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African forest plantations bring work and combat deforestation

07/03/2013

Finnfund is financing a company that plants forests in eastern and southern Africa, producing sustainably grown wood for local markets.

Green Resources AS (GRAS), a forest plantation company founded by Mads Asprem of Norway,Green Resources AS (GRAS) - African forest plantations bring work and combat deforestation has been establishing forest plantations in Tanzania, Uganda and Mozambique since the mid-1990s.

Asprem worked for many years as a forest products analyst. He says that the company’s business idea is produce plantation wood sustainably for local markets. In the longer run it aims to start exporting.

“Eastern and southern Africa are some of the best places in the world for forest cultivation. Local demand for wood is increasing. There is also strong export potential because coastal areas can connect easily with the growth markets of Asia.”

Few forest sector investors

Africa contains many areas suitable for plantation forests, Asprem points out. What has hindered the expansion of a forest economy is the unstable business environment as well as difficulties in securing finance.

The poor state of roads and other infrastructure also complicate operations. GRAS is one of the few international investors that have managed to create established and growing operations in the African forest sector.

“We lease areas from local communities on long-term contracts,” Asprem points out. “Negotiating the lease agreements takes a lot of time.”

Green Resources AS (GRAS) - African forest plantations bring work and combat deforestationThe company has been operating the longest in Tanzania. It manages nearly 34 000 hectares of land, of which 14,000 ha have been planted. In the southern highlands, at Sao Hill, it also owns a sawmill that was previously state-owned. It has been gradually modernised in recent years.

The mill saws pine and a little eucalyptus, most of which is currently procured from the national forest company and private sources. In future most of the wood will come from the company’s own plantation forests.

In the same production area it has a treatment plant for transmission poles and several charcoal kilns. It also makes value-added timber products. Goods sold on local markets are a significant source of income for GRAS.

Growing operations in Tanzania and Uganda

The company manages two forest areas in Uganda totalling 12 000 ha. About half of this has been planted. It is one of the most important players in its field in Uganda. The main product is transmission poles.

The increasing amount of charcoal that it produces from plantation forests in Uganda and Tanzania has an important environmental function. Charcoal is the main fuel used by local households and is otherwise easily obtained by destroying natural forests.

In Mozambique it manages two forest areas totalling 146 000 ha in Lurio and Niassa in the Northern part of the country, where it wants to increase the area of plantation forest over the years ahead.

“We are aiming to plant 4000-5000 ha of new forest in Mozambique and Tanzania every year,” Asprem says.

Another objective is to improve the quality of forest plantations and increase the yield per hectare. At the same time GRAS needs to ensure that its operating models are cost-effective.

Plantation forests prevent deforestation

Establishing forest plantations is important for protecting Africa’s dwindling natural forestland. Forests are being felled for firewood and building materials, and cleared to produce agricultural land.

Deforestation cannot be halted merely by protecting natural forests. If the collection of wood is forbidden in certain areas, it will probably increase elsewhere. Plantation forests reduce these pressures by offering an alternative wood source.

The areas managed by GRAS contain natural forestland as well as plantations. The natural Green Resources AS (GRAS) - African forest plantations bring work and combat deforestationforests are supervised to prevent illegal felling and fires.

In Mozambique, Tanzanian and Uganda GRAS has been certified by the international Forest Stewardship Council, which establishes that the wood has been grown sustainably, covering ¾ of the plantation. It plans to seek FSC certification for the remaining areas, too.

In matters of environmental and social responsibility it observes internationally agreed rules of play: guidelines from the International Finance Corporation IFC, part of the World Bank group, and the UN’s International Labour Organisation.

Good relations with local communities

The company’s strategy is to train the local population and transfer of forest cultivation skills to employees and thereby to local communities.

Forest planting and management bring work and income to inhabitants of rural areas. Asprem calculates that, in the three countries where it operates, GRAS employees total about 4000. If indirect jobs and the families of employees are taken into account, it can be said that GRAS provides a large part of the livelihood of several tens of thousands of people.

“In the long run it’s important to transfer skills to local workers but it’s challenging to create a functional working community in remote districts. We are often the only company operating in the area.”

Maintaining good relations with local communities is vital, he adds. GRAS participates in improving the infrastructure in the areas where it operates. It not only improves roads but also supports local communities by modernising schools and health centre buildings and repairing wells.

Financial backing from Finnfund

The Norwegian development finance institution Norfund and the IFC have been two of the sources of finance for GRAS. Finnfund has provided an investment loan.

Finnfund associate director Hanna Skelly points out that GRAS is operating in a business that Finnfund knows well and in countries that play an important role in Finnish development policies.

“GRAS can’t obtain the finance it needs from purely commercial sources only. At this point in the project, participation by Finnfund and other development finance institutions will get the company through its growth phase and into normal business operations.”


For more information please contact Ms Hanna Skelly tel. +358 400 942 640, firstname.lastname@finnfund.fi