Buyers compete to buy timber from MCDI-supported community forest reserves
Previously, insufficient market demand rather than supply was the critical constraint to communities selling timber under MCDI's Forest Stewardship Council (FSC) group certificate scheme; this is no longer the case. Prospective buyers are now competing to secure hardwood timber supplies from MCDI-supported Village Land Forest Reserves (VLFRs), including offering sums of money that exceed the minimum royalty rate enforced by the Tanzanian Government.
Over the past year, MCDI have invested significantly in sales and marketing to drive timber sales to the level necessary to meet supply. We commissioned research to explore international markets for five locally-prized hardwoods (download the full report here) and, in February 2014, employed a Timber Marketing Officer with a dedicated responsibility to ramp up timber sales from community forest reserves. Although such little time has yet passed, this looks to have been an excellent move: in addition to the seven new customers who purchased timber in 2013, nine additional timber buyers have expressed significant interest. These include new sorts of customers, such as major construction companies, to whom the Timber Marketing Officer has expanded sales efforts.
One outcome of this increase in demand has been the start of price competition, with customers offering to pay more than the government royalty rate to secure hardwood timber supplies. On 22nd August, Mtawatawa – one of the first villages that MCDI helped to secure user rights over their forest in Liwale District, and the first community to implement such an auction process - opened bidding for six local hardwoods. The bidding was closed on 12th September, and the received tenders were opened in front of the Mtawatawa village assembly – a community wide meeting – two days later.
Five different companies competed to secure timber from Mtawatawa VLFR, collectively issuing nine tenders for three of the six hardwoods available. The two most popular species – mninga (Pterocarpus angolensis) and mkongo (Afzelia quanzensis) - each received four bids, with high offers of TSh 216,000 (USD $129) per cubic metre of timber; this is 35% more than the government royalty rate of TSh 160,000 (USD $95.60). The less valuable mtondoro (Julbernardia globiflora), despite securing fewer bids, generated the highest mark-up. It went for TSh 170,000 (USD $102) per cubic metre, 1.4 times the government royalty rate. Assuming sales continue at this price, Mtawatawa has sufficient timber stocks to generate a sustainable TSh 566,857,000 (USD $338,730) annually over the next five years from these three species alone.
Having evaluated the bids, the next step will be for village leaders in Mtawatawa to sign contracts with the winning bidders. The community will be set to make their first ever certified timber harvest at the beginning of next month.