Tag Archives: business

We need a better investment model to deliver food, fuel and fibre without sacrificing forests, which would benefit the economy, society and environment Duncan Macqueen Guardian Professional , Monday 29 October 2012 09.00 GMT A woman sells shea butter at a market. Women in the shea butter forests of Burkina Faso have benefited from investment in locally controlled forests. Photograph: Thierry Gouegnon/Reuters Forests are feeling the squeeze. Overall forest loss ran at 5.2m hectares per year between 2000-2010, driven principally by increasing consumer demand for food, fuel and fibre from a global population soaring upwards of 7 billion. People are the ultimate losers; half a billion indigenous people and 1.3 billion others whose livelihoods are attuned to and dependent on forests, are losing more, and more quickly than others. But of course all of us indirectly and ultimately depend on forests; to sequester carbon and slow climate change, to maintain water and soil cycles on which food, fuel and fibre production depends, and to preserve biodiversity to allow options for adaptation in an uncertain future. Some immediately, and all of us ultimately, may pay a heavy price unless we can create an investment opportunity that delivers food, fuel and fibre without sacrificing them. Justice demands that this opportunity should also prosper indigenous and other forest dependant peoples. This requires a better investment model. Investing in Locally Controlled Forestry (ILCF) has emerged over the last three years as a strong candidate for this better investment model . Dialogues in nine countries in Africa, Asia, Europe and Latin America were convened by The Forest Dialogue (TFD) and funded by the Growing Forest Partnership (GFP) initiative and the government of Sweden (where 100 years of ILCF has already taken place . More than 400 people pooled their expertise. Those looking at what was working, and what was not, included not only investors and forest experts, but also representatives of forest rights-holder organisations such as the Global Alliance for Community Forestry, the International Alliance of Indigenous and Tribal People’s of the Tropical Forests and the International Family Forest Alliance – k nown collectively as the G3 . The G3 define locally controlled forestry (LCF) as: “The local right for forest owner families and communities to make decisions on commercial forest management and land use, with secure tenure rights, freedom of association and access to markets and technology.” Locally controlled forestry is big news. Forests under some form of local control make up 25% of the world’s forests and provide US$75-US$100bn (£47bn-£62bn) a year in goods and services and there are grounds for hoping this will grow. Strong evidence over the last 60 years documents how LCF often outperforms alternatives such as concessions in economic terms and protected areas in environmental terms. Investing in locally controlled forestry (ILCF) is a paradigm shift – away from capital seeking forest resources and needing labour – towards local rights-holders managing forest resources and seeking capital. It recognises the need to distinguish and blend two types of investment: • Asset investment (conventional investment in which the nominal value of underlying capital is expected to increase or at least not fall) and; • Enabling investment (in which capital is foregone to build the self-sufficiency and attractiveness of the business in question). Clever ways to encourage investors Asset investors shy from investing in local controlled forestry for four main reasons: insecure local commercial forest rights (on which to base a deal); lack of business capacity (to seal the deal); lack of commercial organisation (to make scale worth the costs of due diligence); and a lack of brokers (to match those between whom a deal might be struck). A clever mix of four types of enabling investment is needed to pave the way for asset investment and packaging up enabling and asset investment cleverly can boost asset investor’s confidence. A field visit to the shea butter forests of Burkina Faso is one of many examples, including another in Ethiopia, where four types of enabling investment were used. The Union of Women Producers of Shea Products of Sissili and Ziro was established in 2001 (it became the Nununa Federation in 2011) and processes nuts into shea butter for a range of products like soaps and creams. Enabling investment to negotiate more secure commercial forest rights for shea currently comes from NGO supporters of small forest enterprises such as Tree Aid . But in the interim, Nununa members have circumscribed 3,345 hectares of shea-tree protection areas managed by their members. Enabling investment in business capacity development has come from the cosmetics company L’Occitane, which agreed a commercial deal to buy Shea from 600 women subject to certain quality specifications that then attracted technical partners for development such as the Centre for Study and International Co-operation and the Dutch Interchurch Organisation for Development. Enabling investment to achieve investible scale also came from SNV and Nununa itself. Nununa started as a union among 18 district-wide groups, but now comprises 4,596 members, a growth of 156% in comparison with 2,985 members in 2009. Technical support to achieve fairtrade certification in 2006 and organic certification in 2007 further strengthened the track record. Finally, enabling investment to broker a commercial deal came from SNV whose support to develop a new business model included an investment proposal for the construction of a small factory for the industrial processing of shea butter. A fully mechanised and more efficient production facility was installed with loan finance from the Agridius Foundation. Production costs per kilo of butter decreased by a half from 1.68 €/kg to 0.86 €/kg (£1.4/kg to 0.69/kg) and production volumes doubled. More than 4,000 members have achieved a 95% increase in income from shea production for less work and more status. Investors are getting acceptable returns. Stronger roles and incentives for local women to control, sustainably manage and even enrich the shea forests have been put in place. Scaling-up can be seen to happen organically across very different forest contexts once this clever packaging of enabling and asset investment is understood and applied – as numerous cases in the guide to investing in locally controlled forestry that was launched at COFO21 attest. A new Forest and Farm Facility hosted by the UN Food and Agriculture Organisation was also launched at Committee on Forestry on 28 September precisely to start to inject the right sort of enabling investments into locally controlled forestry. Duncan Macqueen is team leader for forests at the International Institute for Environment and Development [/color] [/font] Continue reading →