SHINE A LIGHT
Mahogany: A lost primary resource for landowners?
These landowners gave their land for the establishment of the Government’s mahogany plantations. In return, landowners were promised fair and equitable returns and complete involvement in harvesting operations.
It was a verbal agreement under the then Alliance Government, led by the late former Prime Minister Ratu Kamisese Mara.
The first mahogany plantation trial station was established in Nukurua Village in Tailevu in 1961. The mataqali (clan) Toga had offered 100 acres.
Mahogany was first introduced into Fiji from Central America in 1911. It takes about 30 to 40 years for a tree to mature and ready for harvest.
Commercial harvesting only began in 2003. This, under the Soqosoqo Duavata ni Lewenivanua Government, led by the late former Prime Minister, Laisenia Qarase.
FIJI HARDWOOD CORPORATION LIMITED
To date, under the Fiji Hardwood Corporation Limited (FHCL), landowners receive $12.50 per hectare (ha) from their leased land.
Still a small piece of the pie, most landowners say.
FHCL was originally a state-owned enterprise. It was established in 1998 by former Prime Minister, Sitiveni Rabuka, of the Soqosoqo Vakavulewa ni iTaukei Party.
Today, Government’s mahogany plantation covers a total land area of approximately 50,000 ha (excluding unplanted land area) in 14 stations across Fiji.
Six are in Vanua Levu.
The 14 stations are:
■ Naboutini;
■ Nukurua;
■ Sawakasa;
■ Galoa;
■ Nausori Highland;
■ Nadarivatu;
■ Seaqaqa;
■ Navonu;
■ Korotari;
■ Dreketi;
■ Wainunu;
■ Colo-i-Suva;
■ Baravi; and
■ Saqani.
Most landowners consider mahogany their life insurance.
But are they really reaping the benefits of what they were promised?
Or is this prime resource a lost opportunity for landowners?
VALUE OF MAHOGANY
The dollar value of a mahogany tree depends on its diametre. Using the grading system, Mahogany trees are sold at a log volume price of:
■ (Grade 1) more than 65 cm in diametre - $350 per cube;
■ (Grade 2) between 55cm and
65cm - $300 per cube;
■ (Grade 3) between 45cm and
55cm - $250 per cube;
■ (Grade 4) between 35cm to 45cm - $200 per cube; and
■ (Grade 5) between 25cm to 35 cm - $100 per cube.
PROCESS
The pricing of logs is determined by the FHCL.
Landowners are only paid for leasing their land ($12.50 per ha). The logs belong to the FHCL. In fact, they plant the mahogany trees. Landowners are involved in felling. They are paid $7 per cube as a felling operation fee. This is paid directly to them from FHCL. Contracted FHCL companies carry out the skidding (pulling of logs to the roadside), loading, and cartage from the landing site to the mill.
Millers buy logs from FHCL.
One truck load, carrying 20 cubic metres of logs, is charged about $18 to $20 per run.
Toga clan landowner Sakiasi Rokovucago said one hectare had about 277 mahogany trees.
“With an average price of $250 per cube of mahogany, FHCL earns about $69,250 per hectare,” he said. The expected dollar value differs across Fiji, depending on maturity level of the tree.
Value adding process increases the price of mahogany. Sawed timber is about $900 to $1200 per cube.
COMPARISON
The Qarase Government paid a 10 per cent ($10 million worth) of shares to FHCL on behalf of the landowners, Waisea Mataitini Nayacalevu said.
“This was a legal agreement between the landowners and the Qarase Government,” he said.
This allowed landowners to have two representatives on the board, and landowners were included in field operations from felling to milling.
Mr Nayacalevu is the former representative of the Galoa Forest Base Trust to the Fiji Mahogany Trust (FMT).
He is one of the landowners of the Nakauraki clan of Wainiyabia Village in Serua.
“Mataqali Nakauraki was getting good revenue. In a month the Nakauraki clan would be getting $200,000 to $300,000.”
He added the $12.50 per acre lease money paid to landowners “was peanuts”.
Landowners now receive about $160, depending on the harvest, in their back account, Wainiyabia Village headman, Romulo Rokobu said.
“Money paid to [landowners] is equally distributed among the old and the young members of the landowning unit,” he said.
In the 1960s, a peppercorn fee of 10 cents per hectare was given to landowners as lease money.
“Before, money was directly given to landowners and they share it among themselves.” When FHCL was privatised under the FijiFirst Government, everything was controlled by the FHCL. “Money was transferred to TLTB with limited consultation with landowners,” Mr Nayacalevu said. “We are not informed of the payments and money is directly given to TLTB.” Questions sent to the Ministry of Forestry were unanswered, despite assurance by its Permanent Secretary Pene Baleinabuli that they would reply yesterday. FHCL acting chief executive officer Semi Dranibaka declined an interview when the Shine A Light team visited his office. Questions sent to Mr Dranibaka were referred to the FHCL board. They remained unanswered when this edition went to press. Questions sent to iTLTB were referred to FHCL and the Ministry of Forestry.
LANDOWNERS
Landowners claim they do not benefit from the current framework and processes. Their involvement only reaches the harvesting process. They claim contractors took the biggest share of the cake. The removal of the 10 per cent shares implemented by the Qarase led government in the FHCL meant landowners are now only partially involved in the industry. Paula Kamikamica is the newly appointed Galoa Forest Base Trust representative to the Fiji Mahogany Trust. He said three companies had been contracted in Nadarivatu to harvest 3000 cubic metres of mahogany. Each company is to harvest 1000 cubic metres. A 10-wheeler truck has the capacity of carrying 20 cubic metres of mahogany. “So you can imagine the work put in to harvest mahogany,” he said. Mr Rokovucago said FHCL had stopped paying lease money from 2019. Recently, FHCL started harvesting operations in Nukurua, Galoa, Naboutini, Nadarivatu and Dreketi. Two Nadi-based contractors have started harvesting in Tubarua, Galoa.
FIJI MAHOGANY TRUST
FMT was established by the Fiji Mahogany Act 2003 (No 13 of 2003) for the benefit of landowners. It operates under the umbrella of the Office of the Prime Minister. FMT Manager Ratu Sevanaia Tawake said there were three sources of income for landowners paid by the Government. “Landowners are paid with lease money and when the mahogany is harvested, they are paid with royalties (stumpage), and they are also paid land management fees,” Ratu Sevanaia said. “Although [landowners] don’t own the logs, landowners still participate in the operations in the forest. “Only the stations that have started harvesting operations are getting the other two – stumpage and the land management fees.” Stumpage is the price a private firm pays for the right to harvest timber from a given land base. Land management fee is about $3.45 per cubic metres. Ratu Sevanaia said the global COVID-19 had constrained lease payment. For the past two years, they had been conducting forest base and board meetings twice a year. “This is consultation regarding FHCL, how landowners can be involved, training on harvesting, sawmill provided by the Trust and FMT facilitates.” He said training on chainsaw operations, portable mill training and financial literacy were provided to landowners. Ratu Sevanaia said: “We can’t blame the contractors because they have everything. We are trying to assist landowners to fundraise to buy their machines, chainsaws. “So we have to outsource [work] to the contractors, hoping that once [landowners] build up their capital, they can buy their own machineries, diggers abd trucks.” FMT provides $10,000 start off capital for landowners to set up their Forest Base Company.
AUDITOR-GENERAL REPORT
The FHCL recorded a loss of $4,326,808 as at December 2017. Total liabilities of the company stood at $2,400,911. This was recorded in the AuditorGeneral’s 2018 - 2019 Audit Report on Government Commercial Companies, Commercial Statutory Authorities and Other Entities. The audit was completed on July 31, 2020. The audit report was presented to the Speaker of Parliament, Ratu Epeli Nailatikau, on August 28, 2020. “The company is not generating adequate cash flows to meet all its commitments and obligations as and when they fall due,” the report said. “The above conditions indicate a significant uncertainty as to whether the company will be able to continue as a going concern and whether it will be able to pay its debts as they become due and payable and realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the Financial Statements.” It was also noted that the company’s operations were financed through loans from the Fiji National Provident Fund and the Fiji Development Bank. “Both of these financing facilities are under stress with repayment arrears and interest being charged on both of these accounts.” The company’s cash at bank and cash in hand balance was $568,211. This includes FHCL Trust cash balance of $481,236, making 84 per cent of the total cash. “Should the owners of the cash kept in trust decide to withdraw their monies; the company will be left with only $86,974, which is insufficient to fund its daily operations.”
OTHER NOTES HIGHLIGHTED IN THE REPORT INCLUDE:
■ The inventory log record sheet maintained by the forest officers does not record the number and movement of logs (movement of how many logs has been dumped at the yards and landing sites and how many were shipped out). This is only updated every morning with the number of logs that has been stored at the site. The loose control of recording of stock implies poor management of the principal resource, which in turn implies poor management of revenue and possible loss as well. Moreover, the poor recording of stock movement exposes the company to theft and pilferage; ■ There was a variance of $15,142 between the VAT amount disclosed in the financial statements and as per the VAT reconciliation performed by the company; and ■ A variance of $638,868 was also evident between trade creditors’ balance as per financial statement and the Trade Creditors listing.
REPLANTING OF MAHOGANY
■ Mahogany harvested in 2017 and 2018 were not replanted to maintain sustainability of mahogany plantation. Replanting is required under the licensing arrangement under the Mahogany Industry Act 2010. ■ The audit report states as July 22, 2020, approximately 500,000 of one-year old mahogany plants (estimated value: $500,000) are ready to be replanted. ■ “However, due to constrain with cash flow, the company could not carry out the reforestation process of mahogany plants.” ■ The report also noted that there were no supporting documents to substantiate disclosure of operating lease commitment of $30,948,109. ■ It was also noted that FHCL was unable to supply the mahogany logs as per the license agreement to various license holders. ■ “This has been a cause for concern for a number of years and financial instability of the company is identified as a major contributing factor.”
FIJI HARDWOOD CORPORATION LIMITED
Under the Mahogany Industry Development Decree 2010, FHCL is mandated to: ■ Manage all operations in connection with planting, growing, harvesting and sale of mahogany timber on mahogany timber plantation land; and ■ To provide services and expertise to the Mahogany Industry Council in connection with the management of mahogany plantation lands and the development of the mahogany industry. The council comprises the Prime Minister, Voreqe Bainimarama, Attorney-General and Minister for Economy Aiyaz Sayed-Khaiyum, Minister for Forestry, Osea Naiqamu, the chairman of the Fiji Mahogany Trust, Serevi Baledrokadroka; one person not holding state office or emolument, appointed by the chairperson and a secretary appointed by the chairperson. FHCL engages contractors for its harvesting, management and reforestation operations.
WHAT CAN BE DONE?
When landowning units gave their land for the establishment of Government’s mahogany plantations, they were promised optimisation of landowners’ participation and involvement to secure fair and equitable returns. For this to be realised, the development and implementation of a competency framework for all mahogany landowners, in their pursuit to confidently participate and actively involved in the mahogany industry through FHCL field operations, is necessary. With expert training and advice, landowners will better understand the ‘how’ and ‘why’ of what they do and are capable of achieving in the industry. In return, this will empower mahogany landowners to thrive and realise their aspirations.