Private Public Partnership with KVTC in natural forestry management

BTC Agriculture Sector days, 19.11.2016

The United Republic Of TanzaniaMinistry of Natural Resources and Tourism

KILOMBERO AND LOWER RUFIJI WETLANDS ECOSYSTEM MANAGEMENT PROJECT (KILORWEMP)

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Outline

1. Context and actors2. Why? 3. What for ? How ?4. Lessons being learned

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The place• 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):

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Miombo forests in lower Rufiji river catchment

  Ulanga KilomberoN of miombo VFRs

22 13

Total area (ha)

30,000 16,000Range (ha)

400-7,000 80-7,000

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• 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

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PPP – KVTC purpose 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

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OPPORTUNITIES: PPP rationale 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

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PPP’s roadmap so far

Identification

• KVTC approach

• KILORWEMP forestry work with Districts

• National Forestry and Beekeeping Programe-2 (MNRT/MoF Finland)

MoU (I) Feasibility study

• Technical/ financial appraisal and participatory assessment in 6 villages

• Stakeholder workshops

Pilot Developmen

t

• KILORWEMP/ KVTC Concept paper

• Fund raising consultations

• Improvement 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

Feasibility: the business case9

1 2 3 4 5 6 7 8 9 10(200,000)

(100,000)

0

100,000

200,000 Annual profit/loss over 10 years

Scenario 1 Scenario 2 Scenario 3 Scenario 4

USD

#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

1 2 3 4 5 6 7 8 9 10 -

50,000

100,000

150,000

200,000

250,000

300,000

Loss/profit Value retained in communities

USD

Value retention by villagers - Scenario 3

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PPP – what for? 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

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Minimal model: collaborative forestry scheme

VillagesVillagesVillagesVillages

KVTC

• Shares profits• Buys labor• Develops basic

skills

• Support monitoring and compliance

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Possible evolution over timeIf & when this works as a

CFM on private land

VFRs

Can this be scaled up for CBFM?

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PPP model – vision

KVTC

FORESTRY NEWCO

VillagesVillagesVillagesVillages

District

VFRs

ownership

$$$

service

support

Forest mgt and sale services

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PPP establishment: piloting phases

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 & ownership options for publicly owned forestry company

• Transitional MoU

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

• MoU KVTC-NEWCO

• NEWCO business model developed

• NEWCO governance capacity developed

• NEWCO operational capacity 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 miombo profits with 6 villages

• NEWCO provides forestry services to VFRs (e.g., Kichangani)

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Domains of capacity development

Technical and commercial

forestry capacity

Organizational capacity of new entity

Governance capacity

building of villages and

LGAs

Public Private Partnership

BTC management/partnership support roleBTC operational role

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Lessons being learned for BTC

Strategy Risk mitigation Operations

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Implications for BTC (1):- Strategy

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

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Implications for BTC (2): – Risk mitigation

Reputational risk

Due diligenceRigorous feasibility

studySafeguards in MoU

Stakeholder consultations

Effectiveness riskRigorous feasibility

studyCo-financingBroadening partnershipLong term

perspective

Alterative strategy (no PPP = traditional service delivery):

risk frequently underestimated

Implications for BTC (3):– Operations

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+ Flexibility-pragmatism+ Mgt. capacity to build trust, shared vision, alliances+ Acknowledged relevant technical capacity

- Financial instruments for private sector engagement / enterprise developmentCa

n bu

ild o

nNeeds to

build

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Recurrent questionsHow to engage lead firm in value chain development?

Selection:Type of firm

Existing role in value chain

Desired evolved rolePrinciples of engagement

Lead firm’s own vision

Support to firm without distorting marketLinkages with producers

Sustainability & impact

Market relationships

Exit strategies for support actions

Adequate time line

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Testimonials

Pellage F. KauzeniNational Project Coordinator, Ministry of Natural Resources

and Tourism

Hans LemmCEO, Kilombero Valley Teak

Company