Green Resources is a Norwegian company incorporated in 1995 to become a leading developer of plantations for forestry and other uses and a leading producer of greenhouse gas emission credits. The company decided to focus on East Africa because of land availability, good rainfall, highly qualified foresters, low-cost labour, stable governments and a long-standing Nordic development aid presence in the region. The company has built up a strong and stable management structure, with the late John Haule starting the Tanzanian operations and Jossy Byamah building the Ugandan operations.
Green Resources started pilot planting of forests for carbon offsets in Uganda and Tanzania in 1996/7. Prior to this, there had been no large-scale planting of new forest in East Africa for more than a decade, either private or public, with the exception of a teak project in Tanzania. In 1998, Green Resources established contact with SGS, the leading global certification and inspection company, and an innovator in greenhouse gas offset project certification.
In January 1998, the Ugandan operation became a top performer within a carbon offset project competition financed by AES Corp of the USA. In November 2000, the Green Resources’ Tanzanian afforestation project was certified by SGS as one of the first three projects worldwide to be certified and the company sold the first options on carbon credits.
The start of this decade saw slower than expected development of the greenhouse gas (GHG) credit regulations and markets. Green Resources maintained its organisation, but planted smaller areas of new forest. Since 2003, however, the regulators have been more proactive; the carbon credit market has come alive and Green Resources has once more increased its afforestation operations.
During 1996, Green Resources secured a licence to plant forest in the Bukaleba Central Forest Reserve in Uganda and obtained land from two villages in Tanzania: Mapanda and Uchindele. Following an early peak in the planting in 1998 and 1999, the planting slowed during 2000-02. By 2003, the company was getting ready to renew the afforestation activity and in 2005, more than 1,000 hectares of new forest was planted, increasing to 3,100 hectares in 2007.
New global focus on forest
There was little interest in Southern Hemisphere forestry during the years immediately after 1995. However, since 1998, the world’s four largest pulp and paper companies have made large investments in Southern Hemisphere forestry, at least until the outset of the new slump in the global forest products industry that started in 2000.
The amount of pension investments going into forestry, in general, and Timber Investment Management Organisations (TIMOs) in particular, have increased approximately five times, to about US$35bn in 2007. During the past five years, TIMOs’ investments outside the US have increased sharply, focusing on South America and Australasia, but in 2007 several large TIMOs stated they wanted to invest in Africa. The World Bank has re-entered the forestry sector in full force, after more than ten years’ absence. There is now ample financing available for expanding forestation activities in Africa. The problem seems to be lack of suitable projects.
The Tanzanian subsidiary acquired the first ‘mobile’ sawmilling equipment in 1997 and started small-scale sawmilling using logs from the government-owned Sao Hill Forest Plantation. Green Resources acquired Sao Hill Sawmill (SHS) in 2003, and already owned a Norwegian company that had operated SHS on a lease agreement since 1998.
Sao Hill Sawmill was built in 1974 with the support of Norwegian Development Aid Funds. At least NOK200mn, or about US$30mn, in development aid is believed to have been spent on SHS from 1976 to 1998. SHS was part of the Tanzania Wood Industries company until 1996 when the economic reform policies of the Tanzanian government led to a part privatisation of SHS in the form of a ten-year lease that discouraged investments in the mill.
The privatisation of Sao Hill Sawmill assets (which Green Resources were leasing) was announced in 2000 and Green Resources pre-qualified for the privatisation process. However, it was not until June 2003 that Green Resources was able to complete the purchase of the SHS assets. At the start of 2004, Green Resources embarked on new investments at SHS and strengthened the management of the company.
The acquisition of Sao Hill Sawmill took place at the same time as the global timber market was bottoming out in 2003. The operating environment was very difficult, but the subsequent improvements in the market, combined with investments and stronger management, have paved the way for profit improvements at SHS. The Sao Hill area is the centre of East African sawmilling industries, with the largest plantations between South Africa and Iberia. There are similar sized plantations in land-locked Malawi, Zambia and Zimbabwe. Green Resources is the leading sawmill operator in the area with wood supply secured through a long-term contract.
Sao Hill Industry (SHI), a subsidiary of Green Resources, started up a HewSaw sawmill in June 2012. This is the result of a four-year, USD 10mn industrial investment project at SHI. More than three-quarters of the 30-year-old sawmill has been renewed; increasing sawing, treatment and kiln drying capacity, and as a result, the production capacity has tripled.