THE Sunday Mail Extra of March 6, 2016 ran a story titled “A CEO’s mission to transform a State enterprise” which cannot go unchallenged.
In the story, Allied Timbers of Zimbabwe CEO Dr Daniel Sithole was allowed to pour vitriol on the “old administration” without according those at the receiving end of his diatribe the opportunity to respond to his claims.
We can only assume that this was probably a failed public relations attempt on his part to announce his arrival at ATZ and re-assure the many doubting Thomases who have been critical of his appointment since he possess no forestry or saw milling qualification, being an educationist.
Ordinarily we could have ignored the crude, unprovoked attacks as one of those attention-seeking gimmicks had there been an attempt to presented facts as they are without butchering reality in a widely-read national newspaper like The Sunday Mail, whose online footprint reaches a large, global audience.
That Dr Sithole had the temerity to pass a picture of an old Bedford truck that was used and written-off in the 1980s, long before ATZ was incorporated as evidence of the “old administration’s” negligence in running the affairs of the business, is the stuff of legends.
Dr Sithole actually ran a subsidised but loss-making division of Forestry Commission before he left the group in serious debt.
The division was for all intents and purposes a value dissipating unit.
No matter how hard he may try to malign us, facts are stubborn.
Background
For the benefit of your readers, a little bit of background might help put issues in their proper perspective.
Before Dr Sithole’s appointment in January, ATZ was under an acting CEO, Mr Francis Chinyani, from December 2014 to January 2016, who is the group’s marketing executive.
The position had become vacant after Dr Joseph Kanyekanye left the group at the beginning of December 2014, having fallen out with then chairman, Mr Emmanuel Fundira.
Mr Fundira was to later call it quits, but not before his board had made amends with its founding CEO by signing a mutual separation agreement to enable the two parties to go their separate ways without being bogged down by needless acrimony.
That agreement has been under serious onslaught from the new executive, which seems bent on tarnishing the images of their predecessors to hide their shortcomings instead of applying themselves to the job at hand.
In this particular case, Dr Sithole is attempting to re-write history by substituting facts with fiction by claiming there was hardly any replanting done at ATZ’s plantations; that exports had been halted; that the business operated at a loss for 10 years and that contract milling had proved unworkable. Far from it!
ATZ planted 18 915,6 hectares between 2002 and 2014, while 12 295,3ha were clear-felled in the same period.
A positive plantation development of 6 620,3ha was thus created in 12 years.
In other words, ATZ was planting 1 455,05ha yearly and felling only 945,79ha.
These are official audited figures.
Dr Sithole wants to disguise the breakdown of Allied Timbers at the end of 2014 as if it’s the present situation. Sadly, he is doing so under the same board which toured these operations after they came on board and saw them running.
The current board toured these sawmills in May 2014 which were running before Dr Kanyekanye’s departure.
There have been attempts to discuss sawmilling in a crude and uninformed manner without being clear on the reality.
Erin, which is regularly featured as Allied Timbers best sawmill, had new kilns, and sawing and destocking machines from funds raised from trading, not borrowings.
By running self-serving articles, he has at least shown the level of decay Dr Kanyekanye’s departure.
The current ATZ forests are largely below 16 years, which in itself dispels any notion that we were merely reaping what we didn’t sow.
Responsible forest management demands that one must not cut more than they plant in any given year. The reality on the ground vindicates us.
Beyond planting gum and pine forests, ATZ also acquired EC Meikles, later renamed Allied Timbers Saligna, when other industry players were struggling.
Veronica Gutu, the group’s public relations executive, took the current entire Allied board for a tour of operations in 2014.
They visited forests, saw tractor logging equipment owned by Allied Timbers, Erin sawmill fully working including a functional incinerator, Gwendigwe sawmill equipment bought new from Germany in 2014, Mtao poles treatment plant working on export orders from Zambia, ATZ Saligna logging operations and sawmill, and a functional Mutare factory processing brandering and laminated beams for export.
Contract milling
Dr Sithole also appears to think that contract milling should be abandoned simply because he is out of his depth in applying it.
Failure to contain levels of cutting is a management function which he must come to grips with quickly to remain relevant. His disastrous closure of contract milling is one of the most irrational decisions ever done for a commercial company. How do you fund a commercial enterprise that is not generating revenue?
True to the past when he left Forestry Commission, he is celebrating borrowing as an achievement amidst the turmoil it has done to firms that have borrowed at these expensive rates.
Contract milling is an inescapable part of forestry anywhere in the world because of the seasonal nature of the industry.
It has been part of Zimbabwe’s forestry since the 1980s, with the only difference being that the liquidity crisis confronting our economy forced companies to innovate through barter trading whereupon contractors are paid through timber as opposed to the elusive hard cash changing hands.
Unless one has an over-exaggerated da Vinci complex, there is really no need to be a jack of all trades and a master of none in an environment in which companies are operating on shoe-string budgets.
The complexity of forestry in the 21st century demands that companies focus on their core competencies, i.e managing forests and sawmilling, instead of running everything from forest schools, clinics, roads, road haulage, harvesting to tending forests.
Given that Zimbabwe is competing on a US dollar base, it’s naive to assume the industry can hold its own against South Africa with its deprecating rand, unless we have economies of scale.
Zimbabwe contributes less than four percent of timber in Southern Africa, with the main markets being Botswana (with demand of 90 000 cubic metres), and South Africa (1,4 million cubic metres).
Zimbabwe sells S5 structural timber at US$450 per cubic metre when one can buy the same timber from South Africa at US$289.
This makes us extremely uncompetitive.
South African companies themselves cannot withstand the heat from Brazil.
Major companies from across the Limpopo Rive such as Hans Merensky and York Timbers have closed three sawmills and many more are likely to follow suit.
The US, sensing danger, is not outsourcing manufacturing. Now, if America is out-sourcing manufacturing, what more old and archaic sawmills in Zimbabwe with poor productivity and huge electricity costs of USc14 per kilowatt hour?
Contract milling has worked well for Border Timbers Limited.
ATZ long-realised this ahead of everyone else but sadly this brilliant initiative is being sacrificed on the altar of political expediency. Perish the thought!
The notion that the contract millers are competitors is nonsensical; it’s like comparing whiskey with kachasu.
Exports
ATZ had been active in Zambia and Botswana, operating a healthy export order book there.
It has operated profitably over the years, except in 2004, when it recorded a loss after a decision was made to impair the company’s assets.
On crossing over to multi-currencies, the profitable streak was sustained between 2009 and 2013.
Another misrepresentation is that ATZ had a healthy balance sheet upon its establishment.
While it inherited forests established by the Forestry Commission as far back as 1954, these were not donated.
Because ATZ had no capital to launch itself at the time, these assets were bequeathed through a debt-to-equity arrangement approved by the Finance Ministry, which debt remained unpaid up to 2000 when the likes of Dr Sithole left the Forestry Commission.
That transition saw ATZ go through severe liquidity challenges in its formative years.
Instead of hitting the ground running, management – which is now being vilified – had to get legacy issues out of the way.
ATZ’s early years were traumatic, punctuated by zero profitability.
In fact, when ATZ came on stream in 2002, there was nothing of a forest in Chimanimani, save for Cyclone Eline-damaged stumps which had to be salvaged quickly to stem diseases and generate revenues before the trees rotted away.
What happened in Chimanimani could have been avoided had Dr Sithole and his then Forestry Commission team erred on the side of caution.
They made a controversial decision to get rid of Martin Estate following the failure of Forestry Commission’s manufacturing division, headed by Dr Sithole, to pay salaries and service debts.
Border Timbers, which acquired Martin Estate in Chimanimani, went on to construct roads while undertaking clear-felling, arguably the most extensive ever done in Zimbabwe.
That arrangement with Border Timbers became a major bone of contention in terms of the price of logs used and the fact that Border was allowed to go in and cut what they deemed usable.
And when reconciliations were done, it was found that massive overcutting had occurred.
So dire were the resultant financial pressures that the Forestry Commission went on to award another contract in 2001, which was eventually terminated.
It was these controversial contracts that led to Dr Sithole’s departure from the Forestry Commission.
It is, hence, incorrect to say he left the Forestry Commission “to pursue other interests”.
The desperation for cash led the Forestry Commission to give Border Timbers the best crop in Chimanimani, comprising about 60 percent of ATZ resources.
The Forestry Commission made a loss of US$51 million in 2001, later to be turned into a US$1,6 million profit in the 2002 when ATZ came in.
ATZ’s formation was, therefore, more of a salvage operation after virtually all timber plantations in Chimanimani had been damaged by Cyclone Eline.
Instead of dwelling on the past, Dr Sithole and his team have more pressing issues to attend to.
The fires that consumed Gwendingwe and Chimanimani in December 2015 wiped off ATZ’s balance sheet, and something must be done urgently to repair the damage.
In its assessment, the Environment Management Agency ascribes the blaze to poor fire management and arson, hence it’s up to management to get to the bottom of this rather than dwelling on the past.
As “the old management”, we did our best under very difficult circumstances and with very little, if any, shareholder support. And when the time to leave came, we did so honourably.
It has never been our wish to pick unnecessary fights, but the extreme provocation has left us with no choice but to bare the facts.
The chaotic situation being blamed on the “old management” is nothing but figments of the fertile imagination of those who can’t face up to the prevailing challenges. If there was any sabotage as is being purported, why not let the law take its course.
We stand ready to defend ourselves, even if it means squaring up on these issues in a live national debate on radio or television.
The choice is yours.
Issued on behalf of the old management
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