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| Forest deals stall |
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by
Frank Phiri, 16 April 2006
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07:06:28
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Is it bureaucracy or pragmatism? Cabinet is sitting on a proposal that would have paved the way for private sector to rent some of the country’s industrial forests for a profit, Economic Report has established.
Known as the Private-Public Sector Participation (PSP), the proposal was submitted to government in 2003.
The PSP aims at offering long-term concessions to private forest operators, who are expected to shore up value of the forests, generate new jobs for indigenous Malawians and guarantee their sustainable access to firewood and other non-timber forest products.
In turn, the concessionaire would be allowed to harvest the trees for processing into various timber products for sale on the local and export markets. Government would, however, reserve ownership rights to the plantations.
Following the adoption of PSP, 21 industrial forests were on December 4, 2003, enlisted for concessions under the Divestiture Sequence Plan of the Privatisation Commission (PC), the agency in charge of sale of state-owned enterprises.
But three years down the line, government has not approved a single concession to private forest operators, despite their interest to come in.
According to documents seen by Economic Report, two investors—a local rubber company Vizara Estate and a South African firm Global Forest Products—have already submitted proposals to run Mkuwadzi Forest in Nkhatabay and part of Chikangawa (Viphya) forest, respectively.
The proposals were submitted through Malawi Investment Promotion Agency (MIPA) and the Department of Forest. The two organizations are members of the Plantations Advisory Group (PAG)—a multi sector body set up to facilitate smooth transaction of the forest deals.
PC Communications Manager Susan Banda told Economic Report in a telephone interview that such proposals were not likely to be considered as active transactions since cabinet has not yet nodded to their privatisation.
Chairman of PAG Henry Chimunthu Banda, who is also Minister of Mines, Natural Resources and Environmental Affairs, confirmed in a separate interview that no decision had been made.
Chimunthu Banda said cabinet has not had much time to discuss the proposed options, but was aware of the need to shore up value of forests. He also expressed ignorance of the proposals submitted by Vizara and Global Forests
“This administration [of Bingu wa Mutharika] is still looking into the options. We’re doing something to address the deterioration of industrial forests,” he said.
Asked why government would want to delay the process of sharing the running costs of forests with the private sector to save them from further ruin, the Minister said as of last year, government had pumped in K43 million to redress a combined 300 hectares of industrial forests.
Chimunthu Banda mentioned Ndirande Mountain, Chongoni, Zomba and Viphya, as some of the industrial forests covered under the 2005/06 budget.
“We would like to see an increase in the allocation under the 2006/07 budget. So as you can see, corrective measures are already being explored. The adoption of PSP is in itself an intervention measure,” he said.
Documents in custody of Economic Report indicate that meetings have been going on between MIPA, Department of Forests and the two investors that have already submitted their proposals for concessions.
According to a letter signed by Vizara Dinesh Chugh, managing director of Vizara Rubber Estate, the company would like government to grant it two separate concessions that would help it set up its own rubber processing plant.
At present, Vizara exports natural rubber to four countries in Southern Africa, namely South Africa, Tanzania, Zimbabwe and Zambia where it is processed. In effect, the company would be better off processing some of the rubber locally so that it exports a finished product.
Chugh says in the letter that his company would like government to offer it a concession for 1,000 hectares of Blue Gum trees in Viphya Plantations to allow it set up its own wood processing plant that would support rubber processing operations at its Nkhatabay Estate.
In addition, Vizara wants a concession to manage Mkuwadzi Forest, which is adjacent to its Nkhatabay estate. Mkuwadzi would help Vizara extend rubber-processing life at its estate and meet increasing rubber demand on the export market.
The investment is worth more than US$4 million (K540 million).
“It is our hope that you will consider our application favourably as the benefits from this project are worth noting. The concession could enable us process timber 12 months a year, create new jobs, generate valuable forex and conserve the forest,” reads in part, Chugh’s letter to Director of Forests Kenneth Nyasulu and Mipa.
Mipa Corporate Affairs Manager Aretha Kamwendo told Economic Report that the Department of Forests recently advised that cabinet was taking its time to grant the concessions after the raw deal it got from Raiply, which bought the then Viphya Ply Wood (Viply) company.
“We understand [the concession] decision is still being reviewed realizing that a bad deal was made with Raiply,” she said.
Kamwendo said Mipa’s position is that Vizara should be allowed to expand its capacity as its failure to do so could prompt the company to pull out of Malawi and go elsewhere.
Vizara Estate is the only company in Malawi producing natural rubber, 99 percent of which is exported to Southern Africa. The company employs 800 permanent staff and 700 seasonal workers.
Delays by government to grant concessions come hot on the heels of stiff opposition from various groups, including the Parliamentary Committee on Agriculture, to halt the privatisation of industrial forests.
However, it remains to be seen if government’s stance on the forest deals would have any impact on stemming the severe degeneration and potential disappearance of the country’s industrial forests.
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