malawi forestry sub-sector study (a review of …...report no. 4927-mai malawi forestry sub-sector...

Report No. 4927-MAI

MalawiForestry Sub-Sector Study(A Review of Selected Issues)September 17, 1984

Eastern Africa Projects DepartmentSouthern Agriculture Division

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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MALAWI

FORESTRY SUB-SECTOR STUDY

Currency Equivalent

US$1.00 = MK 1.33MK 1.00 = US$0.75

Weights and Measures

1 kilogram (kg) = 2.2 lb1 ton (t) = 2,204.6 lbI litre (1) = 2.116 US pintsI hectare (ha) = 2.471 acres

Principle Abbreviations

ADD - Agricultural Development DivisionCIMNMT - Centro Internacional de Mejoramiento de Maiz y Trigo

(Internationa' Maize and Wheat Improvement Centre)DA - Development AreaEPA - Extension Planning AreaGOM - Government of MalawiICRAF - International Centre for Research on Agro-ForestryICRISAT - International Centre for Research in the Semi-Arid TropicsIDA - International Development AssociationILCA - International Livestock Centre for AfricaIITA - International Institute for Tropical AgricultureK.FW - Kreditanstalt fuer WiederaufbauMAI - Mean Annual IncrementMFNR - Ministry of Forestry and Natural ResourcesMOA - Ministry of AgricultureNRDP - National Rural Development ProgramSADCC - Southern Africa Development Coordination ConferenceSFA - Senior Forest AssistantTA - Technical AssistantTPL - Timber Products Ltd.VIPCOR - Viphya Pulp and Paper Corp. Ltd.WIC - Wood Industries Corporation Ltd. (Formerly FID)

Fiscal Year

April 1 - March 31

This report is based on the findings of a forestry sub-sectormission which visited Malawi for the period October 25 - November 14,1983. The mission comprised Messrs H. Wagner (Mission Leader) andR. Nelson (Agricultural Economist), with support for part of the missionfrom the Viphya Wood Industries Appraisal Mission led by D. Brown. Thestaff of the Malawi Forestry Department provided a major input with bothdata and proposals.

FOR OFFICALL USE ONLYMALAWI


Table of Contents

Page No.

PREFACE ....... ........................... ......... 33 iii

SUMMARY AND RECOMMENDATIONS .................. , iv

1. COUNTRY AND AGRICULTURAL SECTOR CONTEXT ...

II. THE FORESTRY SUB-SECTOR. . . 2

Forest Resources .. 2........ .2

Supply and Demand of Wood ................ 4............ 4Institutions............... ...... 6Forest Policy, Legislation and Regultion. 7

III. WOOD PROCESSING INDUSTRY. 8

Secondary Wood Processing Industries. 8Government Forest Industries Policy. 9

IV. RESOURCE CONSTRAINTS ......... 9

Introduction .. 9Budgetary Resources .. 9Manpower . .12

V. REVIEW OF MAIN ISSUES .. 14

A. Fuelwood .14

Introduction.... 14The Economics of Fuelwood Production by Smallholders 15Valuation of Wood in Terms of Agricultural

Productivity Impacts .18Pine-Charcoal from Viphya .19Estates ... 19Research, Extension and Training . . 20Pricing and Revenue Collection .. .28

B. Wood Processing Industries .30

The Spatial Distribution of Production . .30Prices ....... ,...... 32Environmental Protection . .33

VI. TOWARDS A FUTURE STRATEGY .34

Introduction .. 34Forestry Policy .. 35Fuelwood Strategy ................. 36Forest Industries ................... 40Training .............................. ,,,,,,,. 41Management of Industrial Forest Resources . . 41Technical Assistance for Wood Processing Industry 42The Planned Pulp and Paper Mill. 42

Thi document has a resricted distribution and may be used by repients only in the performance ofthcir ofci duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Chart 1 - Fuelwood Decline ModelChart 2 - Fuelwood Strategy Analysis

Table 1 - Plantation Areas

Table 2 - Consumption of Mechanical Wood ProductsTable 3 - Sawnwood Production MalawiTable 4 - Projected Production of the Mechanical Wood IndustriesTable 5 - Projected Wood Requirements for Mechanical ProcessingTable 6 - Annual Plantation AreaTable 7 - 1/4 Hectare Woodlot Model for Pole ProductionTable 8 - 1/4 Hectare Woodlot Mcdel for Fuel Wood ProductionTable 9 - Collecting Fuelwood ModelTable 10 - Model ComparisonsTable 11 - Stumpage Cost - Central Government PlantationsTable 12 - Percentage Staff Increases Under Alternative

Training AssumptionsTable 13 - Impact of Higher Stumpage Rates on ConsumerTable 14 - Economic Valuation of Wood and Charcoal Based

on Kerosene AlternativeTable 15 - Transport Costs by ProductTable 16 - Approximate Transport CostsTable 17 - Financial Comparison of Wood and Charcoal Costs by

DistanceTable 18 - Costs of Indigenous Forest ProtectionTable 19 - Financial Analysis of Sawlog ProductionTable 20 - Sawnwood/Pulpwood Production in Zomba MountainsTable 21 - Plantation Management for Sawnwood PulpwoodTable 22 - Cost Estimates and Budgetary Impact of 9200 ha Annual

Planting Program

Annex I - Forest Policy StatementAnnex 2 - TOR for Revenue Collection StudiesAnnex 3 - Demand and Supply of SawnwoodAnnex 4 - Options of Transporting Pine - Charcoal from Viphya

Map IBRD No. 18005

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MALAWI


PREFACE

1. This report was prepared by a Bank mission with a large inputfrom the Forestry Department in Malawi. The field work was carried outjointly with MFNR staff. All the data, some of the analysis and many ofthe ideas came from MFNR. Both verbal and written comments were submittedby them. The report's findings were discussed and agreed with theGovernment of Malawi.

ii. The objective of this sub-sector study was, briefly, to assistGovernment to lay the groundwork for the development of a forestry strategyand to identify the policy actions and possible investments needed tosupport the program. Government also agreed with the mission that fuelwoodsupply, reorganization of forest industries and environmental protectionshould get priority attention. This study, however, concentrated mainly onthe fuelvood crisis and forest industries and there was no need to coverenvironmental protection since FAO is currently preparing a study 'TheEnvironmental Impact of Development which will be addressing environmentalissues in the Forestry Sub-Sector.

iii. The report starts by discussing the forestry sub-sector and theagricultural sector in the country context. It then reviews the overallconstraints to forestry development, essentially the land, labour andcapital limitations to achieving welfare and production goals with woodproducts. In particular, it focuses on the ever-present problem ofbudgetary resources. The report then reviews the two major commodity areaswithin forestry, fuelwood and forest industry products. The question ofproducing fuelwood is analysed in some detail, and some proposals for thefuture are made. A similar but less detailed analysis is done for forestindustries. In the final chapter, a summing up is attempted related to thetypes of interventions which are open to Government to influence thedirection of the sub-sector for productivity,equity and environmentalprotection.

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MALAWI


SUMKARY AND RECOMMENDATIONS

i. The objective of the study is to assist the Malawi Government inlaying the groundwork for a forestry development strategy. The terms ofreference placed emphasis on: the discussion of broad policies andobjectives and possible programs that might meet these objectives, adetailed analysis of the fuelwood issue, the incorporation of the review offorest industries undertaken during the Appraisal of the Wood IndustriesProject an outline of key sub-sector issues and the identification offurther studies.

ii. Malawi is a predominantly agricultural country with a populationdensity of 180 per km2 of arable land. Total export value in 1983 was NK245.9 million of which 14K 223.4 million was from agricultural products.Major imports are petroleum and fertiliser. Malawi is favourably endowedwith a variety of rainfall patterns and soil types conducive to agricultureand Government is committed to its development through both estate andsmallholder sub-sectors. A major constraint has been the lack of strategyand program definition and its linkage to budgetary priorities. Theproblems of the forestry sub-sector largely mirror the overall problems ofthe economy. The most fundamental issue is the pressure of the 2.9%population growth rate against the fixed land resource in an environment ofdeteriorating terms of trade.

iii. The forestry sub-sector produces essentially commodity wood(fuelwood and industrial wood); watershed protection and erosion controlare also important "products" but we have left detailed discussion of thisto the FAO report on environmental effects of development, now underpreparation through the definition of ecologically fragile areas. Fuelwoodsupply is reaching a crisis point because, while demand is outstripping thesupply of indigenous wood resources, the economic incentives which might beexpected to result in a widespread tree planting response are too slow incoming into play to prevent serious environmental damage. Industrial woodproduction strategy is less problematic but has faced difficult choicesrelated to the extent of Government involvement, the location of theplanned pulp and papermill, the timing of investments, the high cost ofmaintaining the Viphya plantations (in the north, far from the demandcentre) and the economics of exploiting Viphya.

iv. National wood demand is estimated at 8.8 million m3 annually,national supply on a sustainable basis i.e. the Mean Annual Increment (MAI)is estimated at 4.6 million m3. This means that indigenous forestresources are depleted at a rate of nearly 80,000 ha clearfelled area peryear. Furthermore, this not only represents a fuelwood loss to future

generations it precipitates serious environmental damage in the process andthus has also a compounding effect on future productivity. The situationis extremely variable with some locations (such as parts of the ShireValley) reaching a fuelwood 'end-point' and others such as the NorthernRegion which still have generous supplies. However, generally the pictureis one of an emerging crisis.

v. Alongside the physical crisis is a serious budgetary constraintand the dilemma is best summed up in the contrasting arguments that on theone hand would say, -Government cannot afford to adequately deal with thefuelwood crisis", and on the other hand would say, -Government cannotafford not to". Realism dictates that the former of these arguments shouldbe taken quite seriously and the recommendations are therefore set againstthe sobering back-drop of a forestry sub-sector recurrent (revenue) budgetof about MK 4 million (US$3.2 million) with little prospect under normalcircumstances of this rising at more than, say, 4% per annum.

vi. Major issues in the wood industries portion are (a)transformation of the Government owned and by Forest Industries Division(FID) operated wood industries into the Wood Industries Corporation (WIC)officially approved on April 16, 1984; (b) elimination of Government'sdominating role in wood pricing. The Government controlled 50% of thesawnwood production and nearly all wood resources; (c) location of theplanned pulp and paper mill near Zomba to utilize the Zomba Mountain Forestfor pulp log supply which is the only place in Malawi with mature highquality sawlogs and peeler logs, a prime resource for high quality sawnwood production. A pulp and paper mill in that location would not onlyterminate a competitive sawmilling industry in the Southern Region it wouldimpose additional constraints on the alredy deficient fuelwood supplythere.

vii. The report's recommendations are discussed in the final chapter.They can be classified by type of tools that Government has at itsdisposal. These consist of studies, investments in both physical andmanpower development, organisational instruments, direct taxation andincome supplements, price manipulations and legislation.

viii. Of the Studies recommended the major ones are the following:

a. A Forest Produce Revenue Collection Study to investigate thecost and benefits of improving revenue collection withparticular reference to customary land.

b. A Study for the Legislation and Management Procedures to makeit compulsory for estates to grow fuelwood and to introduceimproved tobacco curing technologies.

c. A Land Capability and Land Tenure Study to identify theavailability of land and possible tenurial approaches toincreasing allocation of land for forestry purposes; and

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d. Feasibility Study for a low cost technology pulp and papermill in Viphya (Luwawa area) as alternative to the Zombalocation.

e. Studies to improve wood production in the existing mills, toestablish a secondary wood industry and to make a better useof existing resources in particular, the Viphya pineplantations.

ix. Recommendations for increased Government investment include:

a. doubling expenditure on forestry and agro-forestry research;

b. increasing expenditure on revenue collection, possiblyincluding matching grants for District Councils;

c. some significant increase in extension Investment but with aparticular focus on quality and therefore training;

d. fuelwood plantations, the extent being largely dependent onthe size of the budget;

e. training of technical and managerial personnLl for the forestindustries sector;

f. research on alternative uses of Viphya wood resources.

x. The mission is not able to demonstrate analytically thatbudgetary allocations for forestry should be increased, but the report doessupport the view of a mounting fuelwood crisis which would suggest thatforestry should be given special treatment. A special treatment.budgetary scenario is suggested which would involve doubliig the realbudgetary allocation to forestry over 10 years, about a 72 real increaseannually. This scenario would involve very limited Government fundedplantations. An extra special case" scenario aims for planting about9,000 ha of plantation annually and (with donor help for establishment)would require about a 15% real increase annually.

xi. Organisational recommendations include fully integrating forestrysubject matter specialists into the ADD extension system, and (as alreadyunder implementation) divesting the Ministry of Forestry and NaturalResources of the Forestry Industries activities.

xii. Under the general policy instrument category of direct taxationand income supplements the report recommends consideration of a matchinggrant scheme to encourage District Councils to increase their revenuecollection activities. The possibility of providing tax relief to estates,who, through legislation, would be forced to match crops with plantationhectarage, was considered by the mission but was rejected. However, thestudies under para viii (a) and (b) will determine the appropriate measuresto be taken.

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xiii. Recommendations for price manipulation and gradually increasingGovernment fees and royalties for both plantation and indigenous wood.While it is desirable that these should be a national average replacementcost level soon, the rate at which prices can be raised will dependentirely on the extent to which control over indigenous wood can beimproved. Pricing will therefore be an art rather than a science,requiring continual review and feedback. Another recommendation is thatconsideration should be given to letting long-term concessions to thehighest bidder for supervised felling in forest reserves (tendering wouldresult in lower costs for more remote areas). Interest by prospectivebidders would again be dependent on the level of control of indigenousresources. For industrial plantation, stumpage fee for industrial woodshould be set by Government based on market forces and opportunity cost ina particular region.

xiv. Legislation recommendations include giving Government title tothe land as well as the biomass in forest reserves and procedures to ensurethat legislation on estate fuelwood/pole and self-sufficiency be identifiedand implemented.

xV. A new Government policy statement is needed that would reflectthe new directions that Government is taking on forestry. Much of thevalue of preparing a policy statement is in the dialogue that is demandedby the preparation of it. The mission therefore, urges Government to takeits time over the development of the statement so that it becomes not onlyan authoritative signpost to the future but a catalyst to the making ofsome fundamental decisions in the present. The policy statement should, inparticular, tackle the questions of priorities within the sub-sector. Noteverything can be given equal importance, a policy should give someguidance on what comes first.

MALAWI


I. COUNTRY AND AGRICULTURAL SECTOR CONTEXT

1.01 Malawi is a relatively small country heavily dependent on theagricultural sector which provides a living for about 85% of thepopulation, contributes 43% of GDP and accounts for about 90% of exportearnings. The country has historically met its food requirements andproduced exportable surpluses by expanding the cultivated area. However,this option is no longer viable as the land frontier can be extended onlymarginally and population is growing at 2.9% per annum.

1.02 Wage employment in agriculture constitutes 45% of total wageemployment, but average monthly earnings are only 40% of the all-industryaverage. Smallholder agriculture contributes about one-third of thecountry's GDP, but the agricultural GDP per farm family is 45% of the totalGDP per family. Malawian labor no longer enjoys the migration option onceavailable (agricultural and mining labor in neighboring countries),allowing the labor intensity in Malawian agricultural production to beamong the highest in Africa.

1.03 Malawi's agriculture is divided Into two sub-sectors, smallholderand estate, based on the tenurial system under which the land iscultivated. Agricultural production occurring on traditional tenured orcustomary land is defined as smallbolder whereas estate production occursonly on freehold/leasehold land. This distinction is somewhat misleadingsince smallholder production ranges from subsistence agriculture to highlycommercialized small farms. Conversely, some estate production,particularly Burley tobacco, is actually produced by smallholder tenantsbut marketed through the estate infrastructure. This has meant that someproduction, which could well be counted as smallholder production, isconsidered to be estate production. The important facet of the land tenurecriterion is that it determines the crops each sub-sector may grow and theaccess each will have to different markets, credit institutions andextension services.

1.04 Malawi is favored by environmental, ecological and soilconditions conducive to the production of a wide variety of agriculturalcrops and a wide range of tree species. The main crops grown on customaryland by smnallholders are maize, pulses, cassava, fire-cured and sun/aircured tobacco, cotton, groundnuts, and rice, which account for about 85% ofall agricultural production. The estate subsector, which occupies about13% of total cultivable land and uses about 1.1 million m3 of woodannually, is principally involved in the production of tea, flue-cured andburley tobacco and sugar. With the very limited exception of small areasof Burley and flue-cured tobacco, the production of these crops is, infact, restricted to this sub-sector. Overall, the estates account for 15%of total agricultural production and 70% of all agricultural exports.

1.05 While most livestock is owned by smallholders, their ownership ishighly skewed. Although only about 10% of smallholders own cattle and evenfewer own work oxen, as many as 60% own some poultry. Goats, however, arethe most important source of meat. Sheep and swine are of minorimportance. Livestock production is integrated into the farming system andtrue pastoralism does not exist.

II. THE FORESTRY SUB-SECTOR

Forest Resources

2.01 Once, most of Malawi's land area was covered with forests.During the past 100 years man reduced the forest cover to 39% of the totalland area a figure which is typical for highly developed industrialcountries. Encroachment on these forest areas continues and thedestruction rate increases with the rising demand for agricultural land andwood ener3y.

2.02 The botanists distinguish nine different vegetation zones eachwith characteristic tree associations of which only the "miombo- woodlandshave a nation wide economic importance since it is the country's mostextensive forest variety and the nearly exclusive supplier of fuelwood andfine timber for panels and furniture.

2.03 The wood demand of a growing population has diminished thenatural forest resources, in particular, in the Southern Regions.Although more than 90% of Malawi's population depends for its fuelwood andpole requirements on the natural forests, efforts in the past to replacethe resource were sporadic and often inconsistent.

2.04 Although Government was perceiving wood shortages and imminentdepletion of natural forests it concentrated in the past, on establishingindustrial plantations with exotic pine species and to a lesser extenteucalyptus. Thus, over the last 30 years the Government established morethan 75,000 ha of plantations (87% conifers) (Table 1) of which 71% are inthe Northern Region where only a few people live and low priced land wasavailable. The largest plantation block in the country was establishedwith assistance of ODA in the Viphya mountains. Total investment cost isestimated US$35 million and current operational costs are about US$1.3million per year. The purpose of these Viphya plantations was pulp andpaper production but in the late 1970's it was found that internationalpaper demand was not growing as predicted and that Malavi would have nochance to export paper economically. Now it is difficult to findalternative uses for the wood since it grows in an area more than 600 Kmfrom the country's major market. Only 7X of the potential wood yield inViphya will be used by a sawmill, and a panel and blockboard mill recentlyappraised by IFC and the German Development Bank (KfW).

2.05 In the mean time the fuelwood shortage has become more pressing.The plantations established in the past were predominantly coniferous treesand concentrated in large blocks. These industrial plantations exceed thedemand of the industry beyond the year 2000. For alternative utilizationof the plantations such as for fuelwood, transport cost would be

prohibitive. Only recently, with the oil crisis, did Government fullyrealize that fuelwood must remain the major energy source for people withlow income and initiated programs for improving the wood energy supply.The NRDP II Wood Energy project partly financed by IDA was the mostimportant effort to tackle the energy problem.

2.06 In Malawi, an area of 3.7 million ha is classified as forestland. The indigenous "miombo" forest has a low productivity (MAI 1.2m3/ha) due partly to ecological conditions in the region but also to humaninfluence, in particular in large areas of customary land, whereproductivity is further reduced to an estimated MAI 0.8 m3 /ha by annualburning for pastures and excessive cutting for fuelwood.

2.07 In Malawi, the following forest areas can be distinguished: (a)Reserves of 980,000 ha or 17% of total forest area; these are protectedforests under Government authority to secure sustainable fuetwood andtimber supply, erosion control and watershed protection. Wood cutting islicensed. About 30X of the Forest Reserves are on Customary Land; (b)Forests on Customary Land under local or traditional authorities; these arethe rural population's major source for fuelwood and poles. The forestsare not managed and no charges are levied for wood cut for the people'sown subsistance. Officially there is a stumpage fee on wood cut forcommercial purposes which is seldom collected due to the local authorities'understaffed and inefficlent revenue collection system. Increasing ruraland urban demand will now rapidly deplete these forests. It is estimatedthat the cutting rate exceeds the sustainable yield by more than 100Z; (c)there are large forest areas (about one million ha) in National Parks andGame Reserves in which wood harvesting on license is permitted; (d) forindustrial supply, over the last 30 years the Government established 65,600ha of coniferous plantations with mainly Pinus patula and about 9,000 habroadleaved with plantations mainly Eucalyptus spp. The Northern Region,in particular in the Viphya mountains, has 72% of all industrialplantations while the Southern Region has 12% although the wood processingindustry is concentrated there.

LAND USE a/

Total Land Area 9430Forest Reserves 690National Parks and Game Reserves 1070 b/Estates 470 c/Urban Areas and Infrastructure 370Total Non Customary Land 2600

Forest Reserves 290Cultivated Areas 1370Cultivable Land Under Forest 2250Non Cultivable Land (70Z Under Forest) 1760Tewporarily Cropped Land Partly Under Forest 1200

Total Customary Land 6830

a/ Plantations are established in Forest Reserves, Estates and UrbanAreas.

bl About 70% is under forest cover7I 90,000 cropped (20% of total Estate Land).

SOURCE: Hunting Technical ServiceForestry Department

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2.08 While the Government emphasized pine planting in the past, overthe last 5 years it has helped private entities and farmers establish20,600 ha (Table 2) of plantations with eucalyptus and other broadleavedspecies which together now cover 22% of the country's total plantationarea. These eucalyptus plantations are scattered all over the country,making them more accessible for fuelwood and pole consumers. The missionestimates that over a quarter of these recently planted eucalyptusplantations would be used for transmission poles and sawn wood, a half beused for agricultural purposes and housing poles, arid the remaining quarterwill be used for fuelwood of which tobacco curing has a large share.

2.09 The supply from these already existing fuelwood plantationsaround cities and elsewhere will reach 320,000 m3/year by the end of thedecade. Also, about 100,000 m3/year of residues from logging and woodprocessing would be available at that time.

Supply and Demand of Wood

2.10 Although 39% of the country is covered with forests only 52% ofthe total demand can currently be met by sustainable wood production.

Estimated Wood Production a/

EconomicallyPotential Accessible Projected

mAI b/ 1984 1984 1994m3-/a --Million m3

Forest Reserves 1.2 1.2 0.8 0.8National Parks and Game Reserves 1.0 1.1 0.8 0.5Estates (Natural Forests) 1.2 0.5 0.5 0.3Cultivated Areas 0.1 0.1 0.1 0.1Cultivable Land Under Forest 0.9 2.0 1.4 1.4Non Cultivable Land 70" UnderForest 0.8 1.0 0.8 1.0Plantations 15.0 0.2 0.2 1.4Total Wood Production 6.1 4.6 5.5

a/ Estimates are based on location and accessibility.

b/ Mean Annual Increment (MAI) and ha has been estimated by the ForestryDepartment. Its differences are based on different stockingdensities and exploitation intensities.

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Estimated Wood Consumption

Actual Projected1984 1994 c/

-Million m3-FuelwoodUrban 1.2 1.6Rural 5.1 7.6Estates 1.1 0.8Rural Industry 0.5 0.7Urban Services and Industry 0.1 0.1

Subtotal 8.0 10.8Poles 0.7 0.9Wood Processing Industry 0.1 0.2Subtotal 0.8 1.1Total Wood Consumption 8.8 11.9

c/ Annual consumption is estimated with increase of 3% with the exceptionof estates which could reduce their consumption by 30% over 10 yearswith improved barn technology. Other wood savings have not been takeninto account.

The major reasons are that (a) the indigenous forest have low naturalproductivity which is further reduced by overexploitation in Customaryareas; and (b) an estimated 30X of the forest areas are inaccessiblebecause of lack of infrastructure or are located too far from theconsumers. The forests in Customary land are providing 702, ForestReserves and plantations slightly more than 10X and non forest areas suchas cultivated or temporarily cropped areas and estates 20% of totalconsumption. However, forests in Customary Lands are carrying the largestburden since the cutting rate is three times higher than the sustainableannual wood production which means that the natural forest's productivityis currently reduced by 1.8% annually. Thus the wood deficit is mainlybeing met by drawing on the nation's forest capital. Total woodconsumption is estimated 8.8 million m3 of which only 0.1 million m3 areprocessed in the sawmnilling and panel industry and 0.7 million m3 are usedas poles for housing and fencing. The remaining 8 million m3 (90% of thewood consumed in the country) are used for energy.

2.11 The demand for industrial wood 1/ including the projectedincreases can be met by the existing plantations beyond the turn of thecentury. The pole demand for housing and fencing is already quite wellcatered for by plantations and farmer woodlots and it is very likely thatthe demand will be fully met over the next five years since current pole

/ Logs for the mechanical wood processing industries and transmissionpoles.

prices do stimulate private tree planting. Thus the deficit has beencaused by the increasing demand for fuelwood. The rural population isconsuming 70%, the estates 14% (mainly for tobacco curing) and the urbanpopulation about 16% of the country's fuelwood. The latter have however ahigher per capita consumption (2.5 m3/year) than the rural population (0.8m3/year) since they use more charcoal and they have a more affluentconsumption pattern.

2.12 Timber volumes required by the existing and proposed woodprocessing industries are shown in Table 5. The Northern Region has asurplus of sawlogs and peelers available even after installation of theproposed Chikangawa mill (and also a large volume of surplus pulpwood). Onthe other hand, the mills located in Blantyre will run into increasingunavailability of timber grown in nearby areas and will have to purchase atleast part of its wood inputs from plantations in the Zomba area or evenfurther away lowering the profitability of their operations.

Institutions

2.13 Forestry Department. The Forestry Department is part of theMinistry for Forestry and Natural Resources and manages public forestresources. It is organized in 4 divisions: (i) the Forestry Division isresponsible for establishing timber plantations, protection of forestreserves for wood production and ecological stabilization. It also handlesland policy and forest legislation; (ii) the Wood Energy Division (createdin 1979) is responsible for fuelwood plantations, for extension and theformulation of wood energy policy. The Energy Studies Unit under the WEDis responsible for carrying out all surveys related to wood energyproduction and consumption. The creation and operation of the Division issupported by the NRDP II Wood Energy Project funded with a credit ofUS$13.8 million; (iii) the Management Services Division includes forestryresearch, training, forest inventory, surveys and economic planning.Research is carried out by the Forest Research Institute of Malawi (FRIM)in Zomba. The research policy of FRIM is determined by the NationalForestry Research committee which meets once a year with the Chief ForestryOfficer. The major research areas are (a) silvicultural research includingsilvicultural management, mensuration, tree breeding and ecology; (b)supplementary research including soil analysis, entomology,pathology andforestry products; and (c) fuelwood production and management of indigenousforests; (iv) The Viphya Plantations Division which established andoperates the Viphya Forests. A fifth division, the former ForestIndustries Division operating the Government mechanical wood processingindustries was recently converted into the Wood Industries Corporation,Ltd. (WIC).

2.14 The Ministry of Local Government. The Ministry of LocalGovernment is supervising agency of the District and Town Councils. TheDistrict Councils are controlling forest resources and the trade of forestproducts in customary land to District and Town Councils. Licences forutilizing forest's and, with the exception of charcoal making, the amountcharged as stumpage for a particular species or a group of species have tobe authorized by the Minister of Forestry and Natural Resources. Only 34Forest guards control more than 4 million ha, about 118,000 ha for eachguard. The District Councils have to transfer 20% of forest revenues tothe central Government.

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2.15 Wood for domestic use is free of charge in Customary Land but, iftraded, District Councils charge different stumpage fees often notauthorized by the Minister of Forestry and Natural Resources. This may notbe undesirable given the local variations in the size of the fuelwooddeficit. However, the revenue collection system is ineffective and closelyrelated to the inadequate control and management of the forests inCustomary Land.

Forest Policy, Legislation and Regulations

2.16 The present Forest Policy dates from 1964 and contains the basicprinciples for managing the Forest resources of the country (Annex 1). TheForestry Department is currently formulating a new Forest Policy statement.

2.17 Forestry is governed under the Forest Act of 1964 (Cap. 63:01),and the Forest Rules issued pursuant to the Act.

2.18 The Forest Act covers four major areas:

-- The establishment of Forest Reserves, and the use of forestproducts from the Reserves;

-- The transfer of responsibilities from the Minister of Forestryand Natural Resources to District Councils who can establish,manage and control Council forests on Public and Customaryland;

- Village Forest Areas to be designated on Customary Land by aVillage headman, with the approval of the Minister; theMinister may prescribe rules for the use of Village ForestAreas;

P- olice powers granted to forest officers and other officersconcerning the control of forest produce; fees, royalties andlicences pertaining to forest produce controlled by Forestry,Game or District Council; or for offenses against the ForestAct.

2.19 The Land Act is the paramount legislation governing the use ofland. The Land Act can transfer title of land to the government and canenable the Department of Forestry to manage land for forestry purposes ifthat land is declared to be a Forest Reserve. However, the Land Act hasfar -reaching implications on the management of the forests in CustomaryLand since the Act does not grant title of the land of Forest Reserves tothe Forestry Department; title is retained by Traditional Authorities; thusone party owns land but cannot use it, whereas the other party (theForestry Department) is theoretically powerless to prevent abuses of forestland or to manage land for forestry purposes; because of this omission inthe law, other agencies such as the Post Office, ESCOM, or Public Roads canuse reserved forest land in conflict with forestry purposes.

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III. WOOD PROCESSING INDUSTRY

3.01 Four out of the five major sawmills were operated by the ForestIndustries Division (FID) in the Forestry Department. FID produced 48Z,Timber Products, Ltd (TPL), a subsidiary of UK Imperial Group, with thelargest single sawmill in the country, produces about 44% and small familymills and pitsaws about 8% of the country's sawntimber output. The publicsawmills operated well under their installed capacity with the variousmanagerial shortcomings. TPL however is operating efficiently although itsexpansion has been curtailed by limited access to Government produced highquality pine logs in the Zomba mountains. In view of the disadvantages torun an industry with civil servants, Government recently decided to convertFID to the Wood Industries Corporation Ltd. (WIC) a commercially operatedenterprise.

3.02 Sawmilling and Panel Industry. The most important industrialactivity processing forest resources in Malawi is sawmilling. (Traditionaluse of untreated poles for housing is not considered part of the industrialsector). Out of eight sawmills now in operation, five (four WIC mills andthe TPL mill) are accounting for 90% of total production. Plywood andflush doors are produced by TPL in Blantyre. The plants' output is shownin Table 3. Their operations are summarized below.

3.03 The Blantyre and Zomba sawmills are obsolete and the latter'slayout and location is inadequate. The Mazamba sawmill is mainlyprocessing thinnings but it has inadequate handling facilities and for theproduction of quality lumber it would require the installation of dryingkilns. The Dedza sawmill is relatively new having been designed in 1973and completed in 1978 but its operation is handicapped by small size oflogs of thinnings fed to it. The TPL mill operates efficiently but it isalready having difficulties in obtaining log supplies due to the depletionof indigenous forests and the limited yield of the company's own eucalyptusplantations in the Blantyre area.

3.04 Except for the Blantyre mill, WIC processes mainly softwoods andless than 5% of its total output has been hardwood. The reverse is true ofthe TPL mill in Blantyre which has utilized mostly indigenous hardwoods andplanted eucalyptus.

Secondary Wood Processing Industries

3.05 Most sawmills are integrated to some degree with furtherconversion operations. The Dedza sawmill makes some furniture and alsomoulding, woodwool/cement boards and sawdust pellets. The WIC Blantyremill has a separate unit to manufacture furniture and it also producespallets, boxes, crates, etc. These conversion activities are not, however,strongly promoted. TPL, on the other hand, not only makes tea chests,tobacco cases and other boxes, but also produces 2,000 flush doors annuallyusing its own plywood and sawnwood. In addition, there are ten firmsspecialized in joinery and furniture production (of which three employ morethan 50 people) and many artisans or cottage operations, whose output isunder-reported.

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Government Forest Industries Policy

3.06 Given the relative scarcity of other natural resources, forestryand associated industries are important to the Government's economicdevelopment plans. The large-scale utilization of Viphya's extensiveplantations for pulp (established for export) has been studied extensivelybut it has not been demonstrated to be economically feasible. To improvethe efficiency of forest industries already established in the country theGovernment converted, by Presidential Directive on April 16, 1984, theForest Industries Division (FID) into Wood Industries Corporation Ltd(WIC). Some or all of the WIC mills could eventually become joint ventureswith private investors. The Bank will support these developments by a loanof US$6.4 million now under preparation for equipment and technicalassistance to help WIC organize itself into a private company,rehabilitating the sawmills, preparing feasibility studies for secondarywood industries and finding alternative uses for the Viphya forestresource. In addition, IFC will provide a loan of US$4.8 million andequity for the recently formed private company Viphya Plywoods and AlliedIndustries Ltd. which will produce sawn wood and pannels in Chikangawa(Viphya). (Market for mechanical wood products is discussed in Annex 3).

IV. RESOURCE CONSTRAINTS

Introduction

4.01 The purpose of this chapter is to inject a note of realism priorto the discussion of issues and solutions by reviewing briefly the fundingand manpower constraints of the sub-sector. One of the most seriousproblems in development in Eastern Africa over the last decade has been thewidespread failure to tailor programs to budgetary and manpower resources.Often this has not been a small matter of modest percentages ofovercommitment, but a major issue with overcommitments of many times.

4.02 It would be defeatist to ignore any potentially productiveinvestments, however promising, that took budgetary resources beyond theirpresent level, but it would also be dangerously unrealistic to plan totallyunfettered by the harsh realities.

Budgetary Resources

4.03 The Ministry of Forestry and Natural Resources (MFNR) has arevenue (recurrent) budget of MK 3.8 million (US$ 3.0 million) for1983/84. This represents a 21% nominal increase (about 9% real) from the1982/83 revised estimates, considerably more than the 10% nominal increase(slightly negative real) in the total revenue budget. The 1983/84 figurerepresents about 2% of the total national revenue budget. This compareswith nearly 8% for agriculture, 7% for health, and 17% for education. TheMFNR development budget, much of which includes recurrent types ofexpenditure and including a very small National Parks element, is MK 5.2million (USS 4.2 million), representing about 3.5% of the total nationaldevelopment budget compared with 252 for agriculture, 4% for health, and15% for education.

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4.04 Personal emoluments represent 53% of the sub-sector revenuebudget. Appropriations-in-Aid, i.e. income from forest sales (royalties,log sales, fees, etc.) are expected to amount to MK 2.2 million in1983/84, covering 58Z of the gross revenue budget expenditure on forestry.Thus, forestry investments do have considerable direct earning capacity.Appropriations-in-Aid have increased quite substantially over the last twoyears due mainly to increased prices and increased production and sawlogsize. From a 1982/83 actual of MK1.8m, Appropriations-in-Aid are projectedto climb at 8% annually in real terms to Mk2.5m by 1986/87.

4.05 Donor support for forestry in 1983/84 will consist almostentirely of IDA funds for the NRDP II project which are projected for thatyear to be about MK 2.7 million (US$ 2.2 million).

4.06 Elsewhere in this report it is argued that there is an impendingfuelwood crisis and that the consequences are serious enough to warranttreating forestry as a special case. However, there is no satisfactoryanalytical means of comparing hospitals, schools or roads with trees. Itis not, therefore, possible to demonstrate through analyses that theforestry budget should be increased. The provision of 2% of the totalrevenue expenditure seems low given the potential ecological and welfareimpact of fuelwood deficits. Total forestry sub-sector revenue (recurrent)and development expenditures in 1983/84 are 6% of the amount allocated toagriculture. Given the potential impact of loss of labor, loss of soil andenergy shortages on both sustainable agriculture and nutrition, this againseems somewhat low. Looking at benefits, many of the potential forestryinvestments probably have quite high returns. Investment in revenuecollection seems to have good prospects of more than paying for itself infinancial terms; returns to increased research investments in agriculturegenerally have very high returns, and one might expect the same forforestry research. Analyses recently carried out for Ethiopia suggest veryhigh returns to investments in fuelwood production if, in the absence ofthe fuelwood, farmers would turn, as they will, to the burning of manureand crop residues.

4.07 One is faced with the stark reality, however, that if forestrydoes not get any special treatment, one must assume that the forestrybudget will grow in real terms only at the average for the total nationalbudget which for the next few years will probably be 0% and in the longerterm cannot reasonably be projected at more than, say, 4%. Such a growthrate (zero for 3 years and 4% for 7) would provide an additional MK 1.2million by 1993/94, enough for the expanded research program and a modestextension increase but nothing else. One might call this the realisticscenario although it is probably on the optimistic side.

4.08 One might also pose a special case scenario giving a 7% annualreal increase for the next 10 years, based on the following revenue budgetchanges (justifications for the priorities implied ensue in followingchapters):

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Real Increase/l (Decrease) byIDivision Change Year 10

(MK million)

Forestry add MK 1.0 million byyear 5 for revenueI collection;

iForest Industries transfer to private or commer-

I cially self-sustaining operation: (0.2)

$Management Services add MK 300,000 for research nowadd MK 500,000 for trainingby year 5;add 4% annually after Year 5: 1.1

gWood Energy add 6X annually for increasedI | extension: 0.3

add MK 1.0 million by year 5 forI urban plantations; add 4%annually after year 5: 2.8

IViphya reduction of 30Z to a reduced

I I - t maintenance level: (0.4)

IAdmin. & General add 2% annually;add MK 100,000 assistancefor Min. of local Govt.: 0.2

I . _ }~I !__________________ Total 3.8

Appropriations-in-Aid are estimated by the mission to increase at 6%annually leaving a net budgetary requirement after appropriations ofMK 2.0 million by Year 10. This scenario represents a 7% annual realincrease in the revenue budget.

4.09 The Revenue Budget increases given would represent about adoubling of expenditure in 10 years. The absolute increment in 1983 pricesby Year 10 would be MK 3.8 million gross or 4K 2.0 million after deductionof Appropriations. This special case scenario still involves very limitedinvestment in plantations. MK 1 million would maintain about 8,000hectares, about 10% of urban demand.

4.10 If further investment in the forestry sub-sector could bejustified an -extra special case scenario might be postulated aiming atthe planting of about 9,200 ha annually (see Table 6). The net annualbudgetary requirement (after sales at a raised price of MK4.0 per m3) wouldbe about MK6.0 m by Year 10 (see Table 22), equivalent to an annual realnet revenue budget increase of about 15%. Establishment costs are notincluded since they are assumed to be Development Budget costs.

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4.11 Thus, we have identified the following scenarios, all of whichfocus on increased expenditure for fuelwood (we have not identifiedsignificant increased budgetary requirements for industrial forestry):

(a) the existing budgetary allocation in real terms, providing,obviously, no change in the present level of services;

(b) the so-called "realistic scenario' (actually somewhat optimistic)with 3 years at 0% growth followed by a 7-year period at 4%annually; this would cover in due course most of the neededincremental investment in research and extension but nothingelse;

(c) the 'special case scenario- covering, in addition to (b)above, a substantially increased training program and anadequate level of funding for national forest reserve guards,2/ but only a token plantation expenditure, involving 7%annual real budgetary increase;

(d) the 'extra special case scenario" requiring about a 15% annualreal budgetary increase covering, in addition to (c) above asubstantial plantation program of about 9,000 ha annually. Theexact net amounts required from Government for these scenarioswould obviously depend on how the expenditures impacted onAppropriations-in-Aid, on the sales price of wood and on donorscommitments. However, although the economic situation in Malawiargues strongly for a concentration by donors on provision ofrecurrent funding, many donors are reluctant to get into thefunding of programs that appear beyond the capacity of Governmentto maintain after the project period.

4.12 In the present economic circumstances, with Government strugglingeven to maintain existing operations let alone increase them it will beessential for donors in this sub-sector as in the economy as a whole to beextremely circumspect about the provision of development expenditure and tofocus largely if not exclusively on support for and rehabilitation ofexisting capital investments rather than creating large new demands forrecurrent expenditure.

4.13 The authors of this report are very conscious of the fact thatmany reports which deal with individual sectors or sub-sectors within theeconomy offer a -special case' argument on some grounds or other, while atthe macro-level Governments are continually urged to reduce spending. Thisreport does not therefore make an unequivocal recommendation that fundingat the higher level should be found, we would, however, argue that theredoes seem a good case for substantial increases in forestry sub-sectorinvestments; later sections of the report will attempt some justification.

Manpower

4.14 Manpower estimates should be closely related to budgetaryprojections since it is generally a reasonable premise that staff numbersshould rise at a percentage not substantially higher than the realbudgetary increase. Currently there are about 526 staff in post above the

2/ Excluding housing cost

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subordinate level in the Forestry Department. It has calculated adesirable 'full complement' of 1,416, the present establishment, excludingsubordinates, is about 840 so staffing stands at about 60% ofestablishment. Within the Forestry Department, the following is theproposed distribution of forestry extension staff in the ADDs. TheTechnical Assistant would act as a Subject Matter Specialist toagricultural extension staff.

(Number of suchLevel of Forestry Staff Administrative Area areas nationally)

Sr. Forest Officer (P8) Agr. Development Division (8)Technical Officer Development Area (40)Technical Assistant Extension Planning Area (180) (12-20 Agr.

TA's per area)

To provide projected full complement in extension would require 228 staff,current staff in post in extension are 2% 3/ of that. In view of thelimited availability of purpose-specific and location-specific messages andin view of the fact that wood surplus areas could be omitted there seems tobe no need to place one TA in each EPA . However, it will be necessarythat the Forestry Department identifies areas where fuelwood shortage hasalready reached crisis proportions and where at least one TA should bestationed. Thus in the beginning, about 80-90 TAs would probably be themaximum number which would have a measurable impact. The mission urges astrong focus on quality over quantity in extension since forestry extensionstaff will be operating as subject matter specialists and fewer highquality staff at this level will have more influence over the number ofeffective farmer contacts than large numbers of poor quality staff.

4.15 The large increases of staff in Management Services, ForestIndustries, and Viphya Divisions seem difficult to justify. The totalnumber of Field Assistants requested in these Divisions is 300 compared toa current level of posts filled of 40, and for posts above SFA and belowP8, 248 requested compared with 37 filled. Certainly an increase inresearch and training staff is justified, but a jump from 21 FA's to 117 inViphya seems excessive when already Viphya, a resource whose commercialvalue is at best uncertain, is a massive drain on the budget.

4.16 It would require a detailed manpower study to review all tasksand develop justifications for optimal levels of staffing in all Divisions,but there would appear to be some evidence that proposed staffing levelsare, in total, somewhat excessive in relation to likely budgetaryresources. It is essential that staff numbers are not allowed to growsignificantly faster than the real growth rate in the budget so thatoperational funds are available to effectively use the staff in post. Thispoint is perhaps addressed more to Treasury than to the ForestryDepartment. Government Departments may often pursue high levels ofstaffing in order to wring out of Treasury larger budgetary allocations.It is up to the Treasury to place a major emphasis on relating recruitmentand training approvals to future budgetary projections.

3J Without 80 nurserymen giving some limited technical assistance in treeplanting to farmers.

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V. REVIEW OF MAIN ISSUES

A. Fuelwood

Introduction

5.01 Is there a fuelvood "crisis"? Government, many people in thecountry and most outside observers seem to perceive that there is. Surveysby the Energy Studies Unit suggest that farm families, on the other hand,do not perceive the situation to be of crisis proportion, although they arewell aware that there are fewer trees than there used to be, thatcollecting is getting more difficult, and that planting more trees would bea good thing.

5.02 To provide some background, in the following paragraphs a modelshould demonstrate the stages that would occur in a rural area aspopulation builds up at 3% per year from 25 persons per square kilometerto, theoretically, 270 persons per square kilometer over about 80 years(Chart 1). Stage 1 of the graph covers the period when both cultivableland and fuelwood are in surplus. Cultivated area per capita isconstrained by labour and therefore remains the same (in practicetechnological change would probably alter this assumption somewhat), themaximum that can be handled is assumed to be 0.5 ha per capita. Aspopulation rises cultivated area rises and eats into the indigenous forestresosurce but this presents no problem initially since the fuelwood demand,assumed to be 0.8 m3 per capita in rural areas, is below the aggregatesustainable wood supply provided by a Mean Annual Increment (MAI) ofindigenous forest of 0.8 m3 per hectare. Stage I ends when cultivableland runs out, this is assumed to be at 25% of the total land area, butthis would obviously vary with land and soil type. During Stage II,cultivated land area per capita falls as the increasing population isconfined to a fixed cultivable land area. However, fuelwood would stillnot be a problem since the aggregate demand would still be below theaggregate supply generated by the MAI of the remaining indigenous forest.Stage II ends at the point where population has grown to the level at whichthere would be less than one hectare of indigeous woodland per capita (percapita demand - 0.8 m 3, MAI of indigenous woodland - 0.8 m3 per ha). Thispoint is the start of the fuelvood declire. Demand over and above the MAIwould then have to be met by eating into the capital wood resource, theequivalent of clear felling of trees, although it would normally bemanifested in increasing thinning rather than in clear felling. Thedecreasing cultivated area per capita continues, of course, as populationclimbs. Stage III goes on until the indigenous forest is completely gone.By this time, cultivated area in the model has fallen to about 0.1 hectaresper capita which also happens to coincide in this particular case with thesubsistence -end-point" (the point at which, assuming a 2,000 kg per haaverage maize yield and a subsistence need of 200 kg per capita per year, afamily can no longer feed itself). Time periods in this theoreticalscenario might be stretched or foreshortened by various alternative modelassumptions (for example, an urban demand overlaid on the rural demandwould pull down the indigenous forest hectarage curve faster, a highercultivated percentage would squeeze Stage II), but the general picturestill seems broadly applicable to an understanding of the Malawi

- 15 -

situation. Although there are enormously wide variations between areas,many locations in Malawi appear to be well into Stage III, perhapssomewhere between the 50 and 60-year marks on the graph.

5.03 There would certainly appear to be the makings of a crisis ofsupply, although there is little doubt that, even without planting,adjustments would be made by people through reduced fuelwood demand,switching to alternatives such as dung and, in desparation, outmigration.However, the surveys by the NRDP II Project Energy Unit do not show muchperception yet of a crisis in the minds of farmers. Farmers are aware thatfuelwood is getting more scarce and are planting trees, but this is almostuniversally for poles, and as the models which will be discussed latershow, there is no incentive to grow fuelwood since currently only about 40poles would buy the families' total annual fuelwood requirement (given thecurrently low financial price of extractirg fuelwood from customary lands).

5.04 Some form of end-point does seem almost inevitable withoutdetermined and concerted action to either avert it or at least relieve someof the hardshiip and ecological damage. One can guess from the variousprojections available, including those in the NRDP II Preparation Report,that an end-point would be reached over much of Malawi within 20 to 30years. One would consider any such total loss of a basic need within 20 -30 years serious enough to be termed a 'crisis-, quite apart from theecological crisis that would be precipitated in the process. One mustconclude therefore that there is a fuelwood crisis. Malawians of thepresent generation are borrowing both wood and soil from future generationswith little prospect of repaying it. The country in a very real sense isrunning a large deficit budget.

The Economics of Fuelwood Production by Smallholders

5.05 Farm Management Issues. Any economic analysis of likelyresponses of farm families to production options must be interpreted as apartial analysis for two reasons. First, it is theoretical, second, thereare many social factors that cannot be incorporated and, third, even withrespect to economic judgements, there is the analytical complication ofhaving two decision makers in the family, the husband and the wife.Notwithstanding this caveat, we believe that there is sufficient evidencein Africa of farm families generally acting in an economically rationalmanner to give some confidence that such an analysis is a worthwhi'lecontribution.

5.06 In order to review the options open to a farm family the readeris asked to refer to the Model Tables 7 to 10. Table 10 summarises thereturns to investment, the returns to land and the returns to labour offour options: growing poles, growing fuelwood, collecting fuelwood, growingmaize. Future earnings are discounted in the Models at two rates, 25% and50%, to represent what seem to be farmers perceived discounting of futureearnings. It should be noted that the direct comparison with maize madehere is only relevant to the extent that land, labour, and capitalresources are competitive. The technological solution of agro-forestry isan attempt to reduce this competitiveness and even to exploitcomplementarities. To the extent that this can be achieved (and packagesstill have to be developed on this) a direct comparison with maiae is notwholly realistic.

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5.07 For the family whose major constraint is lack of cash, growinglocal maize and collecting fuelwood are two good options, due to the smallcash outlay. Growing fuelwood does not compete well due to the delay inrevenue. For the farmer whose major constraint is land availability, andthis is likely to be the predominant constraint in the future, although itmay not be perceived to be at present, growing poles is very profitableeven if the family discounts its future earnings by 50%. Again, growingfuelwood does not compete well except that at the lower perceived discountrate on future earnings it is marginally better than growing local maize.

5.08 For the farmer who has adequate land and for whom returns tolabour are critical, growing poles is again an excellent enterprise andgrowing fuelwood does not compete with growing maize. The model suggeststhat growing poles would be particularly suited to the older family who,having invested the labour in trees prior to old age, could sit back intheir old age and earn a good cash income from pole sales with minimallabour requirements.

5.09 The surveys by the Wood Energy Division indicate that land isnot, at present, perceived to be short, that livestock are not a seriousproblem to planting, and that the expense of seedlings is not a majorconstraint except in the Shire Valley. The survey answers seem to implythat the limited planting is a combination of lack of interest and possiblya labour constraint, combined with the delay in production at a highperceived discount rate. The models are consistent with this, they suggestthat growing fuelwood is not competitive with most other productiveactivities at the present, although poles production is a good enterprise.Looking to the future, however, it seems clear that while the extensionservice have, in poles, a very profitable crop to offer the farmer, thedemand for poles is likely to be both limited and highly inelastic.Assuming a national annual requirement of 20 poles per family per year andan average production of 1,160 poles per hectare per year (based on Table7), a national polewood hectarage of about 20,000 hectares would satisfythe market. Once the pole market is saturated, the decision about growingtrees for fuelwood would be a new and independent decision, dependent onthe perceived relative value of wood at the time in relation to otherlabour and land demanding options.

5.10 The models indicate that, at the 25% discount level and presentmaize/fertilizer prices, the value of fuelwood would have to beapproximately doubled from Its present value, i.e. it would have to rise toabout MK 5.0 per m3, to be competitive with improved maize. With a 50%discount rate it would have to rise by over 4 times, to about MK 11.0 perm3 to be competitive. The higher discount rate seems a more realisticassumption for the future as land becomes short and immediate needs becomeincreasingly paramount. The figures themselves should not be taken tooseriously, but the principle seems valid. Scarcities have not yetgenerally bitten hard enough to expect a substantial planting response.

5.11 Unfortunately, the graph model at Chart 1 suggests that in atleast one representative situation the subsistence "crunch' comes at aboutthe same time as the fuelwood -crunch", i.e. that as the last of theindigenous woodland disappears due to increasing population pressure so thecultivated area per capita reaches levels at which subsistence is seriously

- 17 -

threatened. The effect would be that as the value of fuelwood rose sharplyso would the value of mai2e for consumption. In other words a wood priceof, say, four times the present price might well be matched by food pricesfour times the present level. One may, therefore, conclude that it cannotbe assumed that in due course there will be widespread incentive to utilisepotential arable land to grow fuelwood unless the fuelwood growing is notcompetitive with arable crops such as in an agro-forestry system. Thus,one has a present situation in which unless the growing period of wood canbe substantially reduced (2 years?) fuelwood is not an attractiveenterprise at present prices and one has a future situation in which foodmay increasingly compete in spite of a rising perception of wood scarcity.Note that this interpretation of the issue implies that it is not simply aquestion of sitting back and waiting until farmers do really feel the pinchenough to do something about it; it implies that the stratety must be towork at fuelwood production through the technology to make it moreattractive against future severe land resource competition.

5.12 If these conclusions are valid it throws the focus urgently ontothree strategies. First, research on fast growing species and systems,second, the growing of trees on uncroppable land and third, the developmentof agro-forestry.

5.13 Research is discussed further in paras 5.27 - 5.40. The extentof uncroppable land which is not suitable for food crops but which issuitable for growing fuelwood is not known. The mission believes that itis important, first, to carry out an assessment of the extent of such landnationwide and second, to focus some adaptive forestry research on speciesand husbandry adapted to such areas. Two obvious land categories thatshould be covered in research are rocky areas and seasonally wet areas onthe edge of dambos". (The mission spoke to one farmer who appeared tohave made good use of a rocky slope unsuited to maize without, apparently,any significant erosion problem). In addition, more data is required howlocation, distribution and size of forest areas could influenceagricultural productivity.

5.14 Generally, the majority of croppable land has already beenallocated to either estates or to individuals under customary land tenurearrangements whereas the majority of uncroppable land in customary areasremains communally allocated. There is therefore a need for a review ofcustomary land allocation mechanisms with reference to forestry uses to seeif some means cannot be found for increasing land allocation to eitherindividuals or groups for the purposes of tree growing. Such a reviewshould also identify incentives and technical packages necessary toencourage individuals or group to apply for these land allocations. Acondition of further land allocation to individuals might be that the landbe utilised only for the growing of trees, a form of allotment system fortree plots. One needs to be aware of the social problems of suchindividual land allocation but it is nonetheless clear that thepossibilities have still not been fully explored. (The system has,of course, already developed with communal woodlots, but communaloperations have been generally very limited In scale to date and thesurveys show some resistance to communal wood production).

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Valuation of Wood in Terms of Agricultural Productivity Impacts

5.15 The end-point scenario for fuelwood in most African countriesinvolves the widespread burning of cattle dung for fuel as an alternativeto wood. In this section we attempt a crude analysis of this to value thenutrients lost to crop production by this practice and thus put a value onwood production where dung burning would be the alternative.

5.16 The energy value equivalence assumed is 1 tonne of dung = 1.45 m3wood. Elemental nitrogen is taken as 1.46% of the dry weight of dung andelemental phosphorous as 1.30% of dry weight (data based on an analysis inEthiopia, Newcombe '84). This one ton of dung would be the equivalent ofapproximately 1.4 bags of 20:20:0 (approximately 14 kg of N and 14 kg of Pin one ton of dung, 50 kg of 20:20:0 contains 10 kg N and 10 kg P therefore1.4 bags contains 14 kg of each nutrient). The economic cost of 1.4 bagsof 20:20:0 is currently about MK 35 (Malawi Smallholder Fertilizer Projectanalysis). Thus, one tonne of dung is worth about MK 35 in terms of N andP nutrients only. Note that this is an absolute minimum since there isalso value related to the physical impact on soil structure as well asmicro-nutrients. If there was direct substitution at the margin so thatfor every 1.45 m3 of wood produced 1 tonne of dung would be retained forcrop nutrient purposes then the value assv.gnable to wood would be MK 24per m3 (assuming a zero opportunity cost for the labour of dungapplication).

5.17 Such a value for wood is even competitive with the high cost ofGovernment plantations. In reality, a one for one substitution at themargin would be unlikely, i.e. for every 1.45 m3 of wood produced farmerswould probably not, in fact, release unburned and apply 1 tonne of dung,but even if they achieved 50% of this the implied value of wood would beMK 12 per m3, This is quite a high value for wood. For example, it wouldgive a 25% rate of return to investment in an extension assistant (MK 2400annually, see estimates in para 5.43) where a net value equivalent to theincremental adoption of 10 hectares annually could be attributed to theextension assistant's efforts.

5.18 We conclude, therefore, that the economic benefits of preventingthe use of agriculturally useful residues for fuel through investment intree growing is probably substantial. The above data based solely on themajor nutrients probably grossly underestimates the benefits. In oneexperiment in Eastern Africa the effects of a substantial manurial dressingon yield was significant up to 13 years after the application. Effects for2 or 3 years are common. Such effects are not explainable by themacro-nutrient content alone.

5.19 A further agricultural benefit to investments on fuelwood can beexpected from the shelterbelt effect. A matrix of trees spread amongstagricultural crop lands has been shown to improve the micro-climate and tohave a positive effect on total crop yields. We do not have sufficientdata to quantify the impact for Malawi but it may be substantial.

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Pine-Charcoal from Viphya

5.20 Whether charcoal from the north transported to the south would beeconomic in terms of giving some minimum rate of return depends largely onhow one values charcoal energy for urban areas. Table 14 suggests thatcharcoal is worth about MK 380 per ton at the urban market in terms ofkerosene alternative (this is based on a delivered kerosene price excludingtaxes of MK 0.50 per litre, data provided since this calculation was madesuggests that the delivered kerosene price may now be considerably higherthan this - the data will be reviewed with Government).

5.21 -Preliminary calculations suggest that charcoal in the Northwould require a very large subsidy to compete with the free wood resourcescloser to consuming areas. However, the issue of whether, in economicterms, a subsidy on say transport of charcoal from Viphya would be a betterinvestment than developing plantations in the South to sell wood below costneeds further review. The mission attempted such an analyses in its firstdraft which is now in Annex 4 but because of valid disagreements byGovernment staff with a number of coefficients and assumptions used we havewithdrawn this particular analysis from the main part of the final report.The methodology of the draft however remains broadly valid and we proposethat the Energy Studies Unit should get involved in comparision of thissort to provide the findings on which policy decisions could be based.

Estates

5.22 The wood consumption on estates, mainly for tobacco and tea, isestimated at 1.1 million m3 annually. Although many estates could growtheir own wood, very few in fact, do, for two main reasons. First, it isstill cheaper to send trucks outside the estate to collect from indigenousforest areas and second, many managers receive bonuses based on annualoperating surpluses which gives little incentive to invest now for futurebenefits. There are strong arguments for ensuring, through eitherlegislative means or incentives or a combination of both, that estates dogrow their own fuel supplies.

5.23 The cost of growing their own wood may not, in fact, involveestates in large cost increases since collecting wood is becomingincreasingly costly as the nearby indigenous areas are felled.Furthermore, as fees for indigenous wood from Government or CouncilReserves are increased, growing wood on estates will become morecompetitive. The UNDP/World Bank Energy Sector Management Program Report009/83 on Improving the Efficiency of Fuelwood Use in the Tobacco Industryestimates an average cost of MK 6 per m3 for wood collected by estates froma typical haulage distance. It seems likely that with the complementaryuse that estates can make of both labour and equipment their costs ofgrowing wood could well be only half the MK 18 per m3 of Governmentplantations, this would give a cost of M4K 9 per m3, a cost that is probablybeing approached already by those estates collecting over longer distances.

5.24 There seems little alternative to insisting that all estates growtheir own wood. The mission proposes that a system of tobacco hectaragelicenses should be considered, linking registered area of tobacco to

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certified area of plantation through inspection. Legislation alreadyexists on this so it is more a matter of enforcement but the legislationwould probably require modification if crop hectarage were to be registeredon the basis of plantation area.

5.25 Estimates suggest a typical wood requirement figure of 20 m3 ofstacked fuelwood for 500 kg of tobacco, totally unimproved, this wouldimply a requirement of about 1.25 ha of plantation (yielding 16 m3 per haMAI) to one hectare of tobacco(yielding 1500 kg of tobacco). Landavailability seems to be a less serious problem since only 90,000 ha out of469,000 estate land are currently cultivated.

5.26 The mission considered the merits of an option involving theprovision of tax incentives to help with initial establishment costs.However, in view of the limited and predominantly agricultural tax base theGovernment has to draw on, and in view of the fact that costs of collectingwood are in any case approaching the costs of growing it, tax incentiveswere not considered either desirable or necessary. With investments of MK450 for some technical improvements in barns, fuelwood savings of upto 40%are possible. A TA project funded by the Bank for testing the technicalpackage, for determining the total investment requirements and fordeveloping an extension system was approved by the end of 1983. This wouldreduce the cost of fuel growing further and is another reason for demandingplantation hectarages erring on low side, otherwise the incentive toutilise this technology to save wood would be diminished.

Research, Extension and Training

5.27 Research. The Revenue Budget expenditure on forestry researchfor 1983/84-is approximately MK 130,000 excluding salaries; nothing isprovided under the Development Budget. With salaries included expenditurewould be of the order of MK 200,000. The staff at the Forestry ResearchInstitute of Malawi (FRIM) consist of six research officers;specialisations are pathology, soils, silviculture (plantations, indigenousforests) and mensuration. There is another officer stationed at Viphya.FRIM is severely handicapped by shortage of staff equipment and transport.There is very little research on Social Forestry.

5.28 In agriculture sectors elsewhere in Africa, a rule of thumb whichhas been quite widely used is that research expenditure should beapproximately 1% of the gross value of output from the sector, with 2% oreven 3% being a short-term target for a sector or sub-sector that has beenneglected in the past. Expenditure on agricultural research in Malawi hasbeen running at about 0.7% of the value of output, a normal figure forAfrica although one which should probably be increased. Generally, in expost analyses of agricultural research, high economic returns have beenfound. This has applied particularly to research related to plant breedingand cultivar selection.

5.29 We have argued that the fuelwood problem can justifiably betermed a crisis. If this is a correct characterisation of the situationthen fuelwood should be given a special budgetary priority. We have also

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argued that, while modest increases in extension investments are warranted,mainly to exploit the potential of pole production as a profitable farmenterprise, the major problem in social forestry is the rather limitedavailability of appropriate technology. There is therefore a strong casefor forestry and agro-forestry research to receive funds at least to alevel equivalent to 1% of the value of output from the sub-sector.

5.30 Valuing the output of the sub-sector is a somewhat subjectiveexcercise but the following would appear to be a valid approximation:

NK million

Plantations excluding Viphaya df 42,000 haat MK 28.6 mean annual production per ha 1.2

Indigenous Forest Consumption 8.0 millionm3: (i) 50% not requiring replacement

@ K 2.0/m3 a/ 8.0(ii) 25% @ full pla7ntation stumpage of

K 18/m3 b/ 36.0(iii) 25% @ smallholder stumpage of K 1.3/m3 c/ 2.7

Total 47.9

a/ Based simply a common fuelwood price at source.hi From Table 11C From Table 8 assuming 12% discount rate and labour opportunity cost @ MK

1 per labour day., Viphya is excluded on the assumption that it has a zero opportunity

cost.

5.31 On this basis, forestry and agro-forestry research should receive1% of about MK 50 million, MK 500,000 per annum.

5.32 This indicative figure of MK 500,000 should be taken as justthat, a very rough approximation, but nevertheless a useful indicator oforders of magnitude and one which suggests that the research budget forforestry should almost certainly be doubled and possibly trebled.

5.33 The major thrust of any incremental funding should be on researchrelated to integrated land use systems involving forestry. Such researchshould be done jointly between forestry and agriculture researchers andshould include a substantial element of on-farm diagnostic surveys.Location-specific adaptive research on fast growing species, spacing,alley-cropping, erosion control, inter-plant competition, mulch systems,and systems for rocky Boil areas are all important subjects for attention.

5.34 To date, there appears to have been little or no contact betweenthe Forestry Research Institute of Malawi (FRIM) and the Farm SystemsResearch Project. The Government is currently planning a majorreorganization and reorientation of the Department of Agricultural Research(DAR) and to establish an Agricultural Research Council (ARC) in whichmajor institutions of importance for the agricultural sector arerepresented. However, in the proposal, the Forestry Department has not

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been included into ARC. This report recommends therefore4/ that the FD,through the Chief Forest officer, should be represented i1 the ARC toestablish the link between Forestry and Agricultural Research for aspecific program such as agroforestry which is already under theresponsibility of DAR. Social Forestry has basically three researchaspects. (a) Agroforestry research on farming systems comprising besidestraditional crops tree crops such as wood, fodder and fruits and theirinterrelationship and economic viability; (b) wood production research ongenetic material, suitable species and provenances, rapid regenerationsystems, maximized biomass production and management of indigenous forests;and (c) sociological surveys on what motivates or prevents a farmer toplant trees. For agroforestry it seems that DAR is well equipped toprovide the basic infrastructure and overall technical input. Woodproduction research is definitely a responsibility of FRIM with itsexperience and general infrastructure available. Sociological surveysshould probably be done in close cooperation by both research institutionsand the extension service.

5.35 For proper funding and implementation of Agro-Forestry Researchby DAR two important questions arise. First, can agro-forestry researchadequately be funded when its budget is added as a component to a larger,mainly agricultural, research program. Second, will it be possible todevelop the appropriate research/extension links with agro-forestryresearch in one Ministry and extension subject matter specialists inanother. These two issues require discussion within Government. Thisreport offers two suggestions. First, to protect the budget Treasuryshould consider identifying agro-forestry research under some form ofseparate vote sub-head. Second, that a post of research/extensioncoordinator in agro-forestry extension should be considered with theresponsibility for ensuring smooth functioning of the research/extensionlink.

5.36 We have concluded elsewhere in the report that it is almostcertainly out of the question for Government itself to grow trees forpeople on any massive scale, budgetary constraints will prevent it.Furthermore, the economics are against it (about MK 18 per m3 by Governmentplantation compared with about MK 2 per m3 by the small farmer). Thus, thetechnological needs in the future will be at least as much those of thesmall fermer as those of the plantation. Obviously, the budgetaryallocation within the research vote and the profile of staffing expertiseshould reflect this.

5.37 An expanded budget for such a program should not be applied tobuilding research sub-stations. It should be applied to expertise andoperating funds. Expertise is limited and should remain focussed to retaina critical mass. Adaptive research requires nothing but staff, transport,housing, a subsistence budget, a farmer's field and an interested extensionofficer. One would want to avoid the problem of having too many researchstations too thinly staffed so that potentially promising efforts aredissipated. A recent study showed that in the Department of AgriculturalResearch in Malawi only 33% of the voted funds went to actual researchwork, 52% went to station overheads.

4J The Government agreed recently that FD should be represented in ARC.

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5.38 Two important areas of expertise that may initially need to beinternationally recruited are agro-forestry and farm economics. It will beessential for the Ministry of Forestry and Natural Resources to send goodMalawian diplomat holders and graduates away for training in these fieldsas soon as possible.

5.39 Good research is as much a matter of discipline and attitude asof training. There are no short cuts. It requires long-term dedicationwhich can only be expected from staff who see a future in it. It will beessential to tackle the problem of promotional prospects and pay scales toensure that it is possible for good researchers to continue up through thePublic Service pay scale without hitting ceilings which force them acrossto the management stream. Without a realistic solution to this problem,increased budgetary allocation to research would be meaningless. TheMinistry of Agriculture has already tackled this problem to some extent.

5.40 The following is a proposed listing of important elements in asocial forestry research program:

(a) Collection and Review of all past research related toagro-forestry followed by a characterisation of allpotentially useful cropping and whole farm systems to betested;

(b) Discussions with relevant international institutions on farmsystems research including ICRAF, CIMYT (both have staff inNairobi), IITA, ICRISAT and ILCA and the regional SADCCstaff.

(c) Mounting of a national agro-forestry research conferenceinvolving all interested parties including the National FarmSystems Research Program and the Wood Energy Unit with theobjective of designing a 5-year program of collaborativeresearch and resolving management responsibilities andfunding for the program.

(d) Focusing research on the Southern and Central Regions andland scarce farms with priorities on:

(i) alley cropping of food crop/fuel/fertility building mixturesto assess yields of mixtures and optimal husbandry methods(e.g. leucaena/mai e);

(ii) testing of suitable fast growing species, particularlymultipurpose fast growing leguminous trees and shrubs suitedto each priority zone and suited to both good and poor soiltypes (particularly rocky sloping locations and damboedges);

(iii) testing spacing of pure stands of a range of trees forplantation pole production purposes together with food cropintercropping during early years;

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(iv) testing integrated land use practices for crop/tree mixturesand conservation layouts on steep slopes for erosioncontrol;

(v) testing all potentially useful species by zone for crop"neighbourliness", measuring range of impact on nearbycrops;

(vi) evaluating systems incorporating trees for livestock fodderpurposes; and

(vii) during later years, developing demonstrations of integratedland use systems on cooperating farms, and a range ofrecommendations that can be fed through forestry subjectmatter specialists to extension staff.

5.41 Extension. There are generally two types of influence that canbe brought to bear on a farmer; one is persuading a farmer to adopt a newenterprise, the other is teaching an enterprise management technique.

5.42 Is there a major persuasion role for forestry extension? Manyextension services have foundered because an attempt was made to 'persuade"farmers to grow crops that it was in Government's, but not their own,interest to grow. It is essential therefore, to have an understanding ofthe private profitability of what one is pushing.

5.43 The farm models in Tables 7 to 10 indicate that growing poles islikely to be perceived to be profitable but growing fire wood is not. Thisconforms with recent field survey findings by the Energy Studies Unitsuggesting the major interest is in poles. Thus, with respect topersuasion, the extension service have good reason to be persuasive aboutpoles. The problem with persuasion, apart from its potential misuse, isone of economics. How much increased pole growing can be expected fromsuch an approach? Don't most farmers already know what poles are worth andhow long it takes to produce one? What can the extension service tell themabout this that they don't already know? Generally, the highest returns topersuasive strategies come with innovations that are neither massivelyprofitable (these are adopted fast regardless of persuasion, even in theface of dissuasion) nor hopelessly unprofitable (these are rejected by allbut the foolish or the wealthy who wish to please) but which areintermediate with respect to profitability, well worthwhile but requiring asmall nudge to take off. Poles possibly fall in this category, but atpresent fuelwood does not appear to. A persuasion tactic on poles mighttherefore be economic, we would be less optimistic about such a pay-off onfuelwood and would not recommend designing an extension strategy aroundsuch an approach.

5.44 With respect to the other element of extension, the provision oftechnical knowledge, what proven recommendations can extension offer? Dofarmers really not know how to grow trees? If they don't, what is theproblem? Spacing? But spacing is very flexible depending on product andmost farmers seem to be doing the right thing for small pole production byplanting closer than recommended. Termites? Aldrin is not sold to small

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farmers, and they seem to know more than the extension service about'dequeening'. Species for different situations? Yes, there is undoubtedlyan extension role here, except that more research is still needed to becomfortable about recommendations. When to harvest? Surely, best left tothe farmer's judgement. Where to get seedlings? A small role perhaps.Helping researchers experiment with new species and systems? This may bethe most important role of all.

5.45 The limited number of roles suggested are all useful andcertainly warrant some limited increase in numbers of subject matterspecialists, but they do not represent a massive extension program. Themost urgent need is for more focus in terms of staffing and funds on thedevelopment of recommendations because the major problem is notcommunicating the messages, it is the development of the messagesthemselves.

5.46 The need is for an extension approach which treats trees as oneof many potential productive activities that must be incorporated into thefarm system. This is already reflected in the Governments decision toplace agro-forestry under the Ministry of Agriculture for an integratedtreatment of land use of both research and extension level. It isdifficult to conceive of this working through a separately operatedextension service focussing only on trees. The planting of trees onsmallholdings is not fundamentally a forestry issue; it is a farm systemsand social issue. Increasingly, in agriculture, extensionists are comingto realize that the highest yields per hectare are seldom the route to thehighest income or welfare because the essence of farming is making theleast detrimental management compromises between competing activities andthe exploitation of complementary effects between plants and animals; inother words technically bad husbandry may be good management. Thus theintegration of trees into the farming system should arise not from anobjective to grow trees but from the objective of improving the farmfamilies welfare which may involve, among other things,the introduction ofsome form of woody vegetation.

5.47 Such an approach has the following implications for the design ofthe forestry component of the extension service:

(a) it should utilize the existing EPA extension staff;

(b) the work program should be fully integrated with the agriculturalextension and land husbandry work program;

(c) the forestry specialist input at the EPA and District levelshould be provided as subject matter specialist support to theagriculture TA; an attempt should be made to involve existingfarmers who have nurseries and trees in the extension effort(possibly even through paying them as part-time assistants);

(d) the focus initially should be on pole production, this appears tobe a good farm enterprise particularly for farm familiesapproaching old age, it '.s relatively much better than fuelwoodand successful adoption of this would build confidence betweenfarmers and extension staff which wjuld be invaluable in lateryears;

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(e) extension should start to focus on women, perhaps commencing withsome further diagnostic surveys (the Wood Energy Studies Unit hasalready done some preliminary investigations) to identify theproblems and possibilities of getting women interested in treeplanting; but they profess not to know how to plant trees; thereare, therefore, many aspects that need study including the extentof their technical knowledge, their control over woody vegetationon the family holding, the extent to which sale of wood for polesby the husband affects women's motivation to plant trees; etc.

5.48 The mission recommends the fullest integration possible and theMinistry of Forestry and Natural Resources agreed to gather over five yearsexperience with integration of forestry into the agricultural extensionservice and that all operating funds should pass to the Program Manager.Work programs should be agreed between Forestry Department and the ProgramManager but then should be supervised by the Program Manager, salarieshowever, should continue to be paid direct to staff by the ForestryDepartment. Vehicles should be allocated to individual staff while theForestry Department should continue to have control over forestry subjectmatter specialists on technical matters the ADD Program Manager should befully responsible for management and monthly work programs.

5.49 A major issue related to investment priorities and extension isthe question of the economics of plantations provided by Government versusextension and related investments to get rural people to grow treesthemselves. Since adoption rates are impossible to predict it is adifficult question to answer but in the following paragraph the issue isexamined briefly mainly for the purpose of demonstration of the sort ofsimplified methodology that might be useful in comparing alternativeinvestment options.

5.50 Currently, Government plantations are costing about MK 300 per hato establish and about MK 125 annually per ha to maintain (Table 11) givinga stumpage cost at 16 m3 MAI of about MK 18 per m3- What chance is therethat investment in, say, an extension officer would be better? The cost ofan extension officer is about MK 1,000 annually (about 50% salary, 50%management and supporting services). Training costs are about anadditional MK 1,400 annually.5/ A total annual cost per extensionassistant of about MK 2,500 can therefore be taken as representative.Assuming a wood cost of MK 18 per m3, an extension officer costing MK 2,400annually would only need to generate about 5 hectares of planting annuallyto give a 20% rate of return on his cost and be competitive with theequivalent spent on a Government plantation. Note that if the 5 hectaresof plantation have a significant opportunity cost in terms of land orlabour then it would not be a sufficient adoption rate. Other comparative

5/ Recurrent training costs for a certificate of MK 1,200 per student peryear based on present Dedza costs. Capital costs estimated at MK30,000 per student place, amortised over 20 years @ 12% = MK 4,000annually = MK 8,000 for a two-year course. Total cost is therefore8,000 + (2 x 1,200) = MK 10,400 over 20 years of extension officerservice e 12% = MK 1,392 annual cost.

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performance rates could be generated by alternative improved assumptions.However, there is some evidence from these very tentative figures that onemay be talking about quite modest extension impacts to compete with thehigh cost of Government plantations, particularly since an adoption spreadeffect has not been included. One can conclude therefore that extensionprobably has a reasonable chance of being competitive. Research isessential for extension and so is training. One could argue therefore thatplantation expenditure should be a budgetary residual, not that it isunimportant, but that it should not deny funds to the other wood energyactivities.

5.51 Training. The mission was not able to carry out a full review oftraining needs and did not consider such a review necessary given therecent FAO Report 'Training and Education in Forestry and Natural Resourcesin Malawi". However, in this section, the mission has carried out somestaffing projections to expand on the FAO work by linking staff trainingwith budgetary projections.

5.52 Table 12 gives some theoretical calculations of annual percentageincreases in staff numbers allowing for attrition averaging 5X annually andassuming two scenarios of trained staff output. Scenario I represents thelevel of trained staff output proposed by the Forestry Department.Scenario II represents a 50% reduction of that scenario. The nuxmbers donot incorporate a lagged build-up of output and therefore the percentageannual increase actually achieved would in practice be staggered some 3years after the periods shown.

5.53 The staff increases of about 14% annually for 10 years inScenario I must raise some concern about future budgetary funding. Thereis reason to believe that operating funds to allow staff to do their work(fuel, vehicles, training materials, etc.) are already a serious constraintso it is likely that the total forestry revenue budget would need to riseat a similar rate of about 14% annually to service these staff.Otherwise,they would become increasingly inoperative as has occurred inmany other Eastern African countries.

5.54 Given the staggered nature of any training build-up the projectedannual increases in budgetary expenditures would not reach figures as highas 14% immediately, but they would certainly reach such figures within 5years. The mission believes that the proposed level of output, whiletheoretically desirable (more staff are always nice to have) would be amajor budgetary problem in the future. Average rates of staff build-upbeyond the 4% to 6% range may even be threatening to a balanced program ofsupport for forestry. The mission therefore proposes that the ForestryDepartment carry out a further review of this issue involving a detailedanalysis of attrition rates by post category and a 20-year projection ofstaff numbers on the basis, first, of the proposed staff output scenarioand, second, of a 4% and 6% rate of build-up annually over 10 years.

5.55 The mission has found no strong arguments for disagreeing withthe recommendations of the draft FAO Report on Training and Education inForestry and Natural Resources. However, the mission does support therecom endations in para 4.5 of the technical committees review of the

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report calling for a financial analysis of the training alternatives.However, given the need for a wide range of training on social forestryincluding agriculture, agricultural economics, soil science, land husbandryand extension methods and given the existence of this expertise and thefacilities at Bunda College it is difficult to conceive of a costeffectiveness analysis that would find Dedza a preferable institution fordiploma and degree training over Bunda.

5.56 The FAO report implied that it was the absence of linkages withother disciplines that would be likely to have an adverse effect ontraining quality at Dedza. Thus, the effectiveness element is as importantin the analysis on the cost element. The concern with effectiveness is asmuch for the staff as for the students. It is extremely difficult for anarrowly focussed institution to retain good staff, to develop them, and toprovide good teaching. There are substantial advantages for staff as wellas students in being close to related disciplines. The skills needed insocial forestry are largely indistinguishable from the skills needed inagriculture and land husbandry with a strong farm systems bias. (be theresponsibility of Ministries of Agriculture). It would therefore besensible to utilize an existing agricultural training facility for trainingin social forestry.

5.57 Another considerable advantage of Bunda is flexibility. Thedemand for graduates of institutions cannot be easily forecast if onlybecause the ability of the Government budget to employ and service suchgraduates is not always easily predictable. Building up smaller numbers oflarge institutions rather than larger numbers of small institutions,particularly at the more costly degree and diploma level, allows anincreased measure of national training flexibility should demand in onespecialisation fall relative to demand in another.

5.58 In the light of this analysis and a review of the FAO report themission strongly supports the recommendations made by FAQ that the diplomacourse should be mounted at Bunda College with assistance from the NaturalResources College. The mission has reservations about the mounting of adegree course anywhere in Malawi given the enormous cost for providingspecialist staff for a maximum annual output of 10 graduates. However,the situation would be different if SADCC would decide that Malawi shouldtrain professional foresters for the region, a Forestry college could bejustified. Nevertheless, overseas training, preferrably through a jointregional arrangement within the forestry committee in SADCC should bevigorously pursued.

Pricing and Revenue Collection

5.59 It is unlikely that Government, even with substantial donorsupport would be in a position to fund sufficient plantations to meet theurban fuelwood demand. Incentives for private fuelwood production and costrecovery to support limited public production are therefore importantissues. Table 11 gives projected stumpage costs for Central GovernmentPlantations. At an MAI over the full rotational period of 12.3 m3 , astumpage of about MK 18 would be required to cover costs. The presentstumpage fee for indigenous timber is MK 2.88 per m3, covering only about

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23% of the replacement costs. The cost of MK18 per m3 is high and themission recommends a review by Government of these costs to developeproposals for cost saving (for example could vehicle operation costs bereduced?).

5.60 Assuming, however, that costs of MK 18 per m3 are based onacceptable levels of efficiency there is a strong case for moving from thepresent highly subsidised price of MK 2.88 per m3 towards MK 18 as soon aspossible. Clearly the MK18 per m3 is of little practical significance atpresent and there is a good argument that it should not be the ultimatetarget. Plantation prices would only be able to rise gradually In relationto the price of, and the extent of control of, indigenous wood. This mayactually mean lower fees for plantation wood than for indigenous wood.If plantation wood were MK4 per m3 with a 100% chance of having to pay itand indigenous wood were MK8 per m3 with a 50Z chance of having to pay,then the two, if in the same location, may be seen by the buyer to have anapproximately equal cost. If this approach of balancing plantation fees andindigenous wood fees against the degree of control of the resource Isfollowed then the ultimate aim would be to increase the average price ofall wood to a level calculated by taking the total cost of defending theindigenous resource plus filling the national deficit through plantationsdivided by the total deficit quantity. In Table 13 the impact of a higherstumpage fee on urban wood costs to the consumer is investigated to try toassess the degree of hardship that large price rises would impose. Threealternative response scenarios are shown. The indication is that a veryhigh fee for indigenous wood of MK18 per m3, i.e. a massive 600Z feeincrease, would give about a 25% price increase at market assuming areduced but by no means decimated sellers' margin, i.e. the assumption isthat both seller and buyer would share the impact. Whether this isrealistic is difficult to judge; the point, however, is that doubling ortrebling fees for wood will nowhere near double or treble the cost of woodin the market since transport is such a large element. A higher stumpagefee than at present may also contribute to some upward movement in thefuelwood price in rural areas thereby Increasing the incentive to planttrees for fuelwood since it is the widespread availability of free woodthat holds the price down. The mechanism for collecting higher feesefficiently from the urban fuelwood marketing channel is a major problem.Table 18 shows estimated costs using 3 staff to guard a 40 km2 unit. Inpara 5.72 it is suggested that MKl million might be adequate to givereasonable protection to national forest reserves. Since District Councilforest areas are a considerably larger area and more accessible the costswould be much higher. However, only 4 out of 24 District Councils appearto be failing to collect more than they spend on forest revenue.Therefore, increased efforts at revenue collection appear to be profitable.

5.61 The mission recommends:

(i) a study to quantify the forest resources on customary landand to identify measures to be taken for managing theseforests on a sustainable yield basis;

(ii) a study to review revenue collection methods (see Annex 2for TOR);

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(iii) the consideration of matching grants for District Council'sexpenditures on revenue collection; and

(iv) provision of a forestry advisor to the Ministry of LocalGovernment to coordinate a new revenue collection effort byDistrict Councils.

B. Wood Processing Industries

The Spatial Distribution of Production

5.62 In this section, a review is carried out, in a necessarilysimplified manner, of the relative economics of alternative locations forproduction of the three major wood based products (sawlogs/panels, pulp andfuelwood). The approach taken is to ask what the willingness-to-pay priceof a m3 of standing timber would be for the three main alternative uses.The methodology is to summarize and comment on existing analyses.6/ Anumber of simplifying assumptions are made. In particular, there has beenno allowance for complementarities, e.g. pulp and paper mills using residuematerial that does not have an alternative use.

5.63 Wood costs are a very small part of the manufacturing cost of apapermill, which makes analysis of ability to pay very difficult, but inany case the ERR estimated for a papermill alone, using the Jaakko Poyrydata, was only 7.3% and it is therefore apparent that even at a zero costof wood a papermill is unlikely to rise above a break-even economic rate ofreturn of 12%. One might assume, therefore, that a papermill would beunlikely to make anything other than a zero bid for wood regardless oflocation. Such a bid is likely to be competitive in the north, where thelack of alternatives suggests a zero opportunity cost, but not in thesouth.

5.64 The same analysis gives an economic rate of return of 14.5% forthe sawmill/papermill, the sawmill element lifting the rate of returnsubstantially. Sensitivity analysis shows that at a break-even rate ofreturn of 12% the cost of wood could rise from the K 20 per m3 assumed inthat analysis to about K 23 per m3 in 1980 prices, say K 30 per m3 in 1983prices. Thus intuitive assessments are confirmed, that sawlog productionwould usually outbid pulpwood regardless of location. This should notpreclude detailed comparative analysis of specific pulpwood proposals inthe future, it is simply a reminder that a sensible guide to policymakerswould be that, in the absence of evidence to the contrary, pulpmills shouldgenerally be seen as lower priority wood users.

5.65 The valuation of fuelwood is more difficult. For this the readeris referred to Table 14 in which an attempt is made to put an economicvalue on fuelwood. If fuelwood were valued at the kerosene equivalent(i.e., if Government insisted that people must have fuel at any cost) thenwood for fuel could be bid as high as K 49 per m3 (in 1983 prices),

6J Economic Analysls by the Bank's Industzrial Projects Department, January- 1982, using Jaakko Poyry Intenational oy 1981 Report Data.

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substantially outbidding sawlogs. However, this is unrealistic. Atpresent it seems unlikely that, even with good forest control, consumerswould outbid the sawlog figure of MK30 per m3.

5.66 An alternative approach that might be taken to such an analysisis the approach that assumes that regardless of economic returns the fullnational demand for all wood products will be met, i.e., a centrallyplanned economy's approach to the issue. This would demand a costeffectiveness analysis. Returns would in effect be assigned an infinitevalue, and the analysis would focus on transport cost minimization.Table 16 tabulates the results of some very simplified calculations whichhelp to give a feeling for the orders of magnitude. The table shows, asone would expect, that the transport costs of paper are too insignificantto be relevant. It also shows that in relative terms, i.e., relative tothe value of the product, transport for sawlogs is not of greatsignificance (note that this analysis is referring to transport of productand imported inputs, not raw logs; clearly large transport distances forlog supply to a manufacturing facility would become highly significant).Transport costs per m3 of fuelwood are high but one can observe fromcurrent practice and from an analysis of relative transport costs betweenfuelwood and charcoal (see Table 17) that transporting charcoal rather thanwood is the response to distances of 100 km and it therefore seems likelythat before transport cost for fuelwood reaches K 5.00 per m3 a switch tocharcoal would or should occur. However, with a switch to charcoal whenfuel production is pushed out far from a consuming area an additional costto the economy is the extra wood needed to achieve the equivalent heatingvalue in terms of wood. Table 15 shows two partial budget scenarios -modelling sawlog production close and far versus fuelwood far and close.It shows a small theoretical advantage in giving priority land allocationclose to urban centres to fuelwood rather than sawlogs. This advantagewould probably be lost, however, In the case of Zomba when account is takenof the prior existence of a sawlog industry with all the sunk costsinvolved and when the availability of residues for fuelwood is allowedfor. It would also be lost if wood were valued much below the full MK 18per m3 replacement cost. However, if the extra wood required in thecharcoal making were valued at t'w kerosene equivalent then fuelwood closeto the consuming centre would probably have a better claim than sawlogs.

5.67 The Pulp and Paper Mill Issue. New industries throw up someImportant issues. The Government is considering to establish a 12,000ton/year pulp and paper mill at L:.wonde near the city of Zomba. The millis supposed to utilize wood from the Zomba Mountain Forest (ZMF) to produce6,000 ton/year of industrial grad? papers and 6,000 tons/year of writingand printing paper. Total requirements of the pulp and paper mill would be49,000 m3 of pine pulpwood and 23,000 of hardwood for pulp and 42,000 m3 offuelwood. Alternative location for such a plant would be the Viphyamountains. It is not quite clear, if the current feasibility study carriedout by an Indian company is considering the Viphya option. If this is notthe case the Pulp and Paper mill promoted by Vipcor would be faced with rawmaterial supply problem in the Zomba area.

5.68 Currently the sawmill in the Zomba mountains utilizing about15,000 m3 p.a. (capacity is estimated at 17,000 m3 input p.a.) of pine

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sawlogs from ZMF. The sawmill is 16 years old and needs to be replaced,but market projection indicate that a new sawmill would be required by theearly nineties. The logic location for such a new mill would be ZMF sincethere are the only mature pine sawlogs in the country. Also, the privateTPL sawmill is interested in buying sawlogs and peeler logs from ZMF.

5.69 The pine plantations in ZMF is estimated to produce, if managedfor sawnwood production, an annual average of 56,000 m3 (50,000 m3)7/ oflogs over the next 10 years of which 31,000 m3 (27,500 m3) are sawlogs and25,000 m 3 (22,500 m3) are pulp logs (Table 20). In addition, a smalleucalyptus plantations of 670 ha produces nearly 15,000 m3 of wood. Out ofthe production of ZMF the existing sawmill and fuelwood users of Zomba take17,000 m 3 p.a. thus 39,000 m3 would be available for the pulpmill that isabout 10,000 m3 short of its requirements. For the hardwood requirementsthe situation is even worse. For a demand of 65,000 m3 (23,000 m3 pulplogs and 42,000 m3 fuelwood) only 10,000 m3 of eucalyptus wood isavailable.

5.70 In conclusion these are the alternatives: (a) if the ZMF remainsthe major supplier of sawlogs for the existing saw mill and the private TPLmill, the proposed pulp mill should use another resource i.e. Viphya; thiswould also facilitate investments in a future mechanical wood processingplans in ZMF; (b) if the pulpmill were established in the Zomba area theexisting sawmill would have to be closed; it would also put additionalconstraints on the fuelwood supply of the area since 55,000 m3 p.a. wouldhave to come from fuelwood and pole plantations in the vicinity of Zombawhich were partly established by the NRDP II Wood Energy Project. Giventhe imminent fuelwood crisis in Malawi in particular in the Zomba andBlantyre region and given the scarcity of other adequate wood resources forthe mechanical wood processing industry this option seems clearly not to berecommendable.

Prices

5.71 Lumber and panelboard prices have, not officially beenGovernment-controlled. However, since the Government produced in the pastmore than 50% of the councry's lumber and panelboard, it exerted a stronginfluence on the price of these products. Current and projected prices forthe main wood products are shown in the table below:

Malawi - Current and Projected Wood Product Prices(MKlm)

Current for CurrentDomestic Border ProjectedProducts Prices Prices

SawnwoodPine Construction Sawnwood 147 530+ 187-312Hardwood Sawnwood 248 -

Furniture & Joinery 212 635Shorts 82 - -

PanelboardPlywood, 4 mm - 670 650Plywood, 9 mm 354 640 -Blockboard, 18 mm 370 620 600

7! Figures in brackets is the production of the second decade 1994-2004.

- 33 -

5.72 Present pricing of industrial wood ex-Government plantationappears to involve a substantial subsidy on the costs of production. Table19 gives an analysis using tentative Zomba costs in constant prices andwhat are considered representative log volumes and residues from secondthinning to clear felling. If the cost data are correct (the data areunofficial and some staff have expressed doubt about them) then priceswould have to be raised to nearly 3 times the present level to obtain a 1Z2financial rate of return (the opportunity cost and capital which weassume). This price could be lower than 3 times the present level to theextent that the more difficult benefits to quantify such as protection andtourism can be included in the benefit stream. Whether such level shouldaccrue to wood industry activities is, however, debateable.

5.73 Viphya is a different situation. The opportunity cost ofstanding wood at Viphya would appear to be close to zero. The strategyshould therefore be to bargain sawlog prices to as high a level aspossible, i.e. to test to the limit the willingness-to-pay, but given theopportunity cost (knowledge of which will obviously influence the bidder),to be prepared to accept a zero or close to zero bid if necessary.

5.74 Pricing of sawlog products is no longer an issue. The proposalsto transfer the processing industry into private hands will leave pricingentirely to the free play of the market. This in turn will allow a freerhand in the setting of sawlog prices.

Environmental Protection

5.75 The budgetary constraints enumerated earlier which might suggestthat the Malawi Government simply could not afford to invest large amountsof money on the guarding of forest, can be approached from a totallydifferent position; the position that Government cannot afford not toinvest such resources in fuelwood and environmental protection.

5.76 It is beyond the scope of this study to carry out any detailedassessment of the likely costs of environmental damage8 / but thisreport can discuss here potential levels of expenditure and some likelybenefits. Table 18 shows an estimated cost of about MK 2 per ha forprotecting a typical 40 km2 indigenous forest area (about 4 miles square)using 3 patrol staff. Three staff in 40 km2 seems intensive at first sightbut if one wants total protection it is probably not unreasonable given thedifficulty of some of the terrain and the limited visibility throughwoodland. If all National Forest Reserves in Malawi were to be given thatlevel of staffing the cost would be about MK 2 million annually. If, inaddition forests in customary land areas were included the annual costwould rise to at least MK 5 million. National Forest Reserve areas aregenerally the most critical and it seems likely that, in view ofinaccessibility and the fact that guarding around the edges can often beadopted, a lower cost of, say, MK 1 million might be adequate for thoseareas. This would seem a modest price to pay for the protection of the

81 An FAO Study - 'The Environmental Impact of Development', which had amission in the field at the same time as the Forestry Sub-Sector Study,will be addressing some of these issues.

- 34 -

most critical areas and the prevention of problems with erosion.Furthermore, selective exploitation of these areas might well cover aconsiderable part of this cost. If District Council Revenues are anyindication there is reason to be optimistic about cost recovery. Only 4out of 24 District Councils failed to recover their expenditure onCustomary Land Forests and the average revenue was over MK 5.00 per MK 1.00of expenditure. Charges for the felling of Class II trees (e.g.Pterocarpus, Albizzia, etc.) under the Forest (Amendment) Rules of 1983,are now MK 35.00 so one such tree sold annually for every 30 hectares wouldcover about half the costs of patrolling and would still represent a levelof exploitation considerably below the Mean Annual Increment. Furthermore,two cost reducing measures might also be pursued, first, by using a higherproportion of lower paid patrolmen (i.e. reducing the proportion of fullytrained forest guards), and, second, by focussing on improving mechanismsof revenue collection. We conclude therefore that there is a case forconsidering increased expenditure on the protection of environmentallyimportant forest reserves because even the direct revenue collection wouldappear to have some prospect of covering the costs, leaving any indirectenvironmental benefits as a bonus.

5.77 Plantation species, particularly eucalypts, have sometimes beencriticised as causing serious erosion where they have been introduced.Even if such deleterious effects did occur they would need to be seen inthe light of the alternative, that in a wood deficit situation, for everyhectare of plantation established, the alternative would result over 20years in the clear felling of about 9 hectares of indigenous timber forfuelwood which would often be followed by undesirable forms of land use.Nevertheless, choice of species, contouring, and research on undercovervegetation are obviously important priorities to reduce the risk of suchdamage and this should be part of the research program.

5.78 In some cases in Malawi areas of indigenous timber appear to havebeen destroyed to make way for plantations at rates beyond what the localfuelwood market in indigenous timber could absorb. This clearly makes nosense and the mission suggests that the level of local demand for existingtimber stands should be considered in planning the phasing of any newGovernment plantations.

VI. TOWARDS A FUTURE STRATEGY

Introduction

6.01 While the ultimate actions yielding results in a program may bethose of many individuals or businesses who are responding to theenvironment and incentives perceived by them, the initial prompting,whether for good or ill, often comes from Government. A study of this sortis asking what interventions might Government make to stimulate betterproduction and efficiency in the sub-sector and above all to solve thefuelwood crisis.

6.02 The mission noted with some concern, therefore, the quite limitednumber of policy instruments that Government has at its disposal to nudgethe sub-sector into shape. It facilitates thinking about strategy to havesome broad concept of the types of instrument available; the following is auseful typology of potential interventions:

- 35 -

(a) Studies, i.e., actions that carry knowledge further so that adecision about appropriate action can be taken later;

(b) Government investment (with or without donor support);

(i) in physical development such as projects, infrastructure,etc. (e.g. investing in research,extension services,plantations or forest protection);

(ii) in manpower development, i.e., investing in human capital asan intervention mechanism (e.g. through extension);

(c) Organisational instruments (e.g., instigating action byaltering responsibilities within Government or transferringactivities between the public and private sectors);

(d) Direct taxation and income supplements or subsidies;

(e) Price manipulation (often, of course, linked to (d) above); and

Cf) Legislation, i.e., actions which it ic felt can only be broughtabout by the stick rather than the carrot.

6.03 Most of the proposals made for both fuelwood and forestindustries can be fitted into these categories. Policy, rather than beinga Government intervention itself, is the framework for Governmentinterventions.

Forestry Policy

6.04 The existing written forestry policy dates from the early 1960s(see Annex 1). It is brief and does not contain any statements with whichone could seriously disagree. On the other hand, it does not provide muchenlightenment for the 1980s on the direction of the Forestry Department,nor does it adequately address a number of the more recently emerging

issues. The Forestry Department has therefore decided to prepare a newpolicy statement which has not yet been discussed within the Government.The mission understood that this would probably consist of a brief overallpolicy statement dealing with broad objectives of forestry activity and asubsidiary document providing more detail on how the Department would goabout pursuing those goals.

6.05 The purpose of a policy statement is to provide a document thatis a useful guide for staff in the process of making decisions that willdirectly, indirectly, or by default, affect the general strategy directionwhich the Forestry Department is taking. For such a document and itssubsidiary documents to be useful it needs to focus on the more problematicissues at least as much as the easy ones.

6.06 Much of the value of preparing a policy statement is in theinternal dialogue that is demanded by the preparation of it and the missiontherefore urges the Forestry Department to take sufficient time in the

- 36 -

development of the statement so that it becomes not only an authoritativesignpost to the future but a catalyst to the making of some fundamentaldecisions in the present.

Fuelwood Strategy

6.07 The current gap between consumption and sustainable woodproduction is 4.6 million m3- This would increase by 1994 to 5.5 millionm3 if demand is not reduced by wood saving technologies and the productionincreased by planting more high yielding trees or managing naturalforests. The deficit means that Malawi's capital wood resource is beingeaten into at a rate of about 3% annually. Earlier in the report thesituation is characterised as of "crisis proportions. It is a situationthat clearly warrants close attention by Government to review possibleinterventions that would reduce the hardship and resource destruction thatwould accompany the resolution of the supply and demand conflict.

6.08 The reader is referred to Chart 2 which gives a schematicdevelopment of the main elements of a fuelwood strategy. The overallobjective has to be twofold, first to increase supply (but this cannot beat any cost) and, second, to reduce consumption (but this cannot be at toohigh a cost in terms of hardship).

6.09 Looking first at supply, there are three major (not mutuallyexclusive) options, the first is to get increased plantation establishment,the second is to get smallholder plantation establishment, the third is tobetter manage and utilise existing resources.

6.10 The fastest response plantation strategy would almost certainlycome from ensuring that all agricultural estates grow their ownfuelwood/poles rather than exploiting scarce indigenous resources. Whilecreating positive incentives is usually more desirable it is probable thatin this case the major thrust must be through legislative enforcement. Themission recommends that a plan be developed urgently to relate the maximumregistered hectarage of tobacco on each estate to the certified area ofplanted fuelwood in an agreed ratio of fuelwood hectarage to tobaccohectarage. Legislation exists but may require modification and a politicalmill to implement legislation.

6.11 Beyond this obvious and urgent initiative one is left with thequestion of how much plantation or subsidized transportation of charcoalfrom Viphya could Government itself afford to provide given ocherpriorities. Chapter IV outlines two higher level budgetary scenarios. Thespecial case- outlined calls for annual real budgetary increases of about7%,the -extra special case" for about 15%. The former would allow for anadditional MK 1 million annually to be spent on Government plantations byyear 5, allowing a planting of a meager 1,600 ha per year; the latter wouldallow for a a more significant incremental planting of about 9,000 ha peryear (the urban and rural block plantations element in Table 6). However,the second scenario still requires massive rural tree planting to meetdemand about 4 or 5 times the present achievement. The analysis has notbeen able to demonstrate that a particular level of investment in thesub-sector is optimal. However, the seriousness of the fuelwood crisis in

- 37 -

terms of resource destruction and social welfare would seem to pointtowards consideration of the higher expenditure scenarios.

6.12 The break-even analysis in Chapter V that investigated levels ofadoption that would be needed for extension investments to be economicallycompetitive with plantations suggests that,once the technology can beimproved and the incentives can be raised, investments related to helpingrural people plant trees might compete quite well with plantations forrural use. The conclusion of this analysis was that direct investment inplantations, which would involve a subsidy, should be treated as a residualafter investment in research, extension and supporting service to ruralpeople has been adequately covered. Subsidized transporting of charcoalfrom the north falls in the same category.

6.13 There appears to be a need for an improved strategy of revenuecollection, a carefully orchestrated move towards higher fees, and anincreased investment in revenue collection. The potential of interventionsthat will improve revenue collection will inevitably influence TreasuryJudgements on budgetary allocation to the sub-sector. The missionrecommends:

(a) that a study be conducted of revenue collection practices by bothGovernment, and District and urban Councils to recommendimprovements in methods and in control and distribution ofstaff. (See Annex 2 for TOR);

Cb) that the fees for indigenous wood for commercial purposes beraised gradually towards a national weighted mean of replacementand protection costs (a first step might be a doubling of thefees but the rate at which this can be done will depend on therate at which better control of the resource can be achieved, so,for the present, the target level would be academic) and thatduring this period marketed wood prices in urban areas becarefully monitored;

(c) that a review be undertaken of the efficiency of Governmentplantations with the aim of reducing unit establishment cost;

(d) that, if supported by the conclusions of the study, asubstantial increase in budgetary allocations by Treasury forforest guards/revenue collectors be considered to reduce accessto free wood in customary land by uncontrolled commercial woodharvesters;

(e) that consideration be given to providing matching grants forDistrict Council funds allocated to expenditure on forestguards/revenue collectors in District Council controlled forestareas with a view to improving revenue collection;

(f) that a forestry adviser be provided to the Ministry of LocalGovernment to work with District Councils on the improvement ofrevenue collection systems, and for forest management qualifiedForestry Assistants be employed by the local authority councils;

- 38 -

6.14 The second component of a supply strategy must be to encourageplanting by smallholders. There should be three major thrusts to thisstrategy. First, is an expanded and reorientated research effort; second,development of the extension service; and, third, increased landallocation.

6.15 Research undertaken by the Department of Agricultural Researchand the Department of Forestry requires a new direction towards developmentof appropriate farm systems incorporating fuelwood. Budgetary and staffingallocations to research should be at least doubled. The promotionalprospects and salary scales in research need urgent review, indeed, withoutthe latter, the former budgetary and staffing proposals would beunproductive in the longer-term. Agro-forestry research will almostcertainly need assistance from some internationally recruited staffparticularly on crop mixture technologies and agricultural economics.

6.16 On extension, the mission recommends:

Ca) an increase in staff closely related to future budgetaryprospects, but with more focus on quality rather than quantity;forestry extension staff will not generally be in direct contactwith farmers, they will be training agricultural extension staff;in this intermediary role quality of staff is not only the bestroute to quality of message, it is also likely to be the bestroute to quantity of extension contacts;

(b) more focus on women in research and extension commencing withsome more intensive diagnostic survey work and some pilotextension activities in one or two areas;

Cc) a training focus at all levels on understanding farm systemslinkages between trees, alternative productive activities, andresource constraints;

(d) development of integrated land use demonstrations on cooperatingfarms;

(e) focussing initially mainly on pole production, accepting, for thepresent, the reality that poles are the most financiallyattractive and building confidence in the extension service forthe longer term benefit of fuelwood production; and

(f) involving the more experienced existing tree growers inextension (possibly by providing some form of materialincentive to participate, e.g. free inputs or equipment);

6.17 The mission is aware of the immense social problems ofanything related to land tenure reform and is also aware of the efforts todate to develop the use of land for village woodlots. However, analysesand intuitive judgment suggest that much fuelwood planting will have to bedone in the future on what is currently communally-owned indigenousuncultivated and uncultivable land. It is, therefore, imperative toexplore with local leaders all possibilities of allocating land for tree

- 39 -

planting. Field observation suggests that the major constraint to thehectarage of communal woodlots is the level of commitment rather than theamount of land available; it is not yet clear to the mission that the sameproblem of commitment would apply to land that might be allocated for treegrowing to individual smallholders. Some pilot land allocation experimentswith local leaders should be initiated.

6.18 While this issue of land allocation is extremely sensitive andprobably requires different solutions for different locations, it wouldappear to warrant further exploration before all possibilities areexhausted. (A complementary step may be to incorporate forestry landtenure issues in the Bank's proposed land tenure study for FY85).

6.19 Another prospect for increased land allocation exploited by otherland short countries is the growing of trees on roadside strips. Browsingcattle damage could be a serious problem and the need for more rigorouscontrol would probably dictate that these areas should be in the hands ofvillage groups. The land area could be quite substantial, perhaps 10,000ha nationally. The mission recommends the initiation of discussions withthe Ministry of Works and Supplies, Department of Lands, Valuation andWater, and Local Authority Councils of having road side tree plantingwherever possible and where their proper protection can be guaranteed.

6.20 A third element of the supply strategy is to improve theutilisation of existing resources. The mission recommends furtherexploration of the possibilities of controlled utilisation of forestreserves; this might include contracts with urban suppliers for controlledfelling in reserves with lower fees for the more remote areas to encouragean even distribution of exploitation. The mission also recommends a moredetailed review of the possibility of transporting charcoal from the northbecause although it is still unprofitable it may represent as sound a useof Government subsidy as investment in plantations does. It would, ofcourse, be a temporary strategy. Other possibilities include continuedexploration of the better use of residues (although the brickette proposalat Zomba may be uneconomic). Another approach to the better utilisation ofexisting resources is to move people to the resource rather than move theresource to the people. Resettlement is not the responsibility of theMinistry of Forestry but clearly, if it can be accomplished throughestablishment of industries a flow of population from south to north wouldreduce the pressure in the south on many critically short resourcesincluding fuelwood and, incidentally, would have an impact on theopportunity cost of Viphya wood resources. At a minimum, there wouldappear to be a case for discussion between resettlement program andforestry staff on deficit and surplus fuelwood areas and possible impactson resettlement strategy.

6.21 Looking now at the demand side of the strategy, is there hope forsignificant savings?

6.22 Improved stoves do have some potential but estimates by the WoodEnergy Studies Unit, which appear realistic, suggest that in practicesavings are unlikely to be more than 1%-2% on national fuelwood use in theforeseeable future, so no miracles can be expected from this work although

- 40 -

it is still worth pursuing. Savings through improved tobacco barns couldbe much more substantial and more immediately achievable perhaps more than3Z annually,9/ this should therefore be given high priority. However, intotal, signiTicant savings without hardship are difficult to foresee. Oneprobably must conclude that, given the supply situation, drastic savingswill occur but regrettably they will be associated with considerablehardship, while the pressure on supply will be associated with increasinglyserious environmental damage and productivity loss in agriculture.

Forest Industries

6.23 This section attempts to develope the elements of a forestindustries strategy. The issues are less problematic than the fuelwoodissues and the discussion is therefore more program oriented.Nejertheless, fundamentally it also revolves around the making of choicesand the setting of priorities. The Government and the Bank agreed on thefollowing elements of a forest industries strategy:

6.24 Privatization. Transfer of Government forest industries to theprivate sector. In April 1984 the Forest Industries Division (FID) wasofficially converted into Wood Industries Corporation (WIC) to be operatedas a commercial enterprise. For the present the Government is the onlyshareholder but private equity would be desired. Its implementationinvolves a study to develop proposals on the timing and mechanics of thetransfer. This decision has an impact on both pricing of primary andsecondary wood products and organization; in a number of important ways itwill free Government's hand both with respect to management and resourcesto concentrate on the promotion of the production of wood. The missionrecommends that privatisation of wood production itself should not beentotally ruled out. A concession system would be a good alternative to thecurrent system. However, each case should be considered on its own merit.

6.25 Future Production Prospects from Existing Plants. The Mazambamill has a theoretical capacity output of 10,000 m3 /yr but it is notexpected to produce more than 5,000 m3 /yr because of some deficiencies inlog supplies, handling facilities and drying capacity. If no importantimprovements are made, the mill would probably close down in the early1990s. On the long term the Mazamba mill would only be able to keep amarket share in the Northern Region if the planned Chikangawa mill (partlyfinanced by IFC) would not substantially increase its sawnwood production.The cost for transporting lumber to the Southern Region would beprohibitive. The Dedza mill's capacity could be increased to 20,000 m3 /yrby 1995 but, it has been projected by MFNR to reach 16,000 m3 after 1990s.It remains however, doubtful that these production targets could be

9/ Technical Assistance Package to Improve the Efficiency of Fuelvood Usein the Tobacco Industry Report of the Joint UNDP/World Bank EnergyManagement Program, November 1983.

- 41 -

reached, since the plantations for the Dedza mill supply were started inthe early seventies. Logs would only be available from thinnings until theyear 2,000. That means low quality sasnwood and high production cost.Before any investment is planned the F.D. should carry out a detailedinventory with yield projections. The Zomba mill is obsolete and badlylocated and is assumed to stop operating in about four years. A newcomplex is planned for the late 1980s if the planned pulp and paper millwould not be based on the Zomba forest resources. The Blantyre mill isalso obsolete and should stop operations soon although the associatedfurniture, pellet and panel making activities should continue and beexpanded. Finally, the private TPL mill faces diminishing availability ofindigenous hardwoods. It is assumed that purchase of logs from theForestry Department will allow the plant to maintain output, but that theproduct mix will gradually shift from hardwoods to a higher share ofsoftwood. This mill also will depend mainly on the Zomba forest resourcein the future.

6.26 Although TPL has 'ndicated that plywood and blockboard couldincrease to 5,000 m3 through 1988 and double in the next five years throughpeeler log purchases from the Forestry Department, improved quality controland adequate training, the mission has conservatively estimated its averageoutput at 7,500 m3 annually in the next decade.

6.27 So far too little effort had been made in the past to establish z*diversified secondary wood industry such as furniture production joineriesor prefabricated houses. Thus pre-investment studies should be carried outto explore the viability of such an expansion of the wood industry

6.28 A basic tenet of the industrial sawnwood production strategy inMalawi should be meeting demand provided it is profitable. Given the soundeconomics and the external transport problems this should result at presentin national self-sufficiency. There is, however, a subtle but importantdifference in Government's new strategy following the privatising of forestindustries. Whereas before this change production was geared to Governmentdecisions with the potential for these to be unrelated to demand or theeconomics of production, now demand and the economics f production willdetermine supply, rationally and automatically influencing production.

Training

6.29 Training for management and intermediate level staff will becrucial for a successful transformation of the wood industries into aprivate enterprise since there is an acute shortage of qualified andexperienced managers and technical staff. Temporarily, it will benecessary to make expatriate expertise available through management andconsulting contracts. The Wood Industries Restructuring Project currentlyunder appraisal by the Bank will provide these specific training andtechnical assistance requirements.

Management of Industrial Forest Resources

6.30 The Government will maintain and manage the existing industrialwood resources and expand them as deemed necessary for meeting the market

- 42 -

requirements. Harvesting of these wood resources would either be carriedout directly by Government entities or through concessions given to woodprocessing enterprises.

6.31 Stumpage fees will be set by the Government based on marketforces and oportunity costs for wood in a particular region. There is noneed for unified stumpage rates all over the country.

6.32 In the under-populated Northern Region transport cost appear topreclude the use of the vast wood resource at Viphya. The Government willtherefore provide research, studies etc. to find alternative uses for theseresources.

Technical Assistance for Wood Processing Industry

6.33 The Government agreed with the mission that the efficientutilization of forest resources is a high priority endeavor in thecountry's development. Therefore, in addition to the major investment fora new wood processing complex at Chikangawa in the Viphya area beingfinanced by IFC, the Bank is currently appraising the Wood IndustriesRestructuring Project concentrating on rehabilitation of existinggovernment-owned sawmills through the newly created WIC. The project wouldprovide funds for technical assistance and training as well as forimprovements in the existing mills to bring them to full operatingcapacity, prolong their useful lives and substantially upgrade marketingactivities and management capability. The project would also includeassistance to WIC in carrying out feasibility studies for new processingfacilities, product development and quality improvements and forimplementation of such studies, if proven of sufficient economic, technicaland financial merit.

6.34 The Chikangawa complex at Viphya, in the north, was recentlyappraised by the IFC and will be cofinanced by the German Development Bank(KfW). The complex will be operated as a joint venture between Vipcor anda foreign technical partner. The complex consists of a logging unit, asawmill with 6,500 m3 /year one shift output capacity and a panelboard andblockboard output capacity of 15,000 m3/year. Sawnwood will mainly bemarketed in the Northern Region. The development of this reflects a soundstrategy of making the best use of an essentially zero opportunity costwood resource provided an adequate economic rate of return is obtainable.The mission is concerned, however, about the enormous drain on the budgetof maintaining the Viphya forests and recommends that this should be cut toan absolute minimum commensurate with the zero opportunity cost of theresource and with a management strategy related to the highest probabilityfuture modes of exploitation, possibly involving different managementapproaches on different portions of the plantation, perhaps with somepercentage of negligible management input.

The Planned Pulp and Paper Mill

6.35 The location of the pulp and paper mill is a major issue andcrucial for the future of the sawmilling industry of Malawi. If the pulpand paper mill would be established in the Zomba area based on the wood

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resources of the Zomba Mountain Forest as proposed by consultants it woulduse the only mature sawlogs and peeler logs in the country and would forgodevelopiment of a quality sawnwood production for at least 25 years. Inaddition, the mill would impose additional constraints on the alreadydeficient fuelwood market in thle most populated area in Malawi. It wastherefore agreed with the Government to scrutinize carefully thefeasibility studylO/for the pulp and paper mill currently underpreparation. PartTcular attention should be given to the stumpage rate onwhich the rate of return was based, how much wood is required, are otherareas than the Zomba Mountain Forest considered for the supply of the milland did the study evaluate other mill sites such as Luwawa (Viphya) forthis particular mill type.

10/ By Josef E. Atchison Consultants, Inc.

MALAYAFORESTRY SUB-SECTOR STUDY

Fuetwood Decline Over Dme Related to Populaton and Land Use(Model of 12 mile by 12 mIle area)

% HoaPM HO PopulatIo

Ho of --- oww. Fdes

It00 5 2500 icDoIU00

so 4 20(WX) 800). _

zo Pr Coptod okfWgonous F/et

40 2 10.00 40 OM - \Hoot Cuftibon

,1 VP ' Sod Culhebd Land ' \

20 1 bow E 20ow S/^ N'\dk Poo

lio Fv Cabtcs d CultrAt |r' ,

I I r~~~~~~~~~~~~~~~~~~~

2 00 20 0 40 so eo 70 80Yem

SIAGE I STAGE N STAGE M

S&*A Cult'non Cultkoicn Lond hrooN Culvtion Land Poknt BRe'nd Whih fuswcod &Land & Sul Dekfict But Surpkw Dect & fcae Plontv Tes an Wbsiancef uehvod Fue*vod Fuenvod Dl Arable Reducs End Poit

(ie hormtvesid CroppbigBelowvFuekvod om the Moan Sence.

Swco Mison ColcubatU ic n)

Weld Bank-2024

UIj, i ii,i

Ii !1I18 1,gIi '1iij iii I 0''iil

|~~~~~~I II 11

- 46 -Table I

MALAWI Paae IFORESTRY SUBSECTOR REVIEW

PLANTATION AREAS (Ha)Government

Northern Region

District Locatiou Conifers Broad Leaves Total

Mzimba Viphya 51087 2013 53100Mtangtaznga - 30 30perekezi 35 35Champ ra 36 36Dwamdazi 26 26Mbalachanda - 8 8

Nkatabay Kan.ingina - 99 99Likoma Island - 4 4Lweya - 1 1

Rumphi Bolero - 12 12Rumphi Boma - 5 5

Karonga Kasimba - 10 10Katili - 32 32Ighembe - 63 63Chan:.hasha - 10 10Chanturwa - 10 10Ngara - 36 36

Chi:ipa Muvan a - 1 1Nsanje Masenjere - 207 207

Subtotal 51087 2638 53725

Central Region

Ntcheu Dzonzi Muai 1724 30 1754Dedza Dedza Mountains 1758 73 1831

Chongoai 5018 62 5080Lilougwe Dzalanyama - 1420 1420

Katete C.G.P. - 466 466Dova Ngara C.G.P. - 397 397Mchisi Kaombe Timber 560 289 849Kasungu Local Authority - 316 316

Subtotal 9060 3053 12113

Southern Regiou

Hwlanje Chambe 477 - 477Likhubula 33 25 58Forest Lister 278 6 284

Thyolo Amalika - 425 425Masambanjati - 77 77Thyolomwaai 26 164 190

Blantyre Chisumula 380 186 566X.Kanjedza 29 89 118Ndirawde 885 18 903Michiru 322 57 379Chigwaja - 65 65Mirale 85 85Machi tri- 71 71Bangwe 155 155Chilomaoui ~ 84 84

Chiradzulu Chiradzulu - 37 37Zomba Zomba Mountain

Forest 3041 672 3713Zomba C.G.P. - 1257 1257Zomba L.A.P. - 291 291

Subtotal 5471 3764 9235

Total Malawi 65618 9455 75073

SOURCE: Forestry Department, Malawi, October 1983

- 47 -

Table 1Page 2

MALAWI


Private

Capital City Development Corporation 1083Chombe Tea Estate 263Kasungu Flue Cured Tobacco Authority 4748Timber Products Malawi Limited 2225Press Farming Ltd. 2832Estates (Tea and Tobacco) 2215

13366

RURAL WOODLOTS (ha)(Based on Seedlings Produced)

Farmers Woodlots 1/ 3590Admarc Depots 250Church Missions 480*Communal Woodlots 1000Schools 2/ 1425Others 545

7290

1/ Assuming a survival rate of the distributed seedlings of 40%2/ Assuming service rate of the distributed seedlings of 60%

SOURCE: Forestry Department, Malawi, October 1983

- 48 -

Table 2

MALAWI


Consumption of Mechanical Wood Products(000 m )

Sawnwood PanelboardApparent Apparent

Produc- Consump- Produc- Imports Consump-tion a/ Imports Exports tion tion b/ tion

1967 20.02 8.60 28.62 - - -1968 22.24 9.15 31.39 - 2.85 2.851969 22.68 12.00 34.68 - 3.52 3.521970 27.47 8.76 0.90 35.33 - 3.70 3.701971 32.46 7.55 0.25 39.76 - 3.59 3.591972 36.14 8.38 0.96 43.56 - 3.19 3.191973 36.95 7.95 5.62 39.28 3.48 2.43 5.911974 37.17 10.55 1.80 45.92 4.19 4.89 9.081975 37.89 11.62 0.11 49.40 3.39 4.46 7.851976 37.13 5.66 0.10 42.69 3.69 3.66 7.351977 37.96 2.91 - 40.87 3.91 4.17 8.081978 41.97 2.80 0.01 44.76 3.46 9.06 12.521979 45.74 5.59 - 51.33 3.34 6.67 10.001980 40.33 4.84 0.07 45.10 3.36 8.59 11.951981 38.31 0.60 0.32 38.59 4.43 6.77 11.201982 38.33 0.60 - 38.93 5.28 8.94 14.22

a/ Production figures shown in Annex 2-3 are for April/'arch fiscal yearsand have been adjusted to calendar years in this table.

b/ Net of re-exports which were 300 m3 and 1,810 m3, respectively, in 1980and 1981. Fiberboard imports averaging 2,018 m3 annually in the lastfour years not included.

Sources: M. Simula, Markets for Sawnwood and Wood-based Panels for theViphya Wood Industries Project in Malawi, June 30, 1982.VIPCOR/GOPA/Jaako Poyry, Viphya Wood Industries Project,October 1983.FIAG, Mechanical Wood Industries in Malawi (FIAG 80/24), October1980.

Industry DepartmentApril 1984

MALAWI


Sa1dwaxxt P'roJductiom In IhIawM(In iny)~

Year a/1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

llkblc %ector tillIs 1967 /69 /70 /71 /72 /73 /74 /75 /7b /77 /78 /79 /80 /81 /82 /83

Wirthrn Rftiln

Uiikanpy (G) n.a. 1,U07 864 1,366 1,948 1,933 932 -

Mhzanbul (G) n.a. - - - - - - - - - - - - 150 2,341

Umtral Reglioii'dza (G) n.n. 2,561 3,336 3,484 2,737 3,877 4,990 6,074 6,207 6,122 3,499 5,615 8,360 5,774 6,055 4,317(Li wAicl, 1W) ll.d. - - (134) (70) (36) (519) (192) (45) - - - - - - _

&lkXthern WRe,slm761cni (G) n.a. 3,603 4,440 3,013 4,685 5,404 6,634 6,51B 6,314 6,307 7,597 8,316 8,505 6,546 8,407 7,437Bllautyre (G) n.ea. 1,941 4,222 4,751 4,1U) 4,911 5,326 5,485 6,549 4,499 5,423 7,544 7,239 6,876 4,788 4,231

Rjbtotal 7,028 9,112 12,86W 12,614 13,460 16,125 17,882 18,067 19,070 16,928 16,519 21,475 24,104 19,196 19,40 18,325(Of whlilch IW) n.a. (I, Z'X) (3,058) (3,U88) (1,678) (758) (1,37U) (855) (86) (437) (253) (4;)) (474) (411) (3)) (787)

'I'I,B MilI I (P') 9,5l) 9,572 6,2hl 12,4(f1 16,261 14,83 14,901 14,436 14,438 14,762 16,733 16,601 17,382 15 ,5 0Wb 15, 1Xb/ 16 ,500b 1

.%il s;tlvil 1 s (C51') c/ (' 5(1t) 567 7011 991 8 1l) 1,190 I,1(X) 1,100 1,1iJ0 1,100 1,10 1,00 1,10 0 lU 543 500 500

IkUlkw". (pitsirM) (P) b/ 3,L)J 3, 3 ,) 3LXX 3 3,000 3,J0 3,5 3 3 ,500 3,50 4,W 4,00 4,0X)W 4,W 3, 2,500 3,000

'rot.ii AJ,0~ 22251 22,6331 29&013 33.611 35.645 373 3.7 13 38. ;1 6.77 38352 43 LA, 46 3.239d/ 38 ,334d 38.325

(Olf whiiisoftwcxls) n.a. n.a. n.a. n.a. ni.a. n.a. n.a. n.a. n.a. nose n.os n.e. 24,U8d/ 19,600b/ 19,301t/ 19,8&t/

(Of wld.iIprivate) °/ 13,OCXU 9,800 L6,200 19,900 19,3Ul) 19,4W) 18,900 19,00W 19,7W0 21,7(X) 21,600 22,350 18,950 18,300 18,900

C - hiblic sector P - Private suctor

a/ Exceit for 1967, years are for ApriltMardi perioxls correspgxndLrg to thie Forestry lwrtnu3nt fiscal years.b/ Fetinutes.c/ 'lhre are thlre samlI private circular rulls and a few mwhile units aoaI by FID.d/ Frtan Karkets for Sirmsaod ild Wood insed RHiels ( lNUR).

Siirces.: INJKIR, Karkets for Siaxd and Wod-based Panels, by M. Siaila, IL-sinki, Jtute 3U, 1982 (revlsed August ;3, 1982). 0

VIlRlt aikl C(IPA/J. Poyry, Vlplrya Wood I hustrles Project, Blatyre, (ktohbr 1983 (revised ?bveTher LI, 1983). Bn e timtes.

Industry DepartmentAprt I 194

- 50 -

Table 4

MALAWI


Projected Production of the Mechanieal Wood Industries In Malawi('000 m-)

1986 1987 1988 1989 1990 1991 1992 1995Softwood

Northern RegionChikangawa - 4.1 5.4 6.5 6.5 6.5 6.5 13.0Mazamba a/ 4.3 4.9 5.0 5.0 7.0 8.0 9.5 10.0Subtotal North 4.3 9.0 10.4 11.5 13.5 14.5 16.0 23.0

Central RegionDedza a 7.5 8.5 9.5 10.0 10.5 11.5 15.2 20.0

Southern -RegionZomba a/ 8.0 8.0 8.0 8.0 6.5 4.9 3.7Blantyre 3.0 3.0 3.0 - - -Other b/ 2.0 2.0 2.0 3.0 3.0 4.0 4.0 4.0

Subtotal South 13.0 13.0 13.0 11.0 9.5 8.9 7.7 4.0

Total Sawn Softwood 24.8 30.5 32.9 32.5 33.0 34.9 38.9 47.0

Hardwood

Southern RegionTPL (Blantyre) cl 18.0 18.0 18.0 20.0 20.0 20.0 20.0 20.0Other 2.0 2.0 2.0 2.2 2.5 2.5 2.5 2.5Total Sawn Hardwood 20.0 20.0 20.0 22.2 22.5 22.5 22.5 22.5

- _4 69__

Total Sawnwood 44.8 50.5 52.9 54.7 55.5 57.4 61.4 69.5

Of which from existingmills 44.8 46.4 47.5 48.2 49.0 50.9 54.9 56.5

Panelboard

Northern RegionChikangawa - 7.5 10.5 13.5 15.0 15.0 15.0 15.0

Central Region - - - - - - - -

Southern RegionTPL (Blantyre) 6.0 6.0 6.0 6.0 6.0 9.0 10.0 10.0

Total Panelboard 6.0 13.5 16.5 19.5 21.0 24.0 25.0 25.0

a/ Assuming these mills are substantially improved.b/ Including small operations in all regions, but mainly in the South.c/ TPL is shown as all hardwood production. Depending on log supply a

portion of output may shift to softwood.

Industry DepartmentJuly 1984

- 51 - Table 5

MALAWI


Proted Wood Requireients for V*chanIcal Processing a/('000 ui u.b.) D/

Anmsml verages1986- 1993- 2000-

1966 1987 1988 1989 1990 L991 1992 92 99 2009

Northern WonQdka Saiali c/ - 22.0 31.0 40.0 ,4.4c/ 44.4C/ 44.4 38.7 44.4 44.4Mlzmba 8.8 9.0 11.0 13.0 13.0 13.0 13.0 12.1 13.0 5.2

br d/ 0.9 0.9 1.2 1.5 1.8 2.1 2.4 1.8 2.7 3.09.7 31.9 43.2 54.5 59.2 59.5 59.8 52.6 60.1 52.6

Odkanga Panelboard el - 11.5 16.1 20.7 23.0e/ 23.0 23.0 20.0 23.0 23.0Subtotal NorhEbrn Ragion 9.7 43.4 59.3 75.2 82.2 82.5 82.8 72.6 83.1 75.6

Cantzl RegionBda Sawi.ll 16.0 20.0 22.5 25.0 25.0 25.0 25.0 23.9 25.0 37.5

Other d/ 1.0 1.0 1.3 1.6 1.8 2.2 2.4 1.9 3.0 3.0Subotal Central Regeon 17.0 21.0 23.8 26.6 26.8 27.2 27.4 25.8 28.0 40.5

SthmRegimnZobae Sawm.i11 16.7 16.7 16.7 12.5 8.3 16.7 21.9 17.1 27.1 27.1

lmantyre STmaill 8.3 8.3 8.3 8.3 8.3 6.2 3.1 6.2 - -Uzizije Sawmil - 4.2 6.2 7.3 8.3 8.3 8.3 7.3 8.3 8.3Other SazZillW d 1.8 1.8 2.5 3.1 3.7 4.4 5.2 3.8 6.B 6.8

26.8 31.0 33.7 31.2 28.6 35.6 38.5 34.4 42.2 42.2-L Pznelboard fI 3.6 3.6 3.4 3.5 3.6 3.8 4.0 3.8 4.8 6.4Zomba anelbor- - - - - 5.0 10.0 4.3 18.8 25.0

Subtotal Southern Regio 30.4 34.6 37.1 34.7 32.2 44.4 52.5 42.5 65.8 73.6

Total Softwoods 57.1 99.0 120.2 136.5 141.2 154.1 162.7 140.9 176.9 189.7

brtdern RegionOtber II/ 1.0 1.0 1.0 1.1 1.1 1.3 1.3 1.2 1.3 1.8

Other Q/ 1.2 1.2 1.2 1.3 1.3 1.5 1.5 1.3 1.5 2.1

Southern RegionITL Paelboard f/ 7.5 7.5 7.1 7.5 7.7 8.2 8.5 8.0 10.2 13.6Kblajne d/ - 0.8 0.8 0.9 0.9 1.0 1.0 0.9 1.0 1.4Other d/ 2.4 2.4 2.4 2.6 2.6 3.0 3.0 2.7 3.0 4.2

9.9 10.7 10.3 11.0 11.2 12.2 12.5 11.6 14.2 19.2

Total arzd.oods 12.1 12.9 12.5 13.4 13.6 15.0 15.3 14.1 17.0 23.1

Flberbord 81 - - - - - - - - - -

IMMAL MM M0 RF1MMIRE S 69.2 111.9 132.7 149.9 154.8 169.1 178.0 155.0 193.9 212.8

7,' BRqulreats have been estimated on the basis of conversion factors of 0.48 for swammoodprocessed In the Chika,w, Zmba and Blantyre wills; 0.45 in %zamba and 0.40 In the 1zasafll (uthere it Is no 0.39), &Lanje and azll operators. The conversion factor for plywodbos also been estinited at 0.40. For blockboard, consmpaon of sawlogs and peelers bIs beentn fim aCOE.

bJ Under bark.C Crising 27,OO Tm3(r) for sawnwood mnd 17,400 m3(r) for blIokboard at full capacity operation.

d Assumd distribueicn of reamireens from salI operators and pit saws./ Crisirg 19,0XC o3 (r) for plvxcod and 4,000 m:(r) for bLoclboard at full capacity operation.

fi Appradotely tuo thirds of the plant output assued to be In hariwod panelboard.if Asmdng coly saill veste is used.

-52- Table 6

MALAWI


Annual Plantation Area Required to Make up for the CurrentDeficit and the Increase Over 1/a 10-Year Period

Block Plantations Woodlots Total~ha

Urban -/ 5,900 1,000 6,900

Rural -/ 3.300 22,700 26,000

Estates 5,800 - 5,800

Total 15.000 -23,700 38,700

1/ Assuming 3% annual increase in fuelvood demand and MAI of 16 m3 ha.2/ Including urban industries and services.31 Including rural Industries such as tobacco curing, beer brewing,

brick making.

February 3, 1984

FtmRY sax-r snuD

1/4 itetam Wxdlot Ibil for Pole Ftkrtim

Yr I Yew 2 Vear 3 Yur 4 Y"r 5 'r 6 Ybtr 7 Year 8 Yeur 9 Yer 10 blr II Ybtr 12 Year 13 Yer 14 Year 15 Yan l6 bVW 17 er 18 Year 19 Yar 20

wwm

olbea (nRir) I/ - - - 4C0 - - - 1,Gw - - - ,6C2 D - - 3.2W - - 1,00Pxl1di (SOLd.w

3) V/ - - - 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4

V of Pole ( - - - 120 - - - 4U 0 0 0 4S0 - - - 360 - - - NOV&Uw of Pmtvood fb 4t - - - 1.0 1.0 1.0 3.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1. 1.0 L.0 1.0

Total ufUtta (W) - - - 121.0 1.0 1.0 1.0 481.0 1.0 1.0 1.0 481.0 1.0 3.0 1.0 61.0 1.n 1.0 1.0 301.0

Osls OqK)

ftwump (500) 5 S 50 1.0 - - - - - - - - _ - _ - _ _ _ _ _ _

Total Cuta 5.0 1.0 - 5.0 - - - - - - - - - - - - - - -

Ic loam (5.0) (1.0) - 116.0 1.0 1.0 1.0 481.0 1.0 1.0 1.0 481.0 1.0 1.0 1.0 361.0 1.0 1.0 1.0 321.0

AME (labirt lys)

tIl Prarmtim 6 - - - - - - - - - - - - - - - - - -

ldctirfg ad PRatingSiliw 4

Ibatfim v 2 2 1~~aU~~~~ I I I I

DoWmernil (termitem) 3 3 3 1 1 1 1 1 1 1 1lHmwgtbvy - - - 2 - - - a - - - 8 _ _ _ 6 - - - 5

Tntal lA3,r 15 6 6 4 1 - I i I - I a I - I 6 1 - I 5

Awrap epecrC 21 a x 21 a. ae pole per tre dfter 4 yewm 4 pole per tim cthreifter t 4-ear interval drt[pir to 2j polt b Year 20.Umd am outst memo 10% of an KU of 16 *3 per h (i.e. 16 v 4 x 0. 1).

w blls at Wz 0.3D per pole.V/ felwcd at WC 2.MO per 1n

3.

' At WI 0.01 per aiUng with 205 replanUM In Year 2.HaveI t lilbur to often pomed by bir.

We r 14, 1983

RtiltY SlO1lIM gmIJ

1/4 Ife..tarl, Wol... t 2.4iael fr Fti ol Prtlduct Ion

Yrar I Y*ar 2 fr I -ar 4 llrnr 5 YeAr b llnr 7 &r S Yesar9 9 rI 10 ua Year 12 Var 13 Wmr14 Yrar I Year 6 Year 17 Year 18 Year 19 Yr 20

111*7n"

P.mI1M' (0311, 01) If - - - 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 '.7 4.7 4.7 4.7VAti of RKi,lux%l O 2J - - - 11.71 11.7 11 11.75 12.7% 22.7% 227 11.75 11.?$ 11.7S 11.7S 11.7S 11.75 11.75 11.7S 11.7 I 2.75 11.75totA2 hRIfitS ( - - . 11.7i 11.75 11.75 11.75 11.75 11.15 11.75 11.75 11.75 11.7S 11.75 I1.7S 11.75 11.75 11.75 11.75 11.75

rtils (Am, h%l uily) - - - S.0 - - - - - - - - - - - -

o'l22'wu(('l)) Y s.n I4) - - -rwal Outl %.al 2,0 - 5s. -

4Ir *2&7rt (S.m (.0) - 6.7% 11.7% II.7S 11.75 11.7% 11.75 11.75 11.7S 11.75 11.7% 11.75 11.75 11.75 11.75 11.75 11.75 11.75

IMtlR (Iahutr Ihys)

1tA2 2I'u.rtt n ii to - - - - - - - - - - - -Ckillectil.A & P2ltl,)

Au'n222rw. 4Mit II* p 2 I 2 1

2)17.'u.l1IS,(trru21.,lJ I 1 1 1 1 2 1 1 1 1 2 Iktwit latj/ - - - - - - - - - - - - - - - - ' - -

ThIAtalohuwr 15 h, r z I - I - 2 - 2 - 2 - 2 - 2 - I

I/ Am ine eMnr towr tk. .)ir FvrhluJ fI 16 ml'r lu (lb x A - 17 4 4. 1).V -iatui1 .t '4 2.V ;r ml1.1/ PIbvIA prhrv .xv,sam'n hlrittliV Avr ty hAr, it f tir im thn tuy. nueql wt 2 nthI ur tivw 'rt l to r l it to acu to to stas of collected hIraI1Sn eWn.

l%E'udwr 41, 12M3

- 55 -

Table 9

15ALAWI

FORESTRY SUB-SECTOR REVIEW

Collecting Fuelvood Model (Collection of 1 Solid =3)

BENEFITS

Fuelwood (solid m3) 1

Value of Fuelwood 2.50

COSTS

Tools (depreciation) 1/ 0.18

NET BENEFIT 2.32

Labour (Labour Days) 2/ 7.5

1/ MK 5.0 over 7 years on 4 m3 per year.2/ Assumes 3 hours per headload of 35 kg, one solid m3 - 700 kg, i.e. 20

headloads @ 3 hours - 60 hours per m - 7.5 labour days (of 8 hours).

January 16, 1984

FRVRY SLESMS

etunw to tabwr (Net Peemt Valbe (K)

BeturMS to Intent Pturwm to lard (Ntt Pressnt Value (No per ha) Per Wecaxaed labwr Day

(Eiral Rate of Petur) Mmmt at 252 Discmmta at 5MX IMscomted at 252 Dlsctmted at 5C

(Qudig Poles 185% 858 256 8.9 4.0

Cnwiig Fbelwoxx 652 84 1/ 13 1.0 0.2

Collecting Rjelwood Oyer 1OO(C 1e nmt reluire farers lmrd. 0.3 0.3

Tqroved mime + Pertilimer 2/ 24C% 198 146 1.4 1.0

tocal Maize - Fertilizer 3/ Oyer 300( 69 57 0.7 0.5

1/ Nkte that if a full hIwetIi of the wod was uertaen In Year 4 amd threafter at 4-ear intervals a with poles thls returns to laKI flsre wx4d

increme shAat to a NP of 104 at 25% discunt rate.2/ From MaiLi &mllholder Fertiliser Project Mlze Model Table T-8.

2 F sam rvort Table T-7.

Jaary 16, 1984

57 Table 1I

FO SLB-S Scun

Yaw I Yer 2 Yew 3 Y 4 to Yer 36 9umq*Ae Culculatilt

AJ1ol lWats Projected Dsamntad Rewze Rauirddto bnwax Projected Cta

mmctS Tbo Yar _ __m

amaery 18.30 9 X 2404Bite Eparatlum Iaw C2awrug 17.98 18 K 1831

1hkig. Pittfrg & PIlUzW 25.84 27 X 18319.50 36 K 1831

Pertllizer pplicatim 5.22 K 7900Cidtivatlm 4.23 30.00 30.00 zupe at Varian YieIdRelwmd P'epwatia 9.35Plzbtic M1xteni 1 .54 3.00 3.00 Ml H3 MWI H3 KU m3

Other C4erad.zu 2.04 10.OD 10.00 25.ao 25.0o1st rt. 22 W 13 1D 440

13L00 43.0D 43.00 25.00 25.00 2nt w 27 240 18 160 9 80ad 18 160 9 8) 4 40

lMeetIMterials 4th - 13 12D 9 8D 4 A0

d Tools 4.45 2.00 2.OD 2.0D 2.00 Total 3 7;!0 440 224Rwuey lt8erials .76Pblytlm 11 8.59 Stcqr: K 11 X 18 K 35Fertilisr 18.12Ten kides 26.97 N :Seed 1.41Moto VeWcle lqme 15.91 15.91 15.91 15.91 15.91 1. Prlice disa.mted at 12LCther - 1.21 1.00 1.00 1.00 L.O0 2. Rctations assund at 9 yr

77.Y 18.91 18.91 18.91 18.91 in5terIls.Inlriect Gots 3. Assuind na euee from thin-

Sdlled Tabczr 3.24 3.24 3.24 3.24 3.24 4. Rantmance costs asmxidOvartfu, IBiday & Sitk Pay 3.02 3.02 3.02 3.02 3.02 ^wAtwnt yzu 4-36.Trawal 8 qbRqteRnr .9B .98 .98 .98 .96 5. !WarwUDtx cwsts ate mclausdd.Udlforms 4.68 4.68 4.68 4.68 4.68Other EVene 1.66 1.66 1.66 1.66 1.66

13.58 13.58 13.58 13.58 13.58

DepredActic of Ptxd esets 42.00 42.00 42.00 42.00 42.00

Overhtd Allocatimi 39.00 28.51 28.51 24.51 24.51

Total Irpat 303.00 146.00 146.0O 124.0D 124.00

Sowce: Wood lrg Project,MLnlstry ao Forestry and Natual RPxres.

Juymy 16, 1984

F!RiY 9L-ST SnD,

Ibrivaticm of Percent Staff tler Incren_e thier Alternative Trainirg Oktput Ass.wtlans

Scerio I Sanario UPrLqeso Anmtl Amial Arpes nLal Anmil

Attrition A,unal I Inc se lncreme outpit 2 Incae 2 hxreaseRate 5 / (atput I/ Year I 4I Year 10 Yar 20 Yr. I to 10 Yr. I to 20 Peue 50 Year 10 Year 20 Yr. I to 10 Yr. I to 20

lgne lewel 62 1t) 26 91 126 132 a2 5 52 67 72 52

Diplam tevel 52 2) 3/ &0 289 414 1U 92 14 160 208 7n 5t

(ertIflate 1rve1 4Z 4 2/ 1o0 402 602 15Z 92 2) 234 323 92 62

aib-total 2t6 782 1,142 142 92 446 598 8% 52

I/ As pVosei In PAO draft eport 'Training aid Ficattion in Forestry and %tural Resrs in Halwil', by 1983, on tmis of Qrenmsnt esttltes of nSuiru.nts.21 F li 10 Certifieate staff golrg cn Into Dplm tratnhir - fuU output prqxed wt 5. rrLt intdc Is 40.3/ Exclk' 2 Iplastes amsumd prmedlrg to &gn mcrse - full outpit pnuose was 30. Cirmnt intie is 14.T/ NWat ol 82/83 Ihlaars4 Iin poet.S/ Attrltton rates am uissicm tttimtes. ltq am believed to be "rours. Another Estern African omtqy with a telatively youthful servie has te foaLlwing

rates In tlr agricultural sector: 1grw tevel 3.92, DMpla lewl 3.MX, Certificate leyel 2.32. 11e latter am wtthln tle nornl raw bit w1I incase vithtles m the .a structure In the servoce dwss.

Source: NIssIai actiattes.

FebNuary 3, 1984

IS

mxn

iRible 1Wta of Ijrunr iis(pwr 7-tn tonty lad en'YtIr 12 vr')al

dznwt Smrio Mectd 9 ot 2.0 pr w9) ~ ~ ~ ~ ( 111.0 per a-3

(Is) t.)

IyirW tic of URl 24 216TraFl ltO) tOrU me remi 25lAhur for rt/AMVIrtAM 1MaO i 5 5l*onr for VlIttr 3) 30

Tnal Costs 1P4 376

S&urto I Scutio It 9 o III(lb p1m dw ObliR (Pdjuttu

to au r, tiers mrxtn mlleiu qdnr sell p epr toe d'swh mb

mrjtn) a'tat) wr r prlx

Prlt: (tNLS Mr Ikg)

llt r 5.5 5.5 8.2 6.9.flito PkNw2.5 2.5 .7 3.1

Imrme C*mwr Pricenw o.r (urnet Snirto 12 ct +25Z

Sil: (4)

7s m ulIt Plca. V.6 V46 S1? 43524 m 1.a 53 53 78 65

.*lien Petuu Q4;)

(Qwus lItna, igr hal 399 390 595 E

Net Innwm p%r lcial 215 23 219 124

lletunu s VW SI

(25 .nimrs lr tnLl aI per .'.th) 8.6 0.9 .R 5s.

*rernm to brie,st al Sellirg ldwr a(Ahzral - 2) Oatr IOCM 7(2 Ower Y1At t4rr l

reb 1, 1*

KMU

,Fum SLB-W snw

Eoidle Valuation of Wood "d Charcoal Beed on Taported Keosn Altermative

wood Chuml(per iiJ sol-idT T(per tel)

Coefficients:

Iberne elivered urth viholesaler exhtding tAes CW per litre) 0.50Retailina Cots,2 (W per litre) N.15FRendc Cost of kerose at irban mtket outlet (W per tltre) 0.65Calorific Valhe of kerosene (k cais/litre) 8,000Iharml Efficiency of Keroe () 30S

Ost amparism:

Calorific Valie (k caleAtg) 3,500 7,000Therml Kfficientcy (2) Fl 202Qnmrsions (kg wa1 per solid m3 aMi kg chiar l per ton) 700 1,000Value At urtm mulket In term of kerosem alterntive (C 2/ 53 379ltss: Paxmils mid Harkethlg Oasts 3/ (W) 3 44less: Tranport C,stn 4, (W) 10 15 °Value at pL.ntatton wAide In term of kerosene alternattv (WC) 40 320 (' 38 per m3 solid wood) 8/Foillig, cnm cuttirV & extmctLion to roAdside ) I -1Valabe of stanirg timter in ternm of keroenm altermttive at 100 km

fron urbm area 6/ 39 38 (per 3 solid uaod)Value of stmailtr tlmher In ten.s of kerosae altermitive at periphery

of urtia amea 7/ 49 40 (per m3 soLid wood)

1/ am a cost of W 14 per 2) litm dam retailed to cstowtvs at W N1.0 per litre (in 500 ml lot) givii a total rgin of W0.30 per litre of iihich it is as d 502, i.e. WC 0.15 per litre, are muketirg costs (I,., trRnsport, labair, nmdketirg fes).

2/ Woxi equialent is MK 0465 x 3,500 x 82 x 700 - 53.08; charcol "ivalett is 0.65 x 7,000 x 202 x 1,000 - 379.8,1XT30%

3/ For wcd W 30 per pertu per month splitting aid selUti I lorry lom of 12 m3 per nmnth; fr charcoal sam asawtionw as Table 17footnote 4.

4/ W 0.15 per ta km frm Iuklia.1 Asamene K 120 per In R 120 n3 solid per hi for wosd: for charoaal twse costs at included in pooessi:g./ Value at roadside lee cuttirg ad extraction.7/ With trMIsport oWt taken aut.

Note: flt only adjutst.nt made to fp frun financial to ecormic prices is the exclusion of tans. 9iow rates for foreign ewlhmpaid Lhbxir are taken at par with official or market rates.

Jantury 19, 1984

- 61 - Table 15

Partial Budget Comparing Transport Costs of SawlogProducts asd Fuel Products at zero km and 100 km from Consuming Area

(MK per 1,000 '3 wood or wood equivalent)

Extra Costs Cost SavedExtra Wood Net Savings

Transport Consumed Transport (Loss)

Scenario 1

Sawlogs at LOO km 4,640 2/ - -Fuelwood at 0 km - 10,440 2/ -

4,640 10,440 5,800

Scenario 2

Sawlogs at 0 km - - 4,640 2/ _Charcoal at 100 km 2,100 I/ 3,168 -(8

2,100 3,168 4,640 -C6Z8)

1/ Assumes 1,000 m3 wood @ 700 kg per m3 - 700 tons wood; this wouldproduce 119 tons of charcoal (17% of wt of wood); 700 tons of wood@ 3,500 k cals e 82 thermal efficiency gives 196,000,000 effectivecals. To get 196,000,000 effective k cals from charcoal one needs140,000 kg, assuming 7,000 k cals per kg and 20% efficiency. But140,000 kg charcoal comes from 823,529 kg wood (172), this requires1,176 a3 of wood, i.e., an extra 176 m3.If valued at R 18 per n3 this extra 176 m3 is equivalent to K 3,168.

2/ From Table 16.

February 3, 1984

- 62 -

Table 16Page 1

MAWMJI


Approximate Transport Costs by Product Over a 100 km Distance(K)

Puelvood Sawlog Products Paper

Transport cost per K 1.00of product K 0.58 x 0.03 K 0.03

Transport ccst per m3 of R 10.44 R 4.64 K 14.76wood supplied (charcoal

K 2.10)Total annual transport cost

to meetNational demand (for fuelvood K 13.5 million K 1.1 million R280,000

assumes urban demand only) (charcoalK 2.7 million)

Source: M4ission estimates. See footnotes.

- 63 -

Table 16Page 2

Footnotes to Table Approximate Transport Costs by Product over 100 km.:

1. Fuelvood

* Assume economic value of wood is R 18 per m3 e 700 kg per m3 valueis K 26 per ton.

* Transport assumed to be K 0.15 per ton km for 100 km - K 15 per tontrip.

* Therefore transport cost - 15 26 - K 0.58 per R 1.00 worth ofproduct.

* This is equivalent to K 10.44 transport per u 3 wood.

* Charcoal equivalent in effective heating value assumed to be 140 kgper m3 wood equivalent cost for charcoal would be K 2.10 per u 3 woodequivalent.

If national demand for transported wood is total urban needs thentotal anmual cost nationally if all this demand were transported 100kz would be K 13.5 million in wood or K 1.9 million in charcoal(assumes urban demand of 1.3 m3 anrnually).

2. Sa`logs/panels

* Assume one sawmill/panelmill production of:

45,000 m3 sawlogs valued at economic price of K 312/m 3 .5,000 m3 plywood - K 812/m3 .5,000 m3 blockboard - " 750/m3.1,100 tons phenol + urea as inputs.

* Therefore, total value of products - K 21.85 million.

* 'Transport costs assumed K 0.15 per ton km, weight 700 kg per m3,therefore transport costs K 594,000 for 100 km - K 0.03 per K 1.00worth of Product.

* Wood demand for sawmill/panelmill of this size is 128,000 m3.

* Therefore, transport cost would be K 4.64 per m3 wood supplied.

* 1985 total national demand estizated at 100,000 tons sawlogs pluspanels, ply and block total cost for national demand over 100 kmwould therefore be K 1.1 million.

- 64 -

Table 16Page 3

3. Paper

* Imported inputs for paper mill assumed to total 6,700 tons, product12,000 tons, 19,000 ,3 wood per year required.

* Therefore, transport cost is 18,700 tons at K 15 - K 280,500 per 100km.

* Economic value of product assumed to R 800 per ton, therefore, totalannual value - K 9.6 million.

* Transport cost is therefore K 0.03 per K 1.00 worth of product.

* This is equivalent to K 14.76 per =3 ray wood supplied.

* The mill is assumed to meet total national demand (plus smallexport) therefore, total cost for national demand over 100 km wouldbe K 280,500.

KAMIM


Financial Coqariuon of Wood and Charcoal Cost per UP1tof Effective Energ by Distance

Wood Charcoal(3 ton of EuFAIlYPt) (I ton of Chrco-a-)

Wood Cost per ton of product (present prices) 3.57 1/ 21.0 2/

Processing Cost 4.29 3/ 43.8 4/

Transport: 5/ 25 km 3.75 3.7550 km 7.5 7.5

100 km 15,0 15.0150 km 22.5 22.5200 km 30.0 30.0250 km 37.5 37.5300 km 45.0 45.0

Total Cost per ton 5/ at 25 km 11.6 68.550 km 15.3 72.3100 km 22.8 79.8 U150 km 30.3 87.3200 km 37,8 94.8250 km 45.3 102.3300 km 52.8 109.B

Effective k calu/ton 6/ 280,000 1,400,000

Cost per 100,000 effectivek cats at: 25 km 4.1 4.9 Break even point Is 42 km

50 km 5.5 5.2100 km 8.2 5.7150 km tl,8 6.2200 km 13.5 6.8250 km 16.2 1300 km 18.9 7.8

1/ Assuwes K 2.50/m3 Q 700 kg per .3.7/ Asautes clarcoal produced Is 172 of weight of wet wood, I.e. I ton requires 5,882 kg of wood equivalent to 8.4 o3 wod e K

2.50 per .3.3/ Asatms for wood MH 3 per o3 based on WA 30 for I person for 1 month for splitting and selling I lorry load of 10 a3 solid per

wonth.4/ Assumes, for charcoal, labour use In Energy Unit Charcoal Study Test No. 4 for earth kiln, t.e. for 7 .3 preparing wood - 14

labour days, loading - 5 labour days, charrlng 2 labour days, unloading 2-1/2 labour days; grading and packing 0.5 labour days Atotal 3.43 labour days per .3 or 4.90 per ton of wood @1K 1,0 per day - KK 4.9 per ton of wood - MK 28.8 per ton of charcoal. aAdd imrketing cost of MK 30 for I person for I month selling 500 kg per month gives HK 28.8 + MK 15 * MK 43.8.

5/ Transport at MK 0.15 per ton ka. .E6 Wood 3,500 k cals per kg at 82 efficiency. Charcoal 7,000 k calo per kg 8 202 efficiency.

January 18, 1984

- 66 -Table 18

MAL&WI


Costs of Indigenous Forest Protection

Unit40 km2 Unit (4,000 ha) No. Units Cost Total

K K

Manual Inputs

Direct: Wages

Staff: Forest Guard 1 Staff 1,440 1,440Patrolman 2 400 800

Unskilled:

Hoeing Boundaries 560 M3days x1 560Controlled Burning 1,000 K 1 1,000

3,800

Materials:

Hand Tools 500Uniforms 500

1,000

Depreciation of Fixed Assets

Bicycles x 3 (2 years) 600Housing x 3 (10 - ) 1,000Store x I (10 - ) 100Field Eqpt. 250

1,950

Overhead @ 20% of Direct Cost 960Annual Input 7,710

Source: Wood Energy Division.

January 19, 1984

Firwd AaLyal of Ream idcw fto,Aktisn kAiyity (bsd on ZTa bsts) ,^g par Istum)

dstsm ~tto ThCaetAt i .3 Pec1m int'm tmTo tl Oa t L ft

%ars

r1i*iW %etdltnw 22 40 34 0 96 3/ mx l=.% 126 2/ 22.50 ,Clmr, Pit fLLI P 33 40 34 0 107

i(n got up, umd 13 40 34 0 87Wad1 9 40 34 0 83

0 40 34 0 740 40 34 0 740 40 34 0 14

It Pnrm 8 40 34 0 820 40 34 0 74

ma aid 1st ItIn 22 40 34 0 96 - - 30 0.75 22.5 22.50 40 34 0 740 40 34 0 740 40 34 0 740 40 34 0 74

Zi Ru 13 40 34 31 1182nlT Vn + Rructtct 49 40 34 31 123 14 5.8 81.2 27 0.75 2D.225 101.45

0 40 34 0 740 40 34 0 74

3cd PItu 12 40 34 0 86k3d 1tn + htUtim 78 40 34 0 152 40 11.9 476.0 39 0.75 29.25 505.25

0 40 34 0 740 40 34 0 740 40 34 0 74

4th Ptm 18 40 34 0 924thThttn + htnBrtem 82 40 34 0 156 36 13.1 543.6 30 0.75 22.50 566.10

0 40 34 0 740 40 34 0 740 40 34 0 740 40 34 0 740 40 34 0 74

Cles FWll, tntsct,hitractim 218 40 34 0 292 234 23*1 5,405.4 1126 0.75 94.50 5,499.9

I/ Date 1i ma ieas to MM4 letter datal Ct. 28, 1983 to Odd lbmxtry Offlrw.T/ l4tImle state siilar to amtimtr ty DM, bis am R ell.

A/aaaaw a pria of 0.15 d ao tmula per IC (i.e. prit wilectoa n sm1 mi r1 1 sid prim.) *WK 0.75 per .3.!' 1i ttw. t ot ad prosction fi#ars prleu of sulce ad reasides Ivad htu to be raised to rmarly 3 tilm the pratt price to cftain a 122 bte of tra. But note that

tiIese costs and reveiues tre ail in 1983 constant prices annd adjtitmenits would have to be made to convert them to current prices for anyp4irticular year.

JuMUy 18, 1964

&aimb Mountaln ForestsPlne Plamtation nesmt for S& /a3odMilpm,od

360/m3 /ha 66 m3/ha 79 m3/ha 41 m3/Year 30/m3/ha Total Average per Felling 551/ 45Plantation Plantation Areas Clearoat 4 hlimlng 3 ThimIirg 2 IhMrrin 1 ThImirs Year i1se Salnfs Puilw

Year ha year a00o 000 000 C000 00 m3 -10%

1953 121.4 1984 43.7 3.3 - 7.1 2.1 56.21954 104.6 1985 37.7 15.3 2.9 10.5 3.6 70.0 31.0 26.81955 61.8 1986 22.2 2.6 3.8 11.9 2.3 42.8 64.20 57,81956 241.2 1987 86.8 0.7 0.4 6.3 0.5 94.71957 101.7 1988 36.6 0.5 13.6 4.9 1.7 57.31958 167.4 1989 60.3 - 20.2 0.5 0.7 81.71959 43.8 1990 15.8 2.4 23.0 4.9 1.2 47.3 60.2 54.2 28.8 25.41960 50.7 1991 18.3 3.2 12.2 2.9 1.2 37,81961 231.3 1992 83.3 0.3 9.5 5.0 3.6 101.71962 39.0 1993 14.0 11.4 1.0 3.1 3.1 32.601963 10.4 1994 3.7 16.9 9.5 0.6 1.9 31964 7.0 1995 2.5 19.2 5.5 2.3 7.2 36.71965 - 1996 - 10.2 9.5 1.0 3.0 23.7 29.9 26.9 13.0 13.91966 36.9 1997 13.3 7.9 6.0 1.6 2/ 5.0 33.81967 48.7 1998 17.5 0.8 1.2 1.7 1.3 22.51968 5.0 1999 1.8 7.9 4.5 5.0 1.5 20.1969 172.4 2000 62.1 4.6 1.8 4.3 6.9 79.71970 256.3 2no1 92.3 8.0 3.1 2.5 1.2 107.1 80.3 72.3 38.8 33.51971 291.1 2002 104.8 5.0 3.2 10,0 0.3 123.31972 154.6 2003 55.7 1.0 9.6 4.2 0.2 70.71973 119.9 2004 43.2 3.7 8.3 6.9 - 62.1974 12.2 2005 4.4 1.5 4.9 1.8 1.1 13.71975 120.4 2006 43.3 2.6 19.0 2.1 1.5 68.5 52.3 47.1 21.9 25.21976 70.1 2007 25.2 2.7 8.0 9.5 0.2 45.61977 120.8 2008 43.5 8.0 13.2 1.6 5.2 71.51978 76.4 2009 27,5 6.9 3.5 0.4 7.7 4601979 15.7 2010 5.6 4.1 4.0 0.3 8.7 22.7198) 56.4 2011 20.3 15.9 18.3 - 4.6 59.1 33.6 30.2 14.3 15.91981 23.4 2012 8.4 6.7 3.1 1.5 3.4 23.11982 39.8 2013 14.3 11.0 0.8 2.0 0.4 28.51983 40.5 2014 14.6 2.9 0.6 0.2 3.6 21.9

I/ No samlog in ftirst thinnrws7R Replanwt Planting

EAPSA, April 1984

- 69 -

Table 21MALAMI


P1Itatlm!9D for PRln.od

arvestinrg tmlearat Ares Yield of Wod frao Stands lbtal After Avrg.Year Oer 15 YrB. 15Yrs. Over 15 Yrs. 15 Yrs. Total Fel1ng Per year

Hifa BR (0CO m3) a/ l0sees(l0Z)

1984 121.4 256.3 43.7 76.9 12D.L.,1985 104.6 291.1 3J.7 87.3 125.01986 61.8 154.6 22.2 46.4 68.6 95.5 861987 241.2 119.9 86.8 36.0 122.81988 101.7 12.2 36.6 3.7 40.3A1989 167.4 12.4 60.3 36.1 K.41990 43.8 70.1 15.8 21.0 36.8 66.7 601991 50.7 120.8 21.5 36.2 57.71992 231.3 76.4 98.6 Z2.9 127.51993 39.0 15.7 16.6 4.7 21.1994 10.4 56.4 4.4 16.9 21.31995 7.0 23.4 3.0 7.0 10.01996 - 39.8 - 11.9 11.9 20.1 1s1997 36.9 40.5 20.6 12.2 32.81998 48.7 - 24.5 - 24.iJ1999 5.0 249.0 b/ 2.5 74.7 772000 172.4 249.0 87.1 74.7 161.82001 249.0 74.7 74.7 92.6 9320M( 249.0 74.7 74.72003 249.0 74.7 74.7_2004200520062007

M)I Over 15 Year Is 19.2 .3MXI up tD 15 Years iS 20.0 3

a/ xDuadood Under hbrk. Bark nalce L5Z of total vol ties.T/ Avemp replantlng areas o0r tke Period 1984-1993.

Ma pulp ud of 12,000 tpa would require betwuen 65,000 and 70,000 3of pulpood per year which cuJd be siuled by tce existing plantatis.

EN?SA, April 1984

~WMtFRWr~ ~S-RlU ft ffU

Ot Fattites ard R4Vtary Lquat of a 9200 ha k nAa Mantiri Pni'rm(nlw PnW rauld mt Z2t of thF iRwd pLvttri t 'i4ulmt to wut the full natt.iit i ff WetI)

I 2 1 4 5 tS 7 8 _ 9 10 11 12 11 14 is ItS 17 la 19 ZD

Auiml PliAtimtuis Mikk (hi) I/ 9, 2Tt 9, ,1 9 A,2 n11 9,20 q,)a 9,ul) 9,L 9s,xn 9,23 9s,an 9,2tr 9,0 9? 9,203 9s s,2tu 9,2tU 3,2U) 9,20n 9.,a

(lt.l1tiw PlaitaLht,u Hk (0i) 9,211 I8,401 2J,6IA 3S,0 46,0nu 5,20M 64,403 73,600 R2,800 192,003 l0l,20 110,400 119,603 1283Ft3D 13,Mn 147,20) 156,4)n 165,600 174.&I3 184,OD

FjtbhtAlftuut Y.ur Qmtt (I'i1M) 2, 1u1 2,1ht 7,7W 2,760 1 1 2,JhO 2,711 2,710 2,7W 2,70 2,16n 2,710 21,176 2,7t0 2,760 2,711 2,60 2,760 2,71) 2,7160 2,760

I4tn1,,w?A%'. Qit. ('dl)) - 1, VA) 2,11 D ,450 4,611) %,7s 6,900 R6,05 9,20) 10,350 22,10n I2,69.1 Al1,80 14,950 I6I,(0 17,20 1,40) 19,550 20,7tn 21,850

ThtAil Qvits (K'01t1) 2, 611 1,911 5,060 6,210 7, Wn $,s1 9,6) 20,820 11,96) 13,11') 14,260 15VI41 lhF,ff 17,710 14,8S) 20,010 21,16f 22,31f 23,460 24,610

neitw fnn uIasa (MK(CI11) 4j - - - - - 4,122 4,122 4,122 4,1222 4,122 4,222 8,244 ,24 A, 244 8 ,2 4 64,244 12,366 12,366

Kl{Intim v CAUt 1t Of Sl'Wed (10m) 21 - 2,25 2,J1t 1,450 4,600 5,7W 2,718 1,921 %O,I 6,226 7,3)rS i,n 83/ S,$% 6,7C6 1,856 9(,n 10,156 11,16 8,334 9,484

a

k Runmriut to li tlv 9') Iii .irttn nt 1,71 hI nortl itinntnl In Table % (thv fljitxv, .nw vi .mItionali 25,2.1) hi of wriutl wtl t patt1n rer wAr).7l19 L1 n tl nLi mmtaitie of *he net .1it tlMrYnA t 'aiwlI hiw to Ito l If ei t h1tablt cmata of Pio 27, .illto m &ally iri an byd bt k ,.

kItte this firm,t pm* f d #-5 dlttoU It Ytr 22 4 irt1 l Ir thr pti r iprI2cw%I equivalent tn hkf-tAry terw *f n1 AllIoehon th% year if Mit 5.21 alticn atd that luirn nw aml Y'Ar 12 the hxUrt &mrmw 42 uml rtual tPOh.A AMnSi a utle prttV 1f Wt 4,0 pvr .1, tvtai thw pmaost lewl.

lh.hauLry 1, 1914

U.

ac1

- 71 -

ANNEX 1

Forest Policy Statement (1964)

1. The Government of Malawi recognises the nation's forests arevital national assets fu'filling two main functions - the supply of energytimber and other forest products essential to the prosperity of Its people,and the maintenance of climatic conditions, the prevention of erosion andthe protection of water supplies, benefits essential for the country'swell-being. Forests also include areas of outstanding botanical and faunalimportance and provide places of recreational interest.

2. Government accepts that these functions can only be provided ifareas of forest are set aside as permanent forest reserves throughout thecountry and are protected from f're and all other damage, and developed inaccordance with the prescriptions uf a Management Plan.

3. Government will carry out by itself and encourage LocalAuthorities, small farmers, estates and private entrepreneurs to establishforests and woodlots to provide forest produce for local, as opposed tonational, consumption, and will encourage and assist in the promotion oftree planting schemes and the conservation of natural vegetation.

4. The highest importance is attached to research in silvicultureand forest utilisation directed to obtaining the maximum sustained yield offorest produce, both major and minor, sufficient to provide for thenational requirements of Malawi, and in the future, a surplus for export.

5. Finally, the greatest importance is attached to the training ofsuitable local officers for both the professional and technical cadres ofthe Forestry Department, and general education in the value of forestrywill be given in schools and other institutions and through the informationservices and by other media.

- 72 -

ANNEX 2Page 1

MALAWIL


Terms of Reference for Revenue Collection Studies

1. The objective would be to make recommendations oan Improving thenational fuelwood revenue collection system. The purpose-of increasingrevenue would be to provide for future funding of fuelvood productionactivities and to help push up the dsprice of wood as an Incentive forincreased production.

2. More specifically, the study would:

a. Review existing revenue collection and forest guardingpractices Including:

(1) fees due and fees actually obtained;

(2) the current problem of revenue collection and forestguards;

(3) the major locations where collection currently takesplace;

(4) the relationship between access to the area and revenuecollected;

(5) differences between Government and District Council andlocal comenity performance;

(6) costs of collection using different types of staff andapproach.

b. Review possible improved revenue collection and forestguarding activities including:

(1) pracices in other countries;

(2) increased attention to road collection and road blocks;

(3) changes in the level of local involvemeut;

(4) the likely impact of a policy of free vocn for ruralfamilies bome consumption on any revenue collectionstrategy for urban supplies;

- 73 -

ANNEX 2Page 2

(5) the likely Impact of physical structures to limitvehicle access;

(6) the extent of training necessary for guarding andrevenue collection tasks; -

(7) the likely relationshlp between level of fees forex-plantation and indigenous areas wood and thedifficulty of guarding and collecting revenue;

(8) possibilities of wood cutting coutracts with registeredprivate operators or the leasing of forest areas forselective felling under Government inspection;

(9) support for District Councils.

3. All proposals would be analyzed to the extent possible for theirexpected lmpacc on revenue collection and prices.

-74- ANNEX 3Page

MALAWI


'ihe Market for Mechanical Wood Products

A. Introduction

1. Extensive market surveys on wood products have been carried outin Malawi under TOR consulted by the Government and VIPCOR with the Bankand other lending agencies. The latest was prepared in June/August 1982 byMr. M. Simula for the Finnish firm INDUFOR.

B. Sawnwood

Domestic Consumption

2. Sawnwood consumption increased rapidly in Malawi between 1967 and1974, stagnated during the next four years, again spurted up in 1979 andhas dropped significantly in the following three years. To smooth outyear-by-year fluctuations, three-year averages are used in the followingtable based on figures shown in Table 2.

I-alawi - Sawnwood Consumption(Three-year averages in '000 m-3)

ApparentProduction Imports Exports Consumption

1968 21.65 9.92 n.a. 31.571974 37.34 10.04 2.51 44.871978 41.89 3.77 - 45.661979 42.68 4.41 0.03 47.101980 41.46 3.68 0.13 45.011981 39.00 2.01 0.13 40.91

Average AnnualGrowth Rates (Z)

1968-74 9.5 0.2 - 6.01978-79 1.9 17.0 3.21979-81 (4.5) (32.5) _ (6.8)

3. While the peak year of 1979 reflected the building boom resultingfrom the construction of the new capital (Lilongwe), the 1980-82 slump hashad its roots in the general world-wide economic slowdown and specificdifficulties encountered by Malawi. Construw2ion output in 1981 and 1982declined by 20% from the 1980 level. There are indications (improved worldtrade, increased agricultural production) that the worst of the recessionis past and that the economy is renewing its previous upward trend althoughat a lower rate than in the 1970s. GDP is expected to grow by 2.7% between1980 and 1985 and by 4.4% in the following five years.

-75 ANNE- 3Page 2

4. Income elasticity for sawnwood consumption has averaged 1.17 inthe 1967-79 period but it dropped below 1.0 in the following years. In thebeginning of a period of economic recovery the income elasticity will beabove 1.0 but, in the long term, it will be about 0.9 as shown by thedemand/income figures available for other countries. Therefore, areasonable projection of demand for sawnwood in Malawi can be made on thebasis of a GDP rate of growth of 2.4Z for the 1980-85 period and 4.4% forthe 1985-90 period.l1

End-Uses

5. The end-use breakdown of sawnwood has been estimated on the basisof the 'llowing assumptions for 1980/81:

(a) all imported sawnwood was used for construction;Cb) all local boxwood and about 5,000 M3 of other sawn softwood was

used for packaging;Cc) about 3,000 m3 of sawn softwood was used for joinery, furniture

and other purposes;(d) eucalyptus sawnwood was used for packaging except the small

volume used in laminated beams and blockboard cores. andCe) indigenous hardwoods were used 75% for furniture and joinery' and

25% for construction.

Construction is the most important end-use (61%) of sawna softwood -whilepackaging accounts for 55% of the sawn hardwood. The share of furniture,joinery and other uses is only 12-13% for both types of sawnwood. Insoftwood, the breakdown differs from earlier estimates as the share ofpackaging has gradually declined and that of construction has increased.

6. Construction. Tne private sector accounts for 45-50Z of thesector's total output but a lot of the government activity is contracted toprivate companies. In the main urban centers (Blantyre and Lilongwe), thebuildings completed in 1978-80 uere distribured by type as follows:

Residential ........ 56%Industrial ......... 17%Commercial ......... 24%Miscellaneous ...... 3 %

Total ....... 100%

IA rural areas, the share of residential buildings is aoparently higher.The unit consumption cf wood-based building mater-als in housing is shownin the table below. Saw-nwood is mainly used for roof construction and, toa lesser extent, for fittings. Another important end-use is doors and doorframes. Most of sawwrvood consumption is softwood, in thicknesses of mDrethan 50 mm and iLn widths of 100 mm or less. An important part is

1/ IBRD, CPP for M-alawi, July 12, 1983.

-76- ANNEX 3Page 3

impregnated mainly due to the high share of roofing materials. Inindustrial and commercial buildings the share of large-sized timber isnaturally higher. Substantial quantities of sawnwood are needed also forother construction than building, notably bridges which require largedimensions and long lengths.

Malawi - Unit Consumption of Wood Products in Housing(ma)-

House Type a/Semidetached Detached

Product F E B C

Sawnwood, total of which 0.7736 0.8596 1.3116 2.6450Impregnated 0.4744 0.4234 0.8185 1.0248Non-integrated 0.2992 0.4362 0.4931 1.6202Softwood 0.7142 0.6526 1.0517 2.2226Hardwood 0.0594 0.2070 0.2599 0.4224

Plywood 0.0966 0.1078 0.1241 0.2624Blockboard 0.0152 0.0447 0.1670 0.2273Softboard - - - 0.8606

a/ F - 40.5 m2 bedroom; E - 51.0 m2 bedroom; B - 68.9 m2 bedroom; C -111.0 m2 bedroom (with carport and servants' quarters).

Source: Malawi Housing Corporation, quantity surveyors' work sheets.

7. Packaging. Based on the field data provided by the ImperialTobacco Group, the sawn hardwood market in 1981 was divided by products asfollows:

Tobacco cases ............................ 70%Boxes, pallets, tea chest battens ........ 30%

The share of tobacco cases is declining because of substitution by Hesiancloth and corrugated boxes. Packaging instructions are usually given bycustomers. Exports to the industrialized countries are increasinglytransported in containers where preference is given to corrugated boxesbecause of lighter weight, better stewage and less problems with disposal.On the other hand, substitution by wooden boxes has been relativel.y slowbecause of the high cost of corrugated boxes in Malawi (10-25% higher thanBluegam cases). The cost of Resian cloth is only half that of the woodencases. An important part of Malawian tobacco exports goes to West andCentral Africa, where wooden boxes have reuse value and this market mayprefer traditional packaging for quite some time. it is, however, apparentthat substitution will continue and wooden boxes in tobacco exports willgradually lose their share. A part of this lost volume will be gained byincreasing use of pallets.

8. Furniture, Joinery and Other Uses. This market has traditionallybeen dominated by hardwood whenever timber is exposed. Sawn softwood hasbeen used in flush doors and as structural components. Pine furniture isgradually being introduced. The main market was initially found among

ANNEX 3Page 4

expatriates, but demand is rapidly growing. At present, hardwood is oftenused in applications where softwood would be sufficient. The lack ofgraded joinery and furniture pine sawnwood has apparently favoredhardwood. The market is divided into two sections:

(a) the industrial or semi-industrial joinery and furniture markersserving government, construction companies and offices (40-50Z),and high- and middle-income urban population (50-60%); there are7-10 major companies in this industry in halawi; and

(b) artisan-type workshops serving middle- and low-income population.

Potential market is large because of migration and population growth, butthe customers lack purchasing power. Future consumption will apparently beclosely related to disposable income. In spite of the current recession,the order books of major furniture makers were full at the time of themarket survey and delivery times were 2-3 months even for small orders.

9. Quality. The main timber users and merchants are not satisfiedwith the present quality of local sawn softwood for the following reasons:

(a) poor grading and quality of sawing;(b) the chemical treatment applied does not provide necessary

protection;(c) local timber is not sufficiently available in larger sizes and

longer lengths; and(d) the lack of joinery/furniture grade timber has limited wood

consumption in these end-uses.

Some timber merchants are benefitting from the situation by regrading,dressing, and kilning local timber or carrying out activities which innormal conditions are handled by the sawmills. In principle, thegovernment sawmills grade sawn softwood according to South African gradingrules into No. 1 (construction), No. 2, shorts and boxwood. In practice,most of large-sized timber is sold as No. I which means that grading is notbased on quality but dimension. Sawmills have had no difficulties inselling their output (except boxwood) and during boom periods (e.g.1978-80) the mills have had to sell green timber. Because of the obsoletemachinery in Blantyre and Zomba sawing tolerances tend to varyextensively. In Dedza, the main difficulty has been the poor quality oflogs which still come from thinnings. Eucalyptus sawnwood is almosttotally used for packaging purposes. Indigenous species are mainly usedfor furniture and joinery purposes and no grading rules are applied.

10. FID has recently made a proposal to the Malawi Bureau ofStandards to establish a Technical Committee for Timber Products to workout internationally comparable standards for sawnwood separatingjoinery/furniture, construction and packaging grades. Research should becarried out about the strength and other properties of these grades toenable architects, quantity surveyors and construction engineers to specifyand use local pine whenever possible. The grading rules should covertimber dimensions and sawing tolerances. A new grade for furniture andjoinery purposes could be established. Timber should naturally be gradedafter drying.

-78- ANNEX 3Page 5

11. Seasoning. Fast-growing pine is liable to distort in drying. InMalawi the equilibrium moisture content values are low with an importantvariation between rainy and dry seasons. For these reasons, correctseasoning is very important. Since the high demand in 1978-80 thesituation in timber drying has improved and most sawn softwood produced bythe government sawmills is now sold air or kiln dried but there is lack ofuniformity in the products from different mills and even different batchesfrom the same mill. The quality of drying could be improved by better.ntermediate handling of green timber, better stocking procedures, bettercontrol of kiln operations and high-temperature kiln drying. As thesawmills have currently no stocks of construction grade timber, there is arisk that the next upswing in demand could easily create a shortagesituation when proper drying would again disappear.

Regional Distribution of Demand

12. The available information on the regional distribution ofconstruction activity, timber merchants' sales, packaging and furniture andjoinery industries is shown in the following table:

Malawi - Regional Distribution of Sawnwood Demand(Z)

Type of Distribution or Sale Outlet Weight South Central North Total

Private Construction Output, 1976-78 0.23 38.1 52.1 9.8 100.0

Buildings Work Program of theMinistry of Works & Supplies,1980-83 0.17 29.8 46.2 24.0 100.0

Housing Program of the Ministry ofAgriculture, 1983-90 0.07 43.8 33.8 22.3 100.0

Timber SalesCentral Government Stores, 1980-81 0.03 14.6 47.5 38.0 100.0......... Hardware & GeneralDealers 0.05 45.0 37.5 17.5 100.0

Tobacco Packaging 0.33 74.9 18.8 6.3 100.0

Furniture, Joinery & OLher UserIndustries 0.12 60.0 30.0 10.0 100.0

Sources: Natioral Statistical Office, current housing programs, TPL andINDITFOR estimates based on fieldwork information.

Demand Projections

13. GDP and other indicators used in the INDUFOR report and currentestimates are shown in the following table:

-79 - ANNEX 3Page 6

Malawi - Indicators Used in Consumption Projections(Percent per annum)

Popula- Construc- Export VolumePeriod tion GDP tion Tobacco Tea Merchandise

IlFDUFOR Estimates(June 1982)1980-85 2.9 2.6 1.9 4.0 3.01985-90 3.1 5.1 3.0 4.9 2.0

Current Estimates(July 1984)1980-85 2.9 1.8 n.a. 5.0 3.01985-90 2.8 3.6 n.a. 4.5a/ 3.0a/1990-95

a/ 1985-87.

14. Based on overall GDP/consumption ratios, the INDUFOR reportestimated 1990 demand for sawnwood at 70,000 m3. End-use analysis reacheda lower level of 65,700 i 3 . Both projections are lower than previousmarket estimates as shown in the table below. Taking into account thesomewhat lower GDP projections made in the latest CPP, the current estimatefor sawnwood demand in Malawi is 58,800 i 3 by 1990:

M{alawi - Comparison of Sawnwood Demand Projections, 1985-95

Average Annual Growth Rates1990 1995 1980-86 1986-90 1990-95

Source - M3 (s) - Z

ODA (1980) 73,640 87,230 3.29 3.37 3.45Lyons (1980) 72,500 90,500 4.54 3.75 4.54Poyry (1981) 95,200 114,300 3.24 5.00 3.72INDUFOR (1982) 65,700 84,200 2.60 5.10 5.20Bank (1984) 58,800 70,100 2.70 3.60 3.60

15. INDUFOR projected regional distribution of demand on the basis ofthe weights of different end uses and their regional distribution ofconsumption. The present and projected regional distribution ofdemand is shown in the following table:

-80 - ANNEX 3Page 7

Malawi - Regional Distribution of Sawnwood Demand (1980 and 1990)

Year North Central South Total

1980Construction 17.4 47.2 35.4 100.0Packaging 6.3 18.8 74.9 100.0Furniture, Joinery, etc. 10.0 30.0 60.0 100.0

Total 12.8 35.8 51.4 100.0

1990Total 14.5 39.2 46.3 100.0

Imports and Exports

16. Imports were significant in 1974/75, when they accounted for morethan 23% of the apparent demand, but in the following five years theyaveraged only 9.7% and the last two years they have been reduced to lessthan 2% of apparent consumption. This is largely due to the cutdown ofconstruction of the larger commercial and institutional buildings whenlarger and better quality timber is required than that available from localsources. Economic recovery could in all likelihood lead to larger importsunless the required supplies are produced in a new, modern mill. The mainsources of sawnwood imports were Canada and the Republic of South Africa.

17. Small volumes of sawnwood have been exported (or re-exported) toMozambique, Zambia and Zimbabwe. Because of its land-locked position andlimited access routes, Malawi has difficulties in exporting overseas suchlow-priced, bulk-type commodities as sawnwood because of hightransportation costs and risk of delays and losses. Therefore, exports areconsidered possible only to the other countries in Southern or EasternAfrica. Zambia imported 13,000 m3 of sawnwood in 1981 mainly fromSwaziland (47%), Sweden (31%), Norway (16%) and Kenya (5%) but it is tryingto develop its own wood processing facilities. Therefore, only smallvolumes of sawnwood are expected to be exported in the foreseeable future.

C. Panelboard

Domestic Consumption, Production and Imports

18. Apparent consumption of panelboard shows a peak in 1974 but,unlike sawnwood consumption, after another peak in 1978, the slowdown isnot very pronounced and actually an all-time record level of 14,200 m3 isreached in 1982 (Table 2).

19. End-Uses. The furniture and joinery industries are the mostimportant individual end-uses for wood-based panels (44% of the total)followed equally by packing and construction. The pattern varies byproducts extensively. Blockboard and particle board are used almost

ANNEX 3-81 - Page 8

entirely .by furniture and joinery industries. Plywood's main end-use istea chests but it is also used for construction (shuttering, paneling,etc.), joinery (flush doors), and furniture (drawer bottoms, backings,etc.). Little hardboard is used for the same purposes, while practically.all softboard goes for ceilings in middle- and high-income housing andoffice buildings. The estimated end-use pattern is shown in the followingtable. Most of the plywood and blockboard produced domestically (by TPL)is used to make tea chests (72%) and tobacco cases (9%).

Malawi - End-uses of Wood-based Panels, 1980(X)

Block- Particle Fiber-End-use Plywood board board board. Total

Construction 25 5 10 90 28Packaging 54 - - 5 28Furniture, Joinery & Others 21 95 90 5 44

Total 100 100 100 100 100

Sources: TPL, National Statistical Office, Simula estimates.

20. Regional Distribution. On the basis of the regional distributionpatterns of the main distributors and consumers and the weight of the mainactivities, regional distribution of panelboard has been estimated asfollows.:

Malawi - Distribution of Panelboard Consumption

Type of Distribution or Sale Outlet Weight South Central North Total

Private Construction Output, 1976-78 0.09 38.1 52.1 9.8 100.0

Buildings Work Program of theMinistry of Works & Supplies,1980-83 0.08 29.8 46.2 24.0 100.0

Housing Program of the Ministry ofAgriculture, 1983-90 0.02 43.8 33.8 22.3 100.0

Plywood/Blockboard Sales by:Central Government Stores, 1980-81 0.03 40.0 42.3 17.8 100.0klardware & General Dealers 0.20 57.5 32.5 10.0 100.0

Tea Chest Sales by TPL 0.33 90.0 10.0 - 100.0

Industrial Furniture Manufacturing 0.25 70.0 25.0 5.0 100.0

ANNEX 3-82 - Page 9

21. Quality. Almost all plywood used in Malawi has been hardwood.Local plywood is mainly packaging grade and very little commercial grade isproduced by TPL for construction and furniture. Imports have come mainlyfrom Singapore, the Republic of China and the Republic of South Africa.About half of the imports has been used by furniture and joinery industriesand the other half for construction and general purposes. The bulk ofconsumption is in smaller thicknesses from 4-9 mm. In construction about10% of total volume is of exterior grade, the rest being for interioruses. The standard 122x244 cm dominates sheet sizes with important volumesof flush door sizes being used as well. Because of the nature of end-usesmost plywood is of standard grade and decorative or sliced veneer-facedplywood is only bought in limited quantities by furniture and joinerymanufacturers.

22. Local blockboard is not very high quality as the core material isnot glued, which sometimes presents problems. Two thirds of the smallproduction are veneered for decorative purposes. TPL has had difficultiesin importing suitable veneers. Softwood blockboard is imported from theRepublic of South Africa and Zimbabwe and the product is well establishedamong the Malawian furniture producers. Blockboard is almost entirely18 mm with some 15 and 22 mm in thickness and the standard sheet size122x244 cm dominates the market. Fiberboard is mostly 3.2 mm but also 4and 6 mm are used. Particle board is 15 and 18 mm and small quantities ofthin particle board (4-6 mm) are also used.

Imports and Exports

23. The most important sources of imported panelboard are Singapore(about one half of plywood imports) and the Republic of South Africa andSweden (between 25% and 50% each of blockboard imports) as shown in thefollowing table. Exports (and re-exports) were important in 1981 but notsignificant in other years.

- 83 - ANNEX 3Page 10

Malawi - Sources of Sawnwood and Wood-based Panel Imports, 1980-81

Product/Source 1980 1981 a/

SawnwoodCanada 73 96Rep. South Africa 26 4Malaysia 1 0

* ~~~~~~100 100

Veneer SheetsZimbabwe 4 5Rep. South Africa 96 95

100 100

Plywo )dSingapore 48 51India 16 -Rep. South Africa 12 10China Rep. - 19Others 24 16

100 100

BlockboardRep. South Africa 44 35Sweden 24 50Singapore 18 2Others 14 13

150 100

FiberboardRep. South Africa 45 11Sweden 55 58Others - 31

100 100

a/ Estimates based on 11 months.

Source: National Statistics Office.

24. Most of the exports went to Mozambique (mainly for tea chests).This is not, however, considered as indicative of future porential. Theconclusion reached on sawnwood (about the difficulty of overcoming hightransport costs to export a low-value product, para 17) also holds forplywood and blockboard but to a smaller degree because of the higher unitvalues of panelboard. Zambia has a small blockboard plant (3,500 m3 perannum) which has relied on imported veneers but the situation is likely tochange as the owner, Zambia Steel and Building Supplies Ltd., has plannedto install a peeler. There are two more panel projects in the country, onefor plywood and the other for particle board, both sponsored by the privatesector. In spite of the above considerations, exports of small volumes of

84 ~~~~~ANNEX 3-~ 84 -Page 11

good quality plywood to neighboring countries will remain a possibility inthe near future.

Demand Projections

25. Future demand for individual panel products dapends on to whatextent they are locally available. In the following it is assumed thatplywood and blockboard capacity is enlarged to meet the domestic demandsubstituting the use of other panels within the possibilities of productperformance. The assumptions made are:

(a) particle board will remain a special product the demand for whichis not expected to increase because the long-term import pricewill stay high due to the importance of transportation costs inthe landed price of the product;

(b) practically all hardboard can be substituted by thin plywoodeither as packaging material or in furniture; and

Cc) imported softboard can be substituted t', some extent by plywoodand wood-wool slabs in ceilings but because of traditions andarchitectural preferences and because of insulation and acousticproperties, softboard cannot be replaced entirely.

26. Income elasticity in the period 1968-79 fluctuated widely but, onaverage, it was 1.71. Based on overall income elasticities, INDUFORestimated panelboard consumption at 17,100 m3 by 1990. However, on thebasis of specific elasticities of 2.2 for construction, 0.7 for packagingand 1.2 for furniture and other uses, INDUFOR reached the conclusion thatthe 1990 consumption would be higher (19,100 m3). The current Bank growthrate projections are lower but the projected panelboard consumption figuresfor 1990 and 1995 are similar to INDUFOR's because of a higher startingpoint, based on actual 1980-82 figures:

Malawi - Demand Projections of Plywood and Blockboard

Average Annual Growth Rates1990 1995 1980-85 1985-90 1990-95

Source =I (s)- Z

ODA (1980) 14,420 18,410 23,490 4.8 5.0 5.0Lyons (1980) 12,830 16,230 21,550 5.4 4.8 5.8Poyry (1981) 21,000 27,500 34,200 3.7 5.5 4.4Simula (overall)

(1982) 12,750 17,100 23,700 4.2 6.0 6.7Simula (end-uses)(1982) 12,750 19,100 26,500 4.2 8.4 6.8

Bank (1984) 14,100a/ 19,100 23,600 4.1a/ 7.9b/ +.8

a/ 1986.b9/ 1980-86 and 1986-90, respectively.

ANNEX 3-85- Page 12

27. Present and project regional distribution of panel boardconsumption is shown in the following table.

Malawi - Regional Distribution of Panelboard Demand

North Central South Total % of Total1980

Construction 0.4 1.2 0.9 2.5 22.1Packaging - 0.3 3.3 3.6 32.7Furniture, etc. 0.4 1.4 3.2 5.0 45.2

Totals ('000 m3) 0.8 2.9 7.4 11.1 100.0

Regional % 7.7 26.0 66.3 100.0

1990

Totals ('000 m3) 1.9 6.7 10.5 19.1Regional X 9.9 35.1 55.0 100.0

Industry DepartmentJuly 1984

- 86 -

ANNEX 4Page 1

Option of Transporting Pine Charcoal from Viphya

1. Charcoal made in Viphya with wood at a low opportunity cost of,say, MK 5 per m3 would cost about MK 87 per ton. Transport from Viphya toZomba, about 600 Km, is estimated at MK 90 per ton (MK 0.15 per ton km) sothat if a realistic opportunity cost were considered to be keroseneequivalent it would be worth transporting charcoal since the cost fromViphya at MK 177 per ton (87 + 90) would be competitivel/. The cost thatconsumers are prepared to pay at the door, however, is only about MK 0.08per kg, about 0.06 per kg by the middlemen direct off the lorry. This isabout MK 60 per ton. Adding the transport cost from Viphya would increasethis by about 250%, so at present prices it is not competitive and asubstantial transport subsidy would be needed. The subsidy needed would bethe difference in the cost of transport between the new source (Viphya) andthe old source, a difference of about 500 km at a cost of about MK 75 perton (MK 0.15 per ton km). If all the urban fuel demand were subsidized atthis distance the total national subsidy required would be of the order ofMK 11 million annually. In facc, some of the demand centres are closerthan 500 km so the total subsidy would probably be of the order of MK 8 or9 million. Furthermore, if Government aimed to replace only half the urbanconsumption with charcoal from Viphya, only about SK 4 million would haveto be found; still an enormous sum, equivalent, in fact, to the totalsub-sector recurrent budget, but not necessarily to be dismissed as one ofmany environmental impact.

2. Another subsidy option considered in this report is subsidizingplantations. How does this compare wit% Viphya charcoal? Plantation woodcosts MK 18 per m3 at present. This seems an excessively high figure andit ought to be posbible to reduce it by improving efficiency to, say, MK 15per m3. The cost of charcoal from plantations in the south excludingtransport would be MK 170 per ton assuming a zero opportunity cost of land(MK 15 per i 3 - MK 21.4 per ton wood - MK 126 per ton charcoal plus MK45). At a distance of 100 km the total cost would be MK 185 per ton. Thlsis a very similar cost to the estimated cost of Viphya charcoal at MK 177per ton. The choice between plantations and transporting charcoal fromViphya is not therefore clear cut. We have tended to side with theplantation option in this report since pine-charcoal is of lower qualitythan eucalyptus charcoal and we suspect that the charcoal making costs atViphya may be higher than we have estimated, because there seems to be somereason to hope for lower plantation costs in the future and because the

I/ (MK 5 per m3 for wood - MK 7.1 per ton of wood - ?T 42 per ton ofcharcoal @ 17% plus MK 45 per ton for making charcoal based on the Table 17estimate of MK 30 per ton plus 5O0 for the organizational overheads ofcontrolling charcoal burners in plantation).

- 87 - ANNEX 4Page 2

3. The mission is conscious of the fact that the above is anover-simplified calculation and proposes that the Wood Energy Divisionshould review this issue of the choice between plantations in the south andtransporting from the north in more detail. Important areas of focus inrefining the analysis would be:

(a) the technical coefficients assumed;(b) the opportunity cost of land in the south and the north;(c) transport costs and charcoal making costs;(d) environmental impact issues;(e) preferences for charcoal versus wood;(f) acceptance of pine-charcoal; and(g) cost difference between consumption locations (e.g. Lilongwe

versus Zomba).

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