Major South African and foreign companies and empowerment consortiums, among 16 potential bidders for Safcol, the forestry parastatal, have two weeks to put in binding offers for a 75 percent share in the state`s 332 000 hectares of forests, five saw mills and associated assets.
The two weeks of due diligence and access to Safcol``s data room drew to a close last Friday.
Said to be the largest offering of its kind in the world, the privatisation takes place against a background of rising world pulp prices.
The pulp and paper sector was in better shape than any other resource sector, analysts said. This follows a drive by shareholders for better returns, which saw a rash of international mergers and rationalisations over the past three years.
But whether this could be beneficial to Safcol``s final sale price is arguable.
While pulp and paper producers Sappi and Mondi are leading clients of Safcol and bidders for a share in the parastatal, Safcol has substantial quantities of timber in saw logs for the construction industry, which is in its worst-ever state.
Although world prices are rising it is unlikely local timber producers (unless they are exporters) will benefit, because South African pulp producers have no plans in the medium term to increase capacity.
Foreign interests among bidders are Italian-based Gruppo Mauro Saviola in a consortium with Magnaboard Holdings and Formalchem holdings; Sonae Industria of Portugal, in consortium with York Timber Organisation (Yorkcor) and Madiba Mills; Indonesian PT Barito Pacific Timber; Swedish SAAB Group; and the Tarik Al-Zahid Group from Saudi Arabia.
This is not surprising. Some analysts say the view from the developed world is that to make money in forestry it is necessary to be in developing countries with fast-growing timber.
South Africa``s fast-growing timber has certain attractions but carries labour and environmental problems and costs.
Black empowerment groups among potential bidders are: Amathole Timber Consortium; Molozi Trust; African Forestry Corporation; Ikhwezi Investment Holdings; Imbokadvo Lembalabala (a consortium comprising the Tribal Authority Investments Company, Bassa Holdings and Koti Investments, representing black sawmillers, local communities and some trade unions).
Other empowerment bidders are: Ubambo Timber Industries, in consortium with the Northern Province Timber Consortium, and Union Alliance Holdings, a consortium of 12 trade unions, and New Africa Investment.
The Chemical Paper Printing Wood and Allied Workers```` Union (Ceppawu) distanced itself from the privatisation of Safcol in March last year.
Bengeza Mthombeni, the general secretary of Ceppawu, said the union had made it clear it did not agree with privatisation, so it could not be seen to be climbing on the bandwagon with the other trade unions.
The Industrial Development Corporation (IDC) is listed in two bids, one with Thesen & Co and the other as part of Eastern Cape Forestry, a consortium of Hans Merensky and North East Cape Forest, a joint venture between Mondi and the IDC.
The sale of 75 percent of Safcol is expected to raise R1,5 billion for the government, but this could be undervalued, say some commentators.
But while Safcol saw its turnover for the financial year ended June 30 1998 rise by 1,8 percent to R568,8 million, its profits before tax plummeted by 43 percent to R12,6 million.
It is expected to announce its 1999 financial results next month and probably the names of those groups which have put in binding bids. Next month, the government starts evaluating offers and narrowing the list of contenders.
After that it enters into negotiations with the finalists. It is planned to have the forests privatised by the end of the year. - Durbann