The company that bought South Australia’s forests five years ago for a price criticised as too cheap is making four times the profits generated under government management. Source: The Herald Sun
Then treasurer Jack Snelling oversaw the controversial sale of Forestry SA to OneFortyOne Plantations in 2012 for “a very impressive offer” of $670 million. But documents lodged with the financial regulator show the new owner has been generating annual profits as high as $125.5 million.
At that rate it will have paid off its purchase price by mid-2019, with the forestry firm owning the harvesting rights for three rotations, potentially equating to the next 100 years.
The dividend paid to the State Government from the years 2005-06 until 2008-09 averaged only $26.87 million.
The sale was heavily criticised at the time, with the State Opposition, then Family First MP Robert Brokenshire and Senator Nick Xenophon all saying the asset had been sold off too cheaply.
Former Rann government forestry minister Rory McEwen said at the time the decision to sell the harvesting rights was driven by “zealots” in Treasury.
Mr Brokenshire, now a member of the Australian Conservatives, said at the time the harvesting rights had been undersold by at least $230 million, based on the value of the land.
Timber workers also strongly criticised the sale at the time, with CFMEU members storming the state administration building in protest.
Former Forestry SA chairman John Ross said before the sale there was extremely limited consultation by the Government.
Forestry SA minutes showed the board believed the forests in the state’s southeast were being significantly undervalued, The Advertiser reported.
Mr Brokenshire said yesterday the Forestry SA sale was a Weatherill Government move to try to prop up its ailing Budget bottom line.
“I was critical of it being, one, sold at all, secondly that it was sold well under it’s true value, and thirdly it was sold for short-term expedient gain for the Labor Government without considering the long-term, benefits to both annual returns from Forestry SA’s asset in the southeast but also the security of our timber supply,” he said.
“They said that forestry was in decline. We could have had that return every year going into general revenue and still owned the asset.
“The Weatherill Government was after some short-term gain to stimulate marginal seats in the Adelaide area at the time prior to the (2012) election. They were grossly irresponsible.”
Opposition spokesman for primary industries and the regions David Ridgway said it was another example of “abject financial mismanagement”.
“The Weatherill Government sold the forests for a song and South Australian taxpayers are paying a heavy price,” he said.
“South Australian taxpayers are now missing out on $100 million each year, money that could be used to cut the Emergency Services Levy tax or invested in our struggling schools and hospitals.”
Treasurer Tom Koutsantonis reiterated yesterday the sale of Forestry SA was a “very good result for the state”.
“It is not appropriate to compare management of the assets as the private sector generally strives for certain cost efficiencies and sales revenues in a different way than a business run by the Government,” he said.
“That was part of the rationale for selling these assets and should not be seen as Forestry SA being poorly run. The key consideration is the sales price exceeded a properly constructed reserve price for the state retaining the business into the future.”
