Ethiopia forestry could represent major untapped investment opportunity

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One of the major untapped investment opportunities in Ethiopia is its lucrative forestry sector, it has been suggested.

According to the Ethiopian Privatization Agency, (EPA) around 2.5 million hectares of the country’s natural forest cover is currently in 58 designated National Forest Priority Areas (NFPA). Of these hectares, 13 are being managed through integrated forest management systems, while 80,000 hectares of industrial forest have been created and set aside for limited sustainable exploitation.

As well as the possibility of yielding strong returns for those investors willing to take a risk on a partially unexplored marketplace, injecting money into the sector will also bring numerous environmental and social benefits for the country as a whole.

Indeed, environmentally and socially conscious investors are said to be already exploring the myriad forestry opportunities that exist in the country in a bid to mix profit with sustainability. Investment in forestry offers a number of advantages, ranging from being low risk and less volatile than other investment assets. It also offers flexibility in terms of the timing of the harvest and brings strong returns, even at times when economic uncertainty can spell disaster for other assets.

In Ethiopia, the forestry sector has so far had little involvement from private investors, meaning that the sector is far from being fully tapped. Currently, mass seedling plantation campaigns are being carried out as part of work started by forestry enterprises based in Amhara and Oromia States. It is hoped that these campaigns will help to shine a spotlight on the potentially lucrative sector and could encourage investors to inject their resources into the country’s commercial production of structural timber, as well as pulp-wood, match wood or fuel wood. Indeed, the demand for industrial and construction woods is seeing a sharp rise of late, due to the rising interest in items such as paper, pulp, housing materials and wood-based furniture across the globe. The country has said that between 300,000 and 400,000 hectares of industrial forest plantation is needed over the coming 20 years in order to meet the continued rising demand for wood and wood-related products.

There are also a number of favorable incentives and Government support options available in order to incentivise potential private investors. These include the tax exemption investment projects in forestry development, which are exempt from having to pay income tax for up to nine years, dependent on the location in which the development is based.

The Ministries of Ethiopian Investment, Agriculture, Environment, Forest and Climate Change is encouraging investors from across the globe, as well as local investors, to consider the forestry sector, due to the fact that forestry investment is now a proven solid asset opportunity and is widely acknowledged as providing diversity and reliability to any investment portfolios.

GWD Forestry spokesman, James Barrett, said: “It is clear that there is untapped potential in the country’s forestry sector and, as we all know, forestry is a solid investment asset class so getting involved early could prove to be an astute move. The rising demand for wood and wood-based products for projects such as mass housing creation does not look set to stop any time soon, so investors could do a lot worse than to inject their resources into the forestry sector, be that in Ethiopia or elsewhere.”

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