1) A private-public partnership is being explored between Kilombero Valley Teak Company, a large forestry company, and villages in Tanzania to sustainably manage natural miombo forests.
2) The goals are to prevent conflicts, develop an inclusive management model, and ensure forests are managed according to standards while generating benefits for communities.
3) A feasibility study identified several business scenarios for villagers to profit from forest resources, with a publicly-owned company potentially managing forests and linking villages to markets providing higher prices than local options.
Finance strategies for adaptation. Presentation for CANCC
Private Public Partnership with KVTC in natural forestry management - Giuseppe Daconto (BTC Tanzania)
1. Private Public Partnership with
KVTC in natural forestry
management
BTC Agriculture Sector days, 19.11.2016
The United Republic Of Tanzania
Ministry of Natural Resources and Tourism
KILOMBERO AND LOWER RUFIJI
WETLANDS ECOSYSTEM MANAGEMENT
PROJECT (KILORWEMP)
3. The place
3
• Main agriculture development area in the country
• Established large sugar production (ILLOVU+
outgrowers)
• Booming rice production (local informal rainfed
farming + irrigation FDI/expansion)
• Government planning left behind by pace of
change
• Significant environmental impacts
• Devolution of forest, wildlife and fisheries
management
• Protected area management, land conflicts
and regional planning
• Institutional development of central,
regional district authorities and CBOs
KILORWEMP project: 7M euro,
EU-BEL co-funded (2nd project):
4. Miombo forests in lower Rufiji river
catchment
4
Ulanga Kilombero
N of
miombo
VFRs
22 13
Total area
(ha)
30,000 16,000
Range (ha) 400-7,000 80-7,000
5. 5
• Private foreign owned company
• Teak (Tectona grandis) plantation
production
• Saw mill and processing plant
• Largest teak exporter in Africa
• Accordance with the FSC
Principles and Criteria + IFC
Performance Standards.
• Owns also natural forest
(miombo)
• Has CSR scheme with
neighboring villages
6. PPP – KVTC purpose
6
Prevent potential conflicts with neighboring villages
Develop a more inclusive management model
Lower cost of conserving miombo forest on own
land
Ensure sustainable management of natural
woodland according to FSC principles
7. OPPORTUNITIES: PPP rationale
7
Devolution of forest management after 10-15 years
has not produced economic benefits to communities
Few village forestry business models in country; none
in the area; take time do build capacity
National market offers better prices than local market
and demand for miombo species can grow (needs
work in the market)
A few large VFRs in Ulanga
KVTC is major timber player
A local business actor could provide villagers with a
solid and sustainable capacity in forest management
and marketing
Establishing the actor as an enterprise, if successful,
can grow forestry business + leverage commercial
and public investments
8. PPP’s roadmap so far
8
Identification
• KVTC
approach
• KILORWEM
P forestry
work with
Districts
• National
Forestry
and
Beekeeping
Programe-2
(MNRT/Mo
F Finland)
MoU (I) Feasibility study
• Technical/
financial
appraisal
and
participatory
assessment
in 6 villages
• Stakeholder
workshops
Pilot
Development
• KILORWEM
P/ KVTC
Concept
paper
• Fund
raising
consultation
s
• Improveme
nt of
FMPs/VFRs
MoU (II)
Kick-
starting of
stage 1
Input to improved forest
inventory standard and
practice in VFRs
Capacity
building in
forestry
inventory
9. Feasibility: the business case
9
(200,000)
(100,000)
0
100,000
200,000
1 2 3 4 5 6 7 8 9 10
USD
Annual profit/loss over 10 years
Scenario 1 Scenario 2 Scenario 3
#1. Selling standing
trees for sawlogs
and charcoal
#2. Selling standing
trees for sawlogs
and charcoal for
trade in Dar es
Salaam
#3. Production of
sawn timber and
charcoal for trade in
Dar es Salaam
#4. Production of
sawn timber and
charcoal for local
markets
#5. Selling standing
trees for sawlogs
and producing
charcoal for local
markets
-
50,000
100,000
150,000
200,000
250,000
300,000
1 2 3 4 5 6 7 8 9 10
USD
Loss/profit Value retained in communities
Value retention by villagers - Scenario 3
10. PPP – what for?
10
Public goods purpose (for MNRT/ UDC/
villages)
Getting stream of benefits from timber off
KVTC land to neighboring villages
Developing institutional capacity for forestry
business:
Establishment of a professionally-run publicly-
owned forestry company
Able to serve KVTC natural woodland & village
forest reserves
Linked to national markets (higher prices than
local market)
The above two public good goals provide two options or possible phases:
- Collaborative forestry scheme
- PPP
13. PPP model – vision
13
FORESTRY
NEWCO
VFRs
ownership
$$$
service
support
Forest mgt and
sale services
14. PPP establishment: piloting phases
14
Stage 1 – Start-up
• KVTC establishes
own unit to manage
own miombo
• Establishment of
miombo operation
(forestry mgt and
sale)
• Development of
villages’ capacity
• Detailed feasibility
of legal &
Stage 2 - Bridge
• KVTC miombo land
in operation (own
management)
• Benefits flow to
villages
• Completion of
CBFM process for
VFRs (Kichangani)
• New Company
(NEWCO) legally
established
Stage 3 – Spin-off
• KVTC confers
miombo unit to
NEWCO
• NEWCO gets
management
agreement from
KVTC for KVTC’s
miombo
• KVTC pays fees to
NEWCO
• KVTC shares
15. Domains of capacity
development15
Technical and
commercial
forestry capacity
Organizational
capacity of new
entity
Governance
capacity building
of villages and
LGAs
Public Private Partnership
BTC management/partnership support role
BTC operational role
17. Implications for BTC (1):
- Strategy17
STRENGHTS
• Forest conditions in villages reserves
• Significant number of village reserves
• Good foundations established in
forestry planning and technical
standards improvement during
preparatory phase
WEAKNESSES
• Slow progress of service delivery
• Fragmented forest cover / small
average surfaces per village
• No economic benefits after 10+ys
• Very difficult to build commercial
capacities in villages
THREATS
• Elite capture
• Timber market distortion
• Pressure for land conversion
OPPORTUNITIES
• Major timber market player on site
• Timber market demand / development
• Acceptability of private sector
engagement to GoT/policy framework
• Strengthening governance
(accountability) of timber value chain
18. Implications for BTC (2):
– Risk mitigation
18
Reputational risk
Due diligence
Rigorous feasibility study
Safeguards in MoU
Stakeholder consultations
Effectiveness risk
Rigorous feasibility study
Co-financing
Broadening partnership
Long term perspective
Alterative strategy (no PPP = traditional service delivery):
risk frequently underestimated
19. Implications for BTC (3):
– Operations19
+ Flexibility-
pragmatism
+ Mgt. capacity to
build trust, shared
vision, alliances
+ Acknowledged
relevant technical
capacity
- Financial
instruments for
private sector
engagement /
enterprise
development
20. Recurrent questions
20
How to
engage lead
firm in value
chain
development?
Selection:
Type of firm
Existing role in value chain
Desired evolved role
Principles of
engagement
Lead firm’s own vision
Support to firm without distorting market
Linkages with producers
Sustainability
& impact
Market relationships
Exit strategies for support actions
Adequate time line
