A value chain analysis for timber in four East African countries : an exploratory case study

University essay from SLU/Dept. of Forest Products

Abstract: This study is a value chain analysis for timber in East Africa. It was commissioned by Vi Agroforestry, a nongovernmental organisation registered in Kenya, Rwanda, Uganda and Tanzania engaged in a rural development program that involves promoting tree planting and enterprise development (Vi Agroforestry, 2012). The purpose of the study was to identify and describe common value chains for timber in the countries where Vi Agroforestry operated. Value chain is a concept and a framework describing how to structure information regarding activities included in satisfying a certain customer need, e.g. procurement, logistics, transactions, production and marketing. One purpose of value chain analysis is to show the build-up from production cost to consumer price and how surplus is distributed between actors within a chain. The study was conducted as an exploratory case study focusing on gaining broad initial insights. Data collection was done mainly through semi-structured interviews with actors engaged in activities throughout the chains. The forest products industry in general is characterised by sales of commodity products with push marketing, relatively long lead-times in production and a production processes that generates a relatively high percentage of consequence products (Haartveit, Kozak, & Maness, 2004). The general picture painted by the results in this study correspond with this description. The observed chains consisted of farmers engaged in silviculture, independent contractors providing processing of timber into boards, other independents providing transporting services from interior sites to markets, timber dealers coordinating between different stages plus handling retailing and finally contractors or carpenters engaged in construction or furniture making. Businesses were very small-scale, sole proprietorships with mainly one or two employees and markets were local. One result that stood out was the impact that honesty and trust had as key elements in the competitive strategies of actors. Trust was a key condition for allowing credit and since cash flow was a big issue and liquidity often a limiting factor for most actors, being considered trustworthy had great significance. The biggest potential for improvement that I found for the observed value chains was in increased cooperation and coordination, both horizontal and vertical. This could increase scale and reduce costs but from the farmers’ perspective, for more vertical integration to make sense, there had to be a firm horizontal cooperation between actors in the first stage. Average farm size was a seriously limiting factor to creating economies of scale and considering the cost of required inputs for processing this would need to be in place. The findings point to opportunities to increase the overall surplus to the benefit of all value chain participants. The results from this study can support Vi Agroforestry in their work to increase economic activity and growth with the aim to effectively reduce poverty and contribute to establishing sustainable livelihoods for smallholder farmers in East Africa.

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