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The business model of Form GhanaAfrican Forestry Investment ConferenceJune 13 & 14, 2017, Accra
Rik Sools
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Global view on forest plantations
• World timber market volume
• 1.5 billion m3 currently
• 2-8 billion m3 expected by 2050
• Plantations provide 33% of global timber supply,
1.3% of forest cover
• Currently 50 Million hectares industrial plantations
• Need for additional 250-300 million hectares by
2050 (WWF)
• Realistic expansion 40 Million hectares by 2050
(Indufor)
• 600-700 billion USD invested in timberlands,
mainly plantations
Indufor 2012
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Harvestable volumes in plantationforests and natural forest
• (Sub)tropical forest plantations: 200-700 m3/ha per rotation (7 to 30 years)
• Tropical natural forests: 5-30 m3/ha (Africa, Latin America), 20-60 m3/ha (SE-Asia) per rotation 25-30 years.
• Plantation forestry more intensive and efficient way of production
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So what’s the business case for forest plantations in the (sub)tropics?
• Reasonable return rates possible, 8-15%
• High tree growth rates• Low land and labour costs• Widely spread under-investment• Value-add of management• Human resources and technology
improvements possible
• Plantation timber demand increases
• Timber supply from natural forest declines
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Form Ghana Plantation Areas
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Business plan main features
• Expand with 4,000 new hectares to 12,000 hectares planted forest
• 90% teak, 10% indigenous & conservation
• Revenu from teak sales, carbon credits and services
• Long term land lease and benefit sharing with communities andForestry Commission
• FSC certification
• ESG according to AFDB E&S requirements
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ECONOMIC
• Teak 90% - indigenous 10%
• MAI – Main Annual Increment 14 m3/ha/yr
• Final harvest at 20 years, commercial thinning 8 and 12 years
• Total production 280 m3/ha
• First FSC certified timber sales from Ghana 2016
• VCU carbon credits• 2,000 VCU sold, 3 million in the pipeline
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SOCIAL
• Employment 1,000 staff: pension, social security, collective bargaining, skills development
• Benefit sharing 10-20% Standing tree value
• Intercropping : 90% of area, 1-2 years (400-500 farmers/year)
• Awareness raising in region
• Health & Safety
• Relationship chiefs & communities
• Outgrowing
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ENVIRONMENTAL
o At least 10% native vegetation
o Restocking native tee species (includingendangered species)
o Fire protection
o Soil restoration: halt erosion, organic matter, structure, moisture,
o Improve water quality and quantity
o Protection and flora and fauna
o Climate change mitigation: CO2 sequestration
o Microclimate
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Planted area teak per age class
• Total teak area: 6,670 hectares
• Total area indigenous: 820 hectares (11%)
53,1129,9
474,8605,2
813,2695,5
581,6
1.789,8
1.406,2
128.0
0,0
200,0
400,0
600,0
800,0
1.000,0
1.200,0
1.400,0
1.600,0
1.800,0
2.000,0
2001 2008 2009 2010 2011 2012 2013 2014 2015 2016
Pla
nted
are
a (h
a)
Planting year
Form Ghana plantations
Teak plantations
Indigenous planted
Planted buffer
Remnant forest
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Timber flow
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Vo
lum
e (m
3)Total harvested volume per quality class
A
B
C
D
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Cash flow
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032Am
ou
nts
US$
'000
)
Year
Cost and revenue development 2014-2035
Timber revenues nominal
Costs
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Landscape restoration project
• Build on PPP• Outgrowers timber• Climate smart agriculture• Collaborative fire
management• Restoration and
conservation• Inclusive finance• Smallholder organisation
• Start up grant money• Business models around
timber and agri-business
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• Stepwise approach: pilot, get established, expand
• Sound sustainable model – social and environmental (restore degraded land, social benefits)
• Selection species, soil, climate (bankability)
• Support local stakeholders
• Robust financial model with strong revenue driver(s)
• Strong investor(s) with long term commitment and blended finance
• High biological growth
• Management (track record, evidence, implementation capacity)
• Entrepreneurship (business case, financing, marketing)
• Enabling environment (PPP, land lease, benefit sharing, political and business climate)
Challenges
• Long investment period
• Young sector in Africa, high risk perception (few projects, uncertain exit strategy, small industry)
• Image plantations
• Access to finance: Unknown to investors, patient capital scarce, climate finance??
Success factors
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Contact & info
www.forminternational.nl
www.formghana.com