Forestry company Green Resources, which is growing around 15,000 hectares of pine and eucalyptus in northern Mozambique, is hoping to use its timber to make electricity transmission poles for state utility EDM, replacing the import of thousands of poles from South Africa and Zimbabwe.
According to a recent report by USAID-funded SPEED programme, EDM – which in 2016 bought 78% of its transmission poles from South Africa, and 15% from Zimbabwe – has a long-term contract with a supplier that expires in March 2018, and which will be replaced with annual contracts procured through competitive tendering in an open market.
According to the SPEED report, EDM estimates its annual demand at 30,000 poles – while Norway-based Green Resources told SPEED that the Mozambican electricity pole market is as big as 160,000 per year.
However, the CEO of Green Resources, Erik Knive, told Zitamar News that he still believes the company’s strategy is sound – as Mozambique and its neighbours need to widen electricity access.
“We expect that Mozambique will electrify a lot,” Knive said. “I think that for all countries that are electrifying, eucalyptus is a natural product to use and it should be desirable for the country to use domestically produced wood rather than importing.”
SPEED however points to several barriers for Green Resources to take over the Zimbabwean and South African market share. One challenge could be the volume requirement in EDM tenders, which the report claims that a 2016 meeting with the report’s authors revealed that Green Resources could not meet.
Furthermore, Green Resources uses chromated copper arsenate (CCA) treatment for the preservation of their eucalyptus against for example insect attacks, which Knive says is more environment friendly, rather than creosote, which is the treatment preferred by EDM.
However, Knive says that Green Resources is in fact “the only company that can meet the volume requirements” on its own, and that CCA treatment is only a recommendation from Green Resources and they can adapt to EDM’s requirements.
The CEO also says the company will have other options to sell its poles should the domestic market be smaller than they have forecast. Poles can be exported to neighbouring African countries and wood chips are in big demand in Southeast Asian countries.
Green Resources has however stopped further planting until it has more clarity on how the the eucalyptus market is evolving and admits some delays to production plans, especially in Nampula.
“In Nampula, we haven’t got as far in our plans as we had hoped,” Knive said. “We are working constantly to get capital to complete the projects we have there. Without getting that capital we won’t be able to implement projects to the extent that we would like to.”
© 2018, Zitamar Ltd. Reproduction and dissemination prohibited without written permission.