Previous PageTable Of ContentsNext Page

Company-community forestry partnerships:a growing phenomenon

J. Mayers

James Mayers is Director of the Forestry and Land Use Programme of the International Institute for Environment and Development (IIED), London, United Kingdom.

Out-grower schemes, joint ventures and other formal and informal partnership arrangements in relation to trees outside forests.

Changes taking place in policy, markets and civil society are generating increasing interest in the prospects for private-sector partnerships with communities or individuals (included here in the definition of community) for production of forest goods and services. At the same time, in many countries around the world, forests in large blocks are decreasing and forest farms are consequently growing in importance, so an increasing number of forestry partnerships pertain to goods and services produced outside the forest.

Two major trends are influencing and drawing attention to the collaboration of private companies and communities: political pressures for local control; and globalization of markets, capital flows and technology (Mayers and Bass, 1999). On the one hand, increasing attention is being put on forestry as a tool for local empowerment, whereby previously disadvantaged communities and individuals benefit from taking effective control and responsibility for decision-making regarding their forest assets. On the other hand, this is often occurring in contexts where, through privatization processes and growing use of market-based policy instruments, private-sector control of forest resources and land is increasing. With increased pressure on local land, relationships between the private sector and local actors are becoming more common, but they are not always beneficial for both parties. What are the requisites for establishing mutually beneficial partnerships?

This article examines the relatively new, but growing, range of company-community relationships - out-grower schemes, joint ventures, other contracts and informal arrangements - and discusses their advantages and disadvantages in relation to trees outside forests. Some emerging lessons are identified on the potential of partnerships to deliver security of forest goods and services and the conditions under which good partnerships develop.

Motives and opportunities for partnerships

The terms "company", "community" and "partnership" have a range of meanings, and various influences drive companies and local people to seek productive relationships with one another. The box on below summarizes some of these.

Company-community partnerships - some working definitions

- "Companies" are enterprises organized for making profit, ranging from large-scale corporations to small-scale private enterprises.
- "Communities" include farmers and local individuals as well as community-level units of social organization such as farmers' groups, product user groups and cooperatives.
- "Partnerships" refer to the range of relationships established by the above parties on the expectation of benefit. Partnerships may be formal or informal arrangements and may involve third parties in a variety of roles.

Companies, from powerful multinationals to small community enterprises, are all motivated by profit to some degree, and especially by the need for a secure operating environment. Some (though certainly not all) companies are also motivated by concern for the environment and desire to make positive contributions to local and national development. Some are strongly influenced (even if initially not at their own will) by environmental non-governmental organizations (NGOs) and by discriminating purchasing policies of buyers seeking products from well-managed forests.

Market and regulatory pressures are key incentives, while all companies are likely to want to keep the costs of landholding and labour down simply for reasons of good business (Higman et al., 1999).

People at the local level often have considerable tree-management capacity because of their physical proximity to the trees, traditional or legal rights, indigenous knowledge and systems affecting land and trees, economic and cultural dependence on forest goods and services and sometimes well-developed mechanisms for resolving conflict (Colfer et al., 1999). However, communities as such are rarely suitable units of social organization for tree management. Communities usually include many individuals and subgroups with widely different interests, rights, claims and aspirations for forest goods and services. For example, wealthier farmers may want to plant large numbers of one or two commercial tree species as a crop, while poorer farmers may want to plant various trees for diversification of products available to households (Shepherd, 1999). Before entering into partnerships, local actors may need to consider important trade-offs. For example, farmers considering involvement in schemes based on farm forestry must weigh the potential gain in wood, shade and shelter against the possible loss in agricultural production.

The Western India Match Company's scheme for growing poplars - which provided loans to farmers, replacement of saplings that died in the first two years and information to farmers on irrigation, pruning and rotation - failed in its original intentions but contributed to major growth in farm forestry


Types of company-community partnership

The Table gives a typology of some partnerships, including some of the informal and formal arrangements, as well as some types of partnership whose potential has not yet been fulfilled. This is only one of many possible typologies. It should be noted that individuals or companies may fall in more than one category, and that each of these notional types is likely to change through time. New forms of arrangement are emerging all the time - some of them highly informal.

The attraction of company-community forestry partnerships

Influences that draw companies to partnerships

- Decreased public tolerance of irresponsible corporate behaviour
- Social and environmental concerns raised by discriminating markets
- Unavailability or high cost of other wood sources and land
- Potential to reduce costs and financial risks of landholding and fibre growing
- Potential to increase resource security through diversity of sources of supply
- Potential to reduce labour and management costs
- Opportunity to avoid social risk - such as tenurial and land-use conflict - and maintain good neighbourly relations

Influences that draw farmers, forest product users and local groups to partnerships

- Potential for higher net returns from land and labour, in terms of income or capital accumulation, than alternatives would provide
- Chance to obtain reliable cash flow, in terms of regular income and/or reduced market risk through ensured sales
- Opportunity to benefit from idle or underused areas of land without jeopardizing food production
- Secure land tenure and tree rights
- Availability of technical and financial support, e.g. while trees mature
- Clear means of participation with the partner company

The main formalized partnership arrangements are contractual out-grower schemes and joint ventures - legal contracts between two or more parties combining land, capital, management and market opportunities, formed with the intent to produce a commercial forest crop. There is wide variation in the nature of the relationship. For example, in some out-grower schemes the company pays the market price on delivery and exercises little control over production, while at the other extreme are schemes in which prices are fixed and the company exercises constant and rigorous control over all aspects of production.

The international pulp and paper companies Sappi and Mondi have been establishing out-grower schemes with farmers in South Africa since the early 1980s.

In out-grower schemes in South Africa, farmers grow trees on their own land under purchasing agreements with pulp and paper companies

- J. MAYERS/SA99.1

In these schemes the company provides marketing and production services to farmers to grow trees on their own land under purchasing agreements laid out in a contract. Although they started as corporate social responsibility exercises, out-grower schemes are good business for Sappi and Mondi, even though the fibre produced costs them more than the average mill transfer price. Company managers may find the schemes attractive because there is no need to invest in developing the company's own forest assets, and the costs are dealt with in the profit and loss account rather than on the balance sheet, where forest assets can all too easily become expensive liabilities.

Today Sappi's outgrown timber is sourced from an area of some 88 000 ha in Kwazulu-Natal which includes 11 000 ha owned by 8 000 black smallholders and the holdings of about 260 white farmers with 50 ha or more each. Farmers sign a contract with Sappi which entitles them to free expertise, silvicultural training and seedlings, advance payment for work and a guaranteed market for their trees at current market prices. When the trees are ready for harvest, Sappi pays the out-growers the market value of the produce, less any advance payments. Out-growers earn about US$205 per hectare per year, which compares favourably with alternatives such as livestock grazing or sugar production.




Individual landowners tree growers

Individual tree users

Group of landowners tree growers

Group of tree users

Large forest product buyer, processor and/or planter


Joint ventures

Land rental for tree growing

Product supply contracts


Joint ventures


Product supply contracts


Large forestry concession or plantation owner

Access and compensation agreements

Contracts for timber or non-wood forest product use or supply

Local development agreements

Timber utilization contracts

Intercropping or grazing schemes


Large landowning and/or forest service-related company

Joint ventures

Ecotourism enterprises

Payments for environmental servicesaa

Shared use agreements

Contracts for tree growing

Bioprospecting dealsa

Joint ventures

Ecotourism enterprises

Payments for environmental servicesa

Shared use agreements

Contracts for tree growing

Bioprospecting dealsa

Small locally based processor or community enterprise

Credit or product supply agreements

Shared equity

Product supply agreements

Credit or product supply agreements

Shared equity

Product supply agreements

aType of partnership with considerable but as yet unfulfilled potential.

In Australia, three different types of joint venture arrangement have contributed to the planting of some 82 900 ha, or 8 percent of the country's plantation estate, since the mid-1980s (Curtis and Race, 1998).

There are indications that the range, scale of operation and types of partnership between companies and communities are increasing. For example, in an International Institute for Environment and Development (IIED) global survey of forestry companies producing wood pulp, 60 percent of the responding companies reported that they source some of their produce from out-growers or are otherwise involved in extension of tree-growing packages to farmers (IIED, 1996).

A more recent global review of private-sector involvement in forestry (Landell-Mills and Ford, 1999) revealed at least one example of a company-community initiative over the past decade in 57 percent of the 76 countries covered.

Other stakeholders

It is often of limited value to think of company-community partnerships with- out considering the multistakeholder context in which they operate. Other stakeholders may include the following.

Emerging lessons

There is a relative paucity of development literature analysing company-community partnership arrangements. The analyses available generally focus on contractual out-grower schemes and joint ventures, e.g. in India, southern Brazil and the Philippines (Roberts and Dubois, 1996), South Africa (Arnold, 1997; Clarke, Magagula and von Maltitz, 1997) and Australia (Curtis and Race, 1998). Many contextual factors are involved in every case. For example, in India the development of contract schemes with farmers has been heavily influenced by the fact that the State owns 95 percent of forest land and there are ceiling restrictions on companies' ownership of land, while in South Africa the big companies were initially more interested in such schemes as a means of demonstrating their social responsibility.

Thus, direct comparisons between schemes and ventures are of limited value. However, much can be gained from reflection on the experiences of a variety of partnership arrangements. The following are some of the tentative lessons that are emerging.

Partnerships are risk-sharing arrangements which are highly context specific

A partnership allocates risk between a local group or individual producer, which takes on the risks of production, and a company or contractor, which takes on the risks of the market. The appropriate arrangement will vary according to the policy environment, market conditions, organizations, credit, tenure and land type in question. Even similar farms in the same area may demand different arrangements. Thus there is a need for agile management approaches to activities such as marketing and quality control. Yet current partnerships are often pursued through inflexible and formulaic schemes.

Markets may be unstable and will change in the time it takes to grow trees

Partnership arrangements (like other forestry enterprises), with their long time frames, are vulnerable to market instability. Many schemes have failed because of inadequate analysis of the price margin flexibility of both communities and companies, or because of poor forecasting of the consequences of changes in market conditions, such as the international boom and bust cycle in the pulp and paper industry. However, some partnerships are able to contribute to creating more vibrant local and regional markets, and thrive as a consequence.

Bargaining power varies and investment in it is needed

The relative strengths and bargaining positions of the partners are largely defined by the contract between them and the economic and policy context in which it is embedded. It is rare to find a true partnership of equals - and perceived inequalities limit the adoption of many schemes. Frequently, individual producers and local groups lack the organization and skills to enter into equitable agreements, and most would benefit from support for stronger associations to improve their bargaining power. In addition, bargaining power often changes over time, and the strongest partnerships seem to be those that are regularly renegotiated.

Partnerships help smallholders but may not benefit the poorest

he contribution of partnerships to equitable livelihoods varies. In South Africa, smallholder woodlots developed under out-grower schemes provide a useful addition to household incomes, are often owned and managed by women and do not usually divert land or labour from other activities. However, in India, where secure tenure to land and some proved capacity and bargaining power are often needed to join partnerships, contract farm forestry seems to be a strategy for medium- or large-scale farmers in commercial agricultural areas. Furthermore, there is evidence of absentee landlords favouring these farm forestry contracts and thereby pushing tenants off the land.

As partnerships develop there are likely to be increasing calls for community equity in downstream processing ventures


Particular schemes often dissolve, but broader partnerships can live on

Partnerships that rely on production for a guaranteed buyer may be temporary. As farmers gradually acquire skills, planting material and understanding of the market and become adept at fitting tree crops in with their other activities, their need for a formal relationship with a company may decline. A number of companies have incurred significant losses as a result of farmers reneging on contracts and selling their produce on the open market. However, more astute companies have realized that securing the produce from the farmers involves both paying the market price and building the relationship. Interaction between the company and the producer throughout the growing cycle - to deal with farmers' expectations, technical needs and problems - is crucial.

Extension and technical support are crucial

The more successful out-grower schemes set up supply centres for farmers which provide nursery stock of high quality and are profit centres in themselves. Farmers often need sound advice on the best techniques and appropriate technology for growing trees, but sharing of technical knowledge is also a two-way process in a partnership.

Successful out-grower schemes often establish supply centres for farmers - like this tree nursery in Zimbabwe - which provide high-quality planting material and are profit-earners in themselves


Whole communities present bigger challenges

Companies often find it easier, legally and operationally, to deal with individual out-growers rather than with broader community groups. Many companies have relatively little understanding of communities' social dynamics or lack the ability to help build community capacity so that the partner will be willing, motivated and knowledgeable and so that internal disputes can be resolved when they arise. In South Africa, the government encourages private-sector investment in forestry, but the private sector still perceives considerable risk in dealing with local communities. A Forestry Development Office has therefore been proposed to act as an intermediary between investors and communities.

Third-party roles need to be clarified and developed

Responsibilities for developing partnerships are often blurred, particularly between government and the private sector. Markets currently, and increasingly, reward the short-term behaviour that policies and laws permit. Governments will have a key role in helping partnerships realize their potential as a tool for improving forestry and local development, but government capacities for intervening to support partnerships are not generally well developed. Governments will therefore need to learn from other sectors and from civil society. NGOs can sometimes offer considerable brokering, mediating and management experience.

Going beyond fibre production: sharing downstream benefits

Most current schemes focus on production of fibre only. As demand is growing, attention is increasingly turning to arrangements for equity sharing in downstream processing and other broader joint ventures. Such arrangements may need, for example, to accept the value of community land as equity. Furthermore, in the longer term, to secure their production base, companies will need to have wider socio-economic aims, including the provision of goods and services other than fibre. Partnerships with communities (which may have the relevant rights and skills, but not necessarily the organization and resources) to manage land for non-fibre forest goods and services will assume greater importance.

A sampling of partnerships

Contract timber production fails but farm forestry takes off in northern India

Facing a serious shortage of raw material, the Western India Match Company (WIMCO) invested in developing high-quality clonal poplars (Populus deltoides) which on farm lands could produce timber-size trees suitable for sawing within eight years. Farmers like the poplars because, being deciduous, they lose leaves during winter, the main vegetable and wheat growing season. In the scheme begun in the late 1980s, WIMCO arranged credit for farmers from the National Bank for Agriculture and Rural Development (NABARD), paid over the eight-year period directly to WIMCO for the cost of each sapling and extension support. To secure the loan farmers had to demonstrate that they had legal tenure over the land, and WIMCO guaranteed the loans by assuring farmers of a minimum buy-back price, although farmers were free to sell to other buyers if they could find a higher price. The terms of the agreements also stipulated that WIMCO would replace any saplings that died in the first two years and spelled out details of irrigation, pruning and rotation. WIMCO estimates that during the 1990s more than 20 million seedlings were sold to about 30 000 farmers covering about 40 000 ha.

However, after four to five years farmers began selling elsewhere, largely as a result of poor price forecasting by WIMCO: by the time the trees reached maturity the open market price was as much as twice the price initially guaranteed by WIMCO. Demand for high-quality nursery clonal stock became greater than the supply, and the credit scheme to encourage farmers was no longer necessary. Increased supplies of timber stimulated development of many small processing units producing plywood and peeled veneers.

Today, WIMCO concentrates on selling seedlings to farmers - about 1.5 million seedlings a year - without a guaranteed buy-back arrangement. The company's field staff continue to provide advice to farmers, and this helps keep the company competitive with other nurseries selling poplar stock. Thus, although the original scheme has died, it contributed to major growth in farm forestry and considerable rural employment (Saigal, 1998; Saxena, 1998; E. Morrison, personal communication, 1999).

Timber out-growers raise company image and cut land costs in Brazil

The Klabin pulp and paper company operates four farm forestry schemes which vary according to the farmer's plot size and particular needs. In one scheme the company rents the farmer land, pays the owner 30 percent of the final revenue and provides all the necessary material and labour inputs. A second scheme is a joint venture with the farmer. In the other two schemes, the farmer prepares the land and plants and maintains the trees, while the company provides a varying amount of material inputs. The farmers are under no obligation to sell the final product to the company. Annual income earned by the farmers varies considerably, from US$76 to $217 per hectare.

Klabin intends to extend its out-grower programme, citing the need to maintain a good company image and the increasing costs of land for plantations as the main reasons. The company seeks certification of its out-growers so that they can supply the demand of local furniture companies that sell to environmentally sensitive markets (O. Dubois and M. Grieg-Gran, personal communication, 1999).

Out-growing eucalyptus pulp in Thailand

Under a scheme started in 1992 to supply its new pulp mill, Advance Agro PLC (Soon Hua Seng Group) operates a clonal nursery (as a profit centre), provides agricultural and silvicultural advice through extension workers, coordinates harvesting and transport contractors and offers a guaranteed price to farmers. Smallholders, with average farm sizes of 10 ha, have secured establishment loans from the state agricultural bank. With an average rotation length of four years and a current mean annual increment of 28 m3 per hectare per year, farmers are securing a mean net cash flow per annum of US$343 per hectare. Given the decreasing price for alternative crops such as maize and tapioca, fibre growing seems to be an attractive option for many farmers in the area. Previously degraded lands have been brought back into production and in 1998 supplied 1.6 million tonnes to the mills (J. Gilliland, personal communication, 1999).

State enterprises make profits with farmers in Ireland

As an alternative to purchasing land for afforestation, Coillte, Ireland's autonomous self-financing state forestry corporation, runs a form of joint venture in which farmers provide land to Coillte to plant. In return Coillte shares both the income from the afforestation grants and the revenue from timber sales with the landowner. The scheme has allowed Coillte to increase production and offers farmers a form of tax-free income. To date there are 216 such schemes involving 4 481 ha (Landell-Mills and Ford, 1999).

Hardwood timber growing contracts with farmers in Ghana

Unlike neighbouring companies, the Swiss Lumber Company in southwestern Ghana does not have a timber concession but, rather, aims to meet its future timber needs through timber-growing contracts with farmers. The arrangements emphasize relatively slow-growing indigenous hardwoods such as Triplochiton scleroxylon, Khaya ivorensis and Entandrophragma angolense rather than fast-growing exotics. The contracts also emphasize timber growing on degraded land, which is providing marginal yields under other crops, rather than competing with prime agricultural land.

The company offers farmers four payment options: a lump-sum down payment, a percentage share of the timber at harvest (varying from 20 to 50 percent), an annual land rent, and the first option on a weeding contract on the plantation. Farmers are bound by their contract to give the company the first option in the purchase of their share of the timber at prevailing market prices.

Although this project is in its infancy, many farmers in the area have registered to participate, and there are signs that joint ownership of the timber is encouraging farmers to protect the trees from bush fires and illegal harvesting (Kotey et al., 1998).

Large-scale joint ventures in China

In China, the government has not only made possible joint ventures between local companies and cooperative groups, but has also encouraged partnerships with foreign companies, particularly for plantation establishment or forest regeneration. Partnerships with foreign companies have been concentrated in the coastal provinces where weather conditions support plantations of fast-growing species and where more developed infrastructure favours commercial production. Local government encourages these partnerships because they are thought to enhance forest management by increasing access to finance and technology and by raising supervision. Incentives for foreign investment are sometimes given in the form of exemptions from taxes and fees and priority access to utilities such as electricity and water.

One example is a joint venture involving Plantation Forest Timber Products Ltd, Robabank, the International Finance Corporation, local forestry industry bureaus and farmers. The joint venture, operating in three provinces, is valued at US$124 million. The forestry industry bureaus act as paid mediators so the company does not have to deal with the hundreds of thousands of farmers who contribute timber. (The company claims to pay 600 000 farmers in Sichuan alone.) Local governments are paid forestry charges (N. Landell-Mills, personal communication, 1999).

In China, the government supports large-scale joint ventures between local companies and cooperative groups for plantation establishment or forest regeneration; here, the first timber harvested from a replanted forest of pines and Chinese fir in Sichuan Province

- FAO/P. JOHNSON/16136

Forest tenant farming partnerships for sustainable forest management in Canada

The Lower Saint Lawrence Model Forest Project in Quebec Province has developed a form of partnership known as "forest tenant farming" (Canadian Forest Service, personal communication, 1999). Abitibi-Consolidated Inc. (ACI), a large newsprint company, has entrusted the management of two large holdings (approximately 45 000 ha) to the model forest corporation to allow the settlement of forest tenant farmers. The forest farmers individually manage timber resources in their section of the holding and collectively manage the territory's non-wood forest products (hunting, fishing and recreation). While they may sell their wood on the free market, ACI reserves the right to choose the destination of sawlogs. In return, the forest farmers pay a stumpage fee, a form of rent, which is administered by the model forest, and they must adhere to sustainable forest management guidelines through five-year plans, annual operational plans and financial forecasts.

To date 26 farms have been established, averaging about 1 000 ha. After five seasons of operation, the farmers' average gross annual income is US$34 000, which is well above the regional average of US$19 000 and even above the provincial average of US$28 000. The private partner is benefiting from the farmers' forest tending as well as an improved corporate image. The model's success has attracted attention and it is currently being considered for extension to public land surrounding rural communities. (Some 90 percent of the province's commercial forest is under public tenure.)


Previous PageTop Of PageNext Page