Safcol loses US bidder
AMERICAN forestry giant Weyerhaeuser, widely considered as the front-runner in the privatisation of the SA Forestry Company (Safcol), has pulled out of the bidding, citing government delays.
Weyerhaeuser on Thursday informed the Departments of Public Enterprises and Water and Forestry Affairs, as well as Safcol management, about the decision in a letter. Its withdrawal is a blow to the government as it seeks to infuse foreign funding and expertise into troubled Safcol.
Only a week ago the country's largest independent timber company, Yorkcor, said it was reviewing its bid for the company amid government proposals to revise key aspects of the proposed National Forestry Bill.
Gary Drobnack, Weyerhaeuser's SA representative, explains that the company put together an investment package four years ago with US pension funds for Safcol's privatisation. "We've been monitoring the project since 1994 but the funding has to be committed before 1999. We've simply run out of time," he says.
The letter sent by Weyerhaeuser reveals a deeper frustration. It cites intial deadlines in 1996 and 1997 for Safcol's privatisation and, most recently, the promise of a Memorandum of Information by May. None of these dates has been met by government.
Drobnack says Weyerhaeuser, which has annual sales of about $12-billion and markets Safcol's products internationally, has committed its money to other projects in the southern hemispere.
The privatisation of Safcol has been plagued by government indecision, which has already reduced the value of the company to foreign investors, analysts say.
In February this year government published privatisation proposals attaching stringent conditions on wage levels, business strategy, community and empowerment involvement and small business development.
The trade unions have also proposed that homeland forests, currently run by the Department of Forestry, be included in the Safcol parcel. Lael Bethlehem, chief director in the Ministry of Water Affairs and Forestry, says government is keen to include the forests in the former Transkei and Ciskei, which have enormous investment potential when combined with Safcol forests in the Eastern Cape.
Bethlehem says government will consider including other homeland forests, but only where this makes economic sense and they could be ready for the Safcol deal by the end of the year.
The former homeland forests are currently losing about R290-million a year, are overmanned and on higher salary scales than industry norms.
Bethlehem says interest in Safcol's privatisation has been expressed by local and foreign companies in the US, Europe and Malaysia.
Yorkcor is putting together a consortium of foreign forestry operators as well as black-owned Madiba Mills to buy Safcol, which has asssets of R570-million, but whose profits have been declining in recent years.
However, following the proposed new Forestry Act, Yorkcor chairman Solly Tucker said he was reviewing his bid for Safcol.
The industry is uneasy about a late clause that any contract over the use of government forests runs out after three years. This clause will apply to Safcol even after its privatisation, as the state will retain control over Safcol's land. - netAssets