ticad_13_01During the past 150 years, South Africa’s diverse indigenous forests have been destroyed although there are currently extensive plantations, predominantly of commercially cultivated pine. In addition, there are large plantations of eucalyptus hardwood species such as saligna, which were established to provide prop-shafts for the mining industry. Almost all of the materials used by the furniture industry in South Africa are sourced domestically, with the exception of a small quantity of imported hardwoods. But the furniture sector uses only about 12 per cent of domestic timber, making it a small user group with little influence over production

Three large groups dominate saw milling, one of which is a parastatal (which in 2001 was in the process of being privatized). The other two groups have sizeable investments in paper and pulp. The saw-milling technology used is old, since most new investment has gone into paper and pulp, which has higher profit margins. Consequently, the furniture industry is badly served with respect to input quality and flexibility, and delivery reliability is poor. There are also about 300 informal sawmills, usually referred to as bush mills, which play an important role in meeting niche market demand. Approximately 68 per cent of softwood sales in 1999 came from formal sawmills, with the remainder from the low-cost mills.

Large firms traditionally have dominated production activities in the furniture sector in South Africa (Table 6). Average plant size (as indicated by the number of employees) in the early 1990s was more than twice that of the United Kingdom (which itself was characterized by large firms when compared to Italy, the Benelux countries and Scandinavia). This is true not just for production, but also for retailing (Table 7). To compound matters, two conglomerates have interests, which span forestry, paper and pulp production, furniture, furniture fixtures and retailing. This pattern of concentration may affect the upgrading capacity and performance of furniture firms for various reasons. First, as with many firms which grew under the protectionist mantle of import-substituting industrialization, the range of products made was large.

Consequently, firms tended to be unable to concentrate on areas where they had distinctive competences, a first and important step in the upgrading trajectory. Second, they concentrated on the large batch production of standardized items, and therefore failed to develop the capacities to design and change their product portfolios. Finally, competition in the retail sector took a particular and distinctive form, in that it centred on the provision of hire-purchase finance for consumers. Competitive energies were focused on access to financial markets, rather than on product innovation. At the same time, the provision of finance to low-income markets was such that product design capabilities were unimportant. Consequently, as the economy began to open up to global pressures from the early 1990s, there was no basis for sustained upgrading emanating from domestic buyers.