Beyond The First Step
Credit to: Chabala Sunkutu – Senior Analyst Pangaea Securities
It is a well-known conundrum that Zambia’s economy is heavily dependent on copper production and export. Once a middle-income country, Zambia has been sliding towards poverty since the 70s when copper prices declined on the world market. Albeit, current high prices of copper on the international market after a three-decade slump leave room for optimism about economic growth. However, it’s undeniable that the country’s development has been hindered because, among other downsides, the copper it exports returns in a processed form, which is significantly more expensive, ultimately negating the benefits of the initial labour.
Over and over, talks about diversification and value addition in the economy as a fundamental driver of growth have been had. This has often involved the promotion of agriculture and industrial development, and commendably, strides are being made in this direction. Metal Fabricators of Zambia produces copper cables from copper cathodes. Zambeef produces, processes, distributes and retails beef, chicken, milk, dairy products, stock feed and flour. Trade Kings manufactures laundry and cleaning products, confectionery, and beverages, and it even produces steel from iron, manganese, and coal ores. You get the picture.
Zambia Forestry and Forest Industries Company (“ZAFFICO” or the “Company”) currently has 60,000ha of pine and eucalyptus, a significant portion of Zambia’s natural resources. In 2020, the Company was listed on the Lusaka Securities Exchange, which enhanced its commercial and social impact.
Due to demographic dynamics and increased economic activity in the mining, construction, electricity, and other industrial sectors, demand for the Company’s offerings has increased. In the wake of this, ZAFFICO has acquired 50,000ha of land in the northern part of Zambia to establish more exotic forest plantations, with an aggressive plan to plant at least 5,000ha every year.
The Company previously supplied the trees to the market, losing significant earning potential. The Company then established a pole treatment plant to integrate forward, which more than significantly increased revenue streams.
The Company is unsatisfied with this growth and is still going for more. A Project has been embarked on to establish a sawmill, creosote line, kiln, clipboard, and plywood plants. To contribute to the green economy, the company will also establish a briquette factory. This will add drying, treating, preserving, and producing high-pressure boards from timber to the Company’s service offering.
The ripple effects of this project are overwhelming. Cheap timber imports from neighbouring countries have challenged the local timber market. Still, with this stride, ZAFFICO will reduce imports and, conversely, increase exports of high-quality timber and timber products. Surrounding industries like the construction, furniture and packaging industries are on standby to benefit from reduced costs and the high timber-product quality. Approximately 20,000 jobs will be created in the process, supporting the essential livelihoods of many. Furthermore, the briquette factory will reduce charcoal burning and support carbon sequestration, creating a positive climate impact. And, of course, the Company’s financial sustainability will be further enhanced, creating value for shareholders. ZAFFICO must be commended for this strong participation in the upstream industries in Zambia. The Company’s efforts will play a vital role in Zambia’s economy by diversifying economic activity, creating jobs, adding value to timber, supporting local industries, promoting environmental sustainability, and enhancing infrastructure and export potential. Eyes remain on the Company to see if it will fully participate in downstream industries, take charge of the entire supply chain, and take the Company and the Country to newer highs.
