Timber plant holds key to Ugie’s growth

Radical changes come about when large businesses invest in sleepy rural towns. Mike Burgess travelled to the north Eastern Cape towns of Ugie and Maclear to see how ­international ­furniture group ­Steinhoff and its subsidiary PG Bison plan to erect a particle board plant and how this is set to transform an entire platteland ­community.
Issue date 8 June 2007

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North Eastern Cape Forestry ­cluster ­substation
supplies the particle board plant with 16MW.

“I am excited about the future. Ugie is going to open up,” says new Ugie resident Quinton Schenk. Schenk recently left a large butchery in Mthatha in the Eastern Cape and, with his young wife JJ, has invested in a ­butchery in the tiny town of Ugie. The real sense of opportunity that Schenk and others attest to has been caused mainly by a new Ugie landmark, with the cranes and ­gleaming steel structures of a particle board plant – part of a new R1,3-billion investment in the area by Steinhoff ­International through its subsidiary PG Bison.

Past disappointments

The timber industry started in the area almost 20 years ago when Mondi began establishing plantations. Back then residents were hopeful that significant investment would transform the area, but many were disappointed. “Mondi made a lot of ­promises that never ­materialised,” says a local businessman who wishes to remain ­anonymous. In fact, according to another farmer the Mondi experience had nothing but negative effects on the local economy. ”Mondi made promises about investment and ­development, but the timber business did more ­damage than anything else,” he says.
“About 60% of all ­farmers and their land made way for future plantations,” says Pieter Hills, chairperson of the ­Elundini Chamber of Business. It seems to have been a traumatic blow for the Ugie region.
Over time, as the surrounding ­forests matured, some residents became ­disenchanted with the entire timber ­industry in the area, particularly ­farmers who apparently clashed with Mondi over issues from runaway fires to access to forestry land. “It’s difficult to farm next to a conglomerate,” says John ­Macfarlane, the outgoing chairperson of the Ugie and Maclear Farmers’ Association. Now PG Bison has invested in a community a little jaded by past experiences, though most ­residents believe it will be different this time. “PG Bison is committed to a significant ­investment with its new particle board plant. It is willing to manufacture here,” says Hills, adding that this time the spin-offs for the area could be considerable.

Determined to deliver

PG Bison’s R1,3-billion North Eastern Cape Forestry (NECF) cluster investment is set to create nearly 3 000 jobs with an initial annual wage bill of R88 million. The first board will be pressed in January 2008. Besides the plant itself, the ­logistical improvements needed by such an investment, delivered mainly by local, provincial and national government under the ­Accelerated and Shared Growth ­Initiative for South Africa, will have a positive long-term economic impact on the area. “It’s an example of how big ­business and all levels of government and other investors can work together to address unemployment and poverty,” says Dumisani Mvumu, chief whip in the Elundini municipal council. For example, a new tar road linking Ugie with Mthatha is being built, and a R60-million high-­voltage (132kVA) Eskom electricity supply line will link Qumbu to the cluster’s substation in Ugie. This will improve the quality and reliability of the electricity supply to Ugie and Maclear considerably, says Whitey de Witt, operations manager of the Ugie plant. Furthermore, the local Elundini ­municipality has dedicated R100 million to upgrading the sewage and water supply to the town to accommodate its envisaged growth.

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Boost for small businesses

It is particularly the new road from Mthatha, though, that has interested ­business ­people in the area as it offers direct access to the former Transkei, ­attracting customers and fuelling distribution. “This road can only be good for business,” says Ugie builder Andries Frasenberg.
According to Ugie businessmen Glen ­Venter and Hamid Khan, business has already picked up since PG Bison arrived. “People used to go to Maclear and ­Queenstown to shop, but now they have a direct road to us,” says Khan. Outside his store the town is abuzz with construction vehicles, ­contractors and foreign workers. Such activity is not only good for retailers but is boosting occupation rates of all guest houses and hotels.

“We are continually fully booked. Visitors now have to look for accommodation in Elliot, approximately 60km away,” says Maritza Meiring from Foresters Lodge in Ugie. The shortage of ­housing in the small towns has in turn fuelled ­speculation in the real estate market and prices have skyrocketed. One plot in Maclear was apparently recently sold for R250 000 while municipal plots in Ugie have a ­starting price of R140 000, according to Hills.
PG Bison has long been concerned about the housing shortage and has begun a multimillion-rand housing project for skilled staff on land acquired through the Elundini local municipality. More housing for additional labour will also be built.

Cultivating skills

Sadly, the housing problem is far easier to fix than the lack of skills. “The biggest ­challenge is finding skills. Board ­manufacturing demands a different type of culture and skills, and it’s very difficult to find suitable people,” De Witt says. Even once people are found, Ugie’s isolation has been a ­difficult sell. Those from big cities are used to extensive services, double incomes and high salaries. To say the least, this makes Ugie and Maclear a daunting prospect. “There is nothing here, not even a dentist. You have to travel hundreds of kilometres for that,” De Witt says. Recently more than half the potential employees sourced from East London refused the move.
Solving the rural skills shortage is therefore part of the overall challenge, according to Justin Berry, group brand manager for PG Bison, who says they have a good skills programme in place. Already ­individuals have had training in similar plants in ­Turkey and locally in Boksburg, Gauteng.
Significant numbers of labour recruits drawn from the region are now also being trained specifically at operator level. Investing in skills for the future is an ­obvious priority for PG Bison. Already, a survey of last year’s matriculants has resulted in ­learners from the area registering for ­forestry ­qualifications at the Nelson Mandela ­Metropolitan University, Saasveld Campus in George and Stellenbosch University. Others have been identified for ­operator training.
Furthermore, an agreement with Ugie High School to use its ­facilities for adult ­education will boost skill levels in the area for the area.
“We don’t just want to train people for PG Bison’s needs only, we are trying to ­create a pool of people who can work in the area in the long term, for example in the municipality,” Berry says. The ­municipality, according to Hills – the ­organiser of a ­campaign called Project Gatvol ­protesting against poor municipal service delivery – is desperately in need of skills. Hills also believes that money is spent irresponsibly to the detriment of services.

In for the long haul

“PG Bison is here for the long term. We want to be part of the community and we want to help it grow,” Berry says. The fact that the NECF cluster is designed for ­expansion ­probably best illustrates PG Bison’s ­intentions. Currently the particle board plant covers only 36ha of a total of 64ha. Chris van Niekerk, PG Bison’s CEO, explains that the company plans to optimise the use of renewable forest plantations in the area by creating ­various timber ­beneficiation operations close to the ­plantations. “Obviously we need to expand our timber resources,“ Berry says, explaining that expansion of current ­forest resources of 33 000ha, out of 82 000ha, is a primary goal. Acquisition of more land will also be necessary, but ­alternatives such as ­cooperative ­production with rural ­communities and ­farmers will be ­investigated.

Berry adds that ­consultation with communities in ­communal areas and ­farmers in the ­district is an ­important aspect of PG Bison’s expansion. ­­­Community-based projects are planned in rural areas and ­economic opportunities in the timber ­industry can be created for ­commercial farmers. “We say to farmers, ‘let’s ­evaluate your farms to see if there is ­underutilised land that can be used to plant timber. It’s like an insurance policy that will give you a cash payment in the next 15 years’,“ Berry says. In exchange, farmers could receive agricultural benefits from PG Bison’s landholding.
“We are also looking at ­underutilised land on plantations for controlled grazing, instead of prohibiting people from the area.”
Macfarlane welcomes such ­cooperation. However, he warns that there could be practical reasons, such as high ­insurance premiums, causing farmers to shy away from a long-term investment in timber. Farmers must keep up their ­­short-term investments to maintain cash flow.

Furthermore, some are uneasy about the threat of fires and possible huge insurance claims. Nevertheless, for the entrepreneurs in the area the plant can only represent an enormous opportunity. “There are a number of SMME ­opportunities directly linked to secondary services for the plant, including a canteen, security, maintenance, waste removal and spare-part supply services,” De Witt says.
PG Bison will also be involved in the ­construction of a new shopping centre in Ugie to attract local investment, while a truck stop on the outskirts of town – to service the growing traffic to and from the particle board plant – can only add to possible business opportunities.

Contact PG Bison’s North Eastern Cape Forestry offices on (045) 933 1042. |fw