Two aspects of the implementation of forest revenue systems are most important and have been examined in this study. These are the processes used to set or fix the level of forest charges and the processes used to collect forest charges.
Processes used to set the level of forest charges
Countries in Africa use a number of different processes to determine the level of forest charges. Some countries set charges using market mechanisms or using calculations that are based on market information. These processes fall into three broad categories:
Market-based charges. A few countries use market mechanisms to determine forest charges. Market mechanisms include processes such as: auctions; sales by tender; and sales by negotiation. In many cases, these mechanisms are used for the sale of forest products from forest plantations. Countries using market-based charges include: Ethiopia; Zimbabwe; and Ghana. It is interesting to note that Ghana is considering using auctions to set some of the charges collected from forest concessions in the natural forest. Auctioning of forest concessions has also recently been introduced in Cameroon, although this development has attracted some criticism.
The main advantage of using market mechanisms to set forest charges is that they should, in theory, result in the highest possible price for the product. They should also reflect the conditions of each sale (e.g. quality of timber, accessibility, market conditions) without having to resort to complicated systems of charges that try to account for all of these variables. The main disadvantage of using market mechanisms is that they will only work where there is genuine competition in the market. If there is only a small number of buyers or buyers collude, they can act together to offer only low prices. Another challenge is that market mechanisms only tend to work well where the product being sold and the conditions of the sale are clearly identified and understood. This is why they tend to work well in forest plantations, but may be more difficult to use for selling products from the natural forest.
Charges based on residual value. Residual valuation or stumpage valuation is a method of estimating the value of standing trees, by subtracting all of the harvesting, extraction and processing costs from the value of forest products (i.e. roundwood or, in some cases, forest products such as sawnwood and wood-based panels). Many countries in the World base their forest charges on calculations of residual value and countries in Africa that have used this approach include: Ethiopia; Madagascar; and Uganda.
The advantage of the residual value approach is that it is also based on market information, but can be used in situations where it would be difficult to use market mechanisms completely. The disadvantages of the approach are that it requires a lot of information to calculate residual value, much of which has to come from producers (who may not be willing to co-operate). In addition, residual values should also vary with every sale, which can lead to very complicated schedules of charges if the forestry administration tries to accommodate every variation in circumstances in their charges.
Charges based on replacement cost. Another approach to setting forest charges is to try to calculate the cost of replacing the forest resources removed or damaged by producers. This approach is also based on market information (although, in this case, it is only information about costs rather than information about costs and prices). Countries that have used this approach include: Ethiopia; Kenya; and Malawi. Again, this approach has been mostly used to determine charges in forest plantations, where replacement costs can be calculated more easily.
The advantages and disadvantages of the replacement cost approach are more or less the same as for the residual value approach. It may, however, be a useful method to use for setting minimum prices in combination with market-based mechanisms (e.g. to set reserve prices in roundwood auctions).
The other main way that forest charges are determined in countries is what can be broadly described as "consultation". When setting forest charges, countries seem to consult at three different levels:
Consultation within the forestry administration. In a number of countries, forest charges are discussed at a technical level within the forestry administration before they are passed to Ministers for approval.
Interdepartmental consultation. In a few cases, broader consultation is carried-out within government as part of the process of setting forest charges. Some countries have specific committees or procedures for this process (e.g. Liberia).
Broader consultation. In many countries, forest charges are discussed at a broader level between the forestry administration and other stakeholders (e.g. staff of other ministries, the forest industry).
To a certain extent, all countries consult with others as part of the process of setting forest charges (including the countries using procedures based on market information or market mechanisms). However, in a number of cases, the consultation procedure is a major part of the process of setting forest charges and, where this is the case, this has been indicated in the analysis below.
The number of countries using each of the six different methods to determine forest charges is shown in Figure 10. Many countries use (or have used in the past) more than one method and, in these cases, all of the methods used in a country have been included in this figure. In addition, two countries (Burkina Faso and Lesotho) have not revised their forest charges for a very long time, so it was not possible to describe the processes used to set their forest charges.
Figure 10 The number of countries in Africa using each of the six different methods to determine forest charges
Figure 11 The different processes used in countries to set forest charges
As the figure shows, the most common process used to set forest charges is some form of consultation (and, in many countries, this is the only process used). Although it appears that the first three methodologies are also quite common, the number of countries using them is actually quite small because several countries have used more than one of these approaches (see Figure 11).
It is also important to note that many countries use market-based mechanisms (usually auctions and negotiated sales) to sell forest products that have been seized (e.g. where they have been produced illegally). These cases are not included in the figure above. To some extent, this is probably because such sales meet many of the conditions already described above (e.g. many buyers, clearly identified products). However, it is interesting that many countries are prepared to sell seized products in this way, but appear reluctant to consider using market-based forest charges more generally.
On the basis of the information collected from countries, there is some weak evidence to support the hypothesis that forestry administrations will be more successful at increasing forest charges if they use some sort of methodology based on market prices (i.e. one of the first three methodologies described above). This evidence is presented in Figure 12. For the 11 countries where the recent history of forest charges is available, this figure compares the average annual increase in forest charges (adjusted for inflation) with the methodologies used to determine forest charges. The bold line through these points represents the average increase for all of the countries using each methodology. As this figure shows, the average real increase in forest charges over the last 10 years appears to be higher in the countries using one or more of the first three methodologies than in the countries using consultation to determine forest charges.
Figure 12 A comparison of historical trends in real forest charges (1990 -1999) and the methodology used to determine forest charges
Processes used to collect forest charges and monitor charge collection
In general, the processes used to collect forest charges are, more or less, the same in most African countries. These are broadly summarised below:
Charges for roundwood from forest plantation. Most countries with significant forest plantation resources (e.g. Kenya, Lesotho, Malawi, Zimbabwe) have well-established and detailed procedures for collecting charges. These usually begin with forestry administration staff marking and measuring (or tariffing) the trees that will be cut. These staff then monitor the harvesting operations to verify that the correct trees have been cut and that the production records are correct. They may also put an official stamp on the roundwood produced after it is cut. Charges are usually paid on the basis of the volume of production or number of trees cut, with charges varying by species, tree size and/or quality. Charges are often collected in advance (i.e. after marking and measuring but before production), but may also be paid in stages as areas are cut. A number of countries mentioned weaknesses in this process, particularly where poorly paid staff are in charge of monitoring large volumes of production worth large amounts of money.
Area-based charges. A number of countries collect charges based on the area of forest concessions. These charges account for a significant share of total forest charge collection, particularly in countries with relatively well-developed forest concession arrangements (e.g. many countries in West Africa). These charges are sometimes collected once at the start of a licence period or, more often, they are collected every year. Area-based charges are nearly always collected at the start of the licence period or start of the year and are usually collected at the central level of the forestry administration. These charges are very difficult to evade and usually provide a relatively reliable source of revenue for the forestry administration, although a few countries did note problems with producers getting into arrears with their payments.
Volume-based charges for industrial roundwood production. All countries collect some sort of volume-based charges on the production of industrial roundwood. These charges are usually based on the volume of production but may, in some cases, be based on the number of trees cut. In contrast to the production of roundwood from forest plantations, most countries do not measure or estimate the volume of production before harvesting, but rely on the monitoring of production (either at the forest site or during the movement of roundwood) in order to estimate the total amount of charges that should be paid. Apart from this, the procedures followed are generally the same as described above for forest plantations. Producers record total production volume by species and/or grade and field staff from the forestry administration check these figures during site inspections or at roadblocks. Roundwood is usually marked with an official stamp to signify that production has been checked and verified. In some cases, producers mark the roundwood themselves with their own property hammer (and additional charges are collected on the registration of property hammers). Again, the main problems noted by countries were the lack of resources to effectively control and monitor production and the opportunities for fraud when field staff are poorly paid.
Charges on woodfuel and NWFP production. Most countries use one of two types of charges on woodfuel and NWFP production. Some countries use charges based on the volume or weight of production (particularly in the case of woodfuel or more valuable NWFPs such as rattan and bamboo). Others issue permits to produce these products from a certain area for a specified time period and collect flat-rate charges when they issue these permits. Because it is quite difficult to mark these products to indicate that charges have been paid, countries use a range of measures (e.g. coupons, movement licences and permits) to identify that charges have been paid. This paperwork must be presented if staff of the forestry administration carry out an inspection of production or checks at roadblocks or in the market. One of the most common problems with monitoring this production is the cost of collecting these charges and monitoring production compared to the amounts of revenue collected. Although the production of these products accounts for the majority of production in some countries, it is often simply not cost-effective to try to collect these charges on a large scale. Therefore, in many countries, much of this production is not recorded and the effectiveness of charge collection is generally low.
The text above has described the procedures used to collect charges and monitor production in the field in most countries. In addition to these procedures, most countries also have systems to record production and revenue collection at the central level of the administration and audit or inspect field offices to check for fraud and maladministration. In most cases, these systems are weak due to the lack of resources noted above. However, on a more positive note, some countries (particularly some of the Sahelian countries) indicated that they had developed innovative approaches to try to improve revenue collection and production monitoring. Two examples of such approaches are as follows:
Incentives for field staff. In a few countries, a proportion of the revenue collected from fines and the sales of illegal forest products are shared amongst the staff carrying-out monitoring activities and inspections.
Revenue collection with communities. Many of these countries also have mechanisms whereby local communities monitor production and collect revenues (or assist with revenue collection) on behalf of the forestry administration. The communities then benefit by being given a share of the revenue collected.
Little information is available about how successful these schemes are although, in a few cases, countries reported that these procedures have improved monitoring and resulted in an increase in total revenue collection. Certainly, given the lack of resources in many forestry administrations in Africa, it would seem likely that such developments should be an improvement over the current situation, particularly in cases where there are large numbers of small producers that the forestry administration can not possibly hope to cover.