South Africa is the only African producer of pulp and paper other than Swaziland. South Africa produces approximately 370,000 tons of mechanical wood pulp, 1,500,000 tons of chemical wood pulp, 316,000 tons of newsprint, 970,000 tons of printing and writing paper and more than one million tons of other paper and paperboard each year. In addition, South Africa imports some $US 400 million of paper and paperboard each year.
South Africa has a relatively rich source of raw materials from the pine forests of the Kwazulu-Natal and Mpumulanga regions. The warm, equatorial climate of these parts has meant that trees grow quicker than in most paper and pulp producing countries north of the equator.
The major pulp and paper companies operating in South Africa are Sappi, which is listed on the London, Paris and Johannesburg Stock Exchanges, and Mondi, which forms part of the Anglo American Industrial Corporation group of companies. Other companies involved in the forestry industry are parastatal Safcor and Hunt, Leuchars and Hepburn(HLH), which had planned to sell 50% of its holdings to Sappi and Mondi before competitions board intervention recommended that Anglo American and Mondi acquire 100% of the holdings and swap it to foreign interests in exchange for offshore assets.
Downstream packaging companies include Nampak, Kohler and its subsidiary Carlton Paper, and Consol, which together share more than 80% of the market. Hortors, Bowler Metcalf, Aries, Alex White, Harwill, Clegg, Plastall, Rheem, Transpaco and Coates Brothers are other local operatives while Swedish company Ekman Liebig established a South African presence in late 1995. Mondi and the Dutch group KNP BT have restrucured their paper merchanting interests in South African companies Paperlink and Finwood. Between them, Nampak and Carlton Paper control 70% of the SA tissue industry. Nampak's factories at Klip River and Cape Town produce 50 000 tons/year. Carlton Paper produces 47 000 t/year.
Margins in South Africa have traditionally been 5% higher than overseas making it a very lucrative $US 2,5 billion market. The 1994 / 1995 upswing in paper and pulp markets worldwide has also buoyed the South African market, with Sappi reporting a record 291 % increase in EPS for the year ended February 1995 and Mondi experiencing a 20 % increase in turnover during 1994. However the drop in world prices towards the end of 1995 caused a downturn in profitability.
As a result Mondi is reconsidering major investments following the downturn in the international price of pulp. The company planned to spend R 500 million including R 268 million on upgrading the Kraft Piet Retief Linerboard plant and the Merebank mill.
Kohler has authorised subsidiary Carlton Paper to spend $US 35 to build a waste paper recycling plant at the Enstra facility near Springs. The new plant would almost eliminate the use of virgin pulp and consume 72,000 tons of waste paper per annum. The technology has been provided by Kimberley-Clark.
In early 1996 the HLH sold its 50% interest in softwood operations to Sappi for R 220 million. Mondi acquired Hunt Leuchars & Hepburn's mining timber and Sivacel export interests for $US 220 million. In order to remain internationally competitive and increase output, Mondi invested over R540mn in its Richards Bay pulp and linerboard mill.
Since the late 1990s, Mondi has begun rationalising its assets with the aim of focusing on its core activities – pulp, paper and packaging and move away from the solid wood sector. As a result, the organisation could be selling large amounts of forest land and seven saw mills, depending on investor interest.
Sappi has undertaken to acquire from the Industrial Development Corporation (IDC) its investment in Saiccor at a future date. This acquisition will probably be paid for in the form of Sappi Limited equity. In 1999, the company extended its marine pipeline in Natal in order to reduce the effects of the factory waste on the environment.
Jacaranda Tissue, run by Ntsiki and Ian Gwebu, plan to implement a recycling operation that will operate within Soweto, collecting its waste paper for raw material, and making and selling their products - mainly toilet paper and kitchen towels - to the township community. Phase one will be a $US 25 million tissue mini-mill for Soweto that will produce 10,000 tons/year. If the community concept works out, a second 10 000 tons/year facility, also costing $US 25million, will be added - either in Soweto or cloned to another township. A site for the Sowetan mini-mill has been secured at Devland, near the golden highway. A crucial stakeholder will be Eco-S, a Finnish consulting company that has developed the mini-mill concept and will provide the technological know-how.
