By Jeremy Wakeford, Senior Macroeconomist, QGRL | Success Stories
In June I had the opportunity to visit the operational site of one of Quantum Global’s signature investments in Angola. In December 2015 the Quantum Global Africa Timber (QGAT) fund secured a concession agreement with the Government of Angola to manage about 80,000 hectares of existing timber plantations in the country’s Planalto highlands region, located mainly in Huambo and Benguela provinces. Through a newly established forestry company, Estrela da Floresta, QGAT aims to restart the timber sector and build a forestry industry cluster and value chain in Angola. The ultimate goal is to rehabilitate and expand the timber plantations to the extent that they can support significant downstream timber industries, including a new pulp mill.
On my two-day trip, I met the head of QGAT and Estrela’s new managing director and several employees. I was taken to some of the main sites where early operations are concentrated. Located some 130 kilometres west of Huambo city, most of the plantations straddle the newly refurbished Benguela Railway – a key logistical asset.
The new and the old: plantation trials
Driving along the freshly tarred national road, I was confronted by the endemic poverty of this region. Most of the rural population eke out an existence through subsistence farming – tending small plots of land where they grow vegetables, maize or cassava. There are road-side markets in all the villages and small towns one passes through, where people sell fruits and vegetables, trade clothing and other basic goods, and repair motorcycles. It makes me hopeful that Estrela da Floresta’s timber businesses can generate new livelihoods and incomes in an impoverished area, contributing to socioeconomic upliftment.
I was taken first to the site of the derelict pulp mill in Alto Catumbela. Once a thriving industrial operation supporting thousands of jobs, the factory was abandoned during height of the civil war in the early 1980s. The grey shells of factory building, with shattered windows and disintegrating roofs, told a sad story of decayed infrastructure and wasted potential.
And yet, right next to the ghostly factory I found the literal green shoots of Estrela’s operation – the first nursery being developed by the company. Seedlings from about a dozen different eucalyptus species have been imported and are being trialled for their suitability to local soil and climatic conditions. The approach is a careful one, starting at a modest scale so that lessons can be learnt while avoiding large, costly mistakes.
We drove on over rutted and potholed dirt tracks through miles of plantations. There is still plenty of wood, but it is abundantly clear that the forests have not been properly maintained for decades. Sporadic logging has left certain areas denuded, many stumps lie in between mature trees, and the sometimes dense underbrush gives the impression of a forest rather than a plantation. But harvesting and selling the existing timber generates vital cash flow to sustain and expand the business.
One is confronted by the inevitable challenges and obstacles that must be surmounted to make things work in practice, but also cheered by the strong sense of possibility for making positive changes in local people’s lives.
Next, our driver stopped at a plot of land that’s recently been planted with eucalyptus saplings. An important lesson was learnt: plant at the beginning of the rainy season, not the end! The saplings with their roots in ash-enriched soils are growing much faster, thanks to the higher nutrient content.
On day two, I witnessed another aspect of Estrela’s contribution to social development: a tree harvesting training session. Experts from German chainsaw manufacturer Stihl showed budding youngsters how to fell trees precisely, economically and safely.
Training in safe tree harvesting techniques
My major take-home is that there’s no substitute for on-the-ground, practical experience to get a proper ‘feel’ for what private equity investment really means in Africa. One is confronted by the inevitable challenges and obstacles that must be surmounted to make things work in practice, but also cheered by the strong sense of possibility for making positive changes in local people’s lives.