Small scale timber operations
Small scale timber operations
Project grow helps small farmers overcome the entry barriers
associated with tree farming
The South Africa 2017/18 Yearbook estimates that approximately 158 400 people are employed by the forestry industry in South Africa. The timber industry falls within the forestry industry and has different sectors including sawmilling, timber boarding and mining timber amongst others.
The sectors are operated by a combination of established businesses and small-scale operators. Timber iQ takes a look at what the industry is like for small-scale operators and finds out how they manage to hold their own in a competitive environment.
In addition to the economic significance, the timber industry has also played a significant role in South Africa’s historical context. A research article by Isaiah Mahlolani Mahlangu, homed in on small scale timber farming, focusing on the Entembeni Community. Titled Small scale timber farming in Entembeni Community – exploring sustainability and possibilities for leisure and tourism, Mahlangu’s study explained that timber farming in South Africa dated back to the 16th and 17th centuries. Following the arrival of Portuguese navigators and Jan van Riebeeck in 1652, there was an unparalleled ‘overutilisation of indigenous trees for building ships among others’.
As time progressed, the demand for timber increased, which attracted private sector initiatives because of the lucrative opportunities that became available. Mahlangu’s study further explains that as time went on, the South African government identified and established community forestry programmes to assist rural communities in meeting their requirements for firewood and building materials.
Small-scale timber operations started picking up commercially in the 1980s — which made way for commercial forestry companies to establish business partnerships with local communities. Examples of such partnerships between established commercial companies and communities is Sappi’s Project Grow and Mondi’s Khulanathi scheme.
In the study, Mahlangu mentions that the government showed interest in promoting small-scale timber growing, after realising the potential it had in terms of job creation and poverty alleviation in rural communities.
Small-scale timber operations in South Africa
Small-scale saw milling is an example of a small-scale timber operation. In his journal article titled Raising the Stakes – Impacts of privatisation, certification and partnerships in South African forestry, (2001), co-author James Mayers writes that there are two broad types of miller apparent in the small-scale sawmilling sub-sector. The first is formal businesses, which would be a milling company consisting of permanent staff, casual workers and transport infrastructure.
On average, businesses in this category made an annual turnover of half a million rand. In addition, the article explains how formal businesses made a significant contribution to meeting the ‘demand of downstream processors for industrial timber as well as supplying the regional markets with building timber and final products such as pallets’. The second miller type was micro-millers that relied completely on short-term contracts to make a living. Annually, micro-millers made a net profit below R50 000.
Western Cape based Logo Homes specialises in timber frame design and construction According to Ben Paine, director at Logo Homes, the business has been operating since 1993. “It has its roots in the Elgin Valley/Grabouw region from which the majority of its skilled staff are drawn. Its factory and offices are now based over the mountain in the Helderberg,” says Paine.
Paine explains that quality products at an affordable price, combined with an experienced staff complement, have given the company a competitive edge and kept it going for all these years. “We are very happy to build from other architects’ designs but also offer inhouse designing and council submission which makes it that much more cost-effective for our clients. We always add in that extra detail that doesn’t cost much but makes a real difference to the overall look and feel of the house.”
Sappi’s Project Grow is another example of a small-scale timber operation. After communities or individuals have selected land for growing eucalyptus trees, site assessments are conducted to ensure that plantings do not take place in environmentally sensitive areas, and that planted areas are economically sustainable. Sappi then provides the growers with sponsored seedlings, grown by Sappi nurseries, to ensure only the best available quality genetic material suitable for the growing conditions.
Qualified extension officers are employed by Sappi, who provide technical advice to growers, regarding preparing, fertilising and planting, as well as weed control and the preparation of fire breaks. Certain entrepreneurial skills such as negotiating with contractors and handling money matters are also offered to assist growers. At harvesting time, Sappi buys the timber from the growers and pays them a market-related price.
Project Grow helps small farmers overcome the entry barriers associated with tree farming. These include the significant expense of purchasing seedlings and fertiliser as well as harvesting and transport. Some of these barriers are overcome by ensuring that growers have access to interest-free loans to cover farming input costs and annual maintenance, and by providing advances for work carried out throughout the eight to ten-year growing cycle.
Industry related challenges and getting around them
Challenges are inevitable in any business environment, regardless of its size. According to Mahlangu’s study, some of the challenges faced by small scale timber operators include marketing, harvesting and transportation, coping with risk, theft, runaway fires and exploitation among others. Of these challenges, coping with risk is the challenge which most small-scale timber operators identified with. The growing cycle of trees is an example of a risk factor.
Dave Dobson, a director from Umziki Forestry Consulting, mentions that the long wait from planting to harvesting is a major challenge for small-scale operators, specifically from an income point of view. “A new grower will require an alternative source of income while waiting,” he says. Dobson adds that once the trees are mature and ready for harvesting, the next challenge for small-scale operators is marketing.
State forest restructuring also creates serious challenges because of the uncertainty in terms of accessing timber contracts. Another challenge which Mayer alludes to in his article, is the adequate representation of small-scale mills through sawmilling associations. “Even if such an association were to exist, it is unlikely that it would be able to adequately represent the issues and needs of such a broad membership. As with contracting in the forest industry, information flows to, and amongst millers, is weak,” the article reads.
“The problem that needs to be addressed is that of beneficiaries in land restitution cases. Many have failed because the Department of Land Reform does not have the ability to guide the new landowners,” adds Dobson.
Adequate skills and financial capacity are other challenges faced by small-scale timber operators. Established timber operators have the financial capacity to employ industry specialists to work in their operations. Unfortunately, this is the opposite for small-scale timber operations, where owners often run the operations themselves. In some cases, the owners themselves don’t have the necessary technical knowledge required to successfully run the operation.
Paine explains that the general state of the economy had been problematic in the past decade. “The banks have also been very hesitant to lend money for housing bonds. Legislation and general bureaucracy are also a huge issue, from labour laws to NHBRC and BIBC compliance,” he adds. According to Paine, another challenge is the approval of plans through council with new zoning and energy regulations. “Within timber frame specifically you still get some ignorance about the method of construction and materials used from potential clients and some junior or less experienced staff in the banking and insurance fields.”
Some of the afore-mentioned challenges fall within the macro-economic environment, which means there is little to nothing that timber operations can do to control them. From an economic point of view, Paine explains that the company has to work extra hard to ensure that they offer better services than their competitors. “I think our reputation has helped us a lot in this regard. We have also expanded to take on a greater variety of jobs including more additions and alterations,” he says.
“There is not much that we can do about the banks’ reluctance to give bonds, and for a while we only built for cash clients.” The situation seems to be improving. “Now the banks are starting to open up a bit more and there is even a bit of competition between them on interest rates,” Paine adds.
Dobson believes that cooperative marketing can assist small-scale timber operations. “Look into the history of the formation of NCT for example, and their very successful export contract with the Japanese,” he says.
Assistance for small-scale timber operations
The timber industry falls under the Department of Agriculture, Forestry and Fisheries (DAFF), and to assist small-scale timber operators, the department has established the Forestry Enterprise Development (FED) programme. The aim of the FED programme is to create opportunities for people to utilise forests (indigenous forests, woodlands and plantations), and forest-based resources for economic growth, income generation and job creation in a manner that will take people from a subsistence livelihood system into the market economy.
Included in the FED programme are two sub-programmes, namely, afforestation and timber production and processing (TPP). Afforestation focuses on afforestation activities particularly in the KwaZulu-Natal (KZN) and Eastern Cape (EC) provinces. The estimated land suitable for new afforestation is approximately 100 000 ha in the EC and 40 000 in KZN. This sub-programme will seek to ensure that enterprise development takes place in accordance with the undertakings of the forestry BBBEE.
The TTP sub-programme focuses on timber business development. The aim of this programme is to identify and utilise opportunities that are provided by the timber resources in the country, and turn them into businesses that have a positive impact on the forestry sector across the value chain and at both small, medium and micro level as well as high level forestry industry.
In terms of funding, the FED programme works closely with the Small Enterprise Development Agency (SEDA) and the Industrial Development Corporation (IDC). Small-scale timber operations can approach the two organisations for financial assistance support.
According to the yearbook, 692 000 people in rural communities rely on forestry to earn a living. This figure is an indication of the significance of small-scale timber operations in South Africa. Although the industry continues to face challenges which could negatively affect small-scale operations starting up, with proper guidance and financial support, they too can thrive like established businesses.
Small-scale sawmilling is an example
of a small scale timber operation
By Dineo
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