Chapter 3
Committee view and recommendations
3.1
As noted in Chapter 1, the committee acknowledges and respects that the
responsibility for the decision to forward sell the timber assets of South
Australia's ForestrySA is one that ultimately rests with the South Australian
Government.
3.2
However, the committee notes that many of the issues arising from this
proposal represent the interests and concerns of communities across Australia
that are dependent on rural industries, particularly where those industries are
dependent on publicly owned assets.
3.3
Further, the committee notes that its participation in the inquiry has
provided an important opportunity for consultation with stakeholders in the
South Australian forestry and forest products industries.
Committee view
3.4
The committee heard that there is significant community concern
regarding the potential for job losses and broader negative flow-on effects
from the proposed forward sale of South Australia's timber assets. Such concerns
are exacerbated by the absence of any guidance to date from the South
Australian Government on what conditions, if any, would attach to the forward
sale, particularly in respect of requirements for a purchaser to enter into
supply agreements with local sawmills, and to positively consider the region's
economic interests in exploiting and managing the timber assets.
3.5
The committee notes evidence suggesting that, in the absence of any such
conditions, there is a substantial likelihood of significant job losses in the
region. This would arise not only from the direct impacts on local sawmilling
operations, but also from flow-on effects to value-adding activities and the
local goods and services economy more generally. The imposition of any such
conditions, however, may well reduce the expected sale price of the timber
assets, and thereby undermine the financial imperative underpinning the
proposed forward sale.
3.6
The committee notes that the lack of information on potential sale conditions
renders many of the issues outlined in the inquiry's terms of reference
uncertain. In particular, the potential for a purchaser not to consider local
impacts in exploiting the timber assets would be directly defined by the
conditions of the forward sale agreement. In the absence of any conditions
requiring the purchaser to consider local impacts, or to continue with
non-commercial activities currently undertaken by ForestrySA, the evidence to
the inquiry strongly suggested that commercial imperatives would override, and could
ultimately undermine, local jobs and economic activity.
3.7
In much of the evidence to the inquiry, the considerations outlined
above, and the current and ongoing value of South Australia's timber assets as
an income stream, were weighed against the apparent justification for the
proposed forward sale as stated by the South Australian Government. While the
committee acknowledges the evidence of the South Australian Treasurer that a
range of factors will be assessed in making the decision regarding the forward
sale, the committee notes that any sale price would need to reflect the
potential risks and impacts of privatising the timber assets, as well as annual
income foregone over the period contemplated by the forward sale.
3.8
On the question of the likely value for money of the forward sale alone,
when foregone profits are set against a likely up-front sale price, the
evidence received would suggest that there is as yet, prima facie, no
compelling case for the proposed forward sale.
3.9
Further, the committee notes that the forward sale proposal to date has
failed to engage with any of the broader factors which affect the economics of
the forestry and forest products industries, such as processing economies of
scale and exchange rate fluctuations. These factors would shape the commercial
imperatives of a prospective buyer and, in the event that the sale did not
proceed, would need to be taken into account in any strategy to ensure the
ongoing viability, development and success of the timber asserts in the Green
Triangle region. The committee considers that the South Australian Government should
ensure that any further consideration of the proposed forward sale explicitly
assesses such matters to ensure the protection of the public interest.
3.10
The committee acknowledges the stated view of the South Australian
Treasurer that the decision regarding the proposed forward sale is 'a matter
for the South Australian Government, as the asset owner, and [that] the South
Australian Parliament is the appropriate forum for these matters to be
debated'.[1]
However, the committee would respectfully observe that any government that
holds public assets holds such assets on trust for the public benefit.
Accordingly, it is incumbent on a government proposing to alienate public
assets to ensure that this is done to achieve an explicit social benefit, and
on the basis of a clear social licence or political mandate.
3.11
On this point, the evidence to the inquiry strongly suggests that the
forward sale proposal has to date been characterised by a lack of transparency,
information and public engagement. This is particularly the case, as noted
above, with respect to what sale conditions, if any, are proposed, and in
relation to broader considerations around potential social, environmental and
economic impacts.
3.12
The committee urges the South Australian Government to ensure that the
deficiencies highlighted through the inquiry are addressed in future public
consultation and information processes around the proposed forward sale. These
should also be addressed in the Regional Impact Statement, which should be made
available to the public as soon as possible.
3.13
The committee notes with great concern evidence which strongly suggests
that the proposed forward sale has already negatively impacted on the economic
confidence and activity of the areas which rely on the forest and forest
products industries. This serves to demonstrate the importance of ensuring that
the contemplation of a forward sale occurs with the highest regard for
transparency and public engagement.
3.14
Finally, the committee notes that certain evidence received in the
course of the inquiry went to issues relating to the sale management and
foreign ownership of agricultural assets more broadly. The committee has had an
ongoing interest in these subjects and, although they are not addressed in this
report, notes that these issues are under consideration for future inquiry.
Recommendations
Recommendation 1
3.15
The committee recommends that the South Australian Government facilitate
the timely release of the Regional Impact Statement relating to the proposed
forward sale of South Australia's timber assets, as well as any relevant
information that is currently, or comes to be, held by the South Australian
Government.
Recommendation 2
3.16
While the committee recognises that the proposed forward sale of the
state's public timber assets is a matter for the South Australian Government,
the committee recommends that, in making any such decision, the South
Australian Government have regard to:
-
the potential impact on the region's economy, employment
opportunities, property values and business viability;
-
the conditions under which the sale might proceed having regard
to these potential impacts, and
-
the relative financial benefits and/or disbenefits of the sale to
the state Government's finances in the short and longer term.
Recommendation 3
3.17
The committee recommends that, in the event of a decision that the
proposed forward sale will proceed, the South Australian Government engage in a
public consultation process on the proposed forward sale and any conditions on
which it might proceed, through the release of a public discussion paper and
public engagement strategy.
Senator the Hon Bill Heffernan
Chair
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