Erik Knive, CEO Green Resources 14 JUNE, 2017 EAST AFRICAN - PowerPoint PPT Presentation

Erik Knive, CEO Green Resources 14 JUNE, 2017

EAST AFRICAN ECONOMIC GROWTH CONTINUING AT A STRONG PHASE UNDERPIPNNED BY A STRONG POPULATION GROWTH AND CHANGES IN DEMOGRAPHICS… Estimated East African GDP Growth 2014-17 (1)  East African economic growth is currently considerably outpacing GDP Growth p.a. the rest of the region 8  Africa is the continent with the fastest-growing population in the 6 world ‒ From 2000 to 2015, population numbers increased by more 4 than 370 million from 814 million to almost 1.2 billion (1) 2 • Of this increase 135 million was in East Africa 0 ‒ According to United Nations projections, the population will East Africa Central North South West rise to almost 1.7 billion in 2030 and almost 2.5 billion in Africa Africa Africa Africa 2050 (1) 2014 2015E 2016E 2017E • Of this increase 484 million is expected in East Africa Estimated East African Population Growth 2015-30 (1)  In addition comes one of the fastest rates of urbanisation in the Population (million) world 700 ‒ By 2050 44% of the population of East Africa are expected to 600 live in cities compared to the current 25% (2) 500  In coming decades, Africa will have the most favourable 400 demographics in the world in terms of the development of people at working ages 300 ‒ Its population at working age (defined as 15-64) is increasing 200 rapidly and faster than the total population 100 ‒ In East Africa this trend is expected to add c. 0.6% of annual 0 GDP growth p.a. (1) 2015 2030 Working Age Remaining Population Source: (1) The African Economic Outlook 2016 (The African Development Bank, the OECD Development Centre and the United Nations Development Programme). (2) World Urbanization Prospects 2014 revision. United Nations, Department of Economic and Social Affairs.

…AND RELATIVELY STABLE BUSIESS CLIMATES Tanzania Mozambique Uganda  Expected GDP growth of 7.2% in  Expected GDP growth of 5.1% and  Expected GDP growth of 6.5% and both 2016 and 2017 (1) 5.8% in 2016 and 2017, 7.5% in 2016 and 2017, respectively (1) respectively (1)  Tanzania has achieved Real GDP  The Ugandan economy was severely  Mozambique’s economy has grown growth of around 7% in recent years affected by the Global Financial steadily at an annual rate of 6%-8% ‒ based on gold production and crisis in 2008-2009 over the last 5 years tourism  The economy was further effected ‒ Investment in natural resources ‒ However, the fall in global gold by the banking sector downturn in including natural gas, coal, prices has hurt export revenues 2011-2012 titanium and hydroelectric significantly capacity have recently been seen ‒ The government adopted a tight  In 2015 Tanzania was the 8 th biggest to drive growth monetary policy to curb destination for Foreign Direct  In 2015 Mozambique was the 2 nd inflationary pressures and Investment (FDI) in Africa expectations biggest destination for FDI in Africa ‒ Investment inflows rising to USD  Uganda's real GDP growth has now ‒ Investment inflows rising to USD 2.3 billion gradually recovered 4.7 billion ‒ Resulting from the country’s ‒ driven by accelerating private ‒ Uganda’s oil sector is expected to favourable investment policies consumption and investment into be the country’s main investment and a relatively efficient the infrastructure and extractive magnet in future commercial dispute system sectors Note: (1) The African Economic Outlook 2016 (The African Development Bank, the OECD Development Centre and the United Nations Development Programme).

ELECTRIFICATION RATES IN AFRICA  East Africa is the least developed area, with more than 200 million people still without electricity  Electrification rates for Mozambique, Tanzania, Kenya and Uganda average less than 20%  Much of the challenge across sub-Saharan Africa is in rural areas, where electrification rates average only 14%.  Plans to extend distribution infrastructure in these rural areas has created a significant demand for treated poles  This demand for primary transmission poles is expected to remain strong for at least 10 – 15 years  Considering a lifecycle of up to 20 years, the secondary market for wood based transmission poles should also be strong Source: Poyry. Electrification rates in sub-Saharan Africa are generally very poor, with the average resting at about 32%. It is estimated more than 620 million people in this region do not have access to electricity

WOOD CONSUMPTION  No reliable statistics exist for regional Fuelwood and charcoal consumption Industrial roundwood consumption trade, and so FAO based consumption 120 9,0 should be considered conservative Million m 3 Million m 3  Fuelwood and charcoal consumption 8,0 100 remains by far the main wood use in 7,0 East Africa  Demand for charcoal is increasing in 80 6,0 the region but this is not fully 5,0 reflected in the data because of the 60 informal market and lack of regional 4,0 trade data  Both fuelwood and industrial 40 3,0 roundwood consumption has been 2,0 increasing, however local supply is 20 becoming constrained due to rampant 1,0 deforestation 0 -  Demand will only increase with 2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 increasing populations and urbanisation in East Africa Kenya Mozambique Kenya Mozambique Uganda Tanzania Uganda Tanzania Source: Poyry, FAOSTAT 2016. The relatively modest increase in consumption of fuel wood and charcoal for energy and roundwood (logs) for industrial use is a result of local supply constraint rather than lack of demand

WOOD PRODUCT, PULP AND PAPER IMPORT  No reliable statistics exist for regional imports East Africa wood product and pulp and paper imports (products not entering through ports), and so 200 1,5 these statistics should be considered Thousand m 3 Million t (Pulp & Paper) Sawnwood conservative 150 Plywood  While Tanzania has a reasonably strong wood 1 Other Panel products industry (compared with other 100 countries in East Africa), wood product demand 0,5 is also increasingly being met by imports 50  Compound annual growth rates (CAGR) for 0 0 product imports to East Africa are: 2000 2002 2004 2006 2008 2010 2012 2014 ‒ Sawnwood 20% ‒ Plywood 15% East Africa wood product imports by country 200 ‒ Other panels 12% Tanzania Thousand m3 Uganda ‒ Pulp and paper 13% 150 Mozambique Kenya 100 50 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: Poyry, FAOSTAT 2016. Imports of wood derived products have shown a substantial increase in East Africa since 2000 to compensate for locally produced wood products not keeping up with regional demand

INTERNATIONAL PLANTATION COSTS  Only South-East Asia is close to East Eucalyptus average costs for 1 rotation Pine average costs for 1 rotation Africa’s plantation cost structure, but USD/hectare USD/hectare land availability is poorer than in 9000 9000 Africa 8000  While direct land costs are lower in 8000 Africa, land administrative costs 7000 7000 related to Greenfield development 6000 projects can be high 6000  Establishment includes land 5000 5000 preparation, but not initial land 4000 4000 clearance costs 3000 3000 2000 2000 1000 1000 0 0 Land Establishment Maintenance Harvesting and extraction Source: Poyry. Costs are presented for typical plantations from establishment through to final clearfelling