community-based investment in commercial plantation forestry mike howard fractal forest africa water...
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Community-based investment in commercial plantation forestry
Mike Howard
Fractal Forest AFRICAWater & Forestry
Support [email protected]
Background South Africa – water scarce country Expansion of plantations limited Previous “homeland” states - Apartheid Land restitution – compensate past injustices Rural poverty focus + Equity How appropriate is commercial plantation
forestry?
Extraordinary Cost Elements of Community-Based New Afforestation
Community facilitation / mobilization – US$15 000 Land restitution “Capacity building”
Planning the Forest Enterprise – US$8 500 SFRA licensing – US$3 000 – US$12 000
Water Biodiversity Soil conservation Weed species
All fixed cost – not dependant on area (ha)
Cost of Silvicultural Operations Eucalyptus
Establishment – US$ 900/ha Coppice management – US$ 250/ha
Wattle (Acacia mearnsii) Establishment (plant) and Tending to Year 2 -
US$1000/ha
Annual overhead – US$ 120/ha/year
Typical Cash FlowTypical Eucalypt Plantation Cashflow
€ -3,000.0
€ -2,000.0
€ -1,000.0
€ 0.0
€ 1,000.0
€ 2,000.0
€ 3,000.0
€ 4,000.0
€ 5,000.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Years
Ca
sh
flo
w(E
uro
s)
Annual Overhead
Revenue
Expenditure
Land & Setup
Discounted Cash Flow (DCF) Measures
Compare return against alternate investments Internal Rate of Return - % IRR Equivalent Annual Income (Value per year)
Time value of money – compound interest Costs vs Benefits
Community Investment - Different Wages large part of cost Wages = intermediate revenue stream Wages = community benefit Efficiency of investment
Local source of revenue - rural Multiplier effect within community Minimize transport expenses
Community Investment Cash FlowCommunity Based Cash Flow - Wages ---> Revenue
€ -1,000
€ -500
€ 0
€ 500
€ 1,000
€ 1,500
€ 2,000
€ 2,500
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Year
Cas
h F
low
(E
uro
s)
Annual Overhead
Revenue
Expenditure
4 Case studies
Details of Case Studies
Case #
Case Afforestation Model AreaDistance to Market
Mean Annual Rainfall
Rotation Length
Yield at clear felling
ha km mm/yr yrs m3/ha tons/ha
1Cata
Community Development
Wattle rehabilitation for pulpwood
54 140 950 10 138 100
2Small-scale Outgrower
Eucalypt for pulpwood
2 50 1000 7 206 140
3Large-scale Community Development
Eucalypt for pulpwood
1100 200 1200 9 235 160
4Medium Scale
FarmerEucalypt for
pulpwood150 50 1000 8 235 160
3 Scenarios Scenario 1. – Traditional Approach Scenario 2. –Cash out flows associated with
wages are also considered as a revenue stream
Scenario 3. – Based on Scenario 2 (wages as revenue) but typical monetary support from Government, Donors and Companies
FindingsScenarios of each case
02468
101214161820
Wattlerehabilitation for
pulpwood
Eucalypt forpulpwood
Eucalypt forpulpwood
Eucalypt forpulpwood
1 Cata CommunityDevelopment
2 Small-scaleOutgrower
3 Large-scaleCommunity
Development
4 Medium ScaleFarmer
IRR
% R
etu
rn Scenario 1 IRR standard –wages as cost(%)
Scenario 2 IRR wages as cost & revenue(%)
Scenario 3 IRR wages as cost & revenue +Aid (%)
Conclusion Plantation forestry – Good Investment Small areas prejudiced by large set up costs Wages as revenue – positive Funding from Government, Donors &
Companies – Very important – Very lucrative Plantation forestry – Appropriate for Rural
Poverty Relief and Sustainable Development
