World Rainforest Movement

The corporate power of the pulp and paper industry

This month WRM is launching a new occasional section to the bulletin: “Pulp Inc”. The series will consist of profiles of companies involved in the pulp and paper industry.

In order to campaign effectively on the industry (and certainly before NGOs start talking about collaborating or cooperating with companies), we need to take a careful look at how the industry is structured and the nature of the companies involved in the industry: what they are and what they are not.

Corporations are becoming increasingly powerful. This is true of all corporations, not just those involved in producing pulp and paper. But the pulp and paper industry provides one example of how corporations are attempting to wield their power over governments.

In Uruguay, for example, the government is unable to order the Finnish Metsa Botnia to halt construction of its pulp mill in Fray Bentos, because of an agreement that the Uruguayan government signed with the government of Finland: “Agreement with the Government of Finland regarding the promotion and protection of investment”. In effect this is an agreement with Botnia. Under the terms of the agreement, Botnia is assured of the constant support of the Uruguayan government. The agreement even forces the government to pay compensation to Botnia for any losses, caused by, among other things, demonstrations.

“The most important conflict of the twenty-first century will be the battle between corporations and democracy,” writes George Monbiot in the foreword to a book about corporate influence in Europe. “As companies tighten their grip on national governments and international institutions, ordinary people will discover that, unless they are prepared to confront big business, their residual democratic rights will disappear.”

“The critical weapon in this battle will be information: those who know most will win,” says Monbiot. “Our power lies in our ability to expose the machinations of society’s corporate enemies, to embarrass the governments which have surrendered to them, and to use our knowledge to wage incisive, informed campaigns against both the companies themselves and, even more importantly, the institutional failures which have allowed them to hold sway.”

The aim of this series is to provide an insight into how pulp and paper corporations work and to help explain how and why these firms are always in conflict with local communities.

The series “Pulp Inc” starts off with a profile of Mondi. WRM would be pleased to receive contributions of profiles of other pulp and paper companies.

South Africa: Mondi and Environmental Racism

Mondi was founded during South Africa’s apartheid regime in 1967, by Anglo American, one of the world’s largest mining companies. Mondi now has operations in 46 countries. With sales in 2004 of US$6.9 billion Mondi is the thirteenth largest pulp and paper company in the world. The company is a wholly-owned subsidiary of UK-based Anglo American, although recently Anglo American announced that it plans to list Mondi on the London Stock Exchange before the end of 2007.

Mondi’s international expansion started in the early 1990s. Mondi has expanded through buying companies, mainly in Europe. By 2001, only about one-third of Mondi’s revenue was generated in South Africa. Over the last six years, Mondi has tripled its turnover.

After a corporate restructuring in late 2004, Mondi’s operations are run by two companies: Mondi Business Paper and Mondi Packaging.

Mondi Business Paper employs 17,000 people and incorporates Austrian paper company Neusiedler and Mondi South Africa. The company’s 16 paper machines have a total capacity of 2 million tons a year. Mondi Business Paper has pulp operations in Austria, Russia, Slovakia and South Africa and forestry operations in Russia, South Africa and Swaziland. The company manages about 400,000 hectares of plantations in South Africa and Swaziland.

Mondi Packaging employs about 16,000 people and has about 120 production plants in Europe and 18 in the Americas, Asia and Africa. The company is the result of a merger of Austrian industrial packaging group Frastschach (which was already wholly owned by Anglo American) and the existing Mondi Packaging group.

While generating profits for Mondi, the company’s expansion has often been bad news for workers. In 1996, Mondi bought shares in Swiecie, the largest pulp, paper and packaging mill in Poland. Under Mondi, annual production has increased from 450,000 tons a year to 737,000 tons a year, while profits increased from R25 million in 1996, to R65 million in 2002. Meanwhile employment fell from 3,300 to 1,500 people.

In South Africa, Mondi has contracted out a large part of its workforce. This has had serious implications for workers. “Incomes are insecure and inadequate, there are no financial safety nets in the form of health
insurance or pensions, and workers are exposed to risk of permanent injury that could further impair their ability to secure a livelihood in future,” note researchers Jeanette Clarke and Moenieba Isaacs in a recent report which documents problems for forestry workers. The report, which was carried out as a project with the International Institute for Environment and Development, concludes that forestry contracting jobs will not lift workers, who are mainly women, out of poverty or even prevent them falling further into poverty.

Mondi’s plantations in South Africa and Swaziland are certified by Forest Stewardship Council as well managed. In September 2000, WWF announced that “Mondi has committed itself to responsible forestry management, for example by improving the quality of biodiversity conservation throughout its enormous forest estate”. Mondi also funds a wetlands conservation project, called the Mondi Wetlands Project. The project is run by South Africa’s two largest conservation organisations, WWF South Africa and the Wildlife and Environment Society of South Africa.

In November 2005, South African NGO TimberWatch organised a meeting with local communities and NGOs in Mtubatuba, KwaZulu-Natal province. When asked whether there were any benefits to communities from plantations, none of the community representatives present could think of any benefits. “Since the plantations came, few people are employed. Farms have been destroyed. The impact from tree plantations has been very negative,” said one villager. “Plantations have caused starvation not benefits,” another villager added.

The villagers produced a list of problems caused by industrial tree plantations, including a reduction in the availability of water, a reduction in grazing and arable land, a reduction in natural forest, fruit trees and medicinal herbs, damaged soils and the fact that plantations provide a hiding place for criminals.

One woman explained that even people who have worked for 20 years for the plantation companies have not benefited. “They cannot show you good things and assets they have from their salaries, there is nothing,” she said. “We should do away with these plantations.”

Under South Africa’s racist apartheid regime, black people lost all their rights, including rights to land. “Timber plantations have forced thousands of people off the land in the past, and continue to do so in the present time,” explains Wally Menne of TimberWatch. Mondi expanded its plantations in the 1980s, buying up hundreds of farms to become one of South Africa’s largest land owners. The white farm-owners took the money and moved away. Black farm workers received nothing and lost what little they had.

Mondi’s paper mill at Merebank in South Durban is a classic example of environmental racism. During the apartheid regime, blacks and south Asians were forcibly relocated to South Durban to provide cheap labour for the oil, paper and chemical industries. Toxic chemical pollution from these industries means that South Durban is one of the worst examples of industrial pollution anywhere in the world. One in four South Durban residents suffers from asthma.

I visited South Durban in October 2005 and went of SDCEA’s “Toxic Tour”. The day I was there, the sky was blue and clear and a strong wind came from the sea, but Mondi’s paper mill still stank. According to the South Durban Community Environmental Alliance (SDCEA), Mondi is the third largest polluter in the area, behind two oil refineries. In 2003, Desmond D’Sa, SDCEA’s chairman, traveled to London to voice the community’s concerns at Anglo American’s AGM.

For several years, the local community has opposed Mondi’s plans to build an incinerator at its Merebank mill. Rajah Naidoo, the chair of the Merebank Resident’s Association told the South African Sunday Times that the incinerator would result in more pollution in the area and could increase the high incidence of asthma and cancer in south Durban.

During a tour of South Durban in 2003, Zodumo Mbuli, a spokeswoman for the Deputy environment minister, told the South African Press Association, “My nose is painful from inhaling the air here. I just can’t believe how people exist here like this. This is not normal air.”

By Chris Lang []. A version of this profile was first published in “Alternativer Waldschadenbericht”, by Urgewald, ARA, Forum Umwelt und Entwicklung, January 2006 (in German):