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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
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Parliamentary Committees

SELECT COMMITTEE ON HARVESTING RIGHTS IN FORESTRYSA PLANTATION ESTATES

The Hon. R.L. BROKENSHIRE (16:24): I move:

That the report be noted.

It does not give me pleasure to talk on this final report into the privatisation of three forward rotations of the South Australian pinus radiata in the South-East. I am very excited about this because I am disappointed that we have had to move for this select committee and that we are now having to speak about its report.

First and foremost, I would like to recognise and thank all my colleagues who were on the committee. In no particular order, although probably by virtue of the amount of time spent on the committee, I would like to acknowledge the work of the Hon. David Ridgway and the Hon. Jing Lee. I would like to acknowledge the work of the former minister and member of this council, the Hon. Paul Holloway, who was on the committee for part of the time, and also the Hon. Russell Wortley, who was also on the committee for part of the time prior to being promoted. I would like to genuinely thank the Hon. John Gazzola and the Hon. Gerry Kandelaars, who took up the reins for the government on this committee and cooperated—I put on the public record—in supporting many meetings and looking at all the submissions and everything. I thank those honourable members for that.

I also want to thank all the organisations and individuals who took the time to present both written and oral submissions to the committee. I particularly thank those who came down to Adelaide on a couple of occasions to give further evidence at the request of the committee, and they are Dr Jerry Leech and Mr John Ross. They were very cooperative with the committee, as was everyone who gave evidence. I think it is important to formally thank and acknowledge in Hansard all of those people.

The Hon. D.W. Ridgway: What about the staff?

The Hon. R.L. BROKENSHIRE: I am about to get there. They are all keen to thank the staff, and they will have their opportunity. This committee would not have been able to come up with such a comprehensive report if it were not for the staff. I want to thank Mr Guy Dickson, one of the unsung heroes in this parliament when it comes to the dedication of staff to members of parliament.

I also want to thank Ms Margie Morrison for her excellent work in writing the report. It is not easy for staff and researchers to find suitable dates for hearings, let alone get to a point where we can now talk about this report, so I genuinely thank them for their ongoing work in supporting us as members of the Legislative Council.

I just want to touch on the key points of the report. I have highlighted most of this since it has been tabled publicly anyway in every television, radio or print media that I could possibly find. I see this as one of the most outrageous decisions made in the modern history of this parliament: privatising 100 years of our forests. I know that government members will have a crack about the fact that ETSA was privatised after about 100 years, but there is one big difference between the two that I want to put clearly on the public record, and that is that for ETSA to be privatised or leased out it had to come before both houses of parliament and it had to have a majority of the members of parliament support the sale process and the sale as a concept.

Unfortunately, the parliament did not have the opportunity in this instance because the government used a loophole with respect to the privatisation to get around having to bring it through the parliament. I appreciate and want to thank all my colleagues who supported the motion to allow this select committee, and they did it, I say, because they had concerns about whether or not it was in the best interests to privatise three forward rotations.

However, the South Australian community is clearly disappointed. The government can do some sensible backflipping here and withdraw from any further sale process. It is not too late for the government to be able to do that. That is another reason why the committee has gone so hard to get this second and final report tabled before we get up for the winter recess. Even though the government has called for expressions of interest, it is still several months away from getting anywhere near signing off on a contract with a successful bidder, so there is time for the government to have a proper and thorough look at this.

I recognise that the Treasurer, the Hon. Jack Snelling, has on this occasion acknowledged on radio and in the print media today that he would have a careful look at the recommendations, although from the start he has been very dismissive of the select committee. I encourage the Treasurer to have a very, very careful look at the recommendations because I think that he now has an opportunity—and there are about 200 pages of documentation, including the report—to look at this in hindsight from the point of view of what really is in the best interests of the state and not just at the whim of Treasury, which put this up as a concept in the first place. It was put up as a concept when the Liberal government was in office, but that government decided not to proceed with this for the reasons that are clearly shown in the report.

ForestrySA this year allegedly will have a significant reduction in its net return to Treasury, but, unfortunately, it does not matter whether you are in government or whether you are in business today, profits are back. When you have a situation that we see in South Australia and Australia at the moment where new starts in the housing industry are very low and construction generally is way below where we would all want to see it, that is why the alleged return to government from the 2011-12 year will be back on other years, and maybe back to around $25 million or $23 million.

However, notwithstanding that, if you actually include that and average out over the last 10 years, or thereabouts, it has still returned, as I see it, in excess of $40 million a year net to Treasury; and on top of that it has provided community service obligations, particularly with respect to firefighting capability, about which there is a real question mark considering the evidence we have. Even though the government says that it is going to retain it, it is one thing to say it, it is another thing to ensure that it occurs.

There is also a question mark around silviculture when it comes to growth opportunities and a forestry plan, because for 100 years now the fact is that ForestrySA has owned a large percentage and continued to grow (and still has in the last budget an opportunity to buy more land), but the fact of the matter is that ForestrySA as a government-owned entity has underpinned the growth opportunities for forestry in South Australia, as well as the research and development opportunities and the integration between the whole forestry industry. It plays a very, very important role.

I pay tribute to all the ForestrySA workers and to the former board of ForestrySA, particularly the chair, John Ross, who was not reappointed. I believe he was not reappointed for one reason; that is, because he is an honourable man who knew about the charter of ForestrySA, understood his responsibilities under the federal and state acts of parliament and therefore was not in agreement with the concept of privatisation. For that, for being an honourable South Australian, Mr John Ross got absolutely shafted and was not reappointed to a position that he had demonstrated enormous capability for over many years.

Dr Jerry Leech, from the evidence as I see it, is one of the most qualified forestry valuers in the world and frankly, in my opinion, Dr Jerry Leech should have been engaged before ACIL Tasman when it came to consideration about whether or not it was in the best interests of the state to (1) privatise and (2) if they were to privatise, what the value of the privatisation should be. It is clear for all to see that the base value minimum of ForestrySA for sale purposes, if it is to proceed, should be at least $1 billion and upwards of that to potentially $1.1 billion to $1.2 billion. Yet, we understand that the figure it is going to be sold at will probably be about $600 million to $700 million.

If they get $700 million or anything above that, I foreshadow that the government will be out there singing the praises of what a great decision it is, because while the talk in the media is about $600 million they will say they have reaped an additional $100 million for the sale. I would say that even if they get $700 million they will be foregoing at least $300 million worth of asset to South Australians at a minimum and possibly as much as $500 million. That does not take into account the growth opportunities in the mid and long term when it comes to the net returns to government, which the CEO of ForestrySA advised the committee would soon be at about $50 million a year. In fact, for the 2010-11 year it was $48 million. It was only this year when it came back.

If you look at the risk factor, which is one of the things that we considered as a committee, the government's line through Treasury was, 'We've got to get rid of this because it is a risk to the South Australian taxpayers to continue to hold at this great asset.' It has not been a risk for 100 years: it has been an asset for that 100 years. Suddenly the argument was—

The Hon. D.W. Ridgway: A sort of future fund really.

The Hon. R.L. BROKENSHIRE: —that it was a risk, and I will leave the honourable Leader of the Opposition to talk about the future fund in his comments. I want to also say that it is interesting that the government say that it is a risk to keep it and they have to sell it off, when Labor federal MP from Tasmania Mr Dick Adams chaired a committee of the federal parliament which identified—and this has gone into evidence as I recall—that forestry is anything but a risk. In fact, the report showed that it has a very bright future, which you can understand because it is a renewable sustainable environmentally friendly industry.

It is also worth putting on the record that during the time that we were deliberating on the select committee the federal government apparently indirectly have a lot of money invested in possibly putting a contracting bid in to buy our South Australian forests through the money that the Australian future fund has in the Canadian international conglomerate that I understand is one of the companies internationally that has shown an expression of interest in buying these forests.

This is an important committee. The evidence is there. I do not want to spend a lot of time on it now because other colleagues want to speak and the community will have an opportunity now to have a look at it because Mr Dickson has advised me that it is already on the parliamentary website. There have been enormous protests in the South-East and on the steps of Parliament House here. A lot of energy and effort has been put in by many South Australians, especially those who live in the South-East, and those who have the knowledge of the forestry industry. Those people had every right to protest and they have every right to be concerned.

Not only should they be concerned but, as we get this out into the public debate, if the government proceeds with this sale, I believe that members of parliament who read this report and are concerned should use as much energy as they can muster to remind all South Australians that this government has broken a fundamental pledge—or, as the Hon. David Ridgway has said, a decree. This occurred in 2002 with the former premier's pledge card and then in 2006 when there was another commitment about no more privatisations. When the Hon. Jay Weatherill became Premier, I thought he would have backflipped on this (and he would have received accolades for it), but sadly he has now effectively signed off on it as well. So he has his DNA over this, as did the former premier. In other words, this government has broken a promise to the South Australian community not to privatise.

The Hon. I.K. Hunter: What a load of garbage.

The Hon. R.L. BROKENSHIRE: The Hon. Ian Hunter, the minister, says, 'What a load of garbage.' I ask the minister to go to the seven marginal seats that they want to hold at the next election and doorknock those seats, because there will be other people doorknocking them from the other side, tell them that it is a load of garbage and see what they say. It is interesting even today on the ABC 891 Ian Henschke program that the people ringing in were from Adelaide, Plympton Park and the foothills, outraged at the fact that they were privatising the forests. As long as the effort is put in, then people will make a decision on this as part of their deliberations at the next election.

I would appeal to the government to make its deliberations now based on not necessarily what is just in its interests over the next two years to get over the line in the second Saturday in March 2014—

The Hon. D.W. Ridgway: The third.

The Hon. R.L. BROKENSHIRE: The third Saturday in March 2014. I will be there on the second and the third Saturday, I am that keen for the election. The fact is that we need government that shows responsible management for the state's mid and long-term future as well as the shorter term. Clearly, the evidence shows that this government is not showing that responsibility. There are findings and recommendations in this report. There are 22 recommendations. The first recommendation is that the sale not proceed, and that is something that the overwhelming majority of members on the committee agreed to.

Members interjecting:

The Hon. R.L. BROKENSHIRE: Absolute majority. Two of the members wrote a dissenting report and, as I have already said, they are very good foot soldiers for the government. In fact, I would suggest that both of them should and probably will be promoted within the next year or so, because they are very good foot soldiers. However, deep in their hearts I am sure that they know that the government has made a very bad decision to privatise these forests, but of course they cannot speak out against the government, for the reasons that we know. I do not hold the honourable members who put in a dissenting report responsible in any way at all for the government's decision. I hold the government and particularly cabinet responsible, because the loyal foot soldiers were put on this committee simply to do a job for the government.

In conclusion, firstly, certainly no sale should proceed. Secondly, if a sale is to proceed—and, as I said, there are 22 recommendations—the majority of the committee believes that the Auditor-General should have a thorough look at this whole process, including not only the concept and decision to privatise but also the prudential management and the probity in the privatisation, and report to the parliament on that.

At the moment, apart from our committee, the only people really guiding the government on this are Treasury. I think it is fair and reasonable that one of the other recommendations in the report is that, if they do proceed—and I hope they do not—and it is sold, once it is sold the government shows the South Australian community, by tabling in the parliament in both houses, the valuation recommendation for the sale so that we can see exactly where the transparency is. The other key point is that if the sale does not proceed the government must back ForestrySA to expand its estate, as it was doing before the privatisation process began.

Whilst in the last few years, when the managed investment schemes were running rife, it was difficult to buy land to further expand silviculture, the fact of the matter is that now is a prime time to buy land and expand silviculture. If the government does not proceed with the sale, the majority of the committee and I would like to see it fast-track growth opportunities for the industry. The rest of them I will leave for members to have a look at.

Again, I want to thank all my colleagues on the committee. I want to thank the Legislative Council for allowing us to investigate. This is the most thorough and transparent work that has been done on this privatisation. I thank the staff and those who gave evidence. I want to say one more thing: I did personally push hard for an amount of the sale proceeds to be dedicated to the South-East. Unfortunately—

The Hon. R.I. Lucas: Lower or upper?

The Hon. R.L. BROKENSHIRE: The Lower South-East, primarily the Lower South-East.

The Hon. R.I. Lucas interjecting:

The Hon. R.L. BROKENSHIRE: There is a green triangle—

The Hon. R.I. Lucas interjecting:

The Hon. R.L. BROKENSHIRE: Well, the last person I would have thought who would oppose any support to the Lower South-East is the Hon. Rob Lucas, who was born and bred, obtained his knowledge opportunities to be in this house from living in—

The Hon. R.I. Lucas: That's untrue.

The Hon. R.L. BROKENSHIRE: You weren't born in Mount Gambier?

Members interjecting:

The Hon. R.L. BROKENSHIRE: Anyway, he was brought up in Mount Gambier and should have an absolute passion for Mount Gambier. I would have thought that the Hon. Rob Lucas would absolutely support a dedicated fund. However, as it is, the two major parties on this occasion did not support that. I will continue to argue that there should be a fund, as there is in the Riverland—look at the grant opportunities and expansion there—and that the same thing should be happening down in the South-East. By pulling 100 per cent of the money out of the South-East, it makes it very difficult for them to be able to bring in new businesses, new economic opportunities and infrastructure.

Having said all that, I commend the report to the house, and I trust that the wisdom of the Treasurer will prevail here and that he will go into cabinet after looking at this and say, 'We have broken a promise. This is not in the state's best interest. We will withdraw and retract this privatisation and look at growing forestry in the state with a positive and proactive plan for the future.'

The PRESIDENT: It's a repeat of the speech you made when they privatised ETSA, I reckon. The Hon. Mr Ridgway.

The Hon. D.W. RIDGWAY (Leader of the Opposition) (16:48): I rise on behalf of the opposition, and the Hon. Jing Lee has given me the opportunity to speak on behalf of the opposition. I will, firstly, give thanks to all the members of parliament involved: the Hon. Rob Brokenshire, the Hon. Ian Hunter (I looked on the record a moment ago and he was a member), the Hon. John Gazzola, the Hon. Gerry Kandelaars, the Hon. Paul Holloway, the Hon. Russell Wortley and, of course, the two people who stuck with it all the way, the chairperson, the Hon. Robert Brokenshire, and my colleague the Hon. Jing Lee.

The Hon. J.M.A. Lensink: Yes, you were committed.

The Hon. D.W. RIDGWAY: We were committed and dedicated to the South-East. I also thank the secretary, Mr Guy Dickson—thank you for your hard work—the research officer, Ms Margie Morrison, and also Hansard, as we had a lot of meetings, particularly in the South-East where we had a site visit, and they were there for that as well. I do appreciate the effort and support the staff put in and also the commitment from the government, albeit somewhat lacklustre and with a baton change every now and again; I thank them for their contribution.

I think it is important for members to realise where this all started. Back in late 2002, the Hon. Rory McEwen was made a minister by the Rann government. Premier Rann said that this was a wonderful thing to have—that this was his rural voice in cabinet; it was his rural conscience in cabinet.

The Hon. Rory McEwen had a number of portfolios, but one of them was agriculture, food and fisheries, and there was also forestry. The Hon. Rory McEwen gave evidence to the committee, and the exchanges were somewhat heated in that committee. He said at that particular time that he had never ever agreed to the sale of the forests but that he did agree to an investigation into the capitalisation of the forward revenue. What is the capitalisation of the forward revenue? It sounds like gobbledegook, which it was.

This morning, on South-East radio, I made some mention of this, and Mr Stansfield said, 'But I heard Mr McEwen give evidence to say that he did not agree to the sale; he just agreed to the investigation.' I put it to Mr Stansfield and the listeners and to you here today that Rory McEwen was the gatekeeper for the people of the South-East in relation to the forests, and he left the gate open. Once he let Treasury in and once he let in cabinet and the rest of the lunatics in this government who do not understand how important the forests are, the horse had bolted. We are now here today because of that. Not only was he Mike Rann's conscience in cabinet but he was also Mount Gambier's conscience in cabinet.

The Hon. R.I. Lucas: I reckon he was unconscious!

The Hon. D.W. RIDGWAY: Unconscious! So, in the end, we were faced with the situation where he gave consent as minister and it was put into the Mid-Year Budget Review that we would have an investigation into the capitalisation of the forward revenue. By March of the following year, 2009, the Hon. Rory McEwen said, 'I'm resigning from cabinet. It is time to step down and give the new blood, such as the Hon. Russell Wortley, Hon. Ian Hunter, the Hon. Gail Gago and others, or somebody else from the House of Assembly, a crack at being a minister.'

Interestingly it was the sixth year anniversary that he stepped down. I do not know what that really means, but it was six years from when he first became a minister. So, he was gone from cabinet when that final decision was made. So, not only did he as the gatekeeper leave the gate unlocked but he then shot through and did not care what happened to that gate.

We then were in the situation where the government had run the state almost into the ground financially. We heard Michael O'Brien, the minister for finance at the time, saying at the public meeting in Mount Gambier, 'Well, we have to borrow to pay the wages. If we were a normal business, the bank would have foreclosed on us. It would have taken away the chequebook.' This is the sort of mess that confronted the government. I pointed out also this morning on South-East radio that, during the decade in which we have had a Labor government, Rory McEwen was a minister for six of those years. So, Mount Gambier's local boy—their conscience and their gatekeeper—sat there while this budget spiralled out of control and then shot through.

So we had such a mess financially that the government of the day decided that it had to proceed with the forward sale, and that is where this select committee was born—that is, from that ridiculous decision, which the opposition has never supported. Of course, the Hon. Robert Brokenshire has not supported it and nor have members on the crossbenches. As a result, we were able to get the select committee established.

It is interesting to look at the value of the asset. There is some discussion in the media these days about its value being $600 million to $700 million. I did hear off the record that it may be worth as little as $400 million. For 100 years of community investment, $400 million—

The Hon. J.M. Gazzola interjecting:

The Hon. D.W. RIDGWAY: The Hon. John Gazzola scoffs at it. We are seeing figures between $400 million and $700 million. We heard evidence from Dr Jerry Leech, who said it could be worth up to $1.1 billion, $1.2 billion or even $1.4 billion. I will be very interested to see what the final price is.

It is interesting to look at some of the Premier's recent comments about how he would like to think that, at some point in the future, we may establish a future fund for South Australia. We may invest some of the wealth from the mining boom that sadly has not arrived. I am sure it will one day but it will not be in the form that the government has been spruiking about for the last decade.

Premier Weatherill wants to establish a future fund. Well, we already have one. We have a future fund and it is called South-East forests. We have, as a community, invested in those. In fact, my mother used to have SAPFOR shares. You could invest some money, they would plant an acre of pines and, 30 years later or as they thinned them, you would get a bit of a return. Mum had four or five acres of pine forests that she used to get little dribbles of money out of. It was something that the community actually invested their money in and now, of course, it is gone or about to go, yet the Premier is saying we should have a future fund. We have got one and he is sort of talking around in circles.

I know the Hon. Gerry Kandelaars, when he makes contributions on the poorly put together government dissenting statement, will say that the forestry profits are now down to $25 million a year and they have come back from $40 million. The Hon. Robert Brokenshire is accurate in saying that, on average, it has been about $40 million a year. The high dollar and a few things are affecting it at the moment but, at the end of the day, forestry is a long-term investment and whoever buys it will be buying it for 100 years. So, we are selling 100 years; you have to take a long-term view. The Treasury and the government today are taking a very short-term view. They have got themselves into a mess financially, they have committed to some things they cannot afford and, sadly, we will see the forests being sold probably to pay for Adelaide Oval—that is about the balance of it.

You have to remember that we have state debt predicted to be at $13 billion by the next election, which has already factored in the sale of the forests. So, we are still going to owe $13 billion and we have sold that asset. As I commented yesterday in my appropriation speech, both the forests and the lotteries will be gone by the next election and we will still owe $13 billion. If members opposite think that is a good situation to be in, they are dreaming and they should be ashamed of themselves.

I would like to quickly make mention of the site visit. I thought going down to the people in the South-East was an important thing to do. We had a number of them give evidence and we had some site visits to the local timber mills who are very concerned about the supply of logs. Most of them are small family businesses that have grown out of the privatisation of the sawmills because, in the early days, all that used to happen was that the big logs were sent to the mill and everything else was burnt and got rid of.

Once the mills were privatised, there was an opportunity for the smaller sawmill operators to operate. We saw Whiteheads and Forsters and others that have grown very successful businesses, if you like, using a second-tier supply of timber. McDonnell's are another that are quite concerned about their supply of logs—that is their number one concern. I remember having a discussion with one of the them who was roughly my age. He had a son who was doing an MBA. He wanted to come home to the family business, but he could not get a supply of logs. It would be more than about, I think, eight years, yet he needed to spend in excess of $5 million upgrading all of their equipment. He said, 'The bank will not lend me the money on an eight-year contract to supply logs.' The real concern with the sale of the forestry is: what does it do to those operators who have grown businesses through hard work and grabbed an opportunity? They are the ones that we saw would be at risk.

I am still not sure that they have any comfort but we did see, after some agitation, the government establish a roundtable. Industry representatives, community representatives, the local government and, I think, the CFMEU were involved on it, so it was seen to be a pretty broad group of people. They were, as the Treasurer said, asked to come up with the non-negotiables for the community, the issues that had to be taken into account before the sale could proceed and would put the community at rest.

It is interesting to look at how that was put together. The round table was asked to sign confidentiality agreements, so they could not talk to anybody. We had letters to that effect provided to the committee from Mr Trevor Smith which state:

...the Roundtable unanimously determined that the sub-committee report be endorsed and the agreed Conditions of Sale as drafted and presented at the meeting of 15th May, along with such other correspondence and documentation agreed to at the meeting, now proceed to be incorporated within the appropriate contractual documents.

He goes on to thank the round table for the opportunity to make a contribution and further states:

...we also acknowledge the Treasurers demonstrated commitment to ensure this process would be transparent and would accurately reflect agreed provisions being enshrined within the contractual obligations of a purchaser of the plantation resource.

I look forward to continuing to work closely with you to finalise the necessary outstanding requirements.

The government released an information memorandum to the market that has all those details in it. The round table claim all the information is on the Treasury website and I am sure the Hon. Gerry Kandelaars will say, 'It's all up there; it's all been agreed to,' and 'It's published; it's on the Treasury website.' I have a letter from Mr Brett Rowse, the Under Treasurer, to Mr Guy Dickson, the hardworking committee secretary, which states:

Further to your letter dated 24 May 2012, please accept this response to the question asked by the Hon. D.W. Ridgway...regarding costs incurred in the divestment of the harvesting rights [of ForestrySA].

As at 1 June [this year], the costs incurred...have been $4.049 million comprising salaries of officers [within Treasury] and...other consultants.

The most important point is:

With respect to your further direction to request a copy of the Information Memorandum provided to successful [expression of interest] applicants, I am advised that information within this document is commercially sensitive and release of it, could prejudice the State's ability to maximise the public benefit of the forward sale transaction.

As such, I am advised to resist production of the Information Memorandum as it is contrary to the public interest...

On the one hand you have the round table and the Treasurer's website saying, 'It's all there; it's all published. There's nothing to hide; this is what we've all agreed to,' and on the other hand you have a secret document going out to the market to say, 'These are the conditions under which we will sell the forests,' but they cannot release it to the committee or the public.

I accept that maybe some small part of the actual payment details regarding the transaction and flow of cash from the successful purchaser to government might be confidential, but surely the details of that information memorandum should be made public and, if they are not public, then you would have to ask yourself what is different between what is published on the Treasury website, the round table recommendations and that information memorandum. Mr Rowse, as late as 4 July—so only 13 days ago—says, 'I am not able to release it.'

I think all of us would be very suspicious about why they are not prepared to release that information. There has been supposedly a very open and transparent process, and I suspect that all the information from the round table that they have provided to Treasury has gone up on the website, but this is the final document and we may never see it. That is the one that I am worried about and some of the recommendations do reflect that. We will come to the recommendations shortly, but one of the recommendations is that we should have those conditions enshrined in the Forestry Act, so that parliament gets to decide on the sale.

The government can sell it but those conditions should be in there. We did it with ETSA and I have double-checked. The member scoffed at me last meeting, but I have just looked on Spark Infrastructure's site—which, of course, is the new name for ETSA—and it was a 200-year deal. It was not a 100-year deal. It was a 200-year deal, but it went through the parliament and I just put that on the record. It should go before the parliament for a 100-year deal.

I would now like to move on to the recommendations because I think they are important and, of course, the Hon. Rob Brokenshire has touched on a couple of them. I will not go through all of them, just the key ones that I think are important to me, and certainly the first one—that the sale should not proceed. It was clear that there was no community support for it. The majority of the committee, 60 per cent of the committee—

An honourable member: An overwhelming majority, three out of five.

The Hon. D.W. RIDGWAY: These people, they are students of politics and they think that a 60-40 win is not a smashing, Mr President. It is a smashing; it is a 60-40 split. The forestry sale should not proceed. And, of course, before making a decision to sell, the cabinet should be provided with an appropriate comparison between the sale price and the reserve price for a like for like basis. We do not know what information cabinet is going to get. We have a minister for forests who sits in this chamber who says, 'It's nothing to do with me: the Treasurer is handling it.' With all due respect, the minister did not even know what the rotation length was. When she was corrected by her own office, she still got it wrong, so that shows what little understanding she has. The third most senior person in the government cannot tell you what the rotation length of the forest is, even when she gets advice from her own office, so I am very concerned. The next recommendation I would like to highlight is:

5. Where appropriate the Treasurer must make publicly available the conditions that have been imposed within the contract and how they will be monitored and enforced.

Enforcement is an issue. Treasurer Snelling has been on radio saying there will be penalties if they do not comply. We do not know what they have to comply with and what the penalties will be. If the parliament had some say, we would actually be able to put in some conditions or trigger points if a future owner breached them. We are asking the future owner to return this asset like for like, so in three rotations' time we want to have the forest asset returned to same. That, I think, is a very important recommendation. Recommendation 8 is:

8. That the Auditor-General:

a. investigate and report to Parliament on the current forward sale process, with full disclosure:

i. from Treasury on the extent of its own Regional Impact Assessment (based on the ACIL Tasman report)

ii. of any full-cost benefit analysis conducted by or for Treasury; and

iii. of the forestry estate's harvesting rights' various valuations over time and during the sale process, proposed reserve price and ultimate sale price (if reached before the conclusion of the Auditor-General's investigation)

b. if the forward sale proceeds, have the authority to periodically review the operation of the community service obligations and other conditions of sale.

The community service obligation was certainly an issue raised a number of times by people giving evidence, and it was certainly referred to by the Hon. Robert Brokenshire. The next one is recommendation 10:

10. That the Treasurer considers how to ensure that ForestrySA has the capacity and flexibility to compete successfully for the next contract renewal including exploring the potential for ForestrySA to purchase land no longer in use or held for Managed Investment Schemes to strengthen the ForestrySA estate.

If the Premier is wanting to establish a future fund—and, of course, we know one of the bidders is, in part, the federal Future Fund, or potentially could be that fund—we want to see the opportunity for future state governments, if forestry is a good investment, to be able to compete and potentially purchase some land. We will have ForestrySA with forests at Kuitpo and in the Mid North, so we will still have some expertise and some people running those forests which, of course, after the sale are likely to be uncommercial and non-viable.

We would also see that, where possible, the conditions identified by the round table that should be placed on the forward sale be incorporated in the Forestry Act 1950. I think that is the key recommendation, for me. We accept the government of the day is going to sell the asset, but there should be some way of making sure that that person, that company, that superannuation fund, in 60, 70 or 80 years' time, is held to account by the parliament. That is why the ETSA sale went through the parliament, because it is an important sale. It is a massive asset. I hope if the sale goes ahead it is in excess of $500 million; it may not be. But we saw that as an important recommendation. Recommendation 15 is:

15. That the Treasurer guarantee that the current level of fire protection by ForestrySA is to be maintained going forward.

That is not in the South-East: it is the level of fire protection that is afforded to the people in the Hills, around Kuitpo, on the Fleurieu and in the Mid North, so it is not just about the South-East. I suspect the new owners certainly will have a level of fire protection—it is their asset and they will want to have it protected.

The final recommendation is No. 17, and I certainly supported this, that the government apologise forthwith to the former chair—

Members interjecting:

The Hon. D.W. RIDGWAY: They joke. He was treated poorly, treated appallingly and then basically sacked because he did not agree. They should apologise for the way that he was treated during the sale process. There are a number of other recommendations but they are the key ones, as I see it: that the sale should not go ahead; that we should have the Auditor-General involved; that we should make the information memorandum and conditions publicly available; and that we should enshrine those conditions into some sort of legislation.

It is not just the sale of a truck or a car, or a building that you might knock down and rebuild. This is the sale of three rotations. I am assuming that at the fourth rotation there is an opportunity for it to revert, but we do not know. That is the other issue that we were discussing only at yesterday's meeting: we do not know what happens at the end of the third rotation. Does it revert back to ForestrySA? Does the government have to buy it back?

The Hon. R.L. Brokenshire: There might not be a ForestrySA.

The Hon. D.W. RIDGWAY: Exactly. What happens in 100 years' time? Does the Future Fund try to buy it? It is really quite a bizarre sale and is different from most others. They are the four key points, I think, of the recommendations. Certainly the members of the committee unanimously, 60 per cent versus 40 per cent of the committee—

The Hon. G.A. Kandelaars: Unanimous? That's a new interpretation of it.

The Hon. D.W. RIDGWAY: I should say the majority, not unanimous; I am getting my words mixed up. Certainly it was the majority of the members of the committee. So, I commend the hard work of the committee and this final report to the chamber, and I hope that the Treasurer might actually read it—and that maybe the minister for forests, who sits in this place, might also actually read it and try to understand the industry she is custodian of.

The Hon. G.A. KANDELAARS (17:11): Well, what can I say? Everyone knows that this committee's outcome was predetermined. It is a joke to suggest otherwise. We have the Hon. Robert Brokenshire, our resident media junkie, going out in The Advertiser and suggesting that the government would be embarrassed by this report. Well, the government would bloody well know what we were doing in the first place!

I could have written this report long ago. I know full well that Mr Brokenshire and those opposite already had this outlined long ago, so what a joke this is. To suggest that this is an independent assessment is nonsense, absolute nonsense. To suggest that we should be embarrassed—come on! It was a predetermined outcome. I think Nick Harmsen of the ABC probably captures it fairly well:

This committee was dominated by Independents and the opposition. It's led by Family First's Robert Brokenshire, their MP. So it's no surprise that this committee has recommended against the sale of the forests, and it's also no surprise that the government members on the committee have issued a dissenting report; so they don't agree with what the committee itself is saying and it seems the government can and will likely ignore it.

That is probably a very good assessment of the situation; an honest one.

Now, let us have a look at some of the issues that the Hon. David Ridgway raised. He raised one interesting one; he was talking about coming back before parliament, but one of the recommendations that the opposition actually rejected would have forced an obligation that if there were any further sale of ForestrySA assets it would have to come back to this parliament. What did the opposition do? It rejected it. Why? What a joke. On the issue of privatisation, this is not a privatisation: it is the sale of forward rotations. It is not the sale of land; it is not the sale of water rights; it is not the sale of carbon rights—it is the forward sale of rotations.

Let us come back to where we originally came from. This whole issue arose out of the 2008-09 Mid-Year Budget Review at a time when the GFC was at its highest. The government announced a package of measures aimed at realising some of the value of the state's assets—for example, the forward rotation of the forests. One of these measures was an investigation into the options to sell the harvesting rights of ForestrySA. The Government Enterprises and Market Projects branch in the Department of Treasury and Finance was responsible for coordinating this investigation. This initiative was one of the debt reduction measures announced at the time to improve the state's financial outlook in response to the global financial crisis, I must say.

Prior to the decision being made the government commissioned an independent external economics consulting firm, ACIL Tasman, to report on ForestrySA and the South-East region. The report assessed the proposed divestment's impact on the economy of the South-East, the impact on mills in the area and the employment impact. It concluded that the sale was unlikely to have a significant economic, social or environmental impact on the South-East region. Consultations were undertaken with interested parties including local councils, the timber industry, and key union and Chamber of Commerce representatives.

A key finding of the report was that, irrespective of the ownership of ForestrySA, the forestry industry itself is experiencing economic pressures that are having an impact on the region. I do not think anybody should doubt that. That is essentially because of the historically high value of the Australian dollar, a downturn in the domestic building industry, and competition from imports—to name a few. On 3 May 2011, the Treasurer announced the government's decision to proceed with the sale of the three rotations of the forests in the South-East. The government has insisted the sale would be put in place to support the long-term viability of the timber industry.

The government then went on to establish the South-East Forestry Industry Roundtable, made up of South-East local leaders and union and industry representatives, to make recommendations to the government on the conditions of the forward sale before going to market. The government has engaged and maintained the support of the round table and it is confident that the recommendations for this sale process will ultimately benefit the South-East community. The government and the round table have worked together to ensure that they protect the long-term future of the timber industry and the interests of the local community.

The government has indicated numerous times that it will seek to do the best by the industry and the community and to ensure that it remains true to its word it has continued to engage the South-East through the sale process. The government has taken advice from the round table and also publicly released the recommendations of the round table, including all the correspondence between the round table and the Treasurer. These conditions of sale will be enforced. Through a lease with the South Australian government the new owner of the cutting rights will have the right to manage the forward rotations for commercial forestry purposes for up to three rotations.

As part of the proposed sale conditions will be put in place to support the long-term viability of the South Australian timber industry and to ensure that the forward rotations are managed in a sustainable manner. These conditions include ensuring any sale includes that the new purchaser agrees to target rotations consistent with the current and planned ForestrySA standards and ensuring that there is a commitment for the new purchaser to match ForestrySA's current level of planned viable domestic supply. In creating an obligation on the successful purchaser to report yearly to the government, this will ensure they are meeting the conditions of their purchase. Another condition is providing sawmill owners who have existing log supplies with the ForestrySA an option to extend their contracts for up to a further five years.

Other issues the round table raised included the issue of land, water and carbon rights. The state government has made clear that it will retain ownership of the Green Triangle's forestry land, water rights and any carbon rights, and there is a legal obligation to continue to use the plantation land in the South-East for forestry purposes only. If the purchaser breaches this obligation, then there are financial sanctions that will be applied and the government can take back the land.

The government has also given a commitment on the future of ForestrySA. All current ForestrySA staff will remain ForestrySA staff and public sector employees, and the property, plant and equipment currently owned by ForestrySA will remain with the state government and will be used by ForestrySA as the plantation manager, which, as I understand it, is for the first five years, with the possibility of an extension of five.

Forestry management accreditation will also be required. The successful purchaser must hold and maintain an internationally-recognised, third party, audited forestry management accreditation. The government has also agreed with the round table that the successful purchaser will maintain certain management and maintenance duties consistent with current forestry practice, such as risk management, fire management, plantation management certification, environmental obligations and general plantation management and native forest management.

On the issue of fire protection the government has stated it will ensure the current level of community fire protection remains. The successful purchaser will be required to fund specific fire management costs that will be borne by a private plantation estate in the region. The provision of additional fire services over and above private landowner obligations will continue. These will be funded by the government. Discussions and further investigations are being carried out by the government to determine the best avenue to provide the current level of fire protection in the future beyond five years.

The round table has undertaken its duties diligently and has worked with the South-East community to provide a comprehensive recommendation to the benefit of the forestry industry and the local community. The government has implemented the recommendations of the forestry round table in the sales transaction, and the round table has unanimously endorsed the agreed conditions of sale in its letter to the Assistant Crown Solicitor dated 18 May. I may go to that at this moment. It is a letter to Mr Chris Gray, Assistant Crown Solicitor from Trevor Smith, Chair of the South-East Forestry Industry Roundtable:

Consequently, I can advise that the Roundtable unanimously determined that the sub-committee report be endorsed and the agreed Conditions of Sale as drafted and presented at the meeting of 15th May, along with such other correspondence and documentation agreed to at the meeting, now proceed to be incorporated within the appropriate contractual documents.

I wish to take this opportunity to extend the Roundtable's appreciation of the manner in which you have progressed this matter and the regard you have given to the issues raised by the RT, we also acknowledge the Treasurer's demonstrated commitment to ensure this process would be transparent and would accurately reflect agreed provisions being enshrined within the contractual obligations of a purchaser of the plantation resource.

As I said earlier, the government has previously stated that the sale will only be approved if the sale price is equal or greater than the net present value of estimated future earnings generated by retaining the current forestry rotations in government hands.

I would like to put on the record some of the comments from local regional leaders of the South-East. This comment comes from The Border Watch, dated 19 April, headed, 'State leaders praised for showing regional interest'. The article is essentially about comments from the Mount Gambier mayor Steve Perryman. I understand he was the candidate for the Liberal Party at the last state election. He stated, in part, at a full council meeting in the week concerned:

...Mr Perryman said it was 'clear' Mr Snelling had listened to the roundtable and the community.

'I am satisfied the treasurer has a firm grip on the issues,' Mr Perryman said.

'It is clear that he has listened.'

Mr Perryman said he wanted to meet with Mr Snelling to seek clarification regarding the forward sale conditions.

'The treasurer was impressive in terms of his knowledge of the issues put forward by the roundtable and the stakeholders group,' he said.

The article goes on to say that, while explaining the details of the process, the blueprint that had yet to be revealed:

...Mr Perryman praised Mr Weatherill for taking an interest in the South East.

'I haven't seen the detail about the process, but it was good to see a premier taking interest in our region—I can't recall another premier doing that.'

Another article I would like to bring to your attention is from The Border Watch, dated 19 April, 'Forestry fight secures better deal for region'. The article is essentially a statement from the Mayor of Wattle Range, Peter Gandolfi. The article states:

Raising the issue in his mayoral communication, Mr Gandolfi said on the same day he met with Premier Jay Weatherill in Mount Gambier, Treasurer Jack Snelling released in Adelaide the agreed conditions of the forward sale.

'While still strongly opposed to the forward sale, the stakeholders have found the proposed conditions acceptable in principle,' Mr Gandolfi said.

As I said, a lot of the issues, in terms of the select committee, were pre-determined. Let us not kid ourselves. It was a political select committee with a set outcome. We always knew it was. We always knew what the outcome was. Let us not kid ourselves. Finally—

Members interjecting:

The PRESIDENT: Order! I think Lou and Bud have had their say.

The Hon. G.A. KANDELAARS: Why did you give them a go? Finally, I should recognise the membership of the committee for their effort: the Hon. Robert Brokenshire MLC, the Chair; the Hon. John Gazzola MLC from 8 November 2011; the Hon. Paul Holloway MLC until 13 September 2011; the Hon. Ian Hunter MLC from 29 July to 8 November 2011; the Hon. Jing Lee MLC; the Hon. David Ridgway MLC; and the Hon. Russell Wortley MLC until 29 July 2011. In particular, I should thank the secretariat, Guy Dickson and Maggie Morrison, for their great effort. I will conclude on that.

The Hon. R.L. BROKENSHIRE (17:31): I thank all honourable members for their input. I think it is unfortunate in listening to the debate that government members have had to take party lines rather than the state's best interests when it comes to this decision. At the end of the day, I just want to say—because I am summing up and the opposition cannot speak at this point in time—that I refute the outrageous allegation of the Hon. Gerry Kandelaars, a man whom I generally have enormous respect for. On this occasion I have to absolutely refute the suggestion that the committee did not have an open mind as to the pros and cons of the privatisation.

I had an open mind. I know the other members who voted to support the committee had an open mind and I know the other members on the committee had an open mind, but when the evidence is overwhelmingly against a sale, then clearly you have to listen to the evidence. That is what we have listened to and that is why the debate and the recommendations are as they have been tabled in the house yesterday and debated today. Again, I thank all members for their contribution and I encourage South Australians to have a very close look at the report and to ring the government members and request that they withdraw the decision to privatise.

Motion carried.

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