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Appendix 4.1.3



M.E. Chipeta
Senior Forestry Officer
Policy and Planning Division
FAO Forestry Department/


Over a decade ago, FAO launched the Forestry for Local Community Development programme to focus attention on the need for forestry to play a more effective role in rural development. The programme continues, now under the name Forests, Trees and People, to pursue this objective. In the context of this work, creating off-farm employment and income opportunities in rural areas through small-scale forest-based enterprises (FB-SSEs) was targeted early for study, with focus on developing countries. FAO's two main reports on this (Fisseha, 1985; FAO, 1987) stand as basic references that can serve as foundations for further work./

This early work revealed that small-scale enterprises are a major source of rural livelihoods in developing countries. Much of this employment and income may be of a semi-subsistence nature and poorly remunerative, but some enterprises are profitable and graduate into significant size. Even the semi-subsistence ones are important in that they reduce open unemployment and, even more important, are accessible to disadvantaged societal strata such as rural women and the landless, which other livelihood options elude. Work on non-wood forest products (NWFPs) development is one avenue for securing these benefits of small enterprises.

In this paper, an attempt is made to draw lessons from the work on FB-SSE for application to improving the chances of having successful NWFP activities. The paper adopts a common sense rather than analytical style and, although it makes no claim to newness of ideas, is an attempt to conveniently group in one place selected key factors influencing growth prospects. It needs to be said that a consensus has yet to emerge on the full range of key factors which can aid FB-SSE growth. The work on NWFPs will need to contribute to research in this direction.


NWFP Enterprises Dominate the Small-Scale Forest Enterprise Field

An early compilation of data already revealed dominance by NWFPs among forest-based enterprises: Fisseha (1987) estimated that manufacture of baskets, mats and hats accounted for between 27.3 percent of all manufacturing FB-SSEs (in Sierra Leone) and 70.4 percent (in Egypt), with high ratios also reported for Jamaica (63.5 percent) and Zambia (60.3 percent). If bamboo and cane processing are also added (separate figures were not available), these ratios would be higher still. In Niger, Fisseha (1990) reported five times as many NWFP-based as wood-based SSEs, with the ratio of employment being 3:1 in favour of NWFPs.

A more recent set of studies (Arnold et al., 1994) in six eastern and southern African countries/ gave the following distribution of forest-based SSEs: 42 percent based on grasses, cane and bamboos (i.e. NWFPs); 27 percent on woodworking; 20 percent on trading and transport of various forest products; and 11 percent others, such as charcoal production and sawmilling.

Attributes of FB-SSEs

The main characteristics of FB-SSEs are detailed in FAO (1985, 1987) and Arnold et al. (1994), with a convenient summary in Campbell (1991). In short, FB-SSEs are largely rural and dispersed in location, and are dominated by NWFP-based activities as well as by gathering and trading.

FB-SSEs are usually small (generally averaging between 1.8 and 3.8 workers, including the owner) with over 60 percent of them usually being one-person operations, i.e the owner is often also the only worker/. Among them, NWFP-based enterprises are particularly small and, as they tend to have the lowest entry barriers to new entrepreneurs, are generally the most numerous, like those based on trading. The work mentioned earlier showed that, apart from a few cases such as export-oriented processing of rattan, the greater part of NWFPs tend to be collected, traded or processed by small enterprises, even if in aggregate total production and associated employment may be huge. In other words, NWFPs are generally produced by the masses, rather than being mass-produced.

In many countries, enterprises based on NWFPs, such as grasses, leaves, canes and bamboos, are the smallest in size but are far more numerous than those based on wood; if food-type NWFPs such as fruit, honey, mushrooms or wildlife meat are added, the dominance by NWFPs within the FB-SSE category becomes even more marked.

The very small size means they lack resources to operate independently. Consequently, FB-SSEs are often closely associated with and even located in households. It goes without saying that being at the lower size scale, NWFP-based SSEs (like trading enterprises) dominate the household-based category, while the larger ones (many of them wood-based) are more likely to move into workshops.

Smallness is also associated with other features which may influence growth potential. Key among these is that FB-SSEs (again, especially NWFP-based ones) have low levels of technology, with little or no powered equipment being used. They have limited financial capacity and cannot afford to own raw material sources but, instead, tend to rely on common property sources. The owners, although often possessing some technical skills, rarely have managerial training, so that FB-SSEs are often managed on the basis of intuition rather than expertise.

The above paints a rather dismal picture: small, numerous, dispersed, financially weak, technologically primitive, managerially poorly served ? what chances do FB-SSEs have to succeed? Some of the relevant factors are reviewed in the following section, although with no attempt at exhaustive coverage.


Do they Succeed at All?

In spite of the characteristics just mentioned, SSEs in aggregate do grow. Small enterprises show remarkable resilience in that new ones come up even faster than others close so that there is often a net increase in employment and production. There is a permanent ferment of new enterprise births and deaths so that most jobs created are not from growth of existing operations but, rather from new, transient units.

In the case of eastern and southern African FB-SSEs, Arnold et al. (1994) reported this high turnover to be particularly true for enterprises based on grass, canes and bamboo, or on trading, for which 80 percent and 78 percent of jobs, respectively, came from new units. Such a state of instability can neither be considered a sign of dynamism nor of inherent sub-sector health or attractiveness. It cannot permit accumulation of either capital or skills nor can it facilitate retention of other developmental gains, even though there may be overall net increase in low-grade employment.

For the NWFP enterprises, the units almost never grew bigger. By contrast, for woodworking (with larger enterprises), 55 percent of employment growth came from enterprise expansion. Indeed, Arnold (1994b) reports that employment in the woodworking enterprises was growing ten times faster than for grass, cane and bamboo activities, with over half the growth being due to expansion rather than new start ups.

According to the International Labour Organization (ILO), little is known about mortality rates of rural enterprises and about conditions for their success and expansion or failure (in Chuta, 1987); many SSEs are thought to die within such a short time of start-up that they are not captured by statistics. Estimates suggest that 50 percent of new SSEs die within three years (Arnold et al., 1994) and 80 percent within five (FAO, 1987). Daniels and Fisseha (1992) reported for Botswana that for all SSEs, 16 percent died within a year of creation and 54 percent by the fifth year; by the fifteenth year, about 88 percent had closed.

Combining net new-enterprise formation with gains from expansion, national annual growth in employment was estimated at 7.8 percent in Botswana and in rural areas 6.7 percent; growth by urban woodworking was 81.2 percent, while in rural areas it was zero (Daniels and Fisseha, 1992). In Zimbabwe, the 1988-93 average growth for all SSEs in numbers of enterprises was 19 percent annually; rates were 20 percent for grasses, cane, bamboo products and 8.3 percent for wood processing (Arnold et al., 1994); mortality for all SSEs was estimated at 10 percent annually.

A few SSEs, particularly the larger ones, expand production and may graduate into the workshop-based size. Some even exhibit considerable longevity. In Jamaica, a 1992 study was able to trace processing enterprises surveyed 12 years earlier (Fisseha, 1994) and found 57 percent still in operation, with an average age of 20.3 years. However, craft works (mostly based on grasses/straws) showed the lowest longevity (only 44.4 percent surviving) with woodworks next lowest at 50 percent.

What can Make them Succeed or Grow?

A number of factors affect the prospects of success, some internal to the product, others from the policy, institutional and commercial environment and yet others from level of support.

Selecting the Right Product ? Is there Demand?

Central to success is selecting the right product. Does it have a market or can one be created? Issues related to demand and markets are treated in detail in the paper by Lintu. Aspects particularly relevant to small-scale enterprises follow.

Without adequate and profitable markets, there is no basis for enterprise. As stated by FAO (1987), "Only when market prospects are found satisfactory or capable of improvement would further assessment of the other criteria [of potential for continued growth] be useful". For this reason, it is important in pursuing NWFPs development, as for FB-SSEs in general, to first narrow down the products and activity types of interest to those already with a market or good prospects of having one. Products with limited current market and poor future prospects should be discarded before scarce resources are spent on their promotion. Products retained as having a future can then, for purposes of designing support programmes, be grouped into three categories:

Category 1: those which have large current markets (i.e. are consumed by a large segment of the population) even if the market may not have a long-term future/. Such products may permit good returns and viability for the time they are still in demand. Often, these products are subsequently easily displaced by mass-produced natural or artificial substitutes.

Category 2: products which may have a relatively small market now but have future relevance as the economy develops. Into this second category could fall certain non-utility basketware enterprises, which may, if tourism flourishes for example, gain a large future market. Essences or extracts for use in perfumes or modern medicines may also come under this category.

Category 3: products of a traditional character, which will remain marketable on a niche basis for ceremonial or other strong cultural reasons or to meet new demand (such as by tourists). Examples could be traditionally dyed forest fibre cloth or kola nuts.

Category 1 probably covers the largest number of NWFPs development opportunities. In broad terms, utility non-wood products of the "basket, mat, woven hat" type, which serve a very important purpose for poor people and farming communities, belong here. Some of them can be speedily abandoned as incomes rise or alternative income opportunities emerge. Certain traditional medicines could similarly fall under this category.

Arnold (1994a) has observed that "some of the most important saleable products face uncertain markets because of growing competition from industrial or synthetic alternatives or domesticated sources of materials." Some products of "extractivism" may eventually fall prey to this phenomenon and so could some traditional medicinal NWFPs. Rubber or palm oil went through the transition, having developed such large markets that artisanal supplies no longer sufficed.

Great success in SSE production attracts domestication of produce or industrial entrants into processing to supply the larger market so displacing artisanal producers/. Rattan is a candidate for rapid domestication and much of its processing is already on a scale beyond SSE level. Townson (1994) mentions eight studies which refer to falling demand due to substitution by synthetics; three referring to natural substitutes and a few others indicating loss of popularity with buyers.

Often, displacement is due to greater convenience, more assured availability, consistency in quality and lower prices for industrial goods against which equivalent utility FB-SSE products can compete only behind barriers created by poor transport/communications infrastructure, other locational advantages or deliberate policy preference for SSE products.

The competitiveness of FB-SSE products may also suffer when the depletion of their raw materials leads either to higher costs or poorer quality.

Is the Macro-Economic and Administrative Environment Favourable?

NWFP-based SSEs can be expected to respond to macro-economic or administrative influences, although at such a low scale do FB-SSEs operate that only limited attention has been given to their responsiveness to broader economic policy influences on them. To the extent that they may be in particularly remote locations and partly cushioned by subsistence household economies, many NWFP enterprises may not be abruptly affected by a policy change.

For larger SSEs, the influence of macroeconomic and administrative interventions may be clearer. For example, Fisseha (1992) revealed the possible strong importance of one macroeconomic factor for enterprise survival: 24 percent of the enterprises closed in 1991 alone and another 29 percent in 1992, in coincidence with major Jamaican currency devaluation. Contraction of markets was identified by entrepreneurs as one of the top three reasons for closure and may itself have originated from the devaluation.

It is unclear why devaluation, which makes imports more costly, did not have the reverse effect of favouring local SSE products. There is no information on the impacts of other policy changes associated with structural adjustment. Empirical research is needed to ascertain if they initially create need for informal SSE employment as the formal sector sheds jobs.

Administrative influences have been considered largely in the negative sense of perceived or suspected official bias against small enterprises. Thus it is claimed that there is a policy bias in favour of large industry, for example reflected in exchange rates that favour the use by large-scale industries of imported energy, equipment and skills, enabling them undercut SSEs. Wages and industrial labour safety regulations are made for the larger enterprises and are onerous for small ones. Infrastructure is designed to serve large industry and conditions for access to it (e.g getting connected to utilities grids) has been made difficult and costly. And barriers restrict FB-SSE access to finance, if only through high transaction costs relative to the volume of funding SSEs need.

These and other cries of "foul" are covered in detail elsewhere, including FAO (1987), which carries a general review of various aspects as applied to FB-SSEs, and Arnold (1994a), Arnold et al. (1994) analyzing particular aspects or geographical regions in greater detail.

In certain countries, positive discrimination is practised in favour of all SSEs or specific SSE types. India is an example of where certain sectors or commodities are reserved only for SSEs. In that country, certain supplies to government are to be sourced only from SSEs. Examples from the forest-products sector include: cane baskets; bamboo tool handles; brooms; natural oils of cashew shells, sandal wood, pine, and eucalyptus; turpentine; and wooden furniture and fixtures (Parameshwaran, 1987). Behind such barriers, FB-SSEs can grow and even prosper. However, in this day of free market economics, it is hard to see how this approach can be readily promoted.

What of Forest Raw Materials?

With time or increased demand, the survival or growth prospects of FB-SSEs may be threatened by depletion of, or reduced access to, forest resources; FB-SSEs are generally too small to own their resource. It goes without saying that deforestation would lead to raw material problems for FB-SSEs. Under conditions of shortage, smaller enterprises would tend to be threatened first unless favoured through raw material reservation schemes of the kind operating in India (Parameshwaran, 1987) or through forest concession practices, which enable small enterprises to benefit alongside large industries.

The greater part of FB-SSE raw materials come from private, common property or open access forests not controlled by the enterprise and therefore often insecure. In many cases, enterprises appear to be started with the expectation of using materials for which usufruct rights are granted only for subsistence use and for which commercial harvesting would therefore either require illegal use or securing a licence. Other aspects of access rights are more fully treated in Arnold (1994a). Townson (1994) refers to six studies which address the question of access restrictions due to tenure.

Many other studies refer to destructive harvesting by FB-SSEs of their raw material base. This phenomenon may have several origins: lack of commitment due to non-ownership of the resource; excessive numbers of informal enterprises competing for the resource, with each maximising harvest before it runs out; or inadequate provision in forestry development programmes (including government ones) for the particular raw materials needed by FB-SSEs. The latter is particularly the case for NWFPs, which rarely feature adequately in forest development or management plans. Accordingly FAO (1987) recommended that forests "need to be managed to realise more of the potential of the non-wood components of the forest."

Before embarking on an NWFPs programme, it must be ascertained where the raw materials and ancillary inputs will come from, at what cost, whether they are accessible, for how long, and who will ensure their sustainability.

The Entrepreneur is the Key

A study in Botswana showed approximately three-quarters of all SSEs to be household-based, with nearly two-thirds of the labour coming from family members, including the proprietor (Daniels and Fisseha, 1992). The particular dependence of SSEs on the owner is confirmed in the recent six-country Africa studies (Arnold et al., 1994) showing 67 percent of enterprises to be one-person operations. Results from Niger suggest that the dependence of entrepreneurs on their own and on family labour tends to increase as enterprise location became more rural (Fisseha, 1990).

The proprietor is the sole worker in two-thirds or more of cases, has little capital or technology, and no particular managerial training. The proprietor is thus the main "asset" of the enterprise whose productivity and efficiency is not enhanced by labour-saving technology or specialised skills and adequate funding, and whose weaknesses are worsened by lack of supportive aids. The smaller the SSE, the more critical the attributes of the entrepreneur become for success; the characteristics of the owner are often probably the "make or break" ingredient related to success of NWFP enterprises. In Jamaica, a study tracing SSEs after 12 years from the first survey (Fisseha, 1994) found that death or emigration of the entrepreneur was the second most common reason associated with closure of enterprises.

The growth potential of many otherwise sound enterprises can easily suffer from reliance on management by an owner who has only technical skills, no management exposure, depends on intuition and acts without benefit of information which management in large industry would have. Such is the degree to which the entrepreneur is stretched that, in particularly small units, even the capacity to receive assistance may be negligible. Joshi (1987), referring to the situation of micro-enterprises in India, felt that "poor people operate below what might be called an entrepreneurial threshold" and called for assistance to start by helping them to first reach that threshold. He therefore proposed a "foster-entrepreneur" scheme.

The likelihood is that the determinant factor for enterprise success or survival is human capabilities; a poor entrepreneur can fail even if supported by adequate technology and with access to a limitless market. According to Fisseha (1987), the calibre of small-scale manufacturing enterprise managerial quality is central both to the viability of an enterprise and to the success of external intervention efforts. As FAO stated in 1987 "Managerial weaknesses ... serve to worsen all the other problems since ... entrepreneurs often lack capacity to analyze situations and chart ways to minimise adverse impacts of problems." Furthermore, it appears that for small enterprises in developing countries, the optimum technical level of operation may be far higher than the available managerial talent can cope with (Chuta, 1987), i.e. they cannot cope with technically sophisticated enterprises.

Other Factors

SSE entrepreneurs often perceive shortage of financeand poor access to technology as key bottlenecks to enterprise success. Consequently, they call for more or better credit, largely for capital investment. The truth of the matter may well be that at the extremely small-scale level where many NWFP-based SSEs operate, the capacity to absorb either finance or technology is limited unless preparatory capacity upgrading is undertaken./ For enterprises at the lower end which have almost no capital investment, working capital can be critical and, for the household-type of forest-based enterprise, "it may represent the entire investment" (Brunton, 1987) and may in any case be just as important, if not more so, than investment capital (Fisseha, 1987).

With regard to technology, the almost exclusive reliance on human labour makes the smallest FB-SSEs unable to adapt quickly to changing tastes, designs or to upgrade production either in quantity (when market expands) or quality. Under manual production, attempts to cope with volume tend to destroy quality and brings SSEs into disrepute, accelerating loss of customers to manufactured substitutes.

Last but nevertheless quite important is the question of organisation. The profile of FB-SSEs given earlier indicated smallness, spatial dispersal and capacity weakness, all on a scale where individual support would be far from cost-effective to provide. Even with innovative approaches to providing assistance, success would require grouping of enterprises. NWFP enterprises being particularly small, the issue of organisation would be even more central for them and should feature in planning when first contemplating programmes.


Capacity to develop or succeed is a multi-faceted phenomenon. An enterprise can gain capacity to develop from: continuing relevance of its products to the market (i.e. strong demand); an enabling macro-economic and administrative environment; a favourable location; access to reliable and adequate technology, and to inputs (including raw materials, utilities, support services and finance); and human abilities.

NWFPs programmes need to resist the temptation to select products for focus largely or only on the basis of their having a market or adequate raw materials. Selection should involve also simultaneous consideration of the availability of suitable entrepreneurial resources. The question is, how does one find adequate entrepreneurs among those who have capacities only for enterprises of 1-3 workers? Yet if this is not done, there may not even be the capacity to benefit from supportive interventions.

Secondly, NWFPs programmes should be promoted where the beneficiaries have demonstrated ability to organise and cooperate or where there reasonable grounds to expect them to be able to. The other key factors influencing success would also be assessed.

Social objectives apart, one approach might be to focus on NWFPs that are of interest to larger-scale entrepreneurs, i.e. those able to operate enterprises of a workshop scale. They will be fewer and easier to reach; they will more easily qualify for formal sector services such as bank finance; they will probably have a higher absorption capacity for productivity-enhancing technology; and they may well be more adaptable as the economy develops. However, social objectives often have to be a primary consideration in selecting target activities. This will often mean including or even focusing instead on "micro" household-based enterprises as they have far higher total employment generation potential. In order to partly meet both the need for success and social objectives, approaches may include:

In promoting NWFPs development, it is necessary to look not at the product or commodity in isolation, but at a wide range of factors which would enable that product to be exploited, managed for sustainability, and marketed for profit. Most important, however, is to identify those entrepreneurs with the ability to manage the activities or quickly learn how to do so.


Arnold, J.E.M. 1994a. Non-farm employment in small-scale forest-based enterprises: policy and environmental issues. EPAT/MUCIA Working Paper No. 11. Madison, University of Wisconsin.

Arnold, J.E.M. 1994b. Socio-economic benefits and issues in non-wood forest products use. Paper for the Expert Consultation on Non-wood Forest Products, Yogyakarta, Indonesia, 17-27 January 1995.

Arnold, J.E.M., Liedholm, C., Mead, D., and Townson, I.M. 1994. Structure and growth of small enterprises in the forest sector in southern and eastern Africa. Oxford Forestry Institute Occasional Paper No. 47. Oxford, OFI.

Brunton, P. Desmond. 1987. Financing small-scale rural manufacturing enterprises. In Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Campbell, J.Y., ed. 1991. Case studies of forest-based small-scale enterprises in Asia: rattan, matchmaking and handicrafts. Community Forestry Case Study No. 4. Bangkok, FAO-RAPA.

Chuta, E. 1987. Growth and dynamism among rural small-scale enterprises: information gaps. In Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Daniels, L. and Fisseha, Y. 1992. Micro and small-scale enterprises in Botswana: results of a nationwide survey. GEMINI Technical Report No. 46.

FAO. 1987. Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Fisseha, Y. 1985. The contribution of small-scale forest-based processing enterprises to rural non-farm employment and income in selected developing countries. FAO Forestry Department Document No. FO:MISC/85/4. Rome, FAO.

Fisseha, Y. 1987. Basic features of rural small-scale forest-based processing enterprises in developing countries. In Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Fisseha, Y. 1990. Small-scale enterprises in Niger: Survey results from Dosso and Maradi Departments. Lansing, Michigan State University.

Fisseha, Y. 1994. Dynamic study of Jamaican micro and small-scale enterprises. GEMINI Technical Report No. 70. Lansing, Michigan State University.

Joshi, D. 1987. Shortages of forest raw materials and the development of small-scale enterprises in India. In Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Parameshwaran, K.P. 1987. Institutional support for small-scale rural processing enterprises: the case of India. In Small-scale forest-based processing enterprises. FAO Forestry Paper No. 79. Rome, FAO.

Townson, I.M. 1994. Forest products and household incomes: a review and annotated bibliography. Review draft. Oxford, OFI.

1/.  The author wishes to thank Messrs J.E.M Arnold of the Oxford Forestry Institute and Y. Fisseha of Michigan State University (both of whom were, like the author, closely involved in FAO's earlier work on small-scale forest-based enterprises), who have  provided newer material reflected in this paper. Any opinions expressed in this paper are not necessarily shared by these colleagues or by FAO.
2/. Since then, some excellent updates of the literature have been undertaken, including those by Arnold et al. (1994), Arnold (1994b), and an extensive bibliographical survey by Townson (1994).
3/. Botswana, Kenya, Lesotho, Malawi, Swaziland and Zimbabwe. The surveys were based on ISIC product classification codes within which wood products are better represented than those based on NWFPs.
4/. Enterprises of below five workers are often labelled as "micro" enterprises or "cottage" enterprises. Many tend to operate informally and their character is as diverse as the individual owners.
5/. The suggestion has sometimes been made that some products produced by FB-SSEs,  may, in economic terms, be "inferior goods", demand for which will fall as incomes  rise. This aspect should be ascertained before deciding on what NWFP to support. Arnold (1994b) identifies products such as mats and baskets, often made in one-person enterprises, as being "low-return" items quickly abandoned when wages rise or alternative opportunities emerge.
6/. Production by the masses with small quantities by every household can, in total,  yield as much as industry but cannot cope effectively with concentrated demand. Any NWFP which shows likelihood of becoming a mass-consumption commodity for concentrated markets (e.g. urban) may not for long remain in the SSE domain.
7/. It should nevertheless be recognised that what little finance or minimal tools/equipment they are able to handle may be vital for survival.
8/. Arnold, (1994a) has suggested that FB-SSEs are most likely to succeed where the product : is a staple with assured large domestic demand; requires certain skills or  inputs and processes capable of ready upgrading; and uses readily available raw materials or which can be easily grown and placed under entrepreneur household management.
9/. It is, after all, the human capacity that will permit correct identification of  opportunities, innovation, and organisation of for production and its adaptation to  markets; external assistance cannot substitute effectively for the owner in any of these.

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