Gabon logs its way to economic growth

Policy measures taken by successive governments to introduce sustainable forestry management and to develop the downstream timber industry are widely expected to offer long-term environmental and economic benefits. However, in the short term they have delivered a blow to the forestry industry, which is still feeling the effects, particularly the moratorium in place since 2010 on the export of raw materials.

“The industry was not prepared. Small and medium-sized international and local players were almost wiped out,” said Hassan Chahal, former director of project development at Green Forests Gabon, one of several players to exit the sector following the ban. Unemployment and the cost of raw materials were also affected said Chahal.

This view is supported by Alice Leroy, a project officer at the French Development Agency (Agence Française de Développement, AFD). “It is too early to say whether the export ban will be beneficial, though what we can say now is that almost all sector players are in the red. Only the larger geographically diversified players with big balance sheets and a diverse product range are surviving,” she explained.

The AFD has taken an active role in trying to revive the industry by addressing some of the fundamental financial and technical challenges facing small and medium-sized companies.

The group’s first project to assist small Gabonese forestry permit holders, which was launched in 2005 and ended in December 2014, had mixed results. The aim to create a critical mass by assisting holders of small forestry permits of 1-2 ha failed largely because of the difficulty in convincing smallholders to work together, explained Leroy, but worked better when they were invited to collaborate with larger concessionaires, culminating in the consolidation of some 1.7m ha.

Financing

A new project is planned to support the industry by improving dialogue with the authorities through regular roundtable discussions, and also by providing financial, technical and statistical assistance. The move aims to assist above all small and mid-sized local and international companies in securing project financing by accompanying them through the whole process from defining investments, preparing business plans and loan applications to bringing together the banks and investors. One of the most important features of the project will be a loan guarantee, known as Ariz, to be arranged by the AFD with four commercial banks, which guarantees up to 50% of the loan.

“Forestry companies have problems accessing financing for their projects, which often require significant investment, while banks do not feel confident lending to companies facing financial difficulties,” the AFD’s Leroy said. She added, “This mechanism will reduce the exposure of lending banks, create a climate of confidence and hopefully increase their willingness to lend.”

Lastly, the project will also advise companies on their industrial strategy, as well as assist with increasing the productivity and efficiency of their operations through gradual improvements to equipment or through human resource training.

Potential

More dynamic exploitation of Gabon’s forests in a sustainable management framework, combined with increased investment and optimisation of its processing industry, could see the industry’s contribution to GDP grow from a current 3% to 18% within 25 years, according to a 2014 study by France’s FRM Ingénierie on behalf of the Ministry of Forestry, Environment and the Protection of Natural Resources.

As of end-2013, 11.8m of the 14m ha under concession was being harvested, producing 1.6m cu metres of logs, and producing just 0.85m cu metres of processed wood. The very low yield of 0.14 cu metres per ha per annum was attributed to the limits imposed on sustainable production in tropical zones and the limited wood species that are recognised on international markets.

By increasing the surface area under harvest to 13.2m ha, log harvesting could be increased to 4.5m cu metres per year under a more dynamic sustainable development plan, and allow the volume of processed wood to almost triple to 2.3m cu metres. This would, however, require a significant improvement in production rates, and does not take into account the issue of competitiveness of local industry on an international scale, according to the study’s conclusions.

Competition

Gabon’s forestry industry is facing challenges in an increasingly competitive, oversupplied and regulated global market. The country must compete with neighbouring Cameroon and the Republic of the Congo, which share the same forests in the Congo Basin, on account of higher production costs due to higher wages and poorer transport links, let alone cheaper Asian woods. In addition, stricter regulations introduced by Europe and the US to tackle illegal logging have also reduced export possibilities.

In 2003 Europe introduced the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, and in March 2013 the EU Timber Regulation (EUTR). In 2008, the US amended the Lacey Act to prevent the import of illegally sourced wood products. To open up access to these markets again, Gabon applied in February 2014 to enter into a FLEGT Voluntary Partnership Agreement with the EU. At the time of writing, negotiations were still continuing. The move by France’s Rougier and Switzerland’s Precious Woods, meanwhile, to secure certification from the Forest Stewardship Council for their concessions appears to be bearing fruit. Rougier stated in its 2014 annual report that the entry of EUTR was favouring its certified wood.

Domestic Solutions

The AFD is in discussions with consultants to carry out a market study on Okoumé to evaluate new uses and markets but the future could lie nearer to home, according to Hans Fahrni, the president of Faco Construction, Gabon’s third-largest general contractor, and co-founder of Ecowood, a manufacturer of pre-fabricated wood buildings.

Local wood production could help meet the state’s need to build 400,000 new homes by 2025 as well as the continent’s growing demand for housing, he said. “We offer a solution for the state. Only 40% of Africa’s population live in adequate housing. Gabon could become the major supplier of pre-fabricated wood houses for the whole of Africa, creating in the process a competitive, export-oriented industry.”