 36 Board of Directors 40 Executive Committee 44 Group Financial Review 46 Group Value Added Statement 48 Financial Highlights ANNUAL FINANCIAL STATEMENTS 50 Responsibility of Directors 52 Report of the Combined Audit and Risk Management Committee

    54 Company Secretarys Certificate 56 Independent Auditors Report 60 Report of the Directors 80 Group Income Statement 82 Group Balance Sheet 84 Group Statement of Changes in Equity 86 Group Cash Flow Statement 88 Notes to the Annual Financial Statements










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    CHAIRPERSONS STATEMENTOur business, like many businesses in South Africa, has not been insulated from the global economic meltdown. We have lived through a very challenging year. There have been real challenges in our sector. These include the increase in land claims, limited timber stock availability, and the reduction of land available for forestry, as other sectors increase their claim on other land uses. These changes have brought with them tough trading conditions which for some of our peers, has meant closure and major reduction in staff numbers. The historic and devastating forest fires of 2007 and more recently 2008, have also had a negative impact on our bottom-line, despite Managements best efforts to limit these risks.

    However, against the backdrop of these challenges, we are pleased that our commitment to work closer with our people, though slow, is bearing fruit. We have signed social compacts with some of our community clusters, building the impetus for more vigorous community liaison and empowerment initiatives in the next financial year. We are also invigorated by the passion and renewed enthusiasm in government, who see that forestry as a sector can have a profound impact in terms of the countrys rural development strategy. As we anticipated this, we put on the table certain initiatives that will ensure that our business is positioned perfectly to support the vision of empowering rural communities through forestry. To this end, during the year under review, the activities within the Group were dominated by issues related to the re-design of its future and transformation imperative. Although we have a long way to go in terms of fundamentally transforming SAFCOL to be more responsive to the rural development challenges at hand, and to work closer with our communities in terms of developing better models for real empowerment, we are certain that the restructuring process that we began during the year and objectives as set out in our Corporate and Business Plan will bear fruit in coming years.

    Operationally, much effort went into replanting burnt areas after devastating forest fires occupied activities. Our dedicated staff worked weekends and late hours with some of our suppliers and subcontractors in the salvage operations. A lot of money was saved in the process.

    This year we had to shift gear a few times which, at some level, had a negative impact on the direction of the organisation. But once a clear message was provided that privatisation was on hold until land claims could be finalised or consensus reached about their management, Management put their shoulder to the wheel and worked hard to meet Shareholder expectations.

    We believe that SAFCOL has a major role to play in terms of the successful resolution of land claims over forestry land. Government and the SAFCOL Board of Directors (the Board) needed to reconsider the conditions of the long-term lease for state land under plantation forests, and the format of guarantees to be provided to potential buyers. Approximately 61% of the land under Komatiland Forests management is under claim. It remains critical that we work together with relevant departments in fast-tracking the resolution of these claims. I am pleased to report that an inter-ministerial committee has been established in order to give priority to claims for land under SAFCOL.

    In May 2008, the then Minister of the Department of Public Enterprises (DPE), Minister Alec Erwin, requested the Board and Management to chart the way forward through the development of a five-year Corporate and Business Plan. This presented us with an opportunity to revisit SAFCOLs medium to long-term strategy, and its mission and vision.

    The new strategic direction will be focused on ensuring that a significant role is played in the development, integration and upliftment of local communities where our operations are based. The following are SAFCOLs main strategic goals in terms of the new direction as captured in the Corporate and Business Plan, in no particular order:

    1. Position SAFCOLs operations as an attractive business partner for successful land claimants, investors, and Broad Based Black Economic Empowerment (B-BBEE) business partners. This goal includes the desire to increase equitable ownership in the forestry sector. 2. Create economically vibrant forest communities where people desire to live and return to.

    Chairperson: Gugu Moloi



    CHAIRPERSONS STATEMENT3. Fully embrace in all aspects, and rise above, the sectors transformation charter.4. Build, attract and retain skills. 5. Increase financial value to current and future shareholders. 6. Practice world-class sustainable forest management.7. Increase forestry area under management in South Africa and internationally by partnering with successful land claimants, landowners, other forestry companies and government departments with forest holdings.8. Increase value added services to customers and B-BBEE participation in the industry practices and revolutionising forest community integration.9. Develop solid company brands (SAFCOL, Komatiland Forests and IFLOMA) that are known in local and international stakeholder circles for leading sustainable multi- functional forestry10. Development of and investment in the down-stream processing industry.

    Significant milestones have been reached regarding the above goals in the current year, although more still needs to be done to ensure that these goals are achieved.

    The Board and Management continue to build relationships with all our stakeholders, especially the communities adjacent to our operations. In the year under review, SAFCOL adopted an approach of establishing relationships with these communities by implementing institutional frameworks that will govern the relationship in the form of social compacts. We also aim to grow mutual-beneficial partnerships with the communities through formal communication. The focus is on driving real B-BBEE. While we support the Companys drive to build other non-core businesses which will lead to sustainable socio-economic developments and poverty alleviation, as a Board, we are adamant that the Groups transformation objectives should not be compromised. We are of the view that even the operations should be subject to stringent B-BBEE targets which we agreed to in terms of the five-year Corporate and Business Plan.

    The forestry sector in South Africa is undergoing transformation. The signing of the Forestry Charter heralded a new dawn in the transformation of the industry. As a Board, through our Transformation Committee ably led by Mr Peter Derman, we are very excited about the role that the Group can play in this regard. SAFCOL, as a State Owned Entity, will be at the centre of the transformation agenda. Tangible transformation imperatives have been achieved in the year under review. These include the assessment of the current status of compliance to transformation guidelines, and the setting of aggressive targets which will be monitored by the Boards Transformation Committee.

    In the year under review, two Non-Executive Directors were appointed to the Board. This was done in an effort to ensure that adequate representation of expertise to the Board is achieved. Ms. Elaine Alexander, a natural scientist and Mr. Seth Radebe, a Chartered Accountant, were appointed with effect from 1 June 2008. Both of them have brought skills and experience that has enhanced the Board. During the year under review, the Board held ten meetings to consider all the matters requiring its attention. All Board sub-committees met prior to the SAFCOL Board meetings. I am pleased that the members of this Board have honoured their commitment to serve the interests of the Shareholder in the year under review. For this I wish to thank my fellow Board members, especially the Chairpersons of the various sub-committees for their commitment, leadership and sheer passion to position SAFCOL as a company that is delivering on both the profit and socio-economic imperatives of the Shareholder.

    SAFCOL has the vision to expand its operations outside South Africa. The investment proposal for the proposed fibre project in Mozambique is currently with the Shareholder for review. It is the Boards intention to strategically pursue footprints in Africa and beyond, specifically within the SADC region. We will do this with caution, given the prevailing economic climate. The existing IFLOMA operations in Mozambique present an exciting opportunity to expand our business, and this can be realised within the medium to long-term. Under the Ministers leadership, we await the outcome of bi-lateral talks between the two governments for the plan into the future in that country.



    CHAIRPERSONS STATEMENTAs already indicated above, SAFCOL has not escaped the current negative global economic conditions which are evident throughout the forestry industry. The slowed down markets in the building industry have had a negative impact on the sale of saw logs and the demand for sawn timber. The current downturn in demand for sawn timber, and also the lower prices achieved, had a major impact on the profitability of the Group. The Groups operations are not fully vertically integrated, and its activities are to a large degree limited to a customer base comprising of timber processors, and do not include other operations in the value chain. There is therefore an opportunity for innovation in this regard.

    Based on the commitment and dedication of the Groups employees, I am convinced that, with the assistance of my colleagues on the Board, we will overcome the prevailing economic and business conditions to the benefit of our Shareholder, the communities in the areas where we operate, and the industry at large.

    As a way of summary, our key financial achievement in the year under review is a realised profit before taxation and after discontinued operations of R969.5 million (2008: R868.8 million). Included in the results is an increase to the fair value of biological assets amounting to R 757.9 million (2008: R528.7 million). It is also pleasing to report that, despite the challenges and volatile economic climate that the Group is exposed to, our cash position is R295.9 million (2008: R433.0 million) and our balance sheet continues to remain strong, with a net asset value of R3,385.3 million (2008: R2,695.0 million). During the 2009 financial year, we also achieved a Return on Equity of 31.9% (2008: 36.6%).

    We are excited about SAFCOLs prospects going forward and believe that the five-year Corporate and Business Plan incorporate many initiatives that support the objectives of a developmental state.

    On behalf of the Board, I would like to thank the former Ministers of Public Enterprises who have led us in the year under review; Minister Alec Erwin, and Minister Brigette Mabandla. Thank you for your leadership and support. I also wish to extend our appreciation to the Director General of DPE, Mrs. Portia Molefe, for the passion that she has displayed in ensuring that we keep to the terms of the Shareholders brief. The DPE officials who are responsible for the SAFCOL portfolio have provided us with guidance during this year and facilitated many processes for us with other government departments thank you so much for that. I also wish to extend our gratitude to the Chairperson of the Portfolio Committee on Public Enterprise, Ms. Fatima Chohan and the members of the committee for their oversight role. You have kept us on our toes! How wonderful it is that we all have the same objective which is to make a real difference in the lives of our people.

    We appreciate the fact that some members of the committee took time out of their busy schedules to visit our operations in the year under review.

    I wish to thank my Board for their support. I know it has not been an easy year but I am convinced that the year ahead is going to be one of consolidating the work that we have started. Thank you. I thank the Management of SAFCOL. It has been a tough year. The Board has challenged you and you have risen to the challenges. I hope that we have all learnt enough to realise that we need each other to drive this ship going forward, in order to make the kind of impact we want to make. My special appreciation goes to all the staff of the SAFCOL Group. Thank you for your support and the great work that you have done in the course of this year.

    In conclusion, let me take this opportunity to welcome our new Minister, Minister Barbara Hogan. We are looking forward to a good working relationship with you. All our hands are on deck!!!

    G MoloiChairperson

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