In early 2000 the South African Forestry Company (the major domestic source of logs) adopted a policy of import parity pricing which, along with the strengthening of the Rand, started the demise of the domestic furniture industry.
The increase in log price meant that the local sawmillers were, in effect, paying a premium of approximately 30% for raw materials. This forced the closure of a lot of sawmills as the sawwood export business dried up and it also initiated a lot of closures in the furniture industry as they could not cope with the rising raw material costs.
Because of the parity pricing policy sawmillers concentrated on the more profitable structural market and abandoned grading out sawnwood suitable for the furniture industry. The impact of this was that furniture manufacturers had to utilise mixed grade sawnwood from which recovery of material for furniture making dropped.
This added to costs and undermined competitiveness.
At the same time, the stronger Rand enabled retailers to epand imports of furniture. This situation continues to the present and the largest case goods plant in South Africa was forced to close last year.
During this period, South African company Steinhoff , the world's second-biggest furniture retailer after IKEA, moved most of their manufacturing out of South Africa but the local industry did not expand to fill the gap as imports boomed.
Analysts write “The sad result of this is that we (South Africa) have lost over 60% of the furniture manufacturing sector. The remaining factories are high end bespoke manufacturers using mainly American hardwoods.”