Opportunities for SME in forestry sector

SME Funding
Winston Smit
24 November 2010
Key Strategic Drivers for SME in Forestry Sector
 Forestry Sector BBBEE Transformation Charter
 Land Reform Programme – Restitution and Redistribution
 Industrial Policy Action Plan (IPAP)
 Transfer of State forestry assets
[Southern Africa/Forests]
Slide 2
Sappi – Key Facts
 Sappi is a global pulp and paper company and has operations on 4
 Sappi subscribes to the BBBEE principles and has recently completed an
empowerment deal worth R 842 million
 Sappi is a Level 3 contributor
 Sappi scored 14.96 out of 15 for Enterprise Development
 Sappi has its own in-house SME development centre
[Southern Africa/Forests]
Slide 3
Opportunities for SME in forestry sector
The Forestry industry is highly technical and has high barriers to entry, but
opportunities exist for SME in the value chain
 Plantation management
 Planting and weed control
 Fire fighting
 Harvesting and transport
 Pole manufacturing
 Charcoal manufacturing
 Saw milling
[Southern Africa/Forests]
Slide 4
What makes an SME successful?
Passion – entrepreneur must have passion for his product
Funding – crucial in the different stages from pre-startup through to
growth phase
Market – access to markets
Technical knowledge – of his product and industry
Business knowledge – how to run and manage a business
Business systems – financial, HR, risk management, etc
Mentorship – crucial to any business especially during pre-startup, startup
and growth phases
[Southern Africa/Forests]
Slide 5
Funding and funding challenges
There are many ways to fund SME’s e.g. preferential capital, private equity
and bank loans
 SME not always attractive for banks
 SME not always aware of funding sources and if, how to access it
 Lending criteria from financial institutions very onerous
 Lack of credit worthiness and SME unable to provide security
 Regulatory environment
[Southern Africa/Forests]
Slide 6
Institutions currently involved in SME financing
 Commercial banks
 IDC – involved in the entire forestry value chain
 Ithala Bank
 Development Bank of South Africa
 Forestry companies such as Sappi, Mondi and Hans Merensky
 National Empowerment Fund
 Government support programmes under DTI, DRDLR and DAFF
[Southern Africa/Forests]
Slide 7
The way forward
The success of SME development will require a strong partnership with FIETA,
the private sector and appropriate Government Departments
Development of business support centers in the rural areas which can provide
much needed business support and advice
 Institute securities and guarantee schemes
 Institute dedicated grant incentive schemes
Develop mechanisms to reduce transaction costs associated with SME funding
and support services
[Southern Africa/Forests]
Slide 8
[Southern Africa/Forests]
Slide 9