Katharina Cavano l Palladium - Aug 24 2020
How Komaza, the “Uber of Forestry”, is Revolutionising Timber Production in Africa

Source: Komaza 

Over 80 percent of Africa’s primary energy is supplied by fuelwood, which is the leading driver of forest degradation and deforestation on the continent. It’s estimated that by 2030, Africa’s supply deficit of industrial wood will exceed USD 30 billion.

It is unlikely that traditional large-scale forest plantations will ever meet this deficit or solve for the major mismatch in supply and demand across Africa. The African forestry industry needs a new model if it’s going to survive the next decade and provide fuelwood for a growing population and economy.

This is where Komaza steps in.

Komaza, the ‘Uber of forestry’, is a social enterprise that’s using micro-forestry to disrupt the forestry model in Africa. Essentially, Komaza empowers smallholder farmers to make use of their previously unproductive land to produce timber for sale into industrial markets, utilise waste materials as a sustainable source of fuelwood, and generate potentially life-changing income.

Founded in 2006, the Komaza team works directly with smallholders in Kenya and their 1-3 hectares of land, providing seedlings and hands-on technical support throughout the process in a seven to eight-year-long partnership. In exchange for exclusive and fair tree harvesting rights, Komaza provides farmers with tools, training, best practices, and maintenance during the lifetime of the farm, for free.

Ben Aschenaki, Regional Manager of Palladium’s Partnerships for Forests (P4F) project stresses the innovation in Komaza’s model. “Komaza tackles the African wood deficit crisis by disrupting the commercial plantation approach and addressing a real problem directly on the ground in Kenya.”

According to Aschenaki and the P4F team, traditional commercial forestry has failed throughout Africa due to a booming population, a lack of space, and conflict, making it a high-risk area to grow and harvest wood at a large scale. Komaza’s model is actively working to solve this.

Raising capital

“Forestry is one of the sectors that is difficult to get investment in, particularly private investment,” explains Terry Green, Palladium’s Director of Environment and Natural Resources.

Historically, forestry requires a long time for investors to see returns – often up to a decade, which according to the P4F team, not many investors have the appetite for. Assets are also ‘illiquid’ or not easily converted into cash, which discourages investment. These factors, combined with governance and security risks in the African context, has led to very little commercial investment.

“Komaza is an example of a successful program that’s working with communities, adding value, and attracting private sector investment,” Green says.

He attributes their success to the fact that they have a team on the ground that is already well-embedded in the communities in which they’re working (the majority of their employees are community members), and by constantly iterating and scaling the business up, they’re far more attractive to potential investors.

Despite the challenges, Komaza has raised USD 48 million since 2017, including a recent Series B round of funding of USD 28 million in July of 2020.
“This is a huge achievement for the company and the industry as well,” says Aschenaki. “It sends a signal to investors that there is a real opportunity for companies in Africa that are addressing real problems and making an impact in several different areas.”

Investors in Komaza include Palladium’s P4F, a program that has assisted with Komaza’s strategy implementation for expansion, and brokered meetings with other partners since 2016. With P4F’s help, Komaza has expanded their operations beyond the coastal area of Kilifi to central Kenya and has digitised many of their systems.

In an effort to simplify investing in Komaza and build a more sustainable financial future, P4F also helped the team create a term sheet and investor pitch deck, and launched a special forestry vehicle (SFV) to securitise their harvest contracts. This SFV packages tree production partnership contracts with thousands of smallholder farmers and sells them to investors, providing farmers and forestry companies with access to low-cost, long-term finance while enabling institutional investors to access sustainable forestry investments.

For Komaza, the capital raised from investors reduces its cash flow burden, while investors enjoy a market-rate return from investments in forestation and smallholder farmer empowerment. The SFV provides Komaza with a powerful tool for fundraising in an effort to reach their ambitious targets.

Since their launch, Komaza has restored 7,000 hectares of degraded land in coastal Kenya by planting more than 6 million trees. They have worked with 25,000 smallholder farmers, making them Kenya’s largest commercial tree planter, operating at 80 percent less cost than large plantations, and changing and uplifting thousands of lives in Kenya.

Partnerships for Forests (P4F) catalyses investments in which the private sector, public sector and communities can achieve shared value from sustainable forests and sustainable land use. P4F is managed by Palladium in partnership with SYSTEMIQ. P4F is funded with UK aid from the British people.