Forestry & Paper
Demand for paper remains slow but the pulp export market continues to grow.
• Pulp and paper exports earn R2-billion for South Africa.
• Forestry accounts for 8% of Mpumalanga’s GDP.
Mpumalanga has South Africa’s biggest sawmill and its largest panel and board plant, together with the biggest integrated pulp and paper mill in Africa. Forestry accounts for 8% of Mpumalanga’s gross geographic product (GGP) and downstream production of paper and related products is an important part of the manufacturing profile of the province
South Africa earned R12.2-billion from forestry exports in 2007, but imports cost R9.8-billion. The forestry sector comprises every link in the chain from forestry to logging, sawmilling, wood product and pulp and paper manufacture. The province is at the forefront of the country’s manufacturing capability in sawn timber, particle board, furniture and manufactured wood products for the building industry. Pulp and paper are the main industry exports, along with sawn lumber, wood chips and wattle extract. The major export markets are the Far East, Europe and the UK.
New transport vehicles were introduced to the timber industry in 2010 by Sappi and Timber Logistic Services, with claims that they will be 18% more fuel efficient per ton transported. Private rail operator Sheltam specialises in transporting paper and pulp, and has extensive operations in Mpumalanga.
A broad-based black economic empowerment deal involving 4.5% of Sappi’s South African-issued share capital (about 30% of the business) went through in 2010, with 77.5% of these shares devolving to Sappi employees. The transaction is worth R814-million.
Forestry
Mpumalanga has the ideal climate and topography for forests. Sabie and Graskop represent the hub of the industry, but commercial forests are also found to the east and south along the Swaziland border. About 11%
of the land mass is forested, with 4% of that being natural forest. The province is the national leader in total hectares under forest (514 000) and export earnings.
Sappi Forests’ purchase in April 2010 of the 14 500-hectare Sjonajona plantation takes the paper and pulp manufacturer’s plantation ownership in Mpumalanga up to 230 200 hectares, of which 143 400 hectares is planted. Sjonajona is located between Barberton and eNtokozweni (Machadodorp).
York Timbers Holdings Ltd (York Timbers) owns 61 000 hectares of plantations, leases another 28 900 hectares, and runs seven sawmills and a plywood mill. In the six months to December 2009 York Timbers reported a R232-million loss, in contrast to the 18 months to June 2008 profit figure of R538.7-million. The company closed down two mills and mothballed a third in response to an oversupply of lumber and reduced demand.
The Industrial Development Corporation (IDC) is a 29.8% shareholder in York Timbers, which is listed on the JSE. The IDC also has a 42.6% share in Hans Merensky Holdings, a company which has forests and a sawmill near Sabie.
The commercial forest sector offers attractive business opportunities for small-scale entrepreneurs, particularly small growers, contractors and sawmillers. In addition, the pulp and paper industry creates income opportunities for recycling. Forested areas lend themselves to bee-keeping and honey-making and some initiatives have been started in this field.
The three-day Sabie Forest Fair is a major event on the forestry calender, attracting upwards of 12 000 industry insiders and interested spectators to the York Timbers’ Sports Ground every year.
PG Bison has a sawmill in Empuluzi. Mondi’s softwood sawmill in Sabie is South Africa’s largest of its type. Sonae Novoboard’s panel and board plant is likewise impressively big.
Pulp and paper
Wood from the Sjonajona plantation will help Sappi achieve self-sufficiency at its massive Ngodwana Mill, which has annual capacity to produce 140 000 tons of newsprint and 240 000 tons of kraft linerboard and white top linerboard. Sappi bought the land from Mondi, which put 40 000 hectares of its Mpumalanga forests on the market in June 2009.
Sappi’s international presence allowed for an optimistic report on global demand for fine paper and pulp when the company presented its quarterly report in January 2010. However, in 2009 the company also closed down its London stock exchange listing due to low trading volumes and closed its Usutu Pulp Mill in Swaziland, a reflection on reduced demand in the Southern African market.
Although local demand is dwindling, the export market for pulp and paper from South Africa remains strong. The sector contributed about R2-billion to the nation’s balance of payments in 2009. Pulp production figures have been on the rise since 2007 and companies like Mondi are increasingly focusing on pulp export due to better margins.
Online resources
Forestry South Africa: www.forestry.co.za
Mpumalanga Economic Growth Agency: www.mega.gov.za
Mpumalanga Provincial Government: www.mpumalanga.gov.za
National Department of Agriculture, Forestry and Fisheries: www.daff.za
Paper Manufacturers of South Africa: www.pamsa.co.za
South African Institute of Forestry: www.saif.org.za
