Interview: Frederic Ober; Didier Balzaretti
What effect has Gabon’s log export ban had?
FREDERIC OBER: It is logical for a country to strive to preserve and create value in-country, but the move to ban log exports was too abrupt. The lack of time to transition forced investors to act immediately and resulted in huge losses for operators and the country as a whole. Despite the measures put in place by the government – such as investments in sawmills, training programmes and so on – the sector still faced a huge lack of trained labour and suitable infrastructure.
DIDIER BALZARETTI: Five years after the promulgation of the law, all companies in the sector have become timber processors, while prior to 2010 most companies were only loggers. We have to understand that these are two very different industries which call for a different industrial vision. Despite all of this, in recent years the forestry sector invested heavily in its industrial capacity, resulting in a steady increase in employment. We are now seeing a real push to move towards the second and third transformations, although these changes will not come without their challenges.
What are the biggest challenges facing investors in the industry at the moment?
BALZARETTI: Our main challenge in Gabon is education. As in every industry, moving up the value chain requires a different set of skills and know-how. Furthermore, our activities mainly take place in isolated areas, and the local youth is not accustomed to working with the necessary tools. For this reason, the “Ecole des Bois” project is key to the development of the industry. Despite improvements in the road network and the efforts of Setrag to improve service quality and timing, and increase capacity, transportation costs remain a challenge. We are currently at a 50% yield per log, which makes wood processing near to our cultivation site paramount to our bottom line.
OBER: Indeed, the lack of training in woodworking among the national youth is our biggest challenge. Companies are obliged to carry out in-house training programmes, which represent a heavy investment burden and require long periods of time. The Ecole des Bois is interesting, but it will take time to support the whole sector. A third concern is the tax environment. The government’s inability to refund value-added tax has become a concern in the industry. Liquidity shortages and high interest rates are counterproductive if we want to move up the value chain. We are forced to self-finance in the short to medium term, though this is also the case in the rest of Central Africa.
What are your views on the “bourse du bois”?
OBER: If based on the principle of free trade, this initiative is a positive step towards the creation of a national – and perhaps even regional – timber market. It will facilitate communication and trade between the different industry players, particularly between the first, second and third stages of transformation. It will improve the transparency and visibility of the industry, allowing us to see who needs wood, and where. It will also allow us to find buyers for our products that are unsuited for export. Much of our waste is small pieces of wood, which can easily be used to build furniture and artisanal products.
There are still a few aspects which need clarification – concerning financing and operations – but we are waiting for the African Development Bank’s pre-feasibility study to assess its potential.
BALZARETTI: A bourse du bois will guarantee the supply of wood for investors interested in the third transformation. A few aspects will need to be taken into consideration, especially concerning supply and demand. Keep in mind that Gabon is small, and for the project to be financially feasible there needs to be a market large enough for these products; opening to international buyers is one attractive solution. Another aspect involves the types of woods issued; the labour costs in Gabon are high, so it is not competitive to manufacture base products, such as doors and windows, there. The demand from such an entity will only be a fraction of our capacity, so the sector is ready and able to respond to this demand.
How can the industry move up the value chain?
BALZARETTI: We need to develop synergies with other industries to incentivise more value-added products. In February 2016 the government signed a pact with the Gabonese Employers Confederation in a move to include local processed wood in construction projects, such as social housing. This move is welcomed by the industry, and companies including Rougier have expressed their interest in developing such projects. Given the current housing deficit and estimated costs – with a house costing around CFA15m (€22,500) – we believe that this initiative will drive local content development and industry growth. That said, there needs to be a change in perception among the public when it comes to wooden housing. The Gabonese consider wooden houses cheap, so I prefer the term sustainable housing.
OBER: Customer demands have become more specific, making the tools, equipment and know-how needed to meet them differ increasingly as we move through the different levels of transformation. Outsourcing processes such as drying, moulding and so on have become commonplace. In this regard, the Nkok special economic zone is playing its role to stimulate the development of the second and third transformations by bringing in the machinery and raw materials necessary for the creation of a wood cluster within the zone. However, there needs to be a strong and stable first transformation industry, to ensure stable supply for the other levels.
Despite local wood holding up well against Gabon’s humid climate, local wood use remains marginal. One of the reasons for this is the fact that local wood sales are taxed at 18%, which is more than other construction materials, such as cement (5%). Fiscal support is therefore an area requiring improvement.
How can the sustainable exploitation of the forest be guaranteed, and what are your views on the new forestry code?
OBER: The current forestry code is one of the best in the sub-region concerning sustainable forest management, and should, therefore, be kept as a reference. We expect the legal reform to take into account the necessary balance between the different segments of wood processing, while the size of the concessions are kept at levels that enable the sustainable and efficient management of the wood industry. It should also incentivise concession holders to certify their processes at the highest levels, ensuring a sustainable environment and a level playing field. Certification is a tool recognised for the sustainable exploitation of forests. Programmes ensuring availability in second and third rotations, such as enrichment planting, can be added to the existing selective logging and biodiversity guaranties.
BALZARETTI: The current renegotiation of the law is being done between three parties: non-governmental organisations, the operators and the authorities. The consensus is that the document should include elements appropriate to Gabon and should work to preserve the forest. This highlights one of Gabon’s positive aspects, which is the accessibility to communicate with the authorities, at least in our sector. There are administrative hurdles, but it is the systematic, punitive and costly aspects that we are fighting. There have been some real strides towards sustainable management in recent years. Fewer and fewer operators lack an exploitation or inventory plan. Forest Stewardship Council certification obliges us to have water and waste treatment initiatives, which are hard to maintain but provide benefits in the long term, related to security, planning and management.