Regulatory loopholes, official corruption and the complex flows of trade in wood across south-eastern Africa have cost Malawi millions of dollars annually in revenue from timber exports.
Our investigation hints at the extent of mismanagement of the Viphya Plantation, the country’s largest reserve of timber. With replanting efforts far below what would be needed to offset the effects of harvesting on the plantation’s 53 501 hectares, the forest’s future as a source of revenue for the State appears bleak.
The drop in income from export licences that official figures show—from K8.5 million in the first-quarter of 2015 to K6.9 million in the same period of 2016—may be irreversible, now that only a tenth of the plantation’s area is covered with trees. There is little sign of Malawi’s regulators being in a position to arrest and reverse plunder of the site.
Hopes for the reserve, first planted in the mid-20th century and viewed as a potential revenue windfall following independence in 1964, have been consistently dashed, even as Malawi has been the main supplier of softwood timber to the region, Europe and the Middle East.
Although the dream of having a pulp mill never materialised, harvesting was done on a small scale by pit sawyers before government opened up the forest to concessionaires to manage part of it.
The reserve now consists of a 20 000 hectare-plot granted to Raiply Malawi Limited under a concession agreed in 1998, 2 600ha to Total Land Care and 5 700ha to Kawandama Hills Plantation (KHP) with the rest in government hands and intended for smaller Malawian operators. It is an arrangement that has left the principals disgruntled, the exchequer neglected, and successive plans for use of the reserve to support development in the country unfulfilled.
Raiply Malawi estimates that government has missed out on K2 billion in revenue from encroachment of other illegal harvesters on its concession in the last 15 months at the rate of $10 per cubic metre of timber.
Raiply chief executive officer Thomas Oomen, says some 950ha of the concession has been illegally harvested.
Plantation manager Customs Nyirenda estimates illegal harvesting at 586ha in concession areas and 114ha from the government’s section of the forest, reflecting lost revenue of K880 million and K171 million from the two areas, respectively.
For all the intensity of harvesting, little revenue makes its way back into State coffers through taxation. Some funds, it appears, slip between bureaucratic jurisdictions, while others are simply spirited out of the country, at times enabled by official corruption.
Malawi imposed export duty on timber in 2011. The tax authority collects K1.05 million on a 40 cubic meter truck (28MT) without inquiring the source of the timber. Previously, processed timber was not subject to duty, but value-added tax (VAT) was to be assessed if the wood was sold locally.
Figures from Malawi Revenue Authority (MRA) indicate that 270 000 metric tonnes of soft timber, processed and unprocessed, have been exported from the plantation between 2009 and 2015. According to their statistics, in 2013 unprocessed timber fetched K1.05 billion in tax.
Malawi has so far realised K3.2 billion in export duty on unprocessed timber, which is mostly exported by small-scale traders. Tax authorities argue they collect on what has been certified as taxable, implying other State agencies are failing to hold up their end.
“We only facilitate the exportation but the Department of Forestry is the regulatory body on all forestry products,” said manager for taxpayer education McHizzal Kawanga in response to queries about the timber taxation process.
Trade in documents, then timber
The nationality and tax status of exporters fall within MRA’s jurisdiction, but here, too, the trade confounds the State. MRA forbids foreign nationals from exporting timber, and stipulates that exporters must have taxpayer numbers and a certificate indicating status with the corporate register.
A visit to forestry ministry offices in the Northern Region where the plantation is located, however, shows that foreigners—apparently fronted by Malawian firms—evade those regulations, and seem to have the help of forestry officials in doing so.
In July 2016, this reporter while investigating timber exports in Luwinga Township in Mzuzu witnessed a forestry official certifying the export details of a Somali national seeking export permission. The official in question attributed to that person affiliation to a registered commercial concern—without full documentation.
Another foreign trader, from Zanzibar, who only identified himself as Mpemba, cited the high margins Malawian timber offers and relative ease of circumventing legal barriers to the trade and avoiding tax.
“I have been here for seven years doing this business. Imagine, Somalis come here as refugees, but end up in the plantations. Hiring a licence as a foreigner and obtaining other required documentation cost about K1.2 million,” he said.
Local environmental activist Charles Kajoloweka, based in the timber trade hub of Mzuzu City, echoed that account, saying some 20 trucks filled with timber cross the border into Tanzania each day under such terms. He blames regulatory failures for the untaxed trade.
“The Tanzanians and other foreigners saw the loopholes and took over,” says Kajoloweka.
In the course of the inquiry, I approached Mzuzu MRA office for additional information on the trade and was referred to a clearing agent who handles timber exports. That agent said the fee to obtain documentation for a truckload of timber was about K1.3 million.
The procedures stipulated by MRA are far more rigorous, including remote submission of a declaration supported by documentation into MRA head office.
The clearing agent cited above said any significant cargo of timber would likely be matched with the necessary documentation for export. Officials of the forest authority facilitate such transactions, he said, and the formal procedures are typically ignored in that region.
“All one has to do is source timber and an international market. We will get those people who are registered with forest department to export the timber,” he said.
“MRA charges K1.050 million for a 30 tonne truck of 1 200 planks, but we take K1.2 million for the added charges. It takes a day to get one document,” explains the agent.
“The normal process of getting a timber export licence is hectic. One needs to have a plot of timber registered with the forestry department. I would advise one to get someone with documents. They are the ones who process everything on behalf of the client.”
Addressing members of the Parliamentary Committee on Natural Resources and Climate Change who visited the plantation on September 27-28 on a fact-finding tour, director of forestry Clement Chilima admitted that the system is porous as licences keep on changing hands without the knowledge of forest officials.
Local activists say the regulator’s failures go well beyond such oversights.
“We have seen forest officers selling the trees to illegal harvesters even at night,” said Laston Nkunika, chairperson of the Musipazi Community Based Organisation, who also serves on the local forest management committee.
Chilima concedes his department plays a role in the illicit trade in timber, but notes that it is far from the only party to that trade.
“We have the military, police and community stakeholders’ law enforcing group. We also have roadblocks manned by forestry personnel, a police and Army officer and yet trucks are going in and out with illegal material,” he says.
“We impound a vehicle [carrying stocks of illegally harvested timber] today, tomorrow the vehicle disappears while the keys are still with the police,” says Chilima.
An example of the overlapping failings of the regulators is a plot that locals claim was harvested by one of the influential members among the Timber Millers Cooperative Union (TMCU). TMCU is a union of 100 members who were awarded a 10 000-hectare concession in 2012.
Government claims TMCU overharvested its concession in just a year. Documents relating to the concession indicate it was awarded land with 2 712ha of available wood, with an annual allowable cut of 180ha, which could have stretched out over 15 years.
The TMCU member denies any role in illegal harvesting in the Lusangazi section, saying: “Most people use my name to tarnish my image. There have been many cases of illegal logging claiming that they are me or that I send them to harvest trees illegally.” n