Analysis: KUMBUKILANI PHIRI
AROUND late January and early February 2018, I was privileged to be part of a Zambian delegation comprising of the government and the private sector in the timber industries, which was sponsored by the International Institute for Environment and Development (IIED) and Global Environmental Institute (GEI) to undertake a study tour and fact-finding mission on the timber sector in China, vis-a-vis markets, technology, institutional and policy support.The tour was also meant to promote direct linkages between Chinese and African private timber sector actors, in particular the small-scale enterprises and associations, for future collaboration on sustainable timber processing and high-value addition trade between China and Africa.
The trip was also supposed to provide an exchange of knowledge and technology to enable timber processing that meets the African reality and the existing capacity. Along the same vein, we were also supposed to learn and understand the institutional support needed for the Zambian timber industry to be capable of secondary processing and value addition and trade with China.
Whilst in China, we visited three major places, namely Beijing, Zhangjiagang in Jiangsu Province and Shunde/Foshan in Guangdong Province. In Beijing, we had a meeting with the Forestry Department of China, representatives from the China Timber and Wood Products Distribution and Development Association (CTWPDA) as well as representatives from the biggest State-owned Timber Equipment Manufacturing Company called Foma Group.
In Zhangjiagang, we met representatives from Zhangjiagang City Wood Industry Association (ZCWIA) and visited a tropical timber market and some furniture companies that are using tropical wood from Africa to manufacture boards and furniture. In Shunde and Foshan, we visited some timber equipment manufacturing companies and some furniture making factories.
UNLOCKING THE MYTH
The biggest exporters of timber to China are Russia, America, Australia and New Zealand, which cater for over 77 percent of all timber exports into China, whereas Africa only caters for six percent. In 2017, China imported over 108 million cubic metres of timber, of which only 4.7 million cubic metres came from Africa.
Though Africa is a major exporter of tropical timber to China representing around 40 percent, Zambia accounts for only two percent of all African timber exports to China. Actually, Zambia’s timber exports to China declined by around 8.3 percent between 2016 and 2017.
Moreover, there are only two major species which Zambia exports to China, namely rosewood and mukula. This means there is still room to open up markets for other Zambian species. The major exporters of African tropical timber to China are Equatorial Guinea at 27 percent, Congo DR at 19 percent, Mozambique, Nigeria, Cameroon and Gabon at 12 percent each.
CONSISTENT POLICY AND INSTITUTIONAL SUPPORT AS DRIVER OF A ROBUST TIMBER INDUSTRY
We learnt a few key lessons. China’s forest cover has been increasing steadily from 12.98 percent in 1962 to 21.63 percent in 2017, mainly due to effective forest management policy and monitoring mechanisms, which include putting under concession of almost 98 percent of the forests to peasant farmers, lumber companies and local authorities. According to them, this helps in combating illegal activities and also ensures effective monitoring and control.
HARNESSING COMPETITIVE ADVANTAGE IN THE VALUE CHAIN
China has emerged to be a giant in timber value addition by creating a competitive advantage in timber processing technology. The Chinese experts advised Zambia and other African countries to first and foremost understand their competitive advantage within the value chain and harness it based on the local scenario.
For instance, Zambia needs to identify its current position in the timber value chain based on its technology and resource availability. We can choose to promote any of the following stages of the timber value chain; primary processing (sawmilling), secondary processing (furniture making), distribution and marketing or even designing.
For instance, Europe has almost entirely relinquished manufacturing in the timber value chain and concentrated its effort into designing, marketing and distribution of timber products. The main driver for them to consider promoting this stage in the value chain is because they don’t have a competitive advantage when it comes to labour costs and utilising effective and cheap technologies.
In Africa, Gabon stands out as a country with a clear roadmap that has harnessed its competitive advantage in timber primary processing (sawmilling) and kilning.
If there is something that is important in doing business, it is the understanding of the market into which you will sell your product. Whilst in China, we learnt that some Chinese furniture factories that were using Zambian mukula to make furniture have now started shifting their interest to other timber species because of inconsistent supply from the source.
Their advice to Zambia and other mukula origin countries was that we should quickly devise a policy that ensures good revenue collection from exports of mukula during this time when the commodity still commands a good market and price.
They feared that with time and the shifting trend in production needs, mukula may end up like any other valuable species that will be valuable but with low demand on the market. Another aspect as to why other Zambian timber species have not penetrated the Chinese market was the uncompetitiveness in price.
Most of Zambia’s timber species can also be found in other African countries, such as Angola, Mozambique, Congo, Gabon, Cameroon and Tanzania, which, unlike Zambia, also have sea ports, making their cost of freight lower than timber coming from Zambia.
It also took 45 days more to export timber from Zambia than from other African countries with sea ports. Therefore, for other Zambian timber species like mukwa, indale, mupapa, etc, to penetrate the Chinese market, there is need to streamline our cost structures in-house by, for instance, reducing on export duty, agency fees, transportation as well as the clearance period at the borders.
CREATION OF TIMBER INDUSTRY CLUSTERS
China has been very successful in building its SME industries because they practise clustering of industries. For instance, Shunde town is mainly known for manufacturing of furniture making machines and there are hundreds to thousands of companies which are directly or indirectly involved in furniture making that have been clustered together, while next-door Foshan town is mainly known for manufacturing of furniture, also under the same cluster arrangement.
Through clusters, it is easier for industry operators to get anything they need within the clusters, i.e financing, spare parts, skilled labour, etc. Zambia should emulate the use of clusters to promote its industries, not just in the timber industry.
China has reached a level where there is 100 percent utilisation of timber with zero percent waste. This has been made possible by the use of highly mechanised machines and use of a highly skilled workforce.
Currently, Zambia is only at 55 percent utilisation of its timber from the forests, while the rest, which accounts for 45 percent, is in form of waste and is usually burnt away to create space for operations.
Indeed the trip was an eye-opener to most of us. There is so much that Zambia can learn from China to improve its management of the timber sector and ensure that jobs are created for the people and that Government collects more revenue from the sector.
The author is proprietor of Green Lake Zambia Limited, which holds a timber concession licence in Isoka.
Analysis: KUMBUKILANI PHIRI