Issued by: Ministry of Public Enterprises
21 November 2001
1.1 KWAZULU-NATAL TRANSACTION PACKAGE
The Minister of Public Enterprises, Mr Jeff Radebe is pleased to confirm the sale of 22 000 hectares of SAFCOL commercial forestry assets in KwaZulu Natal to the Siyaqhubeka Consortium. This forms part of the process of restructuring of state forests. The transaction, valued at close to R100 million, has been approved by the Competition Commission and has now become effective following the fulfilment of all conditions precedent.
The Consortium is comprised of Mondi Limited and its empowerment partner Imbokodvo Lemabalabala Holdings (I.L. Holdings). The consortium's shareholding amounts to 75 per cent, with Mondi holding an initial 65 per cent and I.L. Holdings 10 per cent. The National Empowerment Fund will hold 10% of the shares and the remaining 15 per cent will be divided between the employees and Government, which will hold the shares via Safcol. Mondi has made a commitment to reduce its shareholding over time to 51 per cent which will allow the sale of a further 14 per cent to of its shareholding to rural black timber farmers, neighbouring communities (including local traditional leaders) and the empowerment shareholders. I.L. Holdings is chaired by Moses Molefi and counts black business representatives and traditional leaders among its shareholders.
Once the appropriate community trust has been established, the neighbouring communities will hold 5,4% of the shares. The land will not be sold but will be leased by the Department of Water Affairs and Forestry. The company will pay an annual rental of R5.3m which in time will be passed on to successful land claimants and other community groups. The Department of Land Affairs and the Provincial Government will be involved in these processes.
Minister Radebe has expressed his satisfaction with the outcome of the transaction:
"I want to congratulate all the parties to this transaction who worked long and hard to make this vision a reality. This project is tangible proof of the good that can come from a partnership between business and the community. We have been determined to improve black and community representation in this sector, and we are delighted with these developments."
The Minister pointed out that one of the most important outcomes of the process is the decision to remove forest plantations from part of the western shores of Lake St. Lucia. This decision was taken jointly between the Minister of Water Affairs and Forestry, the Minister of Environmental Affairs and Tourism and the Minister of Public Enterprises. The plantations will be phased out over five years, and the rehabilitated land will be incorporated into the Greater St. Lucia Wetland Park, adding 11 000 hectares to the Park. In addition, Siyaqhubeka consortium has supported moving the boundary fence of the park to include a sizeable portion of its plantations, allowing for better management and freer movement of animals. This is a world-first for commercial plantation forestry and a World Heritage Site.
Siyaqhubeka plans to convert the landholdings from pine plantation to fast-growing hardwood pulpwood plantations over a five-year period and will maintain Forestry Stewardship Council (FSC) certification. The conversion process will create significant new employment avenues and opportunities to develop small and medium enterprises in the Zululand Region, and will provide further impetus to Mondi's pulp and paper production at Richards Bay.
The Minister of Public Enterprises, Mr Jeff Radebe, will be present at the official handing over of the KwaZulu-Natal Forestry Assets to the Siyaqhubeka Consortium on 6 December 2001. This will occur in KwaZulu-Natal and will involve invited guests, not only from the relevant departments of government involved, but also community representatives and local traditional leaders.
1.2 NORTHERN PROVINCE AND MPUMALANGA FOREST ASSETS (KOMATILAND)
In terms of a Cabinet decision in August 2000, the above two forestry packages were combined and three bidders selected. The process of finalising the sale of these commercial forestry assets to a preferred bidder commenced in March 2001 with the Information Memorandum being made available.
This process involved an Invitation to Offer, and bids being received from the three bidders during September 2001. These bids were received after each of the bidders had carried out Due Diligence on the forestry assets.
A Bid Evaluation Committee consisting of representatives from various government departments and SAFCOL was formed to evaluate these bids with advice from specialist transaction advisers. As part of this evaluation the three bidders made formal presentations to the Bid Evaluation Committee.
The Bid Evaluation Committee, after extensive evaluation and consideration of the three bids, recommended to Cabinet that AFC and Paharpur be confirmed as the preferred bidders.
Details of the above two preferred bidders are as follows:
AFC / Zama Consortium
African Forestry Empowerment Corporation ("AFC") is a black-owned company, formed specifically for the purpose of bidding for the commercial forest assets being restructured, including the Komatiland Forests. The company has a broad shareholder base, spread throughout the country and its members comprise black businesses, black individuals and trusts, community development companies, black owned forest and milling companies.
Paharpur Consortium
The consortium is led by Paharpur Cooling Towers Limited (Paharpur), a diversified company with interests in cooling towers and saw mill operations, international trading of timber and fertilisers, flexible packaging, and investment and realty operations.
Paharpur is based in Calcutta, India. The Black Economic Empowerment (BEE) partner is Sefateng Investment Holdings (Pty) Ltd, which is made up of a number of empowerment groups.
The bids from these two entities are fairly similar in regards to price and structure. To achieve the objectives of Government and to maximise the price to be received for these assets, the recommendation proposed that negotiations continue with both parties to finalise the ultimate preferred bidder.
Cabinet, today approved the recommendation of the Bid Evaluation Committee.
It is anticipated that intensive negotiations will continue with both bidders and the final legal documentation and transfer of assets in regard to Komatiland transaction will be completed prior to June, 30 2002.
Contact person: Pumla Mtyeku 0825861957