Following the re-absorption of the Homelands within South Africa in 1994, DWAF assumed responsibility for the management of the extensive forests managed previously by the Homeland administrations. These forests extend over 238,436 hectares, scattered across four provinces (Eastern Cape, Mpumalanga, KwaZulu-Natal and the Northern Province) and comprise:

* around 130,464 hectares of poorly managed but potentially highly productive industrial plantations. These provide employment for 9,020 people in direct plantation activities and support a varied processing sector which generates significant wealth and approximately 8,500 further jobs.

* some 12,953 hectares of non-industrial plantations (also known as "community") woodlots which are extensively used by local people.

* 95,019 hectares of indigenous forest - a sizeable proportion of "true" (ie: closed canopy) forest in South Africa.

DWAF was ill prepared to assume this responsibility. The excision from DWAF of the industrial plantations of the former Republic of South Africa (RSA) through the creation in 1993 of the parastatal forestry company SAFCOL, had left DWAF denuded of staff, skills and budget to perform a direct forest management function. A function which the creation of SAFCOL had, paradoxically, sought to remove from it.

The industrial plantation operations present DWAF with a major management problem. Currently they operate at an annual loss of R250-300 million. This reflects the poor state of forest management inherited by DWAF (yields are at least 50% below potential), chronic over-staffing and poor productivity. In addition, much of the resource is committed in long term contracts on less than real market prices and unfavourable supply conditions. Current harvesting rates, necessitated by the need to fulful contractual obligations, exceed sustainable levels in certain areas.

In addition to these more immediate pressing issues, DWAF's policy, as clearly stated in the NFAP, is to withdraw from the ownership and management of industrial forestry assets. This is to be achieved through a process of restructuring these assets with respect to the attainment of key policy objectives; while at the same time, minimising the human resource implications and the costs to GSA associated with restructuring.

At the request of the Minister for Water Affairs and Forestry, DFID has provided assistance to DWAF in pursuit of this policy objective. In mid-1997, additional funding and technical assistance was provided to DFID's existing project with DWAF to meet the cost of a comprehensive review of the strategic options available to DWAF in approaching the restructuring of these assets. This Options Study was completed in February 1998.

DWAF has reaffirmed its commitment to restructure these assets on the basis of recommendations provided by the Options Study. It has now formally requested the extension of DFID's assistance to allow it to complete the restructuring exercise.

This project will assist DWAF to achieve its objective of restructuring the FHA forests in accordance with its policy objectives and thus ensure that restructuring achieves the maximum possible contribution to poverty alleviation and the removal of inequality.

To effectively restructure the Former Homeland Administration (FHA) forests in accordance with national policy objectives.

• FHA industrial forests transferred to new, appropriate and effective management.
• Long term human resources strategy to achieve an equitable solution to present over-staffing identified and implemented.
• Underlying land rights officially recognised and holders benefitting from those rights.
• A wider ownership and participation in the industrial forests of the FHA.
• Indigenous forests conserved under equitable systems of participatory shared forest management.
• Non commercial plantations (woodlots) transferred to effective community management.