Project detail - Merensky Timber

Who is our customer

Merensky Timber (Pty) Ltd is the forestry arm of Hans Merensky Holdings and is one of the leading integrated plantation and processing group of companies in (South) Africa. Merensky plantations comprise both Pine and Eucalyptus species, totalling ca. 65 000 hectares, as well as 3 sawmills, across South Africa. The Group has ca. 2 600 employees and is well entrenched in the forestry market, tracing its roots in the country back for over 90 years.

What is our funding objective?

FMO, as part of a co-investment with Criterion Africa Partners, has acquired a minority equity stake in the Company, as part of a consortium and expects to add value on (i) further strengthening ESG practices and (ii) pursuing sustainability-related growth investment initiatives. The investment is expected to support local job creation, unlock significant climate mitigation potential, and empower local communities, by way of ownership and employment as well as social, economic, enterprise and supplier development.

Why do we fund this investment?

Forestry plays an important role in climate change mitigation potential. There is a significant carbon sequestration and storage in plantations. South Africa has the largest and most developed forestry markets in Africa and this sector is significant for the country’s economic growth. When executed responsibly, and with due care to the environment and local communities, forestry products can support the development of local economies through job creation and local tax contributions.

What is the Environmental and Social categorization rationale?

E&S category is A, given the scale of the commercial forestry sites among many different local communities and against a backdrop of elevated contextual risks. Key risk areas include occupational and community health and safety, stakeholder engagement, land rights, and management of biodiversity and ecosystem services. Subject matter expertise is required to manage these E&S risks, as well as to conserve the indigenous species mainly in the riparian zones (the zone between land and a river or stream). The Company has established a mature organization and is actively managing community relations as well as environmental matters, mainly guided by the FSC certification scheme, and going forward also by an E&S Management System based on the IFC PS. Community trusts have been set-up that channel funds for community projects. PS-5 is triggered following local land claims under the national land restitution program (Merensky is proactively supporting claimants in this process). PS-6 is triggered as the land use affects biodiversity values at landscape level (management and monitoring plans in place). PS-7 is not triggered as there are no indigenous groups as per PS-7 in the Merensky areas. PS-8 is triggered and well-managed in close coordination with local community representatives.