J.-L. Blanchez and Y.C. Dubé
Jean-Luis Blanchez is Forestry Officer (investment) and
Yves C Dubé is Forestry Officer (planning), Forest Planning and Statistics Branch, FAO Forestry Department.
This article is based on two FAO surveys (FAO, 1995 and 1996) and on the conclusions of two meetings on forestry funding, held in South Africa. It clears with levels, areas and sources of funding, concluding with a summary of proposals to boost forestry funding in Africa.
Nigeria reported one of the sharpest rises In recent overall forestry funding
Funding for forestry development is essential for the promotion of the "Forest Principles" and the implementation of the decisions taken by the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro. The lack of funds is often cited as one of the main causes of forest degradation and of the poor overall performance of the forestry sector but, despite this, very little has been done to mobilize adequate funding and to remove the constraints to sustainable forest development throughout the continent.
In conjunction with the Tenth Session of the African Forestry and Wildlife Commission, FAO conducted a survey (FAO, 1996) on forestry funding, covering all of Africa. The survey's aim was to determine the sources and amounts of private or public domestic and foreign funding allocated to forestry during the period 1990-1994 (see Table) and to define the main investment prospects and constraints. As only 29 countries replied and the data were supplied mainly by the forestry administrations, the survey's findings are, consequently, incomplete. For instance, the answers to the questionnaires may not have included private funding, as this is not the responsibility of those agencies. Nevertheless, an analysis of the replies gives sufficiently clear indications of current trends.
Sources and types of funding for forestry development
Types of funding
Public sector authorities, institutions, state-run companies, taxes, subsidies, sales
Official development assistance - multilateral and bilateral agency bans or grants
Individuals, cooperatives, NGOs, small and large enterprises
Direct or portfolio-based investments through international finance companies
Source: Chandrasekharan (1996).
Levels and sources of funding
About 70 percent of the reporting countries indicated increased overall forestry funding between 1990 and 1994. The sharpest rises recorded in Nigeria (+75 percent), Kenya (+60 percent), Madagascar (+40 percent), the Niger (+40 percent), Ethiopia (+30 percent) and Namibia (+30 percent) - are mainly the result of increased official development assistance (ODA). African countries often turn to external assistance to top up their domestic funding.
However, access to this type of funding varies from country to country. ODA fund distributions tend to concentrate on a few countries only, with many others receiving little or nothing. This inequitable distribution could reflect the fact that some countries have acquired the ability to prepare projects attractive to the development banks and some have special bilateral relations with donors.
In more than 60 percent of the respondent countries, the largest share of forestry funding in 1990-1994 originated from external sources. The Congo, Egypt, Ethiopia, Kenya. Morocco, Namibia and Togo were among the few countries reporting more domestic than external funding. Most often, the public sector was the source of the domestic funding. Only the Congo and Egypt reported a higher level of private than public financing. Most foreign funding also came from public sector sources, except in the Congo and Côte d'Ivoire, where such funding was derived from private sources.
Financing by subsector
Forest and wildlife conservation, including protection forestry and desertification control, is the main area currently receiving the major share of financing in 57 percent of the countries. Industrial development, including production forest management and industrial plantations, comes next in order of priority.
In 10 percent of the countries, funding is channelled mainly to community forestry (the Niger, Togo and Mali) or to forest industries and trade (the Congo and Zaire). Fifty-two percent reported channelling less than 10 percent of total annual forestry expenditure to institutional strengthening in 1993. On the other hand, Mozambique, Mali and Burundi spent 40, 30 and 26 percent, respectively, of all their forestry funding on that item.
Forestry investment: principal opportunities and constraints
The countries were asked to identify the principal forestry investment opportunities and the major constraints to domestic and foreign investments.
Forest industries as well as the use of and trade in forest products were listed by more than 68 percent of the countries as the most interesting areas for investment. Others were forest conservation, wildlife protection and forest plantation management. Only a small number of countries mentioned forestry on marginal lands, desertification control, dune fixation and non-wood forest products as having investment potential.
As regards the small increase in forestry investment in Africa, more than 80 percent of the reporting countries mentioned the shortage of capital owing to the weakness of the economic base.
Other constraints were a lack of expertise for project preparation and the establishment of investment priorities; government policies and institutional limitations; a lack of coordination among donors; and difficulties in carrying out funding agency directives. Some countries also mentioned the lack of an appropriate policy to attract foreign investors, the poor state of infrastructures, the small size of domestic markets and currency devaluation.
Industrial forestry was indicated by more than two-thirds of the countries as the most interesting area for investment
Private sector funding
The survey findings were not sufficiently reliable to allow accurate estimates of the level of private sector involvement in African forestry development, but such involvement is certainly significant. Small investors (private individuals in the towns or countryside, local firms, NGOs and cooperatives) are major, but discreet contributors to domestic financial resources and are a potentially valuable source of forestry funding. Some large forestry companies have recently shown a keen interest in forest establishment and management (eucalypt plantations in the Congo and sustainable natural forest management in Gabon and Cameroon). However, it is not easy to obtain accurate information on the scale of private sector participation.
Many development and funding agencies, such as multilateral and bilateral organizations, non-governmental, organizations (NGOs) and public or private institutions, provide backing for African forestry. A 1993 FAO survey examined the current state of and trends in international cooperation in forestry (FAO, 1995). Such a survey has been carried out every two years since 1987. Six countries (the United States, Germany, Japan, France, the United Kingdom and ad account account for 80 percent of ODA.
Bilateral aid remains the major source (70 percent) of external funding to forestry in Africa, with multilateral assistance accounting for the remainder. Funds in the form of loans, credits or grants are made available to governments for small or large projects and for emergencies. However, the projects put forward by recipient governments must not only be given top priority within their own national development policies and strategies, but they also have to meet the funding agencies' priorities (FAO, 1996).
The development banks
The development banks' role in defining forestry investment policy is significant, as these policies strongly influence the decisions taken by the other multilateral and bilateral agencies. The World Bank and the African Development Bank (AfDB) are the major lenders to the public sector for forestry development projects in Africa. These loans usually span 15 to 20 years, with a grace period of three to five years and a variable rate of interest currently about 7 percent. The poorest countries may obtain credits at particularly favourable conditions - 50 years maturity, a ten-year grace period and a rate of interest of 0.75 percent on unspent amounts. Each bank has a special operation for aid and loans to the private sector.
The World Bank defined its forestry policy in 1991, adopting a programme approach based on three principles: political and institutional reform, optimum soil management and sustainable forest management. The Bank does not fund commercial logging operations in primary tropical rain forests. By 1994, it had lent US$583.9 million to fund 24 forestry projects in 21 African countries (World Bank, 1994).
The AfDB's forestry policy, formulated in 1994, aims to tackle the problems of poor natural resource management and the causes of deforestation and environmental degradation in Africa. By the end of 1993, the AfDB had funded 14 forest and natural resource management projects in 13 African countries for a total of US$ 336.6 million. It allocated US$ 245 million to forestry for the period 19951997. Its annual investment for forest conservation and social forestry projects with a high community involvement is scheduled to rise from US$ 20.5 million to US$ 82 million (AfDB, 1995).
International funds, such as the International Fund for Agricultural Development (IFAD), also provide concessional loans and credits. The United Nations Development Programme (UNDP) and the European Union (EU), through the European Development Fund (EDF), provide nonrefundable financing for forestry development or institutional strengthening projects. The UN specialized technical agencies, especially FAO, have their own limited funds and use trust funds made available to them by donor countries and agencies.
The World Food Programme (WFP) contributes significantly to forestry investments, especially in food-deficit areas, supporting forestry activities by exchanging food for work. A portion of its aid may be monetized. Funding facilities, such as the Global Environmental Facility (GEF), managed jointly by UNDP, the World Bank and the United Nations Environment Programme (UNEP), have recently been established to help countries resolve the environmental challenges in their region.
Most bilateral funding operates either through direct agreements between the donor and recipient countries, or through technical institutions, such as FAO, or private organisms, including NGOs. The procedures and conditions governing bilateral aid can be changed rapidly, as they are based on annually negotiated cooperation agreements. All donor countries usually make environmental pro section a sine qua non for their assistance and participate willingly in the funding of forestry development programmes.
Foreign private investments
Foreign private investments are made either directly through specially established companies or through equity interests in forest product processing and marketing. International private sector involvement provides a good opportunity for technology transfer and for foreign currency inflows to Africa, which continues to benefit from traditional funding by long-established foreign forestry companies. Furthermore, the possibility of a world shortage of cellulose fibre is generating fresh interest in African forest resources. New investors (from Asia, for example) have emerged but are not forthcoming with regard to the scale of their investments and investment strategy, with the result that information on this area is scanty.
While the level of domestic and external funding for African forestry is clearly inadequate, this cannot be attributed to the shortage of financial resources per se. The multilateral funding agencies and donor institutions are dissuaded from allocating additional resources to forestry because most African countries' development plans attach low priority to the sector.
Many African governments have to address numerous requirements, some of which are urgent. They are more concerned with meeting their people's short-term food requirements than with the sustainable management of their natural resources. Owing to population growth and often inappropriate agricultural techniques and policies, their food shortage is serious. Moreover, many countries, debt situation dissuades them from borrowing for forestry programmes, where financial returns are not very attractive and benefits are realized only in the long term.
Africa is the developing region where a lack of institutional capacity has most impeded the establishment of sustainable forest development programmes. The implementation of structural adjustment programmes and rapid public sector reforms often tends to further weaken existing institutions. Land-use policies are, to say the least, often poorly designed and implemented. Alone, the forestry administrations cannot cope with all their responsibilities.
There are important contradictions between the development strategies adopted by the countries and the aid policies put forward by the funding agencies. For instance, the developing countries place industrial and commercial development at the top of their investment agenda, whereas the funding agencies attach top priority to forest conservation and protection. The recipient countries attribute the sector's problems to a lack of funds, but external aid agencies tend to emphasize the need for institutional and political reforms. The absence of dialogue between the African countries and the donor agencies on the African governments' development priorities diminishes the effectiveness of cooperation efforts, often marred by the terms dictated by the external agencies. Finally, a lack of coordination between the donor agencies leads to an inequitable distribution of already scarce financial resources, with critical areas such as training and extension often being left out altogether.
The proposals below stem directly from the main conclusions and recommendations made by the African representatives (see Box) at the seminar on funding for forestry development, held during the Tenth Session of the African Forestry and Wildlife Commission (November 1995, Sanbonani, South Africa).
At the country level
Clearly show that sustainable forest and natural resource development contributes effectively to national economic development. The resources available for long-term forestry development will be determined by countries' abilities to raise the necessary funds. Funding is therefore above all a matter for which Africa will have to find its own solutions. Governments will have to create suitable conditions to attract more funds to the sector and strengthen their political commitment and interest in forestry. To this end, foresters will have to show that forestry contributes to a country's economic development and strive to "sell" their sector to the politicians, ensuring that it is included in national development plans. Senegal's Ministry of Natural Resources managed to convince the government of forestry's value and, consequently, received significant amounts of external aid to develop the sector. Regional forestry development programmes could be a step in the right direction. The forest and food security project being carried out in Mali, Burkina Faso and Cape Verde (FAO/Italy), the training centre for forest industries in southern Africa (South African Development Community [SADC]) and in Zimbabwe (FAO/Italy), or the programme for the conservation and use of forest ecosystems (funded by the European Union) - covering five Central African countries are examples of this type of initiative.
A political and strategic forestry development base is a sine qua non for investment. Given available domestic funds and the sums that can reasonably be expected from external sources, development policies and strategies (particularly existing action plans) should be updated and made more realistic. A better selection of priorities should minimize project dispersal. Many countries now have a national forestry programme (13 are under way) or environmental action plans. Economic stability, land-use plans and a clear definition of people's rights to land and trees help to create an investment-friendly environment. For example, between 1990 and 1995, Côte d'Ivoire managed to mobilize more than US$ 100 million to fund a sectoral forestry programme to strengthen forest management, with contributions from the rural people and the private sector.
Funding forestry in Africa
Conclusions and recommendations of a seminar held in conjunction with the Tenth Session of the African Forestry and Wildlife Commission, Sanbonani, South Africa, 27 November to 1 December 1995.
The main conclusions and recommendations of the seminar on funding forestry in Africa were forwarded to the Commission.
Recognizing the importance of foreign, public and private funding sources, the Commission stressed the feet that funding was, above all, a problem for which Africa would have to find its own solutions. It felt that governments should create the conditions needed to attract more funds to the sector, hence the specific suggestions and recommendations below:
RECOMMENDATIONS FOR AFRICAN GOVERNMENTS
· Enhance the political commitment to and interest in forestry and, to this end, "market" forestry better to politicians.
· Review policies and strategies, including existing action plans, with a view to updating them and making them more realistic relative to the availability of domestic funding and what could reasonably be expected from external sources. (African governments were also encouraged to be selective in their priorities.)
· Improve the generation of resources for their own contribution to forestry funding, including through better commercialization of products from plantations and, where appropriate, privatization as well as more effective collection of revenue. (Some suggestions were also made for the creation of autonomous forest funds.)
· Actively promote their action plans, projects and programmes and seize all opportunities to attract private sector and external donor interest in them. To attract such complementary funding requires governments to demonstrate their commitment by first allocating their own public resources.
· Assure donors of their seriousness by improving management of the forestry sector, including accountability for funds.
RECOMMENDATIONS FOR DONOR AND MULTILATERAL FUNDING AGENCIES
· Consider converting or forgiving Africa's heavy debt burden so as to release resources for sustainable management of forests.
· Exercise flexibility in applying programmes of structural adjustment so as to ensure that already weak government forestry institutions are not further incapacitated by reforms of public sector institutions.
· Put into practice their own frequently expressed desire to coordinate their programmes and projects better.
· Show greater flexibility in applying their own priorities so as also to accommodate the priorities of beneficiary countries seeking their assistance.
RECOMMENDATIONS FOR FAO
While governments should take the prime responsibility for mobilizing funding from all possible sources, the Commission recommended that FAO, where appropriate in partnership with other international organizations, should:
· Assist countries in capacity building in matters related to the mobilization of funds and creation of conditions which enhance the attractiveness of forestry for funding.
· Keep member countries briefed on forestry priorities, policies and mechanisms of donors and multilateral funding agencies, for example by publishing information on this subject.
· Take advantage of its ongoing decentralization to assist African countries in mobilizing funding, preferably in cooperation with regional institutions such as the African Development Bank (AfDB).
· Seek to influence the opinion of key international decision-makers in the donor community in favour of forestry in Africa.
Increase domestic and external funding and ensure close coordination between the development programmes. The first step is to make better use of what is available. Forest resources should help fund forestry. The establishment of independent forestry funds (e.g. in Mali and Kenya), new ways and means of collecting revenue (e.g. through deforestation taxes) or the use of public funds are all possibilities worth looking into. In order to attract additional external funding, governments should allocate a larger share of their own resources to the forestry sector. Bringing forestry policy into line with macroeconomic development plans will ensure that projects in the various countries are better coordinated.
Enlist the participation of the private sector in industrial and commercial activities and in forest management. Small investors are particularly sensitive to land tenure issues, the regulations governing the use of forest and tree products, credit availability and extension and subsidies. Large investors, on the other hand, are attracted by political and economic stability. Appropriate policy reforms and incentives are needed to attract private investors to forest resource management and development. The extensive pine and eucalypt plantations in Zimbabwe, South Africa, the Congo, Morocco and, soon, in Mozambique, are the outcome of such reforms. Industrial forestry companies in Gabon, Cameroon and the Central African Republic are actively involved in sustainable management of the forests often allocated to them in close collaboration with international forest research centres such as CIRAD - Forêt (Montpellier, France) or Wageningen (the Netherlands).
Development of multiple-use plantations, such as those for fodder and wood production, was cited as Important by some countries
The development banks are willing to support community forestry and plantation establishment, but not logging In natural forests
The need for institutional strengthening and human resource development. A wide variety of institutions such as government agencies, private companies, local community organizations and research, and extension institutes will all have to be involved in forestry development. Institutional strengthening is a top priority and every effort should be made to attract private sector and donor interest to this activity, in which many projects are already involved. In Zambia and Mozambique, it is part and parcel of forestry planning exercises. In Tunisia, it is done through forestry development projects. Discipline and professional ethics in forest management are essential to win investors' confidence and to attract the new professional skills that the sector lacks.
Donors and multilateral funding agencies
Funding agencies should ensure better coordination of their investment programmes and cooperate with each other. A joint sectoral review could provide an opportunity to: coordinate the funding agencies, respective programmes, ensure a wider coverage of national investment priorities, exchange information and plan joint actions in an attempt to maximize their pact at rural, national and subregional levels. A special effort could also be made to increase the number of recipient countries, especially the poorest.
Funding agencies should encourage private sector investment. Special programmes should be designed to inform the private sector about investment opportunities and to establish appropriate support measures, such as special credit programmes, in order to increase private sector participation in forestry development. They could target small and medium-sized enterprises and individual rural entrepreneurs.
Funding agencies should show greater understanding and flexibility towards the African countries. Debt relief would release funds for sustainable forest management and give new impetus to investment in the sector. A better understanding of the current problems specific to Africa and much greater flexibility in implementing development priorities and policies would help to achieve the harmony needed to improve cooperation. Efforts should also be made to provide information on funding opportunities, terms and conditions. In its capacity: as a neutral technical institution, FAO has a determining role to play in-providing advice- and in accelerating the procedures for investment in African forestry development.
The funds for forestry development in Africa are limited, but they do exist. In order to benefit from them, the countries should attach a higher priority to forestry in their national economies. Henceforth, the private e sector will be seen as one of the public sector's key partners, but the rules governing that partnership will have to be set out. Over the next few years, ODA will continue to provide significant financial and technical support, the extent of which will depend on the effort put in by the countries concerned. Much remains to be done to make the most of current forestry investment strategies. In spite of appearances, Africa is already getting on with the job.
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Chandrasekharan, C. 1996. Status of financing for sustainable forestry management programs. Draft report prepared for UNDP Workshop on Financial Mechanisms and Sources of Finance for Sustainable Forestry, 47 June 1996, Pretoria, South Africa.
FAO. 1995. Review of official development assistance in the forestry sector in 1993. Information Note. TFAP, March 1995. Rome.
FAO. 1996. Report on the In-Session Seminar on Funding for Forestry Development in Africa. Tenth Session of the African Forestry and Wildlife Commission, Sanbonani, South Africa. Document FO:MISC/96/1. Rome.
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