Columnists

Is timber sector still viable?

KUMBUKILANI Phiri.

Analysis: KUMBUKILANI PHIRI
OF LATE we have seen a lot of drama in the timber sector and one would wonder what is going on in a sector where most Zambians have little information about.

As far as most of us can remember, the timber sector is one of the most troubled and messed-up sectors.
Recently, Minister of Lands and Natural Resources Jean Kapata banned all export of timber and instructed that timber only be traded locally.
She emphasised that only finished products would be allowed to be exported. In this regard, many Zambians would like to understand how this has impacted the sector and whether the timber sector is still viable or not.
What does the export ban mean?
In her statement, the minister banned all exports of timber in semi processed form as is provided for in the Forest Act of 2015 which allowed timber to be exported in Cant form or simply shaped into four corners and finished products. Under what was provided for in the Forest Act of 2015, Zambians would mostly use equipment like chain saws, table saws and other sawmilling machines like wood misers to process their timber.
This kind of equipment would generally cost between a few thousands to about a million Kwacha. Therefore, after banning of export of timber in Cant and plank form, Zambians are now required to go further and procure equipment that would allow them to make finished products like tables, doors, parquet tiles, tables etc. and export them to the international markets.
Due to the competitive nature of the international markets, equipment that would make finished products to the international standards would generally cost a few hundred thousand to over US$1 million.
What are some of the limiting factors to this policy?
Lack of capital
Most Zambians do not have the capital to buy the equipment and machinery needed to make finished timber products that can compete on the international market due to a number of reasons. We lack institutions that can provide cheap financing for local businesses. The requirements from the few commercial banks and lending institutions for one to acquire a loan are almost impossible for most Zambians to meet. The interest rates for borrowing in the country are also very high.
Lack of technical know-how
In the past, Zambia had a thriving industrial base which died away a few years ago. The country had many trades schools producing the best technical people who could meet the technology demand of the time, however, with the dying of the industrial base, the country has invested very little in the trades schools such that the standards have fallen short of producing competent graduates with the new technology required for one to produce products that can compete on the international market. Therefore, to efficiently implement the new policy, government should have committed to improving capacity in trades schools so that competent graduates are produced equipped with new technology to help in producing finished products that can compete on the international markets.
Lack of supporting policy
It should be noted that the ban on export of semi-processed timber in support of export of finished products is not supported by other policies from other ministries. For example, the Ministry of Finance should have come up with a policy to allow equipment to make finished timber products come into the country duty-free.
The Ministry of Commerce and Trade should have helped in the identification of markets which would be easier for Zambian finished timber products to penetrate. Without supporting policy, it becomes very difficult for industry operators to sail through the storm on their own accord.
What are the advantages of the timber export ban?
It is important to note that our leaders are being forward looking in that they would want the country to undertake value addition locally and export finished products. However, the timing does not seem to be right. Only allowing export of finished products if done at the right time would earn the country more in terms of export revenue.
It would also bring out job creation. However, given the reasons above, in the short run, we will not achieve much as a country and it will mean that most indigenous Zambian businesses will miss out on the golden opportunity to graduate from being mere raw timber suppliers into manufacturers of finished timber products. With this policy coming at a wrong time, it will mostly benefit foreigners who may have the capital to come and invest with the exclusion of Zambians.
Already the mining sector is dominantly run by foreigners; an industry like the forestry should have been left to Zambians to run given that with gradual progress most Zambians would be able to meet the financing needs required as they are not as high as the mining sector.
What should have been an alternative to the ban?
As we are all aware, licences were only issued early this year, meaning that most licence holders are new in the industry. It is also true that most of them already spent a lot of money acquiring the licences and buying machinery to semi process the timber. Most of them also lack capacity in terms of finances and technical knowhow; they also lack international market information thereby not knowing the exact products that can be exported to the international market.
In this regard, the alternative to this policy should have been the gradual approach. To start with, the government should have given operators a grace period of one to two years in which they should have graduated from exporting semi-processed products to manufacturing finished products. Of course this should have been done in conjunction with policy support to zero-rate duty on the importation of machinery needed to make finished products. Then there was also supposed to be a way to make cheap financing easily accessible to the industry operators. In the same line, a market search on what finished products were marketable in certain markets abroad should have been conducted and information made available to operators. There was also need for capacity building across the sector on various aspects that should have included technical knowhow, marketing, management, financing, etc.
Unleashing ill-prepared Zambians to make finished products and sell to the international markets without equipping them well with financing, skills, and market information is like dropping a person who has never swum in their life in the middle of the ocean with sharks and expecting them to swim to safety. They will be crushed and eaten within seconds.
As things stand now, in the short to medium term the export ban on semi processed timber products is not going to help the country in anyway. Further it will make the industry less friendly to the indigenous Zambians to participate, therefore, rendering the industry not viable to Zambians.
In fact, we have just grabbed a golden opportunity away from the Zambians and given it to a few greedy Zambians working in collusion with foreign businesses. Zambians will only be relegated to be manual workers or casual workers working for a minimum wage for a resource that, given a caring support structure, would provide one of the best entry points for inclusive growth for many Zambians.
Compare this with mining industry that exports primary commodities with no value addition in Zambia, while leaving huge dumps and polluted environment in the country. This is despite the fact that the mining industry has been active in the country for more than a century. As a country we spend huge sums of money to invite mining investors, but at the same time we are unleashing enforcement agencies to deprive Zambians of a legitimate source of livelihoods through the timber sector despite them holding legal documents.
The author is a Zambian entrepreneur.

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