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Competition Commission SA extends submissions on forestry impact assessment study

The Competition Commission SA has extended submissions for stakeholders in the forestry sector to comment on the forestry impact assessment study by 16 September.

Initially, the deadline was set for the 31 August 2020 but after requests for extension the Commission acceded.

Submissions by stakeholders to comment on the preliminary findings follows concerns raised in several forestry merger transactions and complaints related to continuity of supply of timber from large vertically integrated firms.

“The study assessed the impact of vertical integration on security of supply and the ability for non-vertically integrated players and smaller vertically integrated players’ ability to access logs” said the Commission.

South Africa’s forestry covered nearly 1.2 million ha across 5 provinces, with an estimated net export of over R2,2 billion worth of goods.

According to the Department of Environment, Forestry and Fisheries, in 2012, the forest sector employed around 165 900 workers, providing close to 62 700 direct jobs and 30 000 indirect jobs.

Complaints were mainly laid by small vertically integrated and non-integrated downstream players who lamented about the inadequacy of ‘accessing the supply of timber products for their downstream operations.’

Forestry SA, South Africa’s largest forestry organisation, said in its 2014 annual report, it represented 11 corporate forestry active companies, coupled with approximately 1 300 commercial timber farmers and 20 000 emergent small-scale forestry farmers.

According to the notice, the Commission conducted an impact assessment of its cumulative decisions in the forestry sector.

The Commission further said that the study was initiated under the new Section 21 (a) of the Competition Act which enhanced the Commission’s powers to “study and report on the impact of past decisions by the competition authorities in order to gain insights that may inform future action or direction within enforcement and advocacy”.

Key recommendations contained in the study include;

  • Mandatory notification of all acquisitions of plantations by the larger integrated forestry firms to gain a handle on merger creep within the sector,
  • A greater focus on public interest in merger control focused around ensuring continued access to log supply by SMEs and HDP firms and
  • Support for collaboration by smaller firms that may enhance greater security of log supply, joint innovation and investment.

The study among other parts was also calling for state action to assist in “breaking the vicious cycle small non-integrated firms find themselves in so as to achieve the target of greater participation in this natural resource.”

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