South Africa’s sawmilling industry is sharpening its edge to “saw” the future

Radical change is afoot in South Africa’s primary and secondary wood processing industries. If any sawmillers think it is “business as usual”, then they did not attend (or stream) Sawmilling South Africa (SSA’s) first face-to-face AGM since 2019.

The Future Africa campus at the University of Pretoria was the perfect backdrop for launching SSA’s refreshed corporate identity and slogan, its first professionally printed Annual Report, and exciting news from Wespine about market opportunities in Australia.

“Wespine opportunity is a very exciting project. It exposes our sawmills to a new vibrant, and large international market. It could assist mills with export potential in upgrading their processes and widening their product lines,” said SSA’s executive director Roy Southey.

 

Dawie Roodt

Before getting to the nitty-gritty of sawmilling, Southey introduced the keynote speaker, Dawie Roodt, the well-known and respected chief economist of the Efficient Group.

 

Inflation

Roodt described the global monetary policies leading up to and during the Covid-19 lockdowns. It was a period of quantitative easing by central banks injecting unprecedented amounts of cash into economies, low interest rates, and pandemic-induced commodity shortages.

The increased demand and spending further disrupted local supplies and global logistics services when international economies restarted. Quantitative tightening by central banks trying to put the lid on rapidly rising global inflation was dealt a blow when Russia invaded Ukraine, sparking a New Cold War Era. The last two years also ushered in global inflationary trends.

“Inflation is a process, not an event,” Roodt stated. Various global factors over time are aggravated by soft financial instruments and governments injecting cash into their economies.

“Compared to the rest of the world, especially developed economies, South Africa does not have an inflation problem. The United States and rich European countries have an inflation problem. Their inflation is at levels that are four times higher than the average long-term rate,” Roodt opined.

He said SA has barely breached the upper limit of the Reserve Bank’s target range of 3% to 6%. “Higher than expected fuel and food prices do not mean that total inflation is also high. Increasing the interest rates and the fuel price will slow down the borrowing process and buying”.

Unfortunately, the poor are the most vulnerable. However, “the answer is not to reduce the standard of living but to increase the economy to create jobs. Wealth is the only answer to poverty.”

 

Economic growth

Roodt reaffirmed the parlous state of South Africa’s economy, remarking that the rand is 69 years old and has lost nearly 99% of its value. He blames the government, saying its spending is out of control.

“By our estimates, the economy could have been at least 8% to 10% bigger by now, with 1,2-million more jobs, if Eskom had not sent us into rolling blackouts since 2008. But load shedding is not the only culprit. Poor, unaccountable leadership – which translates into corruption, inefficient policies, and a substandard government at all levels – is the main culprit.”

He predicts that, on average, the economy will only grow by 2% or less. “State debt is more than 80% of the country’s gross domestic product (GDP) compared with 2010 when it was about 30%.”

 

The future

Roodt says there is no silver bullet. The three critical non-negotiables are the protection of property rights, free trade and a sound financial system. “From an investment point of view, four sectors hold huge growth potential. These are finance, education, personalised health and medicine, and agriculture.”

He reminded sawmillers to keep an eye on transformational developments in:

• The digital economy
• Artificial intelligence
• Changing retail models
• Blockchain
• Digital currencies.

 

Wespine

Next were two Australian visitors from Wespine, the only major sawmilling operation in Western Australia. Wespine is a softwood sawmill backed by two Australian Stock Exchange-listed companies, Wesfarmers, which owns Bunnings Warehouse, and Fletcher Building, which owns Laminex.

Southey introduced Wespine’s technical officer, Richard Schaffner and Toby James, general manager of Staxa, Wespine’s marketing arm. They were at the end of a whirlwind study tour of South African sawmills.

In 2021, four South African sawmills exported about 180m³ rough sawn S5 structural and mill-run pine to Wespine for testing. The objective was to determine the suitability and appetite for SA pine in Australian markets.

From Wespine’s point of view, the objective is to secure an additional timber resource to counter Australia’s projected 2,062-million m³ per annum shortfall of sawn softwood by 2050.

Schaffner provided feedback on the quality and market tests conducted on the SA pine. James presented an overview of the Australian timber market and trading opportunities for South African sawmills.

 

Sample testing

Schaffner said Wespine appointed an external consultant to conduct the tests and analysis at its modern quality control testing centre.

The four container loads of rough sawn structural pine ranged from 76 x 38mm to 228 x 50mm. Wespine planed and graded the material according to the Australian machine-graded pine (MGP)10 standard. Tests included:

• Bending – strength and stiffness
• Tension
• Density
• Moisture
• Utility
• Treatability (H2 and H3)

 

Results

Schaffner said the SA pine fibre properties are almost indistinguishable from Australian pine.

However, there are important issues to deal with:

• The dimensions of the most common products in each market: SA’s structural grades (S5, S7) differ significantly from Australian structural grades (MGP10, 12). The Australian benchmark standard sizes for structural timber are primarily 90 x 35mm and 90 x 45mm.
• Different standards: Australia’s structural timber standards strictly delineate wood with heartwood and sapwood (free of heart) because of the treatability of the wood. Free of heart allows full penetration preservative treatment to H3 and greater. Heartwood does not meet the penetration requirements for H3.

 

Export Opportunity

James said the tour convinced them that there is “low hanging fruit” that provides a starting point for SA sawmills wanting to export to Western Australia.

“Some effort is required to define a product set that is complementary to your existing production,” James told the audience. “There is a large enough price gap between the two markets to be able to carry the freight costs. Freight costs are high, but South Africa has a competitive advantage over Europe.

“Timber in a 40-foot container ex-Europe to Australia costs R1000 per cubic metre and takes three to four months with disrupted trans-shipping. A 40-foot container ex-South Africa is less than half, both in time and cost.”

 

Congratulations Langeni

Andrew Crickmay presented the annual Crickmay & Associates Sawmill Improvement Award for the sawmill demonstrating five years of productivity improvements. The 2022 honour went to Merensky’s Langeni Sawmill.