Hotel, Kampala, 6 th October Yakobo Moyini, and Moses Masiga Environmental and Natural Resources Economists and Policy Analysts

Transcription

1 The Cost of Converting A Section of Mabira Central Forest Reserve into Sugarcane Production Presentation at Imperial Royale Hotel, Kampala, 6 th October 2011 Yakobo Moyini, and Moses Masiga Environmental and Natural Resources Economists and Policy Analysts

2 Mabira s Attributes a high level of biodiversity richness only major CFR in close proximity to a large urban population (Kampala City and Jinja Municipality) in Uganda significantly supports the livelihoods of the adjacent communities (medicines, water, poles, firewood, foods, etc) critical component of the hydrological cycle sources of two main rivers (Musamya and Sezibwa) high tourism potential significant sink for greenhouse gases the main causes of global warming and climate change etc 2

3 SCOUL s Motivation (East African, New Vision and Monitor Newspapers) Foreign exchange saving of US$ 20 25m per annum. additional 1-12 MW of electricity. Additional 3500 jobs earning of Shs 3 billion/year. Investment (schools, houses, dispensaries), Shs. 3.5 bn. A 300 km of road in the newly allotted areas, Shs. 2bn. The taxes in the form of VAT, Excise Duty, PAYE and import duty from the additional production. Preserve ecology of the remaining Mabira CFR Tree planting in areas not suitable for sugarcane

4 The study The overall purpose of the study to determine whether sugarcane growing would offer a superior alternative to conservation in the part of Mabira CFR which SCOUL has applied for. Compared the net benefits of sugarcane growing with those of conservation. That is, if present value of net benefit of sugarcane growing exceeds the net benefit of conservation, then degazettment, in purely economic terms, would be preferred. Conversely, if the net benefit of conservation exceeds that of sugarcane growing, then conservation would be the preferred option. In other words: The primary analysis dealt with sugarcane growing vis-à-vis conservation. The farm-gate price of the sugarcane estate was compared with the estate value of the natural forest.

5 Analytical Framework That is: if the benefit of sugarcane growing exceeds the net benefit of conservation, in purely economic terms one could argue for degazettment. And the converse is also true. i.e. if B s > B c grow sugarcane; and if B c >B s, conserve where B s net benefit of sugarcane growing B c net benefit of conservation 5

6 The Sugarcane Side of the Story 6

7 Basis of agricultural economics analysis A central premise to the request for additional land for sugarcane production is if Uganda aims to become selfreliant in sugar, the country s sugar industry will need to boost sugar output by 21%. For SCOUL to be competitive, the Company needed to increase production from 55,000 mts/ annum to 110,000 mts/ annum, equivalent to 22,500 ha of usable land. SCOUL had 10,000 ha and needed an extra 7,100 ha from Government; and to buy 1,500 hectares privately. Also, the Government could not shift the factory and the present 10,000 ha of sugarcane to another location.

8 Sugarcane Supply Sugar company the sponsor Sugar Company Nucleus Plantation Company s out growers Department Registered out growers Association Nonregistered out growers Company owned sugar factory Source: Uganda Land Coalition (2006) 8

9 Value of Sugarcane for SCOUL Out-growers SCOUL Kakira Area 15,000 22,000 Sugarcane (kg) 600,000 1,000,000 Price of sugarcane (Ushs/tonne) 20,200 (US$ 11.88) Value of sugarcane based on out-grower sugar prices (Ushs) 12,120 20,200 Per hectare value of sugarcane based on out-grower prices ( 000 Ushs/ha) Value of sugarcane based on out-grower sugar prices ( 000 US$/ha) 7,128 11,880 Per hectare value of sugarcane based on out-grower sugar prices (US$/ha)

10 Status of Sugarcane Land Ownership Classification of land owned SCOUL Kakira Kinyara (ha) (%) (ha) (%) (ha) (%) Nucleus estate 12, , , Government of Uganda lease Private land lease , Outsourcing 3, , , Large private estates Small out-growers 3, , , Large self-funded 1, Total 15, , ,

11 Options for SCOUL If the 7186 ha of Mabira CFR was made available for sugarcane production by SCOUL, based on existing trends: SCOUL would produce metric tonnes Sugarcane produced by SCOUL would be 13% less than if Kakira s yield levels were used AND 6% less if Kinyara yields are used instead 11

12 Winnable Non-controversial Strategies Strategy 1. SCOUL could increase yields to Kakira s levels. This would reduce SCOUL s demand for additional land from 7186 ha to 5496 ha. Strategy 2. If SCOUL could improve its productivity further, say to 120 mt/ha (achievable according to ADB study), it could reduce its requirement for additional land from 7186 ha to 4988 ha. Strategy 3. SCOUL could also improve its sugarcane conversion from 8.4 to Kinyara s level of 10. If this can be achieved, the demand for additional land could be reduced from 7186 ha to 6036 ha. Combined Strategy SCOUL could reduce its demand for additional land significantly through a combination of the last two strategies ( 2 & 3). A reduction of 5038 ha is possible, leaving net land requirement of 2148 ha which can be obtained elsewhere and Mabira left alone. 12

13 Value of Land for Sugarcane The average net profits for outgrowers in 2005 was estimated at Ushs /ha/year Land lease rates in Mukono District a km radius from SCOUL range between Ushs /acre or Ushs /ha Including other estimates the net value of land for sugarcane production was estimated at $ 490/ha/year At a social opportunity cost of capital of 12% (the discount rate used for public projects in Uganda - private sector may require higher rates while conservationists tend to advocate for a very low or 0% discount rate), the present net value for the 7186 ha is $29.3 million. 13

14 The Conservation Side of the Story 14

15 The Conservation Value To estimate the net value of conservation, the total economic value was used to estimate benefits. Typical costs would include management costs and opportunity costs of the land. Costs were embedded in estimating values in that for timber, stumpage values (net of costs) were used while tourism values were estimated using the consumers surplus approach (also net of costs), etc. 15

16 Total Economic Value direct use values benefits that accrue directly to the users of forests, whether extractive (e.g. timber and NTFPs) or non-extractive (e.g. ecotourism); indirect use values benefits that accrue indirectly to users of forests, primarily ecological or environmental services; option value the amount that individuals would be willing to pay to conserve a forest for future use (e.g. biodiversity values); bequest value the value attached to the knowledge that others might benefit from a forest area in the future; and existence value the value placed by non-users on the knowledge that something exists, i.e. its intrinsic value. 16

17 Resulting Value Estimates Present values at 12% social cost of capital 1. Value of timber growing stock: $ 35.2 million 2. One off value of carbon released into atmosphere if timber were cut and burned: $ 3.7 million 3. Annual timber benefits stream (based on principles of long-run sustained yield management): $ 4.8 million 4. Poles + Firewood (Community livelihood benefits): $ 299, Non-Timber Products (also largely community benefits: $ 337,000 17

18 Resulting Value Estimates (contd) 6. Pharmaceutical value (international): $ 900, Domestic water: $ 281, Ecotourism: $ 167, Carbon sink values: $ 1.4 million 10. Watershed protection: $ 1.4 million 11. Option and existence values: $ 120,000 18

19 Summary Estimated Conservation Values One off Values Amount Ushs US $ Timber Stock 59,902,000,000 35,236,471 Value of Carbon Stored 6,352,424,000 3,736,720 Annual Stream of Benefits Timber 986,349, ,205 Poles & Firewood 61,045,070 35,909 Non Timber forest products (NTFP) 68,834,694 40,491 Ecotourism 18,324,300 10,779 Community water supplies 57,258,416 33,681 Pharmaceutical values 34,083,504 20,049 Carbon Sequestration 294,597, ,293 Watershed protection 293,188, ,464 Option/existence values 24,432,400 14,372 1,838,113,773 1,081,243 Net Present Value of Annual Benefits Streams 1. Timber 8,219,577,775 4,835, Poles & Firewood 508,708, , NTFP 573,622, , Domestic water supply for communities 57,702, , Pharmaceutical values 477,153, , Ecotourism value 284,029, , Carbon sequestration values 2,454,977,133 1,444, Watershed protection values 2,443,240,000 1,437, Option/Existence values 203,603, ,767 15,322,615,343 9,819,363 19

20 Comparison Standing crop Annual benefits $/year A. CURRENT VALUES SUGARCANE 0 $ 3.6 million/year CONSERVATION $ 35.2 million $ 1.1 million/year B. NET PRESENT VALUES SUGARCANE CONSERVATION $29.9 million $45.1 million 20

21 In search of the whole story Based on the understanding of ecosystem functioning and ecosystem services; Once you carve out 7186 ha of Mabira, the remaining ha would have been irrepairably damaged. It is plausible that the conservation opportunities foregone should be based on the entire area of the reserve. 21

22 In search of the whole story Present Values (millions) Timber Stock value (Value of carbon stored 15.9) Annual benefits stream Timber 20.6 Poles & Firewood 1.3 NTFP 1.5 Domestic water 3.9 Pharmaceutical 1.2 Ecotourism 0.7 Carbon sequestration 6.0 Watershed protection 6.0 Option/existence Total timber stock + Annual benefits THAT IS, CLOSE TO $200 MILLION OF FOREST VALUES WOULD BE DESTROYED! 22

23 Thank you for Listening 23