The South African Lumber Market

Abstract

The timber industry in South Africa is about a century old. The first half of 1999 and 1998 will probably go down as the toughest year in the history of this industry. However, survival is not enough. Consists of literature research, this study aims to analyse the South African Timber market. Major developments in this industry are that of Sa/col (South African Forestry Co. Ltd.) with extensive publicly owned forestry assets, which are being offered for sale by the government in what is called a restructuring process. Originally the state became involved in commercial forestry for strategic socio-economic reasons, mainly to stimulate industrial activity in rural regions and to reduce the nation's dependence on timber exports. As privatisation emerged as a serious policy, the sawmiller's tenure and other long-term rights were seen to hamper the restructuring process and to inhibit prospects of optimising the price for assets to be privatized. This is where most of the problems of the South African wood industry started. Pressure was applied to induce its customers to accept a significant diminution of their log supply elements. The compound of higher log prices and diminished sawmiller rights would boost the disposable value of the forest to be sold off The fact that the sawmiller had paid a substantial premium tendered in open competition. Also disregarded, it seems, was the constitutional protection against expropriation without just and equitable compensation. For the very formation of the parastatal, sawmillers found themselves under mounting pressure to sacrifice or diminish key benefits in their contracts against rising log prices. These sacrifices includes benefits as the period of the contract, the volumes of timber assured, identified dedicated sources of supply, favorable credit terms and significantly the method and frequency of log price determinations. Sawlog prices were not determined through normal market trends, but through the biggest supplier. The research problem's to be addressed in this paper is the following: • Is it possible for South African sawmills to be profitable and to compete internationally? • How big are the local and export markets.? • Can the R.S.A. sawmills compete internationally? • What effect does exports of logs have on sawmills.?