FSA 2008 ANNUAL REPORT by sdsdfqw21


									                                                 FSA 2008 ANNUAL REPORT

Foreword by Chairperson................................................................................................................. 3
A Word from the New Executive Director...................................................................................... 4
Internal Forestry South Africa Matters ........................................................................................... 5
  FSA Membership ...............................................................................................................................5
  FSA Committees...............................................................................................................................6
  Non-FSA Industry Committees ..........................................................................................................6
  Non-Industry Affiliated Committees ................................................................................................. 6
  Co-operation with Other Industry Organisations.............................................................................. 6
  Co-operation with Government Departments Agencies & Programmes.......................................... 6
  International Co-operation ...............................................................................................................7
  FSA 2008 Annual General Meeting .................................................................................................8
  FSA Staff Matters............................................................................................................................ 8
FSA Focus Areas During 2008........................................................................................................ 9
  Land Restitution & New Farmer Support .........................................................................................9
  Broad Based Black Economic Empowerment .................................................................................10
  Forest Protection, Research & Development...................................................................................11
  Afforestation Issues .........................................................................................................................12
  Water Issues ...................................................................................................................................12
  Environmental Issues.......................................................................................................................13
  Education & Training....................................................................................................................... 14
  Forestry Research .......................................................................................................................... 15
  Emerging Timber Grower (ETG) Programme ................................................................................. 16
  Property Rates ............................................................................................................................... 17
  Forestry Sectoral Determination ...........................................................................................18
  Rail Issues....................................................................................................................................... 18
Appreciation..................................................................................................................................... 19
FSA Finances.................................................................................................................................... 20
  FSA Finances 2008 ..........................................................................................................................20
  FSA Budgets................................................................................................................................... 21
  FSA Audited Financial Statements ..................................................................................................22

                                 It has been a year full of challenges for the Forestry Industry, including issues relating to land claims, fires,
                                 pests and diseases, and now the global recession.

                                 I am very pleased to say that our Association has not only remained abreast of these challenges, but in many
                                 instances has been at the forefront of mapping the road ahead. This has been possible because of the excellent
                                 relationships within our Industry body which allows for robust and constructive debate, the support of our
                                 research partners, and the dedicated staff of FSA. In addition we have strengthened our relationship with
                                 Government, who are often at the forefront of significant shifts in the business landscape.

                                 The endorsement by the Minister of Land Affairs of models to deal with land claims on forestry land, in a way
                                 that ensures both significant benefits and opportunities for communities and the ongoing production of timber
                                 in these areas, is one example of a better Government relationship. Further progress was seen in the alignment
                                 of strategic and business plans and resources between FSA and the Department of Water Affairs and Forestry
                                 around shared priorities as described in the Forestry Charter which was signed in May.

    We extend our grateful thanks to Dr Moshibudi Rampedi, DDG Forestry and Blessing Mphela, Acting Chief Land Claims Commissioner,
    for their support in building a more constructive relationship with the Industry.

    In the year ahead our focus will need to be on resolving the outstanding land claims and developing a public-private partnership with
    Government for the support of new forestry farmers. The future of the success of the Forestry Industry will rest on our ability to deliver
    this support. This will mean changed roles for both DWAF and FSA, and we need to negotiate our way forward to a mutual understanding
    of roles and responsibilities. With the transfer of at least 50% of forestry farms into community hands we would expect a greater funding
    role for Government in R&D, fire protection and farmers’ support. As FSA, we will need to develop public-private models based on
    international best practice to deliver in these arenas with Government.

    The end of 2008 signalled a significant decline in domestic and international demand for timber and forest products, as the global economic
    crisis started to be felt and we will all be focussed in 2009 on keeping businesses afloat. All of these challenges make for an exciting next
    5 years in forestry. We have a team in FSA well able to tackle these challenges. Thank you to Michael Peter, our new Executive Director,
    who has helped shape a new direction for FSA. Thank you also to the Executive Committee for their support over the past year and the
    trust placed in me.

    It has been a privilege to serve you all.


                              A year ago when the 2007 FSA Annual Report was presented to members in
                              Hazyview, I had just concluded discussions with the FSA Executive Committee on taking up
                              the cudgels from Mike Edwards. Needless to say the discussions at that time centred on the
                              key challenges facing the Sector and the Association.

                              These included ensuring successful land reform and security of tenure, addressing the restrictive
                              regulatory barriers to growth and new entrants into forestry, addressing issues of support to
                              new entrants, both in terms of skills development and securing access to affordable capital
                              and the repositioning of the Sector. Added to these relatively new key challenges we also
                              had to consider giving increasing focus to the ever persistent challenges of forest protection
                              and research, security of fibre for downstream processing, increasing environmental considerations
                              and the restructuring of the remaining plantations held by the State.

All of these challenges are clearly captured in the Forestry Transformation Charter which was about to be signed at that time.
Not only does the Charter outline the challenges that need to be tackled in order to ensure the transformation and growth of
the Sector, but it also sets out the commitments that the parties to the Charter made to ensure that these goals were achieved.

What no-one however anticipated a year ago, was that within a couple of months the world would start to experience a global
recession such as had never been seen in history. None of the major previous economic crises from the Great Depression
to more recent ones such as the 1970’s Oil Crisis or the Asian and Argentine financial crises could hold a candle to the truly
global contagion which we are currently experiencing. This is simply because the extent and depth of globalisation has never
been what it was at the start of the current financial crisis.

FSA therefore spent the last six months of 2008 undergoing strategic re-positioning and developing a
comprehensive Business Plan to address the challenges facing the Sector, only to find that by December we were starting
to get an idea of the full potential impact of the global crisis on our domestic Forestry Sector. Projected volumes from our
members were declining and consequently the resources with which to implement our plans were shrinking rapidly.
While the biggest and newest key challenge for people in our Sector (as for most other Sectors) is
how to keep one’s business from going under, the other fundamental challenges facing the Industry,
described above, have not disappeared nor diminished in importance.

All of the subsidies provided by Governments overseas to bail out their financial Institutions and Industries are going to have
a serious impact on our own economic Sectors, which have not enjoyed such subsidies. The new challenge for Government
and the Department of Trade and Industry in particular, is going to be how to ensure that South African companies and
individuals are not greatly disadvantaged when it comes to competing in overseas and domestic markets against companies
who have benefitted from such subsidies. The playing fields will need to be levelled in some way.

There is, however, some good news in South Africa. The Forestry Sector in one province in Canada
which has nearly 40 000 forestry jobs will have re-trenched over 65% of their forestry workforce by
April 2009, whereas our members have been trying as far as humanly possible to protect jobs in the
Sector and we have not yet seen major job losses in Forestry. Many other Sectors in South Africa,
including motor manufacturers, are appealing to Government for even greater subsidies, as is being
seen on a massive scale overseas and yet the local Forestry Sector has not yet had to make such appeals.

More good news is that major progress has been made in addressing some of the key challenges
facing the Sector, including in the critical areas of land reform, forest protection and capacity building.
2009 offers an opportunity to work more closely with Government and other stakeholders, in making
further progress on all key challenges, many of which, such as removing restrictive regulatory barriers, do not require massive
amounts of funding but rather committed and creative collective solutions. Given the depth of talent, commitment and experience
which FSA has within its members, staff and partners, these challenges can all be successfully overcome.



    As membership of FSA is voluntary, it is very pleasing to note that       Group interests for the benefit of FSA as a whole. This bodes well
    three additional “corporate” members joined FSA during the year           for the future of the Organisation and its ultimate objective of
    under review - PG Bison’s North East Cape Forests, Amathole               breaking down the barriers between the various “Groups” and
    Forestry Company and Siyaqhubeka, the latter two being former             forming a single Organisation devoid of any internal demarcations.
    SAFCOL packages leased to private enterprise. Numerous other
    small and medium growers have also joined the Association. Not            The Executive Committee, as constituted on the last day of the
    only is this a very welcome development from a funding point of           2008 Financial Year, is listed at the front of this Report.
    view, as the timber sales tonnage of the three companies mentioned
    above amounts to some 800 000 tons per annum, but also indicates          Group Committees
    that FSA is viewed by the Industry at large as an Organisation
                                                                              FSA traditionally has had three Group Committees, representing
    that serves their interests well. The sterling work being carried
                                                                              large, medium and emerging growers. Each of these met three
    out by Steven Ngubane and Nathi Ndlela has increased our
                                                                              times during the year, providing Group input into the deliberations
    numbers of emerging growers who number more than 20 000
                                                                              of the Executive Committee. It is promising to report that complete
    growers and the support to these members has increased
                                                                              consensus on issues discussed was achieved. Members of each
                                                                              of these Group Committees once again devoted considerable time
                                                                              and effort into their deliberations and are thanked for their support
    Despite the market downturn that has occurred since September
                                                                              and for their endeavours in putting the interests of the Forestry
    2008 and the additional financial strain that this has had on
                                                                              Industry and FSA at the top of their Agendas.
    members’ businesses, it is gratifying to note that over 90% of
    growers by number continue to be FSA members and it is hoped
                                                                              During the process of developing the FSA Strategic and Business
    that this situation will continue during the difficult period that lies
                                                                              Plans it transpired that members were in favour of moving towards
                                                                              greater integration of the FSA Group structures by way of holding
                                                                              joint meetings at both national and regional level. This was seen
                                                                              as having two potential benefits.
    Executive Committee
                                                                              The first is that it promotes much greater networking opportunities
                                                                              among members at different scales, which is regarded as crucial
    During the year three scheduled Executive Committee meetings
                                                                              since by far and away the majority of issues that FSA deals with
    were held, together with three Special Executive Committee
                                                                              at an Industry level affect all growers whatever their scale of
    meetings. Two of these Special Executive Committee meetings
                                                                              operation. As FSA represents over 20 000 small emergent black
    were held in February and March of 2008 respectively to finalise
                                                                              timber growers, over 1 300 commercial timber farmers and all nine
    the appointment of the new Executive Director and the third, held
                                                                              Corporate timber Companies, strengthening the already good
    in October, to finalise and approve the 2009 Business Plan. The
                                                                              interaction between these groups is imperative to the success of
    latter meeting, while approving the Business Plan required two
                                                                              the Association.
    subsequent meetings to approve the overall 2009 budget, one in
    December and a Special meeting in February 2009, these latter
                                                                              The second benefit is a financial one as this promotes the efficient
    meetings being necessitated by the ramifications of the global
                                                                              use of FSA resources, by limiting the need to convene multiple
    economic crisis and the consequent need to reduce the FSA
                                                                              meetings to report on and discuss the same issues with different
    budgets, particularly those related to the Business Plan.
                                                                              groups of members.
    In terms of FSA's Constitution, the positions of Chairperson and
                                                                              The new format of these FSA Group meetings at National and
    Vice-Chairperson should have been held by a representative of
                                                                              Regional level will be tested in 2009.
    the Medium Growers Group and the Large Growers Group
    respectively during the 2008/2009 year.
                                                                              A listing of members of each of the respective Group Committees
                                                                              is given at the front of this Annual Report.
    Given the identified priority issues faced by the Forestry Industry
    and the need to strategically reposition the Industry, the Medium
                                                                              Working Committees
    Grower Group representatives, with the best interests of the
    Association at heart, requested that Ms Viv McMenamin, despite
                                                                              In addition to the Group and Executive Committees, which have
    being a Large Grower Group representative, be appointed as
                                                                              fixed meeting dates and deliberate issues of general importance
    Chairperson and in so doing unanimously withdrew their nomination
                                                                              and concern to the Industry, FSA also maintains a number of ad
    of Mr Murray Mason. This was supported by all members and Ms
                                                                              hoc Working Committees which deal with specific issues and which
    McMenamin was thus duly elected as Chairperson. Mr Dinga
                                                                              are convened if and when necessary. Amongst the most important
    Mncube was proposed and unanimously elected as Vice-
                                                                              of these are the Water and Environmental Affairs Committee, the
    Chairperson, but on the understanding that Mr Hendrik de Jongh
                                                                              Human Resources Committee and the Land Affairs Committee.
    would continue as his alternate and active member of the Executive
                                                                              In addition, a number of Sub-Working Groups are active which
    Committee. The Medium Growers Group Members’ decision
                                                                              deal with very specific issues, such as post-settlement support
    illustrates the commitment that they, and other members of FSA,
                                                                              models for land reform, forest certification, transport, research and
    have to the Organisation in that they willingly set aside their own
                                                                              Industry skills development, amongst others.

   NON-FSA INDUSTRY COMMITTEES                                            During 2008 FSA worked closely with the Paper Manufacturers
                                                                          Association of SA (PAMSA), the newly formed Sawmilling South
   The range of issues that FSA deals with is such that it has to be      Africa (SSA), the SA Wood Preservers’ Association (SAWPA),
   an active participant in a range of Institutions and Organisations     the SA Forestry Contractors Association (SAFCA) and others.
   which are either supported directly through FSA in terms of funding    Although not yet formed, preliminary discussions have been
   or which have a direct bearing on Industry interests. In all cases,    held between FSA and some of the abovementioned on the
   members of FSA staff are represented on these Institutions’            possibility of forming an overarching Forest Sector “'umbrella”'
   Committees and structures, the most important of which being           Association to represent the interests of all those involved in
   the following:                                                         the Sector from growers to processors.

                                                                          FSA would like to thank the Directors and Management of all
INSTITUTE/ CONVENOR               COMMITTEE/STRUCTURES                    these other Industry Organisations for the spirit in which
                                                                          discussion and interaction has taken place. Finally, mention
(i): ICFR                         Board of Control                        must be made of the fact that the Executive Director of SAWPA,
                                  Sirex Control Programme                 Mr Angus Currie is to retire shortly. FSA would like to take
                                  Steering Committee                      the opportunity of thanking Angus for the work that he has done
                                  TPCP Board of Control                   on behalf of the Industry over many years and wish him best
(ii): FABI                        TPCP Finance Committee                  wishes for his retirement.
                                  CTHB Board of Control

                                                                          CO-OPERATION WITH GOVERNMENT DEPARTMENTS
(iii): NMMU (Saasveld)            Forestry Advisory Committee
                                                                          AGENCIES AND PROGRAMMES
(iv): Stellenbosch University     Forestry Advisory Committee             Ironically the very transparent management of the majority of
                                                                          the Forestry Industry’s plantations in South Africa, which has
(v): FIETA                        Authority                               led to world-leading levels of international certification of its
                                  Forestry & Pulp and Paper Chamber       Plantation Sector, has also resulted in it being regulated more
                                  Audit Committee                         than any other land based activity. This heightened
                                                                          attention from a regulatory perspective, is cited by experts as
(vi): Provincial LAAC's           Members                                 being the biggest barrier to entry and growth in the Sector.

(vii): DWAF                       Minister’s Advisory Council             The only positive outcome of this over-regulation is that it has
                                  (NFAC)                                  also provided Government with unique insights into the
                                                                          disproportionately large contribution that the Sector makes to
                                  Industry Liaison Forum                  the lives of our citizens in terms of their economic, social and
                                                                          environmental wellbeing.
(viii):Forestry Charter Council   Steering Committee
                                  Growers Working Group                   This realisation by the State of this contribution has led to the
                                  Finance Committee                       prioritisation of Forestry in several of the country's macro-
                                  Charter Council                         economic policies, strategies and programmes including the
                                  Baseline Task Team                      Accelerated and Shared Growth Initiative of South Africa
                                  Land Task Team                          (ASGISA), the Presidency-led Programme of Action (PoA) of
                                                                          the Economic Cluster, the DTI Industrial Policy Action Framework
                                                                          (where Forestry is listed as one of four key growth and export
                                                                          Sectors) and the Forestry Transformation Charter, all of which
   In addition to the abovementioned Institutions and structures, FSA
                                                                          focus on the transformation and growth of the Forestry Industry.
   is represented on a wide range of non-Industry affiliated bodies
                                                                          It is therefore essential that if the Industry is to continue to
   which, one way or another, have a direct bearing on forestry
                                                                          provide the growth and transformation benefits which it offers
   activities and which are therefore important for FSA to have
                                                                          to the country, it is supported by enabling provisions by
   representation on. Amongst the most important of
                                                                          Government and that a sound working relationship exists
   these are AgriSA’s Commodity Chamber, Kwanalu’s Property
                                                                          between the Sector and the State. The relationship with the
   Task Team and Agrarian Reform Committees, Working for Water,
                                                                          Sector lead Department, in this case the Department of Water
   Working for Wetlands and Working on Fire Programmes,
                                                                          Affairs and Forestry, is especially important in this regard.
   Catchment Management Agencies (CMA’s) and Forums and the
   SANBI Grasslands Biodiversity Forum. Given FSA’s limited
                                                                          Department of Water Affairs and Forestry
   resources, it is not possible for FSA staff to be represented on all
   of these bodies and thanks must therefore be extended to FSA
                                                                          The conclusion of the Forestry Charter in May 2008 and the
   members who fulfil this role.
                                                                          simultaneous appointment of the new FSA top management
                                                                          team, namely the Chairperson, Vice - Chairperson and Executive
                                                                          Director, provided an excellent platform for pursuing a sound
                                                                          working relationship between FSA and Government.
   The Forest Sector Transformation Charter process acted as a
   catalyst for a renewed level of cooperation between Industry
                                                                          Throughout the year, ongoing interaction with DWAF took place
   Organisations and between these Industry bodies and Government.
                                                                          on a range of issues important to the Industry and has led to

    the drafting of a Memorandum of Agreement between FSA and                  Other Government Departments
                                                                               Although only three Departments have been given special mention
    DWAF have reported to the Charter Council that they plan to                above, it must be pointed out that FSA had interactions with many
    finalise the MoA with FSA in 2009. This will formalise the co-             more Government bodies at both National, Provincial and Local
    operation which already takes place on a number of issues such             level. Although not an exhaustive list, some of the more important
    as in forest enterprise development (which includes post-settlement        engagements are mentioned in the table below together with the
    support to land reform beneficiaries), forest protection, Sector           issues involved. Specific details regarding some are mentioned
    promotion and the development of a national certification initiative.      elsewhere in this Report. 2008 saw Industry-Government
                                                                               relationships further strengthened and strong progress being made
    The support and involvement of the DWAF officials on many key              towards aligning objectives and resources towards the growth and
    matters is appreciated. In this regard the co-operation and support        transformation of the Industry.
    received from the Minister, Ms L Hendricks (MP), the Deputy-
    Director General: Forestry, Dr M Rampedi, and all their senior             FSA Interaction with Government Departments
    forestry staff is sincerely appreciated.
                                                                               Government Department              Issues
    Department of Land Affairs                                                 Office of the President            Infrastructural inputs and land reform
                                                                               DWAF (Water & Forestry)            BBBEE Charter priorities including
    One of the greatest challenges facing rural-based economic                                                    Support and Development, Forest
    sectors is ensuring that land reform is successfully implemented.                                             Protection, Licensing, Sector
    This is especially important in Forestry where plantations support                                            Promotion, National Initiative and
    a major secondary processing Industry. These Industries, the                                                  Infrastructure Support
    most important of which being the pulp and paper, sawmilling
    and board manufacturing Industries, not only represent some of             DEAT (Environment)                 Environmental legislation
    the largest capital investments of any Sector in South Africa but          DPLG (Local Govt.)                 Property rates & disaster
    collectively also make a huge contribution to South Africa’s foreign       at National and Provincial level   management
    exchange earnings.                                                         DLA and the LCC (LandAffairs)      Land restitution post-settlement
                                                                               at National and Provincial level   support models
    Successful land reform in Forestry must therefore be measured              DoL (Labour)                       Sectoral Determination
    and characterised by both meaningful and sustainable benefits              DTI (Trade & Industry)             Charter, growth & development
    (economic, social and capacity/skills development) to land reform          DPE (Public Enterprise)            State forest restructuring and
    beneficiaries and by the continued use of the land for forestry.                                              land reform
    Given that it would appear from FSA surveys that upwards of                Provincial Governments             Econ. Development & afforestation
    50% of the total commercial plantation area in the country is under
    claim, the imperative for successful land reform, not only for the
    future of the Industry but also for the livelihoods of its beneficiaries   INTERNATIONAL CO-OPERATION
    cannot be over-emphasised.
                                                                               Forestry is a global business which is influenced by events and
    Remarkable progress has been made in this crucial field, the               actions occurring outside our borders, for which reason FSA makes
    details of which are described under the section in this Report            a concerted effort to stay in touch with the international forestry
    dealing with land reform. FSA must, however, at this early stage           arena. In this regard trade issues, forest certification, pest and
    record its sincere appreciation to the officials of the Department         disease, forestry promotion, climate change and environmental
    of Land Affairs and to the officials of the Chief and Regional Land        conventions are particularly important. FSA is able to remain
    Claims Commissions. The progressive and constructive                       abreast of these issues by sitting on a number of global forestry
    engagement which we have experienced in dealing with this key              forums, the two most important being the UN’s FAO
    focus area is sincerely appreciated and a special word of thanks           Advisory Committee on Paper and Wood Products (FAO ACPWP)
    must go to the Director General, Mr T Gwanya, the Acting Chief             and the International Council of Forest and Paper Associations
    Land Claims Commissioner, Mr B Mphela and his team of Ms R                 (ICFPA).
    De Vos and Messrs T Mdlalose and T Ntombela.
                                                                               During June 2008 South Africa hosted the Annual Meetings of the
    Department of Provincial and Local Government                              FAO – ACPWP and ICFPA. Minister of Water Affairs and Forestry,
                                                                               Ms L Hendriks, MP, was invited to the meeting and her keynote
    Another Government Department which was at the centre of FSA               address was very well received by the delegates. The attendance
    interaction during the year, through its involvement with Kwanalu,         of the Minister and the DDG Forestry, whose input further promoted
    was the Department of Provincial and Local Government (DPLG).              the South African Forestry Sector in the international arena, was
    This came about through Kwanalu’s endeavours to get the Minister           greatly appreciated.
    to impose Rand rateage restrictions on Municipalities in order
    that they did not impose municipal property rate burdens on                FSA considers contact with overseas visitors involved in the
    farming and forestry businesses which were deemed to be                    Forestry Industry as important as it gives us an opportunity to
    financially onerous. Details on this interaction are included in the       learn from others and, on the other hand, to promote the South
    section of this Report entitled Property Rates.                            African Forestry Industry in the region and further afield. DWAF
                                                                               routinely requests support from FSA in hosting these
                                                                               visits and in 2008 delegations from Kenya, Mozambique and
                                                                               Uganda were hosted by FSA, who provided guidance to them

regarding the establishment and running of their own Industry          in 2007, and after several options for the replacement had been
Associations along the lines of FSA. In addition to this, visitors     put before the Executive Committee for consideration and turned
from other countries including the USA and New Zealand visited         down, it was only at a Special Executive Committee meeting held
FSA through making direct contact with ourselves.                      on 8th February 2008, that a decision was taken to, in effect, start
                                                                       the process from scratch by contracting a recruitment agency and
FSA 2008 ANNUAL GENERAL MEETING                                        advertising the position in the national press. After having interviewed
                                                                       a short-list of candidates, the Executive Committee agreed to
FSA’s 6th Annual General Meeting was held at the Sanbonani             appoint Mr Michael Peter at its meeting on 17th April 2008. He
Hotel in Hazyview, Mpumalanga on 17th April 2008.                      was considered ideal for the job as he not only had a forestry
                                                                       background but, having worked for DWAF his entire professional
Dr Mathews Phosa, himself involved in the Forestry Industry, gave      life, was ideally placed to be able to ensure FSA built a more co-
the keynote address and opened the meeting. Thought provoking          operative and strong relationship with Government.
presentations also followed from Ms Rentia van Tonder, Head of
the IDC’s Wood, Paper & Other Strategic Business Unit, Ms Anthea       Although Mike Edwards was to have retired at the end of April, he
Stephens, Grasslands Programme Manager (SANBI) and Mr Paul             kindly agreed to stay on for a period of time in order to make the
Jacovelli, Chief Technical Advisor to EU Forestry Programme in         “hand-over” as smooth as possible. In a further attempt to make
Uganda (SPGS).                                                         this transfer as smooth as possible the FSA Executive Committee
                                                                       agreed to appoint him, on a contractual basis, in the role akin to
This particular AGM had special significance as it was at this event   that of a “Company Secretary”. FSA would like to take this
that the Industry bade the outgoing Executive Director, Mr Mike        opportunity of thanking Mr Edwards for doing this and welcoming
Edwards, a fond farewell after having served the Industry through      Mr Peter to the Association.
the Forest Owners Association and latterly FSA with dedication
and distinction for 28 years. To this end moving (and entertaining)    Another change in FSA’s permanent staff compliment, although
tributes were delivered by the Assistant Director, Roger Godsmark,     not a new face, was the decision to offer Mr Nathi Ndlela, our
who himself had worked with Mike for the past 21 years, and Brian      Small Grower Project Officer, who had been on contract to FSA,
Aitken, the longest serving Executive Committee member. In             a permanent position with FSA.
recognition of his service to the Industry he was not only presented
with a set of furniture made of sleeper wood as a retirement gift      In terms of contracted staff, FSA continues to employ the services
but also presented with a certificate honouring him as one of a        of Dr John Scotcher as our Industry Environmental Consultant
handful of Honorary Life Members of FSA. We wish Mike and his          and, as of 2008, has now employed Steven Germishuizen to run
wife, Di, a long and happy retirement in the Cape.                     the SANBI Grassland Research Programme, a post fully funded
                                                                       by SANBI through the United Nations Development Programme
FSA STAFF MATTERS                                                      (UNDP) Global Environmental Fund (GEF).

After not having experienced any staff turnover whatsoever since       This commitment from all FSA staff has enabled the Organisation
1990, 2008 proved to be an exception to the rule with the retirement   to again perform beyond expectations during one of the most
of Mike Edwards taking place and his replacement, Michael              turbulent years ever faced by the Association and the Industry.
Peter, being appointed as his successor in June 2008.                  As mentioned, FSA is a very lean Industry Association with a
                                                                       disproportionately large work volume which grows in complexity
Although this sounds straightforward enough, the actual process        almost continuously. With the outlook for 2009 being even more
of finding a suitable successor to the Executive Director proved,      challenging, we are grateful to have the calibre of people in FSA,
as reported in last year’s Report, to be “more onerous and             both members and staff who will be able to serve the Industry
problematic than anticipated”. Although the process had started        through these difficult times.

    In response to the rapidly changing socio-economic, regulatory,          similar outcomes on claimed forestry land.
    political and environmental landscape facing the Industry and the
    imperative to work closely with Government and given the joint           A major breakthrough was achieved in 2008 on land claims in
    commitments made in the Forest Sector Transformation Charter,            which the Minister of Land Affairs and Agriculture approved models
    FSA set about developing a Strategic Plan and accompanying               for dealing with land claims on afforested land. Several subsequent
    Business Plan for 2009. An extensive consultative planning process       engagements have taken place with the Chief and Regional Land
    was thus embarked upon from mid to late 2008 which                       Claims Commissioners as well as other Government partners to
    culminated in the production of a Business Plan which captured           develop standardised settlement and lease agreements. These
    the key issues facing the Sector and provided a clear roadmap            are aimed at optimising returns, capacity building and socio-
    of objectives and outputs which needed to be achieved in                 economic development for land reform beneficiaries and at ensuring
    addressing these.                                                        the sustainability of the Forestry Industry. It is anticipated that
                                                                             these models, which will provide for all scales of forestry operations,
    The six key focus areas are:                                             will be implemented in 2009. FSA would again like to express its
                                                                             sincere thanks to the officials from DLA, DPE and DWAF who
    • Land restitution and new farmer support;                               have participated in the process and who have demonstrated
    • Policy and regulation;                                                 leadership in ensuring that communities and the Sector are best
    • Broad Based Black Economic Empowerment (where not already              served in the process.
      provided for under the other focus areas)
    • Forestry protection, research and development;                         As mentioned earlier, the need for post-settlement support to new
    • Marketing and communication; and                                       entrants is of paramount importance in order to avoid the failure
    • Internal business processes.                                           for communities and the Sector, as seen in many previous settled
                                                                             claims on agricultural land and it is expected that the models which
    Each focus area highlighted the strategic objectives, desired            are being proposed, when combined with the Forest Enterprise
    outcomes and indicators and funding requirements. Although the           Fund which DWAF must establish, will ensure that this objective
    Business Plan highlighted several key focus areas which FSA has          is met.
    always regarded as being strategically important such as forest
    protection, others such as land restitution and new farmer support       Sincere thanks are owed to the FSA Land Committee and Task
    have become increasingly important in recent years.                      Team members who, under the exceptional leadership of our FSA
                                                                             Chairperson, Viv McMenamin, have provided tremendous support
    Although the original budget allocated to the Business Plan of           and guidance on these matters. A special and word of thanks
    R3 000 000 has been dramatically cut due to prevailing economic          must also go to Mr James Rycroft of Mondi who has given such
    circumstances, FSA is nonetheless committed to ensuring that             outstanding support to FSA throughout this process in terms of
    through innovative means and the sourcing of outside funding,            legal matters.
    the outcomes set are achieved. This section of the Report, with
    the exception of FSA’s own internal issues, highlights the main          Although not directly related to land reform per se, mention needs
    issues dealt with by FSA during the course of 2008.                      to be made of the fact that Government published two controversial
                                                                             Bills in April for public comment which had a bearing on land
    LAND RESTITUTION AND NEW FARMER SUPPORT                                  reform in its broader sense, especially given the belief, by some
                                                                             quarters in Government, that the slow pace of land reform could
    Although virtually all urban land claims have already been settled,      be speeded up by the use of expropriation. These were the Draft
    very few rural land claims, including those involving forestry land,     Expropriation Bill, (Gazetted by the Department of Public Works)
    have been. Indeed, there are thousands of claims still to be             and the Draft Provision of Land and Assistance Amendment Bill
    Gazetted (1 500 in KZN alone) and although it is estimated that          (Gazetted by the Department of Agriculture). Of the two, the former
    roughly 50% of the country’s forestry estate is under claim, the         was cause for considerable concern as, amongst other things, it
    eventual impact that the restitution process will have on the Industry   gave the Minister huge arbitrary and unfettered powers to determine
    is not known for sure. What we can, however, be sure of is that          what was to be expropriated, at what level of compensation (the
    the area will be significant and that in order to ensure the future      criteria to be used probably resulting in less than market value)
    sustainability of the Forestry and the dependant Forest Products         and in what manner and time frame, whilst on the other hand
    Industry, it will be essential that the land currently under timber      stripping the affected landowner of any meaningful access to fair
    production continues to be used for that purpose. In order to            judicial redress. In short, it was thought that various aspects of
    achieve this there must be both an incentive for new land owners         the Bill were unconstitutional.
    and an enabling legal framework to do so. Fortunately, Government,
    through the Department of Land Affairs and its governance partners       The potential ramifications for the Industry were of such concern
    are equally concerned about ensuring successful land reform in           that the FSA Executive Committee took the decision that Mondi’s
    Forestry as this will provide for the meaningful empowerment of          and Sappi’s offer of getting their respective legal teams to produce
    land reform beneficiaries and the future of the Forestry Industry.       a joint submission on behalf of FSA, setting out the Industry’s
                                                                             concerns, be taken up and that members make every effort to
    Lessons learnt from failed restitution of agricultural land over the     attend the public hearings that were to take place.
    last 15 years, both in terms of communities who have suffered
    greatly from the lack of post-settlement support and in the farming      Despite the fact that the public participation process was far from
    activities which had ceased, have been used to guard against             perfect and that FSA had, only at the 11th hour and after numerous

attempts, been allowed to make an oral submission to the Public             planted if dams are built to cater for low-flow periods. This change
Works Portfolio Committee, FSA’s submission was well received,              in information, from when the Charter was negotiated, is resulting
in fact so much so that the state law advisers who ultimately were          in negative sentiment among communities and their potential
requested to redraft the Bill due to certain constitutionality problems,    investor partners in the areas previously earmarked by Government
had requested FSA’s inputs in doing so. This, however, never                for afforestation.
materialised, as after having received an overwhelming amount
of adverse submissions on it, the Government finally withdrew               Much work has been done with the forestry officials in DWAF
the Bill. Despite this it is concerning to note that some in                around the Eastern Cape Afforestation Protocols to ensure that
Government hold the view that expropriation is the way to speed             the requirements of Section 27 of the National Water Act (those
up land reform and the Expropriation Bill could very well be                dealing with allocation of water to address past imbalances) are
resurrected in a different form in time to come. FSA will monitor           addressed.
developments and take further action when deemed necessary.
                                                                            Several meetings and workshops have taken place and letters
On a final note, this particular issue illustrates how well the Industry,   sent in which the issues of genus exchange, area exchange,
through FSA, can pull together and counter a potential threat to            general authorisations (for water and environment) and the structure
our Industry. Our sincere gratitude must thus be given to all FSA           and functioning of the LAACs have been discussed. Inputs have
members and especially to both Sappi and Mondi for the                      been made on revised and potentially enabling environmental
tremendous input that they freely and willingly gave on our and             legislation. What has yet to happen is that a new set of directives
thus the Industry’s behalf.                                                 are given to the LAACs which reflect the outcomes of the workshops
                                                                            and meetings and which would result in the accelerated granting
BROAD BASED BLACK ECONOMIC EMPOWERMENT                                      of licences. The Charter prescribes a provincial MoU for the
                                                                            Provincial and National stakeholders involved in the LAACs but
Forest Sector Transformation Charter                                        this has yet to be finalised.

The Forest Sector Transformation Charter was signed on 23 May               The possible merging of or the creation of new Ministries in 2009
2008 and in so doing Industry and Government committed                      in the face of the crisis facing the Sector and the need for growth
themselves to the transformation and growth of the Sector. The              and transformation may offer new opportunities for real progress
progress on the some of the priority enabling factors to achieving          in this area, although it will be up to FSA to engage strongly with
these objectives is described below. More details on each area              possible new authorities dealing with Forestry. We urgently need
are covered elsewhere in the Report.                                        to capitalise on this reduced demand window to get licences issued
                                                                            so that those with foresight can invest in growing timber (at reduced
Streamlining and Expediting Afforestation Licensing                         capital costs) and with the potential to benefit economically when
Procedures                                                                  the market turns.

The Charter Steering Committee and subsequently the Charter                 The Development of a Sawlog Growing Strategy
Council agreed that the net 10 000 ha per annum of new licences
needed to be increased to 15 000 ha per annum to compensate                 Again this is an area which must still be addressed.
for the areas which are being voluntarily removed from timber
production for environmental and water reasons.                             Research done by FSA on the sawlog growing Sector has been
                                                                            made available to DWAF. What must follow urgently is the
Regrettably, the licensing process, which should be much easier             development of a strategy which incentivises investment into the
to deal with than land reform issues, remains one of the greatest           Sector for short and longer-term benefits and which deals with
unmet challenges in the transformation and growth of the Industry,          the short and medium-term challenges of supply being
with little having been done to reduce the cost, time and bureaucratic      faced by the Sector.
barriers that need to be endured to obtain such licences. Creative
proposals from FSA and DWAF forestry officials have been                    While the Charter prioritises the need for a sawlog growing strategy,
captured in official plans and DEAT has even tabled draft legislation       as this is traditionally the highest risk sub-sector, there is in fact
which should lower the barriers for growth and new entrants, but            a need for a fibre security strategy for all forest products to meet
none of these have yet been translated into directives to be used           medium and longer-term demand which is set to continue to
by officials involved in the afforestation authorisation process.           outpace supply when the Forestry Sector economy recovers.

The Licensing Advisory and Assessment Committees in the
Provinces (LAACs), in spite of having been restructured, have               Forest Enterprise Development
not yet made significant progress in expediting the process or the
granting of licences. In the Eastern Cape the areas of licence              Support to new entrants into forestry, which is described in the
applications has grown from less than 2 000 ha two years ago to             Charter, is also provided for in the National Forests Act and is
over 30 000 ha currently. An analysis by this particular LAAC               consistent with FSA’s own objectives. New entrants in the Sector
revealed that over 80% of the applications had not yet reached              may enter through green field initiatives or as recipients of afforested
the point where inputs from the Agriculture and Environment                 land through the land reform process. The importance of support
Departments were required, as the hydrological analysis to confirm          to all new entrants is important, both for their own development
the availability of water for afforestation had not been completed.         and well-being and for the sustainability of the Sector as whole.
In addition to this, some officials in DWAF have indicated that             The increasing future fragmentation of land ownership which will
many of the areas originally declared as having available water             take place in the Sector further highlights the importance of such
for afforestation are either no longer available or can only be             support.

     DWAF have met with National Treasury on the establishment of             and sale of solid wood products. In essence, the aim of this
     a Forest Enterprise Development Fund, as prescribed in the               initiative is to mirror those undertaken in both Australia and New
     Charter and as is provided for by most Sector leading Government         Zealand which have successfully promoted the use of wood
     Departments. FSA looks forward to the creation of this Fund and          products in the building Industry and in doing so their respective
     to partnering with DWAF through the MoA to be concluded with             Forestry Industries. Although 2009 will prove to be a challenging
     them and other Sector role players, in using this facility to leverage   year from a funding perspective, the above initiatives will at least
     additional financial and technical support for new entrants.             provide clear messages to key audiences which will promote the
                                                                              benefits that the Sector can offer Government, Industry, the
     Forest Protection (pests, diseases, fire & theft)                        economy and civil society in general.

     We are pleased to report that FSA has managed to strengthen              FOREST PROTECTION, RESEARCH AND DEVELOPMENT
     the relationship with DWAF on these issues and would like to
     express its gratitude to them for their continued support on this        Pests and Diseases
     issue, which is of paramount importance for the sustainability of
     the Sector. The role played by DWAF and the funding of R2 450            As mentioned elsewhere in this Report, the Industry’s resource
     000 made available during 2008 towards the Sirex Control                 base is under increasing threat, not least of which from the ravages
     Programme is particularly appreciated.                                   that are being caused by pest and disease damage. The importance
                                                                              attached to these threats can be highlighted by the fact that not
     We can report further that DWAF has commissioned the                     only did FSA provide almost R2.5 million of funding in 2008 to
     development of an Integrated Forest Protection Strategy (also            combat these threats (75% of which was allocated to the Sirex
     described in the Charter), the development of which is being led         Control Programme) but DWAF also came to the Industry’s
     by the ICFR and which will provide clear direction on the key            assistance by providing a further R2 450 000. Although the control
     protection issues and responses as well as the resources required        of Sirex was the focus of much of the Industry’s attention, an ever
     to implement the Strategy. The Strategy will form part of the MoA        increasing effort is being devoted to the control of other pests
     which will be drafted and through which FSA and DWAF will co-            such as Thaumasticorus and Leptocybe and pathogens such as
     operate on forest protection matters.                                    Fusarium.

     Skills Development                                                       The absolute need for significantly up-scaled pest and disease
                                                                              monitoring and control programmes is therefore an imperative.
     FSA has further developed the relationship with FIETA which              FSA’s role in assisting in this regard has been significant, as
     continues to stand out as one of the best SETAs in the country           highlighted below.
     having, in 2007, been awarded, along with only two of the other
     23 SETAs, a Gold Award for service excellence. FIETA not only            • FSA’s 2008 Forest Protection budget has been increased by
     provides funding for training to individual members through the            30% to just under R3.5 million.
     provision of mandatory grants but also to the Industry at large          • DWAF have agreed to increase their support to an amount of
     through the awarding of discretionary grants. In terms of the latter       R2.7 million (R2.45 million in 2008), specifically to address the
     funding, FSA, using the $75 000 grant from the FAO to produce              Sirex issue, this being over and above their annual contribution
     Small Grower Toolkits as leverage, was successful in obtaining             to FABI.
     R700 000 from FIETA during 2008 to fund the holding of a series          • As mentioned earlier, the commissioning by DWAF of the
     of training workshops for emergent timber growers on the contents          Integrated Forest Protection Strategy under the Charter will also
     of the Toolkits.                                                           help guide support from Government and Industry towards
                                                                                protecting the forest resource. The Strategy should be finalised
     FSA would thus like to express its sincere appreciation to FIETA           during 2009.
     for the financial support given and for the excellent working            • FSA continues to sponsor the secondment of Mr Philip Croft to
     relationship that exists between ourselves. The leadership and             the ICFR in the capacity of Sirex Control Programme Coordinator.
     support shown by all FIETA staff but in particular, by its CEO,            The tireless work of Philip and the teams at both the ICFR and
     Simangaliso Mkhwanazi and its Projects Manager, Ronnie Naidoo              FABI are gratefully acknowledged and the decline in the rate
     are sincerely appreciated.                                                 of infestations of Sirex with the associated savings from timber
                                                                                losses, have been greatly aided by their efforts.
     Sector Promotion
                                                                              Funding remains a challenge and it was hoped that during 2009
     As part of the Forest Sector Transformation Charter commitments,         the commercial biological control breeding facility at the University
     FSA and DWAF collaborated on the development of a Sector                 of Pretoria would be built. Due to the severe financial difficulty in
     Promotion Strategy which was commissioned by DWAF and                    which the Industry finds itself, this will have to be reconsidered
     undertaken by the University of Stellenbosch. The Strategy is a          in the latter half of 2009. FABI have indicated their willingness to
     comprehensive piece of work which highlights current problem             again try to meet the commercial needs of the Sector for 2009
     areas, positive Industry benefits that should be highlighted, to         and FSA, on behalf of the Sector, expresses its thanks to them
     which interest groups these need to be targeted and how this             for this. This is, however, an area which needs to be addressed
     should be done.                                                          as a matter of urgency, as aside from the impact which commercial
                                                                              production has on the research function at FABI, a sudden increase
     Subsequent to the publication of the abovementioned Strategy,            in infestations may render them unable to meet the needs of the
     FSA was invited to join the “Timber Promotion Forum”, an initiative      Sector.
     spearheaded by those in the Sector involved in the manufacture
                                                                              As mentioned, leading the endeavours to control the pest and

disease problem are the ICFR, FABI, the PPRI and individual                Given the seriousness of the problem the FSA Executive Committee
Forestry Companies. The entire Forestry Industry needs to                  felt that FSA should become involved to a much greater extent
appreciate what these research facilities are doing under difficult        in dealing with this problem which costs the Industry millions of
circumstances, both in terms of the limited financial and expertise        Rands per annum. As a first step FSA canvassed members on
resources that they have at their disposal.                                what they thought the main issues were and how these could
                                                                           best be addressed. Although it was overwhelmingly the opinion
Despite there being no magic bullet, they are under intense                of respondents that this issue needed to be dealt with at a local
pressure to come up with answers and solutions, failing which the          level, it was nevertheless felt that FSA could assist with various
future of the Industry is under threat. Whilst it is difficult to single   initiatives including the co-ordination of awareness campaigns
out persons, as everybody involved is playing a critical role, FSA         aimed at growers, purchasers of timber, the police and magistrates,
has to thank in particular Profs Mike Wingfield and Bernard Slippers       the development of standardised Industrywide anti-theft measures,
at FABI and Prof Colin Dyer and Mr Philip Croft of the ICFR who            and facilitating communication and liaison between the various
are working wonders in addressing the problems. The time devoted           Anti-Timber Theft Forums in existence.
by members of the Sirex Steering Committee is also immensely
valuable in ensuring protection for the forest estate and is much          During the course of 2009 FSA will be implementing these initiatives
appreciated.                                                               in a bid to help address the problem.

Forest Fires                                                               AFFORESTATION ISSUES

Following the worst fire season in the history of the Industry in          As mentioned under the Charter, the progress on the issue of
2007 when 64 000 hectares of plantations in South Africa and a             expediting licensing for afforestation has been disappointing and
further 20 000 hectares in Swaziland were either partially or totally      the opportunity costs for communities wanting to enter the Sector
destroyed by fire, the damage from fire in 2008, while significantly       and for the economy as a whole continue to mount.
less, was still extensive at an estimated 25 000 hectares.
Although FSA has not been able to do a full analysis of the damage         The latest available statistics show that new afforestation in
caused by the 2008 fires, if one were to look at the damage caused         2006/07 was a paltry 2 196 ha. Once transfers out of forestry are
by the 2007 fires, then the following estimates can be extrapolated:       taken into account, net new afforestation amounted to only
                                                                           1 403 ha. Given the original target set of increasing the annual
• Based on a salvageable percentage of 66% (i.e. total write-off           net new afforested area by 10 000 hectares per annum, this is
  of 34%), these fires could potentially have resulted in the loss         extremely concerning. What is even more alarming is that,
  of some 1.3 million tons of timber valued at R470 million.               according to DWAF’s own figures, the total net new afforested
                                                                           area between 1997/98 and 2006/07, a ten year period, only
• Translated into the impact on loss of potential output from the          amounted to 10 006 hectares!
  Forest Products Sector, this could have amounted to a potential
  loss in the value of processed products of +/- R1.4 billion.             Given the losses from fires, in the last two years in particular,
                                                                           combined with increasing damage caused by pests and diseases
While the current and anticipated decrease in domestic and global          and other negative factors, the area under productive commercial
demand has diminished focus on timber supply, the medium and               forestry is falling alarmingly. Indeed, over the past 10 years the
longer-term supply forecasts are as worrying as ever and are               gross reported area under afforestation had actually dropped by
greatly exacerbated by the losses sustained from fire. Everything          approximately 250 000 hectares. Under these circumstances and
possible needs to be done to avoid a repetition and continuation           given the targets set, the current constraints to Industry growth
of this.                                                                   simply cannot be allowed to continue if the Industry is to have
                                                                           any chance at all of fulfilling its obligations under the Charter.
As mentioned, the Integrated Forest Protection Strategy being              Frustrations among communities in areas earmarked for forestry
developed also deals with fire and it is hoped that some innovative        development (i.e. the Eastern Cape and Zululand) continue to
solutions to preventing and combating fire will be forthcoming.            mount as they are being denied the opportunity to participate in
                                                                           the economy through Forestry.
Once again, FSA must record its appreciation to all those involved
in helping to protect the Industry’s resource from fire damage,            It is hoped therefore that through the advent of the Forest Sector
including those fire fighters working within the Industry itself and       Charter and the Government’s recently released Industrial
those working for the Working on Fire Programme.                           Development Action Plan, the current situation will improve and
                                                                           that Industry growth and greater participation by historically
Timber Theft                                                               disadvantaged communities can start to be realised.

The theft of timber has become a huge problem which is not being           WATER ISSUES
treated by either the police or the courts with the seriousness that
it deserves. Theft can be categorised into four broad categories,          Although other factors are taken into account when an application
namely theft from sidings and depots, the “skimming” of timber             for a water use licence to plant forestry is applied for, water is by
trucks, the illegal purchase of timber by certain dishonest timber         far and away the single biggest determinant as to whether or not
“speculators” and, in the most brazen instances, by the illegal            the application is or is not successful. It is for this reason that the
felling of compartment interiors. The problem is particularly serious      Industry focuses a considerable amount of its attention on dealing
where numerous suppliers and markets exist, such as in the                 with matters related to this very important and finite commodity.
Richards Bay area which is particularly badly affected.                    As in previous years the Industry has made limited progress in

 addressing its concerns with DWAF. A summary of these issues              the FSC contact person for South Africa, is overseeing the
 is reported on below.                                                     development of a National Forest Certification Standard for forest
                                                                           management based on South African conditions.
 Water Tariffs
                                                                           During 2008 the momentum picked up with considerable progress
 While public meetings in KZN were presented with figures that             having been made with the Institute of Natural Resources, the
 indicated a nil or marginal increase, which were acceptable to            Project service providers, having held a number of stakeholder
 FSA as the process of calculating these figures had been done             meetings throughout the country with considerable input made by
 through a “zero based budgeting” process, the final increases             FSA members. Field testing of the proposed Standard is planned
 published by DWAF’s Head Office were totally different. According         for February 2009, with the Project scheduled to be completed by
 to them, with effect from 1 April 2009, the weighted average              the end of April 2009. The National Initiative Working
 increase in water tariffs amounted to 12.5%, which is 50% more            Group,established in accordance with FSC requirements regarding
 than inflation and considerably more than the 6.4% increase in            representivity (in relation to economic, social and environmental
 2008. Although this hike in itself is cause for concern, more             factors), will then evaluate the Standard. Once further possible
 importantly, DWAF have once again appeared to have ignored                inputs from stakeholders have been incorporated, a final Standard
 the requirements of their own National Water Act by not only              will be submitted to the FSC’s Head Office in Bonn for accreditation.
 unilaterally increasing the tariffs without consultations with Industry
 but also by not substantiating the increases through the provision        There has been considerable effort put into stakeholder engagement
 of the necessary financial documentation. The Industry takes              in the process, particularly with organisations strongly opposed to
 exception to this and will appeal, once again, to DWAF, to follow         plantations in general and /also those highly critical of the FSC.
 its own regulations.                                                      The Convenor of the National Initiative Working Group and members
                                                                           of the Working Group itself are thus happy that the process has
 Water Allocation Reform – Compulsory Licensing                            been inclusive as far as can be reasonably expected.The
                                                                           accreditation of this standard is important in that from henceforth
 The central mechanism that DWAF is to use to drive its Water              the FSC certification of plantations in South Africa will be
 Allocation Reform (WAR) Strategy is “Compulsory Licensing”.               tailored to suit local conditions rather than generic criteria.
 Essentially this mechanism is designed to achieve a fair allocation
 of water from a water resource which is under water stress or             Grassland Biodiversity Conservation Programme
 when it is necessary to review existing water use to achieve equity
 in allocations. At the same time compulsory licensing must promote        During the course of 2007 FSA became a fully fledged partner
 beneficial use of water in the public interest, facilitate efficient      of this Programme by signing a 5 year contract with the SA
 management of the water resource quantity and protect water               National Biodiversity Institute. In terms of this agreement and
 resource quality.                                                         after following a recruitment process, Mr Steven Germishuizen
                                                                           was appointed in May 2008 as the full-time Forestry Grasslands
 In order to test this mechanism, the Mhlatuze Water Management            Co-ordinator on a 5 year contract basis to manage the Programme.
 Area was selected as a pilot catchment. The findings of the               Not only will Steven be responsible for this but is also one of a
 resultant Draft Water Allocation Plan indicated that the problem          six member panel working on the FSC criteria relating to ecosystem
 in this particular catchment was not overuse of water per se, but         integrity in plantations for the FSC plantation review process
 rather over-allocation of water (in particular to irrigation farmers)     which starts early in 2009.
 and that as such, the allocated water was not being fully used
 (with the exception of afforestation). In fact the study has shown        The Grasslands Programme and the Forestry Co-ordinator is
 that far from the Mhlatuze WMA being a “water stressed” catchment,        funded by a grant from the United Nations Development
 there is ample excess water capacity available and that there was         Programme (UNDP) - Global Environmental Fund (GEF) and in
 therefore no justification for DWAF’s decision to “close” it to further   this sense, does not have a financial impact on FSA’s budget.
 allocation of water (included to forestry). It is hoped that the
 lessons learned from this exercise will benefit the Industry’s            The Grasslands Programme itself was established to sustain and
 attempts to increase its footprint by being allocated more water          secure the biodiversity and ecosystem services of South Africa’s
 in catchments that were hitherto closed to it. This issue was also        grasslands biome by acknowledging production Sectors as
 raised during the recent Water for Growth and Development                 important Sectors of the grassland biome and negotiating trade-
 Summit held by DWAF and it is hoped that a resolution to the              offs between production and conservation needs through market
 matter can be achieved.                                                   mechanisms, incentives and conservation stewardship. The
                                                                           Programme relies on partnerships with agriculture, forestry, urban
 ENVIRONMENTAL ISSUES                                                      areas and coal mining to achieve its goals. Concerning the Forestry
                                                                           Industry specifically, the Programme works to incorporate
 Dr John Scotcher, the FSA’s Environmental Consultant, again               biodiversity priority areas into planning and decision-making;
 had a busy year dealing with environmental issues, the most               develop biodiversity management tools for forestry; support
 important of which are highlighted below.                                 plantation owners in expanding their conservation and stewardship
                                                                           role; and strengthen forest certification.
 Development of a National Certification Standard
                                                                           FSA is delighted to report that the forestry component of the
 As reported on in last year’s Annual Report, Dr Scotcher,                 Grasslands Programme has delivered consistently good results,

the more important of which being:                                     in Cape Town early in November 2008. The event was very
                                                                       successful with almost 300 people from 65 countries and diverse
• the development of a Microsoft Excel-based conservation              interest groups having attended, including good representation
  planning tool which allows timber growers to assess the relative     from FSA members. Key highlights of the event were discussions
  and absolute conservation value of their unplanted areas in          around governance, the role of National Initiatives, forests and
  order to guide their management planning;                            climate change, FSC’s credibility and controlled wood. The FSC
• the development of a common Industry-wide approach to                membership approved motions related to these topics which will
  assessing high conservation value areas, planning ecological         now be incorporated into the FSC’s work plan for implementation.
  networks and integration of the data into the design of research
  projects;                                                            Perhaps one of the most important events was the election of
• the early stages of the development of a sustainable forest          FSC members to serve on a Working Group that will revise the
  management system for small scale timber growers;                    FSC’s 10 principles and 56 criteria during 2009. FSA will monitor
• the development of biodiversity stewardship programmes in            developments and keep members abreast of these as the various
  KZN and Mpumalanga in some of FSA members’ timber                    draft revisions are proposed.
  plantations, the aim of which being to secure high biodiversity
  rich areas in a partnership arrangement between the grower           Special thanks must go to Mondi, the 2008 General Assembly’s
  and relevant conservation agency;                                    “'Gold Partner” for their generous support in helping to sponsor
• the development of a research project to understand the roles        the event, together with other local sponsors including another
  of ecological networks in buffering climate change.                  FSA member, MTO Forestry, and SGS South Africa.

It is important to note that the ICFR will be involved in a number     Once again Dr John Scotcher’s expertise has ensured that the
of these developments, such as the conservation planning tool,         environmental interests of members have been catered for in a
which will be maintained and operated by the ICFR, and                 professional manner and ours thanks are extended to John for
collaboration with the ICFR in their climate change modelling          his efforts in this regard.
exercise for commercial timber areas.
                                                                       EDUCATION AND TRAINING
Other initiatives
                                                                       In recognition of the need to improve the level of education and
FSA, through Dr Scotcher has also been involved in a number of         training in the Forestry Industry, FSA continues to be active in
other initiatives during 2008. These included active participation     this field, primarily through its involvement in the affairs and funding
in various catchment management fora, the review of DWAF’s             to both the University of Stellenbosch and the Nelson Mandela
Wetland and Riparian Zone Delineation Procedure, the National          Metropolitan University (Saasveld Campus) and being a major
Water Act Section 27 review which deals with the factors that          stakeholder of the Forest Industries Education and Training
DWAF must take into account when considering the issue of              Authority. Outside of these bodies FSA is also involved in an
general authorisations and licences, and the general authorisation     Industry based initiative to enhance the training efforts being
process in general.                                                    undertaken by the Industry through the establishment of an Industry
                                                                       Training Fund. A brief summary of FSA’s involvement in these is
As the “FSC Contact Person”for South Africa, Dr Scotcher has           given below.
reported a significant increase in requests for information on the
FSC certification requirements from local timber merchants,            Tertiary Educational Institutions
builders, suppliers, printers and others. This increase in interest,
at the same time as the development of local certification standards   During the 2008 financial year FSA spent a total of R191 300
(with the emphasis on FSC requirements), augers well for the           towards supporting tertiary educational interventions. Of this,
Industry in South Africa.                                              R130 000 was allocated to Stellenbosch University, R37 000 to
                                                                       the NNMU (Saasveld) and a further R24 300 to the ICFR in the
Environmental Legislation                                              form of bursary funding for the further education of their researchers.

Issues dealing with legislation and regulation continued to form       Regarding the funding made available to Stellenbosch, this
a significant focus of FSA’s environmental work during 2008, the       provided for 6 bursaries totalling R120 000 plus a further R10 000
more important of which being the following:                           contribution towards the cost of sending a representative to the
                                                                       2008 International Forestry Students Symposium.
• National Environmental Management: Biodiversity Act – input
  into lists of threatened species                                     The funding to Saasveld comprised an amount of R22 000 in
• National Environmental Management: Waste Bill - extensive            travel funds to allow for interaction with the Industry, R5 000 to
  input and discussions have resulted in a Bill that is far more       run a Zulu language course and lastly, R10 000 to help to pay for
  favourable to Industry, particularly regarding the definition of     a student to attend the abovementioned IFSS symposium.
  waste (which ceases to be waste if it is re-used).
• National Environmental Management Act – amendments to the            What must be mentioned is that over the past number of years
  Act itself to cater for new upcoming regulations in 2009.            the world, not just South Africa, has seen a substantial decline
                                                                       in the number of students, particularly at tertiary level, enrolling
FSC General Assembly                                                   for forestry qualifications. It is therefore encouraging to note that
                                                                       enrolments at both Stellenbosch and Saasveld have been
The Forest Stewardship Council (FSC) held its General Assembly         particularly encouraging of late, with student numbers at both
                                                                       Institutions being at the highest level for several years.

 FSA not only provides funding to both Institutions but plays an           Fire Management Symposium
 active role on both of their respective Advisory Committees. The        • 2nd Annual Forestry Sector Skills Development Forum
 graduates and diplomates produced by both these Institutions are          (co-funded with DWAF)
 going to become the future leaders of the Industry.It is imperative     • Limpopo Forestry Summit
 therefore that the Industry not only continues to help assist these     • Forestry SMME Conference
 Institutions in developing trained individuals who will be assets to
 the Industry but also to ensure that once graduated these individuals   As mentioned in last year’s Report, there has been talk of
 have a vibrant Industry in which they can be absorbed into rather       Government possibly completely realigning the SETA landscape
 than having to resort to finding employment beyond these shores.        by merging the 23 current SETA’s into as little as 5. It is FSA’s
                                                                         contention that such a move would result in unwieldy structures
 FSA’s sincere appreciation must be extended to all those dedicated      which would not allow for effective participation by specific Sectors,
 individuals who strive to educate the future leaders of our Industry,   including our own. For this reason, FSA and the FIETA
 and in particular to Mr Pierre Ackermann, Chairperson of                management, who are also of the same opinion, will oppose any
 Stellenbosch Forestry Department and Dr Josh Louw, Head of              such move. Although no announcements in this regard were made
 the School of Natural Resources at Saasveld, together with all          in 2008, given that the current lifespan of all SETA’s ends at the
 staff members and respective Deans.                                     end of March 2010, any debate on the matter will have to begin
                                                                         in the coming months.
 Forest Industries Education and Training Authority (FIETA)
                                                                         FSA needs to acknowledge the valued participation of other Sector
 As FSA has done since FIETA’s inception in 2000, we continue            representatives involved in FIETA’s structures, its management
 to remain a major stakeholder in the Organisation, being                and in particular its CEO, Mr Simangaliso Mkhwanazi, for their
 represented on its Board, Forestry and Pulp & Paper Chamber             efforts in continuing to improve the Industry’s skills base.
 and Audit Committee. This not only allows FSA to give its members
 a voice as to how the education and training interests of the           Forestry Industry Skills Fund
 Forestry Industry can be enhanced in particular but at the same
 time ensuring that FIETA continues to be run as one of the best         During the course of the year FSA was approached by Sappi and
 performing SETA’s. FIETA’s funding of training initiatives in the       Mondi to seek its support for an initiative that they were driving
 Industry is substantial. The funds provided take the form of            to improve the skills training received by contractors’ employees
 mandatory grants to qualifying individual contributing employers        through the establishment of a centrally administered Training
 and secondly, discretionary grants, which are applied for by those      Fund. This was premised on:
 wanting funds to spend on training initiatives in the Industry which
 will lead to enhanced productivity.                                     • the fact that the Forest Sector Charter committed “qualifying”
                                                                           employers to spend 3% of their payroll (on top of the 1% paid
 In 2008 the funds allocated for these latter mentioned grants             to FIETA) on training; and
 relating specifically to the Forestry Industry totalled some R10.5
 million, some of the more important interventions funded being          • the principle that any funds raised there-from should be
 the following:                                                            administered by the Industry itself.

 • The SMME 3 Project aimed at providing emerging contractors            In essence, the scheme is based on assessing each contractors’
   with training. In 2008 this training focused on fire fighting and     training needs in terms of a standardised “training matrix” and
   chainsaw operation.                                                   then organising the required training through a centralised
 • An extensive ABET Project to increase the literacy of forestry        administrative structure. To this end SAFCA, who were appointed
   workers and those living in surrounding communities.                  as the service provider to run the system, has employed two
 • The funding of the production of “ground based harvesting” and        Administration Managers (one in Mpumalanga and one in KZN)
   “fire management” handbooks.                                          who will be responsible for administering the training fund, producing
 • The Amahlati Emerging Entrepreneurs Forum Project aimed at            training reports, updating the training and funding database and
   training aspirant forestry entrepreneurs.                             facilitating training efficiencies.
 • The funding of a cost and management accounting course
   aimed at improving the financial skills of small forestry related     After having received full support from the Executive Committee,
   businesses.                                                           FSA is in the process of interacting with all relevant stakeholders
 • The funding of the Kranskop Community Forestry Project aimed          including growers, SAFCA, training providers and FIETA in exploring
   at training land reform beneficiaries.                                ways to extend the scheme to cover all growers who want to enjoy
 • The awarding of 68 bursaries to students to study forestry at         the benefits of it, whether they use contractors or not.
   tertiary level.
 • The provision of R700 000 to fund training interventions in           FORESTRY RESEARCH
   support of the FSA’s Small Grower Toolkit.
                                                                         Given the pressures being placed on the Industry to produce
 Although the provision of funding to fund training interventions is     sufficient fibre to meet the demands of a growing “developing
 an important part of FIETA’s work, the dissemination of information,    economy” and, conversely, facing severe threats to its resource
 the capacity building of and communication with all stakeholders        base, including fires, pest and disease damage and other potential
 is nevertheless also an activity with FIETA involves itself in. In      factors that may reduce the physical footprint of the country’s
 this regard numerous meetings, workshops, and other events              plantations, it is becoming increasing important to ensure that the
 were held under the auspices of FIETA, the most notable of which        resource that we do have is not only protected but also maximised.
 being the following:                                                    Although this can be achieved in part by means other than research

(e.g. enhancing fire protection efforts), research nonetheless is          of the world’s leading forestry research Institutes. Special thanks
the foundation that we as an Industry must rely on to deliver the          must thus be extended to the heads of these two Institutions, Profs
tools for both better protection and better production                     Colin Dyer and Mike Wingfield and to all the management and
for the Industry.                                                          staff employed at these Institutes.

It therefore comes as no surprise that FSA continues to devote             Other Institutes and Organisations are also involved in Forestry
a large amount of its resources to research. This is highlighted           Research, amongst these being the Universities of Stellenbosch
by the fact that over the past five years, FSA has increased its           and NMMU (Saasveld), the CSIR, the Plant Protection Research
research funding from R7.2 million in 2003 to R11.6 million in             Institute (PPRI), the University of KwaZulu Natal (outside of the
2008. This excludes the R1.6 million that was allocated to the             ICFR) and the Institute of Natural Resources. All of these, in their
SANBI Grasslands Research Programme in 2008 which is                       particular fields of interest, are doing valuable work and are thanked
managed by FSA.                                                            for their efforts.

FSA looks forward to the concomitant Sector support which will             EMERGING TIMBER GROWER (ETG) PROGRAMME
be forthcoming from DWAF for research, once the Integrated
Forest Protection Strategy has been finalised.                             FSA’s ETG programme has 6 primary elements and the excellent
                                                                           progress that was made in 2008 in each of these areas is described
Given the priorities set, it is pleasing to report that the Institutions   below.
that FSA supports, namely the ICFR and FABI have, during the
year under review, once again continued to prove themselves                Strengthening Emerging Timber Grower Organisation
experts in addressing the research needs of the Industry, both in
terms of protecting what we already have and by ensuring that              In the continued quest to strengthen the effectiveness of ETG
the productivity of our plantation resource increases in the future.       structures, Regional Committees were assisted by FSA with the
In both areas of research they are doing outstanding work and              drafting of their Annual Work Plans which, importantly, included
the Industry must thus recognise that we are fortunate to have             the participation of members on District Municipalities’ (DM)
world-class scientists who are doing world class research with             Forums. Such interactions triggered serious consideration by
world class results.                                                       District Municipalities of the value of forestry and also of the role
                                                                           that they could play in supporting afforestation in their respective
Recognition of the status of South Africa’s research capability in         Municipalities. To this end a number of initiatives were championed
a global context is apparent with both FABI and the ICFR being             by DM’s in association with the Sector, including the establishment
held in high regard by the international forestry research community.      of the Sisonke DM Forest Cluster and the intention of the Ugu DM
This is evident from the number of overseas visitors to these              to undertake a forestry feasibility study in KZN, the actual
Institutions and from the fact that South Africa is continually being      undertaking of forestry feasibility studies by the Vhembe DM in
asked to host international research symposia.                             Limpopo and the Ukhahlamba and Alfred Nzo DM’s in the Eastern
To ensure that FSA’s research and technology efforts also serves
the interests of our many thousands of new emergent timber                 As mentioned previously, FSA has over 20 000 emerging timber
growers through FSA’s Emergent Timber Growers’ Programme,                  grower members throughout the country and ensuring regular
particular emphasis is being placed on undertaking and making              engagement and support with them is therefore crucial.
accessible appropriate research and technical information to these         Consequently, the ability to partner with Provincial and Local
growers. An example of this is the fact that the ICFR developed            Government and with DWAF through MoUs and co-hosting
the previously mentioned Small Grower Toolkits, the production             of workshops and through other media is therefore a very efficient
of which was sponsored by the FAO. Similarly, attendance by                way of serving our members’ needs.
emerging growers at research field-days organised by FABI and
the ICFR is being promoted by FSA and is receiving encouraging             Communication and Information Dissemination
                                                                           Three mechanisms of increasing our information dissemination
Recognition of the importance of research is also provided for in          capacity and getting feedback from our many thousands of emerging
the Forest Sector Charter where it is intended that a Forest Sector        timber growers were used in 2008. The ETG newsletter was
Research and Development Strategy as well as an Integrated                 distributed, workshops were held throughout the country and
Pest and Disease Control Strategy are put in place. The ICFR               committee meetings of our ETG were utilised for ensuing that
was awarded the contract to develop the Integrated Forest                  members remained informed of the latest developments in forestry
Protection Strategy which will be delivered in 2009. This will also        and were provided with the latest information to assist them in the
spell out the roles and resources needed for ensuring that the             growth and development of their businesses. All five planned
country’s plantation assets are protected and as such will be the          Committee meetings were held, two newsletter editions were
basis of some of the MoA which is to be concluded with DWAF                published, and four workshops were convened in 2008. In 2009
in 2009.                                                                   FSA plans to access affordable cellphone SMS solutions which
                                                                           will also increase our ability to affordably reach all of our emerging
During the year under review the Research Institutes serving the           growers on a regular basis.
Industry’s needs have come under increasing pressure from
various quarters, not least of which being the increased incidence         Promoting Forestry Development
of pests and diseases threatening the Industry and the need to
increase plantation productivity. The Industry must thus be thankful       Focused on forging co-operation with key authorities for the
that they have, on our behalf, met these challenges with the               promotion of forestry development, the following were achieved
professionalism and determination that befits their status as some

     during 2008:                                                            • Participation on the Forest Governance International Workshop
                                                                               held in Zomba, Malawi.
     • The KwaZulu-Natal Forest Sector Initiative was forged between
       FSA, KZN Department of Economic Development (DED), the                FSA is indebted to all Institutions for their contribution in any form
       DTI and DWAF and a study commissioned to assess the Sector.           during 2008 to the ETG Programme, particularly DWAF, DTI, IIED,
                                                                             LIBSA, Industry, District Municipalities, Provincial
     • Four Provincial (KZN, EC, LP and MP) afforestation potential          Economic Departments, SANBI, FAO, FIETA and FGLG-SA
       assessments were started with DWAF’s support and the LP               members.
       assessment finalised.
                                                                             PROPERTY RATES
     • An implementation plan for the memorandum of co-operation
       that was signed between DWAF, FSA and the Limpopo Business            In terms of the Municipal Property Rates Act (MPRA), all those
       Support Agency (LIBSA) was developed and implemented.                 Municipalities that have not yet done so must implement the Act
                                                                             on 1 July 2009. Although a handful implemented the Act on 1 July
     • A draft Forestry Development Plan for the EC was developed            2007 and a few more a year later, the majority have yet to do so.
       through the ASGISA-EC led forum initiative.                           As reported in last year’s Annual Report, it would appear that most
                                                                             of those Municipalities that implemented the Act in 2007 and 2008
     Capacity Building and Skills Development                                did so in contravention of the provisions of the MPRA and, more
                                                                             importantly, set Rand rateages which resulted in property rate
     Leading on from last year’s Annual Report, ETG pamphlets were           liabilities which have and will continue to have a detrimental effect
     reviewed and translated into four official languages, namely            on the financial sustainability of farming and forestry businesses.
     IsiXhosa, Chivhenda, Northern Sotho (Sipedi) and IsiZulu. 15 500        Given this track record it is likely that those implementing the Act
     copies were printed and many have already been distributed.             in 2009 will do so in a similar manner.
     Good feedback has been received from those who have received
     these Toolkits which is very encouraging.                               It is for the above reasons that FSA continues to be fully involved
                                                                             in and supportive of the actions already taken and being taken by
     It became apparent during the communication and feedback                the KwaZulu Natal Agricultural Union (Kwanalu) in its effort to try
     process that emerging growers wanted additional support in the          and get the Minister of Provincial and Local Government to
     use of the Toolkits. The further distribution of pamphlets will         introduce regulations which would limit the ability of Municipalities
     therefore also entail ETG groups’ classroom sessions and field          to levy unsustainable property rates on agricultural and forestry
     days. Further support in the order of R700 000 per annum from           properties. These limitations are already prescribed in the
     FIETA has been received and this will boost FSA’s ability to reach      Constitution of South Africa, but the process followed and the
     even more of our emerging timber growers situated throughout            rates set ignore these prescripts.
     the country.
                                                                             Our efforts during the year under review, both aimed at getting
     Sustainable Forest Management System                                    the Minister to introduce regulations which would set the maximum
                                                                             permissible Rand rateage on agricultural and forestry properties
     As part of the SANBI Grasslands Initiative described elsewhere          at 0.5% (i.e. a half of one cent in the Rand) focussed on two areas,
     in this Report, an implementation plan for the SFM system for           namely:
     small scale forestry was developed and successfully piloted. A
     request for additional funding for the second pilot was forwarded       • interacting with the DPLG regarding the evidence we provided
     as part of a broader submission to DWAF during 2008. DWAF                 to the Minister, in the form of a Case Study Report, in support
     not only indicated it appreciation for the initiative but requested       of our request; and
     FSA support in the roll-out of the system to all small and medium
     growers throughout the country.                                         • preparing court papers to support a legal challenge, should the
                                                                               Minister not accede to our request.
     This initiative, which brings together FSA, DEAT, SANBI, ASGISA-
     EC and DWAF, all of whom have a mandate in such matters, is             The Case Study Report, which covered 6 individual farming
     an excellent example of efficient co-operation on forestry, which       enterprises and 3 entire Sectors in KZN (including Forestry) in 42
     needs to characterise all future activities between Government          different reporting periods over 8 years, was unambiguous in its
     Industry and other stakeholders.                                        conclusion, namely that our request was indeed valid. It was thus
                                                                             heartening that the DPLG took our concerns seriously and to this
     Forest Governance Learning Group                                        end, employed a firm of agricultural economists to establish the
                                                                             veracity of our Report’s methodology, findings and conclusions.
     This stakeholder driven initiative produced numerous positive
     outcomes during 2008 including the following:                           Although the DPLG had originally requested that they be given
                                                                             until September 2008 to officially respond to our request, after a
     • Four distinct policy briefs each focused on funding, afforestation,   number of requests for extensions drew the date out to March
       skills development and property rates – all oriented towards          2009, Kwanalu, due to time limitations, had no option but to
       Small and Medium Forestry Enterprises.                                commence the legal process towards year end. Although this
     • Co-hosting with FSA and DWAF of the four workshops mentioned          could be halted depending on whether a favourable response is
       above.                                                                forthcoming from the Minister, no such response had been received
     • Participation on the Forest Governance and Decentralisation           by year end. Whatever the response, FSA and Kwanalu will
       Conference in Africa held in Durban.                                  continue to try and ensure that the sustainability of agricultural

and forestry businesses are not jeopardised by the imposition of       RAIL ISSUES
inappropriate property rates. Incidentally, the research which FSA
conducted into the sawlog growing Sector, highlighted the role of      Over the past few years the Forestry Industry, through the Transport
property rates and taxes as indirect dis-incentives/incentives in      Interest Group, has been increasingly aware of and concerned
facilitating new afforestation. Interestingly, countries such as New   about certain management decisions being taken by Transnet
Zealand and Chile who abolished or reduced property rates and          Freight Rail (TFR) which are continuing to have the effect of
land taxes (admittedly among several other initiatives), saw their     moving ever increasing volumes of timber off rail and onto road.
annual rate of afforestation increase roughly nine times and remain    These issues centre around the unilateral decisions by TFR to
at that rate for the past 20 years.                                    suspend branch lines serving the Industry without following due
                                                                       process and secondly, hiking timber tariffs annually by exorbitant
On a final note, some measure of the level and appreciation of         rates (i.e. by a weighted average of 38% in 2008 and a planned
FSA’s involvement in this process can be gauged by the fact that       20%+ increase for 2009).
our FSA Assistant Director, Mr Roger Godsmark, who drafted the
Case Study Report on the property rates for Kwanalu mentioned          Despite having held numerous discussions with senior TFR and
above, was recognised for this by being presented with a Meritorious   Department of Public Enterprises officials and getting no satisfactory
Service Award for “dedicated, committed and faithful service to        resolutions to the above concerns, the Transport Interest Group
organised agriculture” by Kwanalu at its 2008 AGM. FSA                 and many of FSA’s members approached FSA to intercede on
congratulates Roger on this achievement and thanks him for his         Industry’s behalf. They requested that FSA appoint a high-level
continued dedication to the appropriate resolution of this issue.      Industry delegation to engage with the Departments of Public
                                                                       Works, Transport, Trade and Industry and Water Affairs and
FORESTRY SECTORAL DETERMINATION                                        Forestry. The delegation is to appraise them of the negative
                                                                       impacts that TRF’s actions are having on the Industry and
FSA provided a huge amount of input into the process that resulted     specifically to request the Government to ensure that the timber
in the Gazetting of the first Forestry Sectoral Determination which    tariff increases for 2009 be limited to the inflation rate and that
became effective from 1st April 2006 through interactions with         a moratorium be placed on the closure of branch lines until such
both the consultants that DoL appointed to do research into the        time as due process has been followed.
labour practices of the Industry and subsequently through extensive
interactions with DoL itself. Although not all of the Industry’s
recommendations were taken into account, some major ones
were, most importantly being the one that the task based work
system universally used in the Industry be catered for.

As all Sectoral Determinations only have a life span of 3 years,
FSA once again began engaging with DoL during the course of
the year concerning the new Determination that is to become
effective from 1 April 2009. Although outside of this Report’s
reporting period, mention needs to be made of the fact
that on 27 March 2009, the new Determination was Gazetted.

Despite recent warnings from FSA that an excessive increase in
the minimum wage would not be appropriate given the sudden
and dramatic downturn in the local timber market and the overall
parlous state of the local and global economy, the Gazetted wage
rate of R1 138.71 per month represented a 14.6% increase over
the prevailing rate. Although in absolute terms this wage can be
considered low in comparison to those paid in Industry and
commerce, given the labour dynamics in the Forestry Sector, the
fact that the increase is way above inflation and that is being
implemented at a time of economic and market turmoil, it is
regrettable that job losses may well result. Although members can
apply to DoL for relief and are encouraged to do so rather than
take the drastic action of laying workers off, FSA will monitor the
situation closely and take the appropriate actions if and when
deemed necessary to ensure that DoL has the capacity to timeously
handle what may be hundreds of such applications for relief.


     In order for FSA to operate effectively it comes into contact with a large number of organisations and individuals on a continual and ever
     changing basis. It is almost impossible to thank all the individuals who have, in one way or another, interacted and co-operated with
     ourselves in order to assist the Association in fulfilling its mandate to promote the interests of both its members and the South African
     Forestry Industry. FSA would thus like to extend its thanks and appreciation beyond those people already thanked in this Report to all
     those who have given their support to the Association over the past year.

     Notwithstanding the above, a special debt of gratitude is most sincerely owed to the members of FSA who have not only supported FSA
     financially during the course of 2008 but who have given freely of their time and expertise to assist us, for without this support FSA would
     not be the Organisation that it is today.

     On a personal note I would like to express my sincerest thanks to everyone who has supported me since taking on the responsibility as
     Executive Director. It was an especially daunting task, having taken over from a stalwart of the stature and ability of Mike Edwards and
     so I am firstly indebted to Mike for his unstinting support in so many forms and his ever-willingness to assist.

     The patience, guidance and time afforded to me by our FSA staff, the visionary leadership of our Chairperson, Viv McMenamin and the
     entire Executive Committee and the many members with whom I have had the pleasure of interacting, is deeply appreciated.

     Their enthusiasm and commitment and that of our partner organisations, is best seen in the achievements made in 2008 and the innovative
     Business Plan that was developed for 2009.

     APRIL 2008

FSA FINANCES 2008                                                      Balance Sheet

The Audited Financial Statements for the year ended 31st               At year end, money in the various bank and investment accounts
December 2008 are included at the end of this Annual Report.           amounted to R6 692 142, an increase of R2.6 million or 62.3%
However, 2008 proved to be an “out of the ordinary one” in that        over the same period in the previous year. The Organisation’s
expenditure on the FSA operational side was considerably above         financial position therefore remains healthy with a strong balance
budget due to a large amount of Executive Committee authorised         sheet and sufficient funds available to meet commitments and
but unbudgeted for expenditure having taken place, a lot of which      sustain its activities.
relating to costs associated with the process of appointing a new
Executive Director and the adjustment of staff salaries to bring       Monitoring, strict budgetary control and accountability are the
them in line with the market. Given this it is necessary make the      cornerstone of FSA’s financial management, to which the 2008
following brief points:                                                financial results bear testimony. As usual FSA’s Financial Controller,
                                                                       Muriel Farquharson, must be complimented on doing an
Income                                                                 outstanding job.

Record income, amounting to R22 997 777, as compared to R16            Concerning the 2008 financial year, FSA was most appreciative
450 455 for the previous year, an increase of close on 40% was         of the financial support given to it to assist in funding activities
achieved. This was due primarily to an increase in membership          that benefitted the Industry as a whole. In this regard recognition
contributions of R2.3 million or 15% and, most notably, to an          and thanks must be extended to DWAF for their contribution
increase in other income amounting to R4.0 million or 65%. This        towards the Sirex Control Programme of R2 450 000, the Forest
latter increase was due in most part to the receipt of additional      Industries Education and Training Authority (FIETA) and the
external project sponsorship income for the Sirex Control              International Institute for Environment and Development (IIED)
Programme ex DWAF (R2.45 million) and the Emerging Grower              for their contributions of R700 000 and R400 000 in support of
Technical Information Project, ex FAO (R550 000). FSA must             FSA’s Emergent Timber Grower Programme. In terms of the
record its grateful thanks to all these sponsors for their support.    FSA’s strategic objectives, as outlined in its Business Plan, FSA
                                                                       will strive to elicit funding from these and other external sources
Expenditure                                                            in the coming year and beyond.

Total combined expenditure (operational and Industry) for 2008         Lastly, it goes without saying that by far the most important
amounted to R21 098 034, an increase of R5.5 million or 35.4%          contributors are FSA’s members and to them FSA would like to
over the previous year, 63% or R3.5 million of which emanating         extend its most sincere thanks for their continued support which
from FSA’s Industry funding budget, with the balance being             enables FSA to fulfil its role of looking after the Industry’s interests
attributed to FSA’s own internal operating expenditure. Most of        to the best of its ability.
this operating expenditure increase was due to additional work
activity related to the external project sponsorship income referred
to above, and unbudgeted for but approved expenses incurred
in the replacement of the previous Executive Director and approved
mid-year salary adjustments for technical staff. Were it not for
these latter-mentioned items, actual FSA operating expenditure
would have been within budget.

Income Statement

As shown on the Income Statement, a surplus of income over
expenditure amounting to R1 899 743 resulted, increasing the
Organisation’s net equity or accumulated funds to R8 909 794 as
compared to R7 010 051 for the previous year.


     The process of developing the FSA Budgets for the 2009 financial              In order to fund the above budgets, given the fact that the tonnage
     year was particularly complex, especially given that it had to be             figure on which to base this had decreased substantially to 14.9
     constructed around the approved FSA Business Plan, itself based               mt, the Executive Committee approved an increase in the
     on a strategic planning process which was implemented last year.              contribution rate of 18 cents per ton to R1.28 per ton of roundwood
     Added to this new approach, as described at the beginning of                  produced ex plantations with effect from 1 January 2009. Although
     this Report, was the magnitude and speed of the knock-on effects              this represents a somewhat steep increase of 16.4%, had this
     that were being felt by the local markets caused by the prevailing            budget been based on the same tonnage sales as in the previous
     global economic crisis. Not only did this lead to the FSA operational         year of 16.7 mt, then the contribution rate would only have needed
     and Industry budgets having to be revised downwards twice since               to have been increased by 3 cents per ton to R1.13 per ton, a
     they were first presented to the Executive Committee in December              very modest increase of 2.7%.
     2008 but also to a downward revision of the tonnage sales volume
     upon which the funding of the budget was based from 16.2 mt to                Given the fluidity of the situation FSA will continue to monitor the
     14.9 mt (or by 8%). If one compares this to the 16.7 mt used as               situation closely and it may be necessary for the budgets,
     a funding base in 2008, this is drop of 1.8 mt or 11%.                        contribution rate, or both to be altered during the course of the
                                                                                   current financial year.
     The net result of these changes has been that the combined FSA
     and Industry funding budgets have been cut from that originally
     requested in December 2008 by R3 887 000 (15%) to R21 756
     000, some 8.3% above the approved 2008 budget. However, due
     to an increase in attributable income, the funding requirement of
     R18 944 000 is slightly lower at 7.8% above that of the previous
     year. A summary of these budgets is shown in the Table below:

     FSA Operational and Industry Budgets

       Allocation                         Approved       Approved       % Change
                                             2008           2009
       (1):FSA Operations                  4 697 980      5 401 459          15.0%(1)
       (2): Industry support
            Forestry Research             9 077 690      9 806 995             8.0%
            Forest Protection             2 489 000      2599 430              4.4%
            Environment & Water           1 070 000      1 080 000             0.9%
            Charter Council                 500 000        360 000           -28.0%
            Education                       167 000        167 000             0.0%
            Sundry                           20 000             Nil              n/a
            Grasslands Programme          1 573 920      2 211 048            40.5%(2)
       Industry total
       FSA Business Plan                         Nil       130 000               n/a
       Income Recovery                      500 000             Nil              n/a
       TOTAL                             20 095 590     21 755 932             8.3%(3)

     To be noted from above:

     (1): If compared to actual 2008 operational expenditure,
          which included a lot of authorised but unbudgeted expenditure,
          the 2009 budget represents a decrease in expenditure of

     (2): Fully funded through UNDP-GEF / SANBI.

     (3): If expenditure on point (2) above were to be excluded in both
          years (as this expenditure is fully funded), actual increase
          5.5% and not 8.3%

Forestry South Africa
Annual Financial Statements for the year ended 31 December 2008
General Information

Country of incorporation and domicile              South Africa

Nature of business and principal activities        To promote the growth, development and well being of the
                                                   South African commercial forestry industry both locally and
                                                   internationally in the interests of all its members.

Office bearers
Chairperson                                        Ms V McMenamin
Vice-Chairperson                                   Mr D Mncube
                                                   Mr B Aitken
                                                   Mr P Day
                                                   Mr D Khakhu
                                                   Mr M Mason
                                                   Mr L Mudimeli
                                                   Mr W Nxumalo
                                                   Mr P van Zyl
                                                   Mr S von Fintel

Business address                                   Cnr Austin & Morris Streets

Postal address                                     P.O.Box 1553

Bankers                                            Standard Bank of South Africa Limited

Auditors                                           AM Smith and Company Inc.
                                                   Chartered Accountants (S.A.)
                                                   Registered Auditor

Company registration number                        017-638NPO

 Forestry South Africa
 Annual Financial Statements for the year ended 31 December 2008

 The reports and statements set out below comprise the annual financial statements presented to the members:

 Index                                                                                                     Page

 Independent Auditor's Report                                                                              24

 Executive Committees' Responsibilities and Approval                                                       25

 Balance Sheet                                                                                             26

 Income Statement                                                                                          26

 Statement of Changes in Equity                                                                            26

 Cash Flow Statement                                                                                       27

 Accounting Policies                                                                                       28 - 30

 Notes to the Annual Financial Statements                                                                  31 - 33

 The following supplementary information does not form part of the annual financial statements and is unaudited:

 Detailed Income statement                                                                                 33

Forestry South Africa
Annual Financial Statements for the year ended 31 December 2008
Independant Auditor’s Report

To the members of Forestry South Africa

We have audited the annual financial statements of Forestry South Africa, which comprise the balance sheet as at 31
December 2008, the income statement, statement of changes in equity and cash flow statement for the year then ended,
and a summary of significant accounting policies and other explanatory notes, as set out on pages pages 26 to 33.

Executive Committees' Responsibility for the Annual Financial Statements

The Executive Committee is responsible for the preparation and fair presentation of these annual financial statements in
accordance with South African Statements of Generally Accepted Accounting Practice, and in the manner required by the
Companies Act of South Africa, 1973. This responsibility includes: designing, implementing and maintaining internal control
relevant to the preparation and fair presentation of annual financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable
in the circumstances.

Auditor's Responsibility

Our responsibility is to express an opinion on these annual financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance whether the annual financial statements are
free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual financial
statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material
misstatement of the annual financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation and fair presentation of the annual financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the annual financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


In our opinion, the annual financial statements present fairly, in all material respects, the financial position of Forestry South
Africa as at 31 December 2008, and its financial performance and its cash flows for the year then ended in accordance with South African
Statements of Generally Accepted Accounting Practice.

Supplementary Information

Without qualifying our opinion, we draw your attention to the fact that the detailed income statement set out on page
33 does not form part of the annual financial statements and is presented as additional information. We have not
audited this information and accordingly do not express an opinion thereon.

                                                                                                                             6 May 2009
AM Smith and Company Inc.
Registered Auditor                                                                                                 774 Waterval Avenue
AM Smith                                                                                                                     Little Falls
Chartered Accountant (S.A.)                                                                                                         1724

 Forestry South Africa
 Annual Financial Statements for the year ended 31 December 2008
 Executive Committees' Responsibilities and Approval

 The Executive Committee is required to maintain adequate accounting records and is responsible for the content
 and integrity of the annual financial statements and related financial information included in this report. It is their
 responsibility to ensure that the annual financial statements fairly present the state of affairs of the Association
 as at the end of the financial year and the results of its operations and cash flows for the period then ended, in
 conformity with South African Statements of Generally Accepted Accounting Practice. The external auditors are
 engaged to express an independent opinion on the annual financial statements.

 The annual financial statements are prepared in accordance with South African Statements of Generally
 Accepted Accounting Practice and are based upon appropriate accounting policies consistently applied and
 supported by reasonable and prudent judgments and estimates.

 The Executive Committee acknowledge that they are ultimately responsible for the system of internal financial
 control established by the association and place considerable importance on maintaining a strong control
 environment. To enable the Executive Committee to meet these responsibilities, the Executive Committee sets
 standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The
 standards include the proper delegation of responsibilities within a clearly defined framework, effective
 accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls
 are monitored throughout the Association and all employees are required to maintain the highest ethical
 standards in ensuring the Association’s business is conducted in a manner that in all reasonable circumstances
 is above reproach. The focus of risk management in the Association is on identifying, assessing, managing and
 monitoring all known forms of risk across the association. While operating risk cannot be fully eliminated, the
 Association endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical
 behaviour are applied and managed within predetermined procedures and constraints.

 The Executive Eommittee is of the opinion, based on the information and explanations given by management,
 that the system of internal control provides reasonable assurance that the financial records may be relied on for
 the preparation of the annual financial statements. However, any system of internal financial control can provide
 only reasonable, and not absolute, assurance against material misstatement or loss.

 The Executive Committee has reviewed the Association’s cash flow forecast for the year to 31 December 2009
 and, in the light of this review and the current financial position, they are satisfied that the Association has or has
 access to adequate resources to continue in operational existence for the foreseeable future.

 Although the Executive Committee is primarily responsible for the financial affairs of the Association, they are supported by the Association's
 external auditors.

 The external auditors are responsible for independently reviewing and reporting on the Association's annual
 financial statements. The annual financial statements have been examined by the Association's external auditors
 and their report is presented on page 24.

 The annual financial statements set out on pages 26 to 33, which have been prepared on the going concern
 basis, were approved by the Executive Committee on 6 May 2009 and were signed on its behalf by:

 Chairperson                                                                        Executive Director

Forestry South Africa
Annual Financial Statements for the year ended 31 December 2008
Balance Sheet

Figures in Rand                                                   Note(s)            2008          2007

Non-Current Assets
Property, plant and equipment                                        2              1,363,994     1,162,933

Current Assets
Trade and other receivables                                          4              1,829,490     1,895,946
Cash and cash equivalents                                            5              6,692,142     4,122,852
                                                                                    8,521,632     6,018,798
Total Assets                                                                        9,885,626     7,181,731

Equity and Liabilities
Accumulated funds                                                                   8,909,794     7,010,051


Current Liabilities
Trade and other payables                                             6                975,832       171,680
Total Equity and Liabilities                                                        9,885,626     7,181,731

Income Statement

Figures in Rand                                                   Note(s)             2008          2007
Revenue                                                                            17,872,398     15,545,553
Other income                                                                        4,621,598        619,704
Operating expenses                                                               (21,098,034)   (15,582,135)
Operating profit                                                     7              1,395,962        583,122
Investment revenue                                                   8                503,781        285,198
Finance costs                                                        9            -                       (8)
Profit for the year                                                                 1,899,743        868,312

Statement of Changes in Equity

Figures in Rand                                                             Accumulated funds   Total equity

Balance at 1 January 2007                                                           6,141,739     6,141,739
Changes in equity
Profit for the year                                                                  868,312        868,312

Total changes                                                                        868,312        868,312

Balance at 1 January 2008                                                           7,010,051     7,010,051
Changes in equity
Profit for the year                                                                1,899,743      1,899,743

Total changes                                                                      1,899,743      1,899,743

Balance at 31 December 2008                                                        8,909,794      8,909,794

 Forestry South Africa
 Annual Financial Statements for the year ended 31 December 2008
 Cash Flow Statement

 Figures in Rand                                                   Note(s)       2008       2007

 Cash flows from operating activities

 Cash receipts from customers                                                  17,921,202    5,038,843
 Cash paid to suppliers and employees                                        (15,575,232)   5,214,524)
 Cash generated from (used in) operations                             11        2,345,970    (175,681)
 Interest income                                                                  503,781      285,198
 Finance costs                                                                          -           (8)
 Net cash from operating activities                                             2,849,751      109,509

 Cash flows from investing activities

 Purchase of property, plant and equipment                            2        (280,461)      (11,586)

 Total cash movement for the year                                              2,569,290       97,923
 Cash at the beginning of the year                                             4,122,852    4,024,929
 Total cash at end of the year                                        5        6,692,142    4,122,852

Forestry South Africa
Annual Financial Statements for the year ended 31 December 2008
Accounting Policies

1. Presentation of Annual Financial Statements

The annual financial statements have been prepared in accordance with South African Statements of Generally
Accepted Accounting Practice. The annual financial statements have been prepared on the historical cost basis, and
incorporate the principal accounting policies set out below.

These accounting policies are consistent with the previous period.

1.1 Property, plant and equipment

The cost of an item of property, plant and equipment is recognised as an asset when:
• it is probable that future economic benefits associated with the item will flow to the company; and
• the cost of the item can be measured reliably.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs
incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying
amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is
also included in the cost of property, plant and equipment.

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses. Depreciation is provided on
all property, plant and equipment other than freehold land, to write down the cost, less residual value, by equal instalments over their
usefule lives as follows:

Item                                                                                        Average useful life
Buildings                                                                                   50 years
Furniture and fixtures                                                                      10 years
Motor vehicles                                                                              4 years
Office equipment                                                                            5 years
IT equipment                                                                                3 years

The residual value and the useful life of each asset are reviewed at each financial period-end.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the
item shall be depreciated separately.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of
another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss
when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and
equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the

1.2 Financial instruments

Initial recognition

The company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

Financial assets and financial liabilities are recognised on the company's balance sheet when the company becomes
party to the contractual provisions of the instrument.

Trade and other receivables

Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost

 1.2 Financial instruments (continued)

 using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised
 in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the
 debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in
 payments are considered indicators that the trade receivable is impaired. The allowance recognised is measured as
 the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at
 the effective interest rate computed at initial recognition.

 The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is
 recognised in the income statement within operating expenses. When a trade receivable is uncollectible, it is written
 off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are
 credited against operating expenses in the income statement.

 Trade and other receivables are classified as loans and receivables.

 Trade and other payables

 Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the
 effective interest rate method.

 Cash and cash equivalents

 Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid
 investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes
 in value. These are initially and subsequently recorded at fair value.

 1.3 Tax

 Current tax assets and liabilities

 No provision has been made for taxation as the association is exempt in terms of Section 10(1)(d)(iv)(bb) of the
 Income Tax Act. Donations by or to the association are exempt from donations tax in terms of Section 56(1)(h) of the
 Income Tax Act.

 1.4 Leases

 A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A
 lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to

 Finance leases – lessee

 Finance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of the
 leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor
 is included in the balance sheet as a finance lease obligation.

 The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in
 the lease.

 The lease payments are apportioned between the finance charge and reduction of the outstanding liability.The finance
 charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining
 balance of the liability.

 Operating leases – lessee

 Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference
 between the amounts recognised as an expense and the contractual payments are recognised as an operating lease
 asset. This liability is not discounted. Any contingent rents are expensed in the period they are incurred.

 1.5 Impairment of assets

 The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If
 any such indication exists, the company estimates the recoverable amount of the asset.

1.5 Impairment of assets (continued)

Irrespective of whether there is any indication of impairment, the company also:
• tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually
   by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period
   and at the same time every period.
• tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If
it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cashgenerating
unit to which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its
value in use.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to
its recoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised
immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating
units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the
carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit
in the following order:
• first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and
• then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior
periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the
recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does
not exceed the carrying amount that would have been determined had no impairment loss been recognised for the
asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than
goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated
as a revaluation increase.

1.6 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such as paid
vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the
period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that
increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.
The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or
constructive obligation to make such payments as a result of past performance.

Defined contribution plans
Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

1.7 Revenue
Members levies and subscriptions are recognised as income.

 Forestry South Africa
 Annual Financial Statements for the year ended 31 December 2008
 Notes to the Annual Financial Statements

 Figures in Rand                                                                                                      2008                  2007

 2. Property, plant and equipment

                                                                     2008                                             2007
                                                      Cost       Accumulated         Carrying             Cost    Accumulated          Carrying
                                                                 depreciation           value                     depreciation            value
 Land                                             240,000                    -        240,000          240,000                -         240,000
 Buildings                                        930,000           (111,600)         818,400          930,000        (93,000)          837,000
 Furniture and fixtures                           133,857             (56,161)         77,696          111,831        (41,714)           70,117
 Motor vehicles                                   353,589           (155,138)         198,451          126,789       (126,788)                1
 Office equipment                                  10,297              (8,062)          2,235           10,297         (5,686)            4,611
 IT equipment                                     161,534           (134,322)          27,212          129,899       (118,695)           11,204
 Total                                          1,829,277           (465,283)       1,363,994        1,548,816       (385,883)        1,162,933

 Reconciliation of property, plant and equipment - 2008
                                                                                      Balance         Additions    Depreciation             Total

 Land                                                                                 240,000                -                -         240,000
 Buildings                                                                            837,000                -         (18,600)         818,400
 Furniture and fixtures                                                                70,117           22,026         (14,447)          77,696
 Motor vehicles                                                                             1          226,800         (28,350)         198,451
 Office equipment                                                                       4,611                -          (2,376)           2,235
 IT equipment                                                                          11,204           31,635         (15,627)          27,212
                                                                                    1,162,933         280,461          (79,400)       1,363,994

 Reconciliation of property, plant and equipment - 2007
                                                                                      Balance         Additions    Depreciation             Total

 Land                                                                                 240,000                -                -         240,000
 Buildings                                                                            855,600                -         (18,600)         837,000
 Furniture and fixtures                                                                69,525           11,586         (10,994)          70,117
 Motor vehicles                                                                             1                -                 -              1
 Office equipment                                                                       7,076                -          (2,465)           4,611
 IT equipment                                                                          21,851                -         (10,647)          11,204
                                                                                    1,194,053           11,586         (42,706)       1,162,933

 Details of properties

 Freehold property
 Erf 13, Woodmead, Sandton
 - Purchase price: 2002                                                                                              1,170,000        1,170,000

 3. Retirement benefits

 Defined contribution plan

 It is the policy of the Association to provide retirement benefits to all its employees. A defined contribution pension fund, all of which are
 subject to the Pensions Fund Act exist for this purpose.

 The Association is under no obligation to cover any unfunded benefits.

Forestry South Africa
Annual Financial Statements for the year ended 31 December 2008
Notes to the Annual Financial Statements

Figures in Rand                                                                 2008         2007

4. Trade and other receivables

Trade receivables                                                             1,826,923    1,875,727
Deposits                                                                            649          649
VAT                                                                                   -       16,500
Other receivable                                                                  1,918        3,070
                                                                              1,829,490    1,895,946

5. Cash and cash equivalents

Cash and cash equivalents consist of:

Cash on hand                                                                     17,716       12,681
Bank balances                                                                 4,282,832    1,363,869
Short-term deposits                                                           2,391,594    2,746,302
                                                                              6,692,142    4,122,852
6. Trade and other payables

Trade payables                                                                  36,477        8,155
VAT                                                                              33,555           -
Accrued leave pay                                                              111,003       97,753
Accrued audit fees                                                              25,000       21,800
Other accrued expenses                                                         769,797       27,208
Other payables                                                                        -      16,764
                                                                               975,832      171,680
7. Operating profit

Operating profit for the year is stated after accounting for the following:

Operating lease charges
• Contractual amounts                                                            42,000      42,000

Depreciation on property, plant and equipment                                    79,400       42,706
Employee costs                                                                2,827,440    2,107,550

8. Investment revenue

Interest revenue
Bank                                                                           503,781      285,198

9. Finance costs
Bank                                                                                   -            8

 Forestry South Africa
 Annual Financial Statements for the year ended 31 December 2008
 Notes to the Annual Financial Statements

 Figures in Rand                                                                                2008           2007

 10. Auditors' remuneration

 Fees                                                                                         25,000         21,800
 Adjustment for previous year                                                                  2,700            200
 Tax and secretarial services                                                                      -          1,000
                                                                                              27,700         23,000

 11. Cash generated from (used in) operations

 Profit before taxation                                                                    1,899,743        868,312
 Adjustments for:
 Depreciation and amortisation                                                                79,400          42,706
 Interest received                                                                         (503,781)       (285,198)
 Finance costs                                                                                     -               8
 Changes in working capital:
 Trade and other receivables                                                                  66,456       (506,710)
 Trade and other payables                                                                    804,152       (294,799)
                                                                                           2,345,970       (175,681)
 12. Commitments

 Operating leases – as lessee (expense)

 Minimum lease payments due
 - within one year                                                                           157,087        190,152
 - in second to fifth year inclusive                                                          15,842        103,527
                                                                                             172,929        293,679
 Operating lease payments represent rentals payable by the Association for
 certain of its office properties and office equipment. Leases are negotiated for
 an average term of five years. No contingent rent is payable.

 Detailed Income Statement
 Figures in Rand                                                               Note(s)       2008           2007

 Revenue                                                                                  17,872,398     15,545,553
 Other income
 Interest received                                                                  8        503,781        285,198
 Other income                                                                              4,316,621        414,952
 Rental income                                                                                51,414         58,099
 Sponsorship                                                                                 253,563        146,653
                                                                                           5,125,379        904,902

 Expenses                                                                                (21,098,034)   (15,582,135)
 Operating profit                                                                   7       1,899,743        868,320
 Finance costs                                                                      9               -             (8)
 Profit for the year                                                                        1,899,743        868,312


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