Hans Merensky - through Singisi Forest Products - has 60 OOOha of plantations stretching from Mthatha to Maritzburg and has started the construction of a R130m plywood factory at Kokstad. The IDC has approved a R69m debt facility for the factory, with the company raising the rest. The factory is expected to be completed by April 2007 and should be operational the following month.
That's just the first part of a Rl,34bn expenditure programme, which will include a sawmill, biofuel and medium density fibre plants to be completed by 2010. Singisi currently has four wood processing facilities in the Eastern Cape and KwaZulu-Natal, employing in excess of 5 000 local people.
"The whole philosophy of the development is to extract maximum value from the existing plantations and the additional ones still under development," says Piet van Zyl, MD of Hans Merensky Holdings. Van Zyl says the equity partners in Singisi - the IDC, Spain's Financiera Maderera SA and Hans Merensky - would raise around RSOOm, with the balance funded through debt.
In a 70-year agreement, Singisi has leased the land from the 350 000-strong local community at R6,5m/year, with an inflation-linked escalation clause. The community, through the Singilanga Directorate Trust, is also a 10% shareholder in Singisi and received Rl,2m in dividends in financial 2006.
Singisi and the community have also entered into a new lease agreement for another 30 OOOha of land - on which planting has already commenced - and is currently involved in negotiations with the Department of Water Affairs & Forestry (DWAF) to acquire a further 30 OOOha under the department's management in the Eastern Cape.
Says Van Zyl: "We have the community's approval and commitment in the new Major employer in a sea of poverty.
Singisi
sawmill,
Mthatha
land. We're very proud of the fact that the community is a participator and has a stake in Singisi. We believe that's true empowerment." Van Zyl says 200ha of the land has already been planted and another 9 OOOha will be planted next year.
Singisi, which is 50,43% owned by Hans Merensky Holdings and 14,57% by the Eastern Cape Development Corporation (ECDC), was born out of the privatisation of the Eastern Cape and KwaZulu-Natal forestry assets of the SA Forestry Company (Safcol) in 1999.
The IDC assisted Hans Merensky Holdings and invested R103m for a 42,6% stake to create SA's second largest softwood saw-milling company. That investment is now estimated to be worth more than R300m. Safcol operated the Elangeni and Weza sawmills and Eastern Cape Veneers in Mthatha and the Singisi sawmill in KwaZulu-Natal. The group generates R118m/year in operating profit. The Mthatha facility has been turned around from an R80m loss-maker at privatisation in 1999 to show a profit of R55m in financial 2006.
Van Zyl says one major highlight of the turnaround was outsourcing transporting logs to the sawmill. Truck drivers were offered an opportunity to buy their own trucks, and the company gave them guarantees to provide them with jobs.
That gave them the confidence to approach financial institutions for funding to start their own small businesses.
"The result is that they look after their trucks properly, because as soon as they've repaid their loans, the trucks belong to them," says Van Zyl. "We no longer have to maintain the trucks and there aren't as many accidents as before."
"Singisi is one of our strategic investments, as it captures the key focus areas of the IDC with regard to rural development," says Rentia van Tonder, head of the wood/ paper business unit at the IDC. "We're always looking at funding projects and investments in forestry, pulp, paper, wood-related and renewable industries."
Van Tonder says the IDC is always in constant discussion with leading forestry companies to promote the development of new entrepreneurs with a high developmental effect located in rural areas.