Entrepreneurship Zone: 07 March 2025 : Money in trees? Investing in Africa’s forestry sector

[Bulls n Bears]

 <https://bullszimbabwe.com/> 

 


 

Bullszimbabwe.com  <http://www.bullszimbabwe.com/>       Views
<mailto:info at bulls.co.zw?subject=View%20and%20Comments> & Comments
Bullish Thoughts <http://www.bulls.co.zw/blog>        Twitter
<http://www.twitter.com/BullsBears2010>         Facebook
<https://www.facebook.com/BullsBearsZimbabwe>           LinkedIn
<http://www.linkedin.com/pub/bulls-n-bears-zimbabwe/57/577/72>
WhatsApp <https://chat.whatsapp.com/CF6wllAfScU9Wr6dXxoQnO>
Unsubscribe <mailto:info at bulls.co.zw?subject=Unsubscribe> 

 


 

 


Entrepreneurship Zone: 07 March 2025 : Money in trees? Investing in
Africa’s forestry sector

 


 

 


 <https://www.firstcapitalbank.co.zw/> 

 


 

 


 

 



 

Criterion Africa Partners recently invested in Form Ghana, one of the
largest reforestation companies in Africa.

Criterion Africa Partners is a private equity firm focusing on investments
in the continent’s forestry sector. It has backed forestry and wood products
related businesses in Ghana, Gabon, Uganda, Tanzania, Namibia, South Africa
and eSwatini. Jeanette Clark spoke to Jim Heyes, managing director at
Criterion, about the areas within the forestry value chain that hold the
most potential and some of the challenges to be aware of.


Why is private equity a suitable investment vehicle for forestry on the
African continent?


As Criterion Africa Partners, we’ve been fully dedicated to the sector
since 2010 when we closed our first US$160 million fund, the Africa
Sustainable Forestry Fund. We are now nearing the end of the deployment of
our second fund, which closed in 2018.

Private equity is a suitable investment vehicle for forestry on the African
continent because it brings three key elements: capital, expertise and
access to an established network. Capital is crucial, as it has been in
short supply in the sector. However, with the rise of climate change
mandates, this has changed in recent years. Criterion Africa Partners also
brings expertise to the table, which helps unlock long-term value in the
sector. In addition, investees get access to the fund’s network, allowing
for technical support, connections, and other key elements needed for
success in the challenging forestry sector.


What are some of the main challenges in the forestry sector in Africa?


First of all, land issues are complicated in Africa. There is a common
misconception that there is an abundance of available land for forestry, but
much of the biologically productive land near credible markets is already
used for farming and food security purposes.

Implementation is another challenge, as projects require significant
investment and handholding to succeed. Structural issues, such as the high
cost of capital, also impede growth in the sector, making it difficult for
projects to become cash-flow positive.


How do you overcome land issues specifically?


It is very important, from the start, to establish good relationships with
local stakeholders. I would advise that companies are modest about their
ambitions until they demonstrate how they can perform on the ground.

Smallholder forestry can overcome land availability challenges and be a
valuable investment opportunity. We are looking for ways to make this model
investable.


Which sub-sectors or areas in forestry have the most potential?


Traditionally we have three areas that we invest in.

The first is brownfield plantation forestry operations with established
market potential, ESG standards, and management teams. We’ve made various
investments in this area and have a few others that we are currently
considering. We don’t have any special focus in terms of species. The most
common species in plantation forestry are eucalyptus, pine and teak, and we
have investments in all three

The second is downstream manufacturing operations such as sawmills, and the
production of utility poles and plywood. These are exciting ventures because
continued growth and demand in the local, regional, and international
markets mean that the value chain will continue to develop over time and
more opportunities will become available.

Investment in biomass energy to address the continued dependence on fossil
fuels is the third area.

We have also started looking at investments that address deforestation
caused by charcoal production. Modern technology for charcoal production can
reduce the wood input required by two-thirds.

Currently, we are also exploring investments into agriculture on marginal
forestry land, to boost the return on investment from those projects.



Jim Heyes, managing director of Criterion Africa Partners


What investment opportunities would you not consider?


We have been historically negative about greenfield plantation investments
in Africa due to past failures. According to our research, there has been
US$1.2 billion invested in 30 greenfield plantation projects over the last
30 years, with two-thirds of that capital lost. However, within the context
of the current climate change mandates, we are closely monitoring potential
projects to see if an investment could make commercial sense in the future.


Do you see the carbon credits market influencing investments in the future?


It is already having a significant impact. We sold a stake in the Gabonese
forestry company Compagnie des Bois du Gabon to TotalEnergies in June, and
the company indicated its plans to build a portfolio of projects that could
generate five million metric tonnes of CO2 equivalent of carbon credits. Not
all investors coming into forestry are necessarily seeking carbon credits,
but it is probably the biggest driver at the moment.

However, the realistic supply of carbon credits on the continent is nowhere
near meeting the demand from these announced projects. Getting five million
metric tonnes of CO2 equivalent per year translates into planting an
additional 250,000 hectares a year, which is more than all the new
plantations established in the past 30 years.

These are extremely ambitious targets and whether or not it is realistic,
remains to be seen. There is potential in the market, but it is more
difficult than people realise.


How do you choose which companies to invest in?


We seek companies where we can add value. We try to find companies that are
on a clear path to cash positivity within our holding period. We also have
high ESG standards as we always hope to have a positive environmental
impact.

Considering these criteria, the pool of investible assets in Africa is
limited, but our experience and our networks give us access to deal flow. At
the moment we have more opportunities than we have capital.

—Howwemadeitinafrica

 

 


 


 


 

 Invest Cellphone:    +263 71 944 1674 | +27 79 993 5557 

Email:                <mailto:bulls at bullszimbabwe.com>
bulls at bullszimbabwe.com

Website:             <http://www.bullszimbabwe.com> www.bullszimbabwe.com 

Blog:                  <http://www.bullszimbabwe.com/blog>
www.bullszimbabwe.com/blog

Twitter (X):        @bullsbears2010

LinkedIn:           Bulls n Bears Zimbabwe

Facebook:           <http://www.facebook.com/BullsBearsZimbabwe>
www.facebook.com/BullsBearsZimbabwe

Skype:         Bulls.Bears 



 

 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
Faith Capital (Pvt) Ltd for general information purposes only and does not
constitute an offer to sell or the solicitation of an offer to buy or
subscribe for any securities. The information contained in this report has
been compiled from sources believed to be reliable, but no representation or
warranty is made or guarantee given as to its accuracy or completeness. All
opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
suitable for all investors. Securities of emerging and mid-size growth
companies typically involve a higher degree of risk and more volatility than
the securities of more established companies. Neither Faith Capital nor any
other member of Bulls ‘n Bears nor any other person, accepts any liability
whatsoever for any loss howsoever arising from any use of this report or its
contents or otherwise arising in connection therewith. Recipients of this
report shall be solely responsible for making their own independent
investigation into the business, financial condition and future prospects of
any companies referred to in this report. Other  Indices quoted herein are
for guideline purposes only and sourced from third parties.

 


 

 


(c) 2025 Web:  <http://www.bullszimbabwe.com> www.bullszimbabwe.com Email:
<mailto:bulls at bullszimbabwe.com> bulls at bullszimbabwe.com Tel: +27 79 993
5557 | +263 71 944 1674

 


 

 

 

 

 

 

-------------- next part --------------
A non-text attachment was scrubbed...
Name: winmail.dat
Type: application/ms-tnef
Size: 464027 bytes
Desc: not available
URL: <http://listmail.bulls.co.zw/pipermail/bulls/attachments/20250307/13207f8c/attachment-0001.bin>