x Abu Dhabi, UAE Thursday 20 July 2017

Hardwood to help South Sudan wean itself from oil dependence

One of the hardest woods in the world may help to soften the effects of conflict over oil in East Africa.

Teak is cultivated and harvested in many tropical countries because of its extraordinary qualities, and demand is rising. istockphoto.com
Teak is cultivated and harvested in many tropical countries because of its extraordinary qualities, and demand is rising. istockphoto.com

One of the hardest woods in the world may help to soften the effects of conflict over oil in East Africa.

Equatoria Teak Company (ETC), a forestry group based in South Sudan, plans to start shipping the wood from the East African nation within two months, helping the country diversify away from its dependence on oil.

The company, a unit of the venture capital group Maris Capital, based in London, will export a container load of furniture-grade teak to the United States within two months and may boost shipments to three containers a week by April, says Coco Ferguson, a director of ETC.

Exports may yield millions of dollars a year, says Simon Ndigi, the state minister for trade and investment in South Sudan.

"It is a rare product and demand worldwide is exceptionally high," he says in Yambio, the state capital of the Western Equatoria region in South Sudan.

"It is of huge economic benefit to Western Equatorial state and to the Republic of South Sudan."

Teak is one of the most valuable hardwoods and planted teak forests have attracted investment in Africa, Asia and Latin America, according to a report last year by the United Nations Food and Agriculture Organisation (FAO). Processed timber can retail at prices from US$750 (Dh2,754) per cubic metre to $1,500 per cubic metre, according to ETC.

Globally, teak constitutes the only planted hardwood resource that is increasing in terms of area, the FAO said.

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South Sudan's teak forests are the oldest in Africa, having been planted by British colonialists before Sudan gained independence in 1956, according to Mr Ndigi. The trees have not been harvested because development of forestry was impeded by two civil wars, including a two-decade conflict that led to South Sudan's independence from Sudan in 2011.

South Sudan's only export is oil, which the government relies upon to generate 98 per cent of its revenue. Last year, the state shut down crude production in a dispute with neighbouring Sudan over transit fees. That led to a foreign-exchange shortage and resulted in the South Sudanese pound weakening 6.3 per cent since the start of last year. Black market rates fell even further, with the pound falling as much as 30 per cent to 5 per US dollar on the streets of Juba, according to a report by Standard Chartered.

The government has said it plans to diversify the economy by developing industries such as agriculture and mining. The country still imports most of its food and a mining law that would allow companies to purchase concessions is awaiting the president Salva Kiir's signature after being passed by parliament in November.

Teak may fill some of the containers that leave South Sudan empty after arriving fully loaded in a country that imports everything from building materials to telephone poles, Ms Ferguson says. The load of teak being shipped by ETC will travel by road through Uganda to the Kenyan port of Mombasa, she says.

The logs may fetch top prices because of the high quality of South Sudanese teak and because ETC is the first company in Africa to obtain certification from the Forest Stewardship Council, based in Germany, which allows access to markets in the US, Europe and China, she says.

"Our teak is second only to the Burmese type of teak," says Mr Ndigi.

Myanmar, as Burma is known, "is the only country producing quality teak from natural forests" according to the FAO. The agency forecasts "a continuing decline in the volume and quality of natural teak".

ETC owns plantations in South Sudan covering 18,640 hectares, 1,319 hectares of which are under teak, according to its website. Central Equatoria Teak Company (CETC), which is also a unit of Maris Capital, holds the rights to three plantations in Lainya County and around the town of Yei, Ms Ferguson says.

ETC has invested $10 million developing the company and is committed to investing an additional $4m, she says.

This month, the CETC is hiring workers to start thinning plantations, begin work on a nursery for new planting and break ground on community fund construction projects, Ms Ferguson says. As the company grows, it will invest in infrastructure that is needed in Lainya county and throughout South Sudan, which is one of the world's poorest countries, according to the World Bank.

"It's not easy doing business here," Ms Ferguson says.

"But it's worth it because otherwise trees that have been here since the 1940s will be gone and people living there won't benefit."

Oil has long been a source of conflict in the region. Sudanese and South Sudan troops clashed in the oil-rich this month, in the latest flare up of tensions along their poorly marked border, officials said.

The Sudanese infantry attacked several positions of South Sudanese army 20 kilometres inside South Sudan's oil producing Upper Nile state, in one of the major clashes, since April last year, according to the South Sudan military spokesman, colonel Philip Aguer. The clash underscores worsening tensions between the two countries as they continue to bicker over the creation of a demilitarised zone along the border to pave the way for the resumption of transit oil exports, a lifeline for their respective economies.

"The SPLA [South Sudan army] managed to repulse the ground attack forcing the Sudanese troops to retreat," Col Aguer says, adding Sudanese air force later provided cover for the retreating ground troops, bombing several positions in Renk County, located in northern Upper Nile state.

At least one South Sudan soldier was killed in the attack, which also left three others critically injured, he added.

The Sudanese army is battling rebels of South Sudan People's Liberation Movement North, in its border states of South Kordofan and Blue Nile. Aid officials say thousands of civilians have been fleeing their homes along border regions due to a worsening security situation.

Sudan and South Sudan accuse each other of backing proxy rebels in each other's territory; each denies the other's accusations. Efforts to restore security along the 1,800km border have stumbled since Mr Kiir and his Sudanese counterpart, Omar Al Bashir, signed agreements in September aimed at improving relations.

An impasse over the implementation of the deals has prevented the resumption of South Sudan's 350,000 barrels-a-day crude-oil shipments through Sudanese territory. Talks over the implementation of the deals have broken down several times since late last year plunging the two countries' economies into turmoil.

South Sudan's oil shipments have been suspended since January last year.

Negotiations over the implementation of the peace deals are expected to resume tomorrow. Last month, at least 32 people were killed during clashes between the two countries armies in the Western Bahr El Ghazal state.

South Sudan's move away from oil and into the trees can't come quickly enough.

 

* with Bloomberg News and Dow Jones