Having spent the last three years as the CFO of SAFCOL, D’Shorne Human has seen a lot of opportunities for the private sector to collaborate with the public sector.
South African Forestry Company (SAFCOL) CFO D’Shorne Human knows to effect meaningful change: leaders have to get maximum exposure to the industries and organisations they work in, he says, They have to contribute to the bigger picture. Throughout his career, D’Shorne has been intentional about making sure he gets the exposure he needs to make the impact he wants.
He has worked across various industries, including blue-chip multinationals in mining, oil and gas, construction and even private equity. “I worked for the Oppenheimers for four years in the private equity space, and although I learnt a lot, I also realised that I prefer corporates to the more entrepreneurial environment.”
When the opportunity to join the public sector came up three years ago, it offered a chance to further diversify his experience. “This has been one of the most rewarding experiences so far,” D’Shorne says. With only two years left on his contract and a state requirement for the CFO and CEO to only serve a term of five years, he is excited to take what he has learned from the sector back to the private sector.
Learning from the public sector
“What I’ve learned from this role is that socio-economic development is often underrated,” he reveals. Acknowledging the recent increase in focus on ESG, D’Shorne says the emphasis on the “S” is still not enough.
“It’s such a welcome relief to see the private industry coming on board with something that, as a public sector, we have always had to do.”
The public sector relies largely on its “social licence” to operate. “It’s about balancing being financially sustainable and driving value generation for your shareholders. This, by extension, means the country at large. So at the same time, we have to make sure we are investing sufficiently into the communities around our operations,” D’Shorne explains.
He adds that, with over 189,000 hectares of plantations, it’s important to ensure the communities around them buy into what SAFCOL is doing. “If you don’t have communities that foster a sense of investment and ownership in what they see next to their homes, then you stand the risk of losing it. If someone becomes disgruntled, they can easily set the forest alight, which could cost us billions of rands.”
SAFCOL is ensuring the safety of its crops by bringing those communities in as service providers through transparent processes, like supplier development programmes that teach people the basics of doing business. “We are trying to look out for the guys on the ground – the entrepreneurs who want to build their own businesses. Once they see the benefits from a service provider perspective, it’s a win-win for everyone,” D’Shorne says.
One of the exciting projects the company is introducing is called AgroForestry. “Some of our plantations have to grow for 25 years before we can harvest them, but you can plant many crops and smaller plants on the ground in-between the trees in the meantime,” he explains. “You can also have small livestock, which benefits the trees, because the animals take care of some of the weeds and assist with fertilisation.”
In the same way that trees are farmed, D’Shorne says that leaders need to strategically look ahead 20 to 30 years, not just three or five years. “It’s not just for us, but for the generations that come after us too. If more private sector organisations start focusing on the social aspects of ESG too, a lot of change can happen in both sectors.”
Public sector against itself
D’Shorne says a big problem in the public sector as a whole is poor infrastructure. This is not only having an impact on citizens and business, but on the rest of the public sector too. “The electricity supply is currently causing our liquidity to be at the lowest levels it’s been in the last two to three years. Eighty percent of our customers are sawmills, and as soon as the country enters stage four loadshedding, we start to see losses. Customers can’t take on more logs, because they’re unable to process them,” he explains.
When the country saw stage six loadshedding, SAFCOL was losing money at alarming rates, D’Shorne adds.
This infrastructure challenge stretches to the logistics network, especially for roads, railways and, most recently, the Durban harbour. “The cost to take products to the harbours for export is so high that a lot of our customers have decided it doesn’t make business sense anymore. Upstream, as the raw material provider, we also feel the impact,” D’Shorne says.
Public sector vs. private sector
D’Shorne explains that countrywide challenges like these make it difficult to remain competitive. “Because we’re in forestry, we have to compete with the likes of York Timber, Sappi, Mondi, etc. We get no real benefit from being owned by the state; no bail-outs, no guarantees.”
Adding to the challenge are the constraints of the PFMA (Public Finance Management Act) and the SMF (Significance and Materiality Framework). “The SMF requires that we, as a public entity, have to ask the minister for approval before we can, for example, acquire or dispose of an asset that is more than two percent of our total assets,” he explains. “In a private entity, the board is usually entrusted with this level of decision-making to ensure quick and timely action.”
This means that where the private sector can make a decision in a couple of weeks, it takes the public sector numerous months. “We should also be able to leverage our sister SOCs a lot more,” D’Shorne says. “Recently, when I initiated a capital raise for reinvestment in our sawmill complex in Louis Trichardt, I sent out investor packs and brochures to various organisations, including state-owned development funding institutions (DFIs). I’ve already heard back from most other commercial banks that are ready to move forward, whereas the DFI is taking a lot longer because of these kinds of challenges.
“If we can address this bottleneck, the sector can really step up and compete,” D’Shorne says optimistically.
He adds that when he joined the company and read through the PFMA, he realised the principles in it were actually world-class. “After I qualified as a chartered accountant, I spent the first four years as a senior internal auditor at BHP Billiton, where I was responsible for their global internal audits and SOX compliance.”
This has given him the unique insight to understand the potential within the PFMA. “I can understand where it’s coming from, because you want to control a sector where, as a whole, you know there are many things going wrong. But it’s the overregulation that’s killing the compliant entities in the sector,” he cautions.
D’Shorne suggests that the way to go is if the public sector partners with the private sector to also draw on the unique qualities they have. “They have a different work ethic, and some of it may be more capitalistic, but it gets things done. I don’t think the public sector can completely convert to that approach, but we can certainly benefit from picking up best practices.”
He explains that the South African government itself recently stated that the best way it sees to turn things around more efficiently and in a better time frame, is via public and private partnerships.
