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Linking independent timber growers to markets
Submission to the Portfolio Committee for Trade and Industry
– Co-operatives Bill
15 March 2005
Vusi C Dladla
NCT FORESTRY CO-OPERATIVE LIMITED
Linking independent timber growers to markets
A Forestry Co-operative
• NCT Forestry Co-operative• Established in 1949
– Asset base: R 0.5 billion as at 1 October 2001– Annual turnover: R 1.4 billion
• Today has 2045 members of which 24% are Black• The Small Timber Growers have enjoyed benefits of Co-op
membership:
– Access to international market– Direct benefits from exchange rate
Mission: NCT Assist members to achieve their full forestry potential and thereby optimise financial result on a
sustainable basis
Linking independent timber growers to markets
Our sphere of influence
Linking independent timber growers to markets
Characteristic of NCT• Because of strong first economy, second economy benefits
from such strong base
• Making profits at farm level
Linking independent timber growers to markets
Evidence of working together
• NCT DWC plant • Big suppliers secured
the market, small suppliers get full access to the market
Maximum patronage benefit to all members
Linking independent timber growers to markets
Where is NCT coming from?
NCT Forestry Co-operative
• Supports the objectives and principles of Co-operatives Bill
BUTBUT
Does have two serious concernsDoes have two serious concerns
Linking independent timber growers to markets
Proposed Co-operative BillConcern # 1 Voting
• We cannot underestimate the role of
democracy in running organisations
• Section 14(1)(e) = 1 member: a vote
• Amount of business ≠ amount of say
Members participation differs by size and so is the financial risk they carry
Linking independent timber growers to markets
Challenges to NCT• Should the bill be approved in its current form:
– Members who are the backbone of the co-op might resign & form own marketing companies
– The co-operative will weaken and lose market share– Small timber growers will suffer as they are to a large
degree dependent on big growers for market access – The profitability of tree farming will plunge since
companies will offer low prices for suddenly available timber
– Up to 10 000 job losses possible
Linking independent timber growers to markets
SolutionTo conserve our member base, we propose:
• Make s14(1)e an optional provision for co-ops• Allow patronage voting for co-ops that are
either:– Above x member base or– Above y turnover or– Have an existing constitution that allows for patronage voting
• General issues of the co-op be decided on head count bases and financial/investment issues on patronage
Linking independent timber growers to markets
Proposed Co-operative BillConcern # 2 Access to information
• We accept the need to have access to information
• Section 22 (i) gives members access to minutes of the board meetings & other sensitive information.
• Members can make copies of this for their own use
Now we have both timber farmers and corporates (such as paper companies) as our members
Linking independent timber growers to markets
Challenges to NCT• Should the bill be approved in its current
form,– International pulp & paper companies who
compete with the co-op can access information to use it against us
• Marketing strategies• Co-ops members plantation information• Market prices
– Disclosure of sensitive information can do serious harm or disadvantage the business
Linking independent timber growers to markets
SolutionWe propose:
• Expand section 22 subsection 2 to capture restricted access to confidential
information as determined by the board of directors
• Mirror Companies Act: “Any minute book of a company kept under section 204 shall
be open to inspection during business hours by any member of the company, without
charge, at the registered office of the company or the office where it is made up,
subject to such restrictions as may be provided for in the articles or imposed
by the company in general meeting, but so that not less than two hours in each day
shall be allowed for inspection ”
• Access to information is captured in PAIA
Linking independent timber growers to markets
Summary
• The objectives and principles of the bill are supported by NCT Forestry Co-operative
• Two important concerns of large marketing co-operatives should be considered
• The experience gained to date by the bigger co-operatives will be valuable in mentoring the emerging co-operatives.
• Closure or conversion of these co-operatives will be a loss in the economic system of South Africa
Linking independent timber growers to markets
Conclusion
• We need a win-win situation
Where
• Co-operatives are equally benefiting their members without any fear of prejudice
But• Managed in the manner that is both
economically viable and sustainable
Linking independent timber growers to markets
Thank You