South Sudan to Start Teak Exports to Cut Dependence on Oil

Equatoria Teak Co., a South Sudan- based forestry group, plans to start shipping the wood from the East African nation within two months, helping the country diversify away from its dependence on oil.

The company, a unit of London-based venture capital group Maris Capital, will export a container load of furniture-grade teak to the U.S. within two months and may boost shipments to three containers a week by April, Coco Ferguson, a director of ETC, said in an interview in the South Sudanese capital of Juba. Exports may yield millions of dollars a year, said Simon Ndigi, state minister for trade and investment.

“It is a rare product and demand worldwide is exceptionally high,” he said in a Jan. 22 phone interview from Yambio, the state capital of Western Equatoria. “It is of huge economic benefit to Western Equatoria state and to the Republic of South Sudan.”

Teak is one of the most valuable hardwoods and planted teak forests have attracted investment in Africa, Asia and Latin America, according to a March 2012 report by the Food and Agriculture Organization. Processed timber can retail at prices from $750 per cubic meter (35.3 cubic feet) to $1,500 per cubic meter, according to ETC. Globally, teak constitutes the only planted hardwood resource that is increasing in terms of area, the FAO said.

Africa’s Oldest

South Sudan’s teak forests are the oldest in Africa, having been planted by British colonialists before Sudan gained independence in 1956, according to Ndigi. The trees haven’t been harvested because development of forestry was impeded by two civil wars, including a two-decade conflict that led to South Sudan’s independence from Sudan in 2011.

South Sudan’s only export is oil, which the government relies upon to generate 98 of its revenue. Last year, the state shut down crude production in a dispute with neighboring Sudan over transit fees. That led to a foreign-exchange shortage and resulted in the South Sudanese pound weakening 6.3 percent since the start of 2012. Black-market rates fell even further, with the pound falling as much as 30 percent to 5 a dollar on the street of Juba, according to an April report by Standard Chartered Plc. The currency changed hands at 4.2 a dollar yesterday.

The government has said it plans to diversify the economy by developing industries such as agriculture and mining. The country still imports most of its food and a mining law that would allow companies to purchase concessions is awaiting President Salva Kiir’s signature after being passed by Parliament in November.

Empty Containers

Teak may fill some of the containers that leave South Sudan empty after arriving fully loaded in a country that imports everything from building materials to telephone poles, Ferguson said. The load of teak being shipped by ETC will travel by road through Uganda to the Kenyan port of Mombasa, she said.

The logs may fetch top prices because of the high quality of South Sudanese teak and because ETC is the first company in Africa to obtain certification from the Bonn, Germany-based Forest Stewardship Council, which allows access to markets in the U.S., Europe and China, she said.

“Our teak is second only to the Burmese type of teak, Ndigi said.

Burma, also known as Myanmar, ‘‘is the only country producing quality teak from natural forests,’’ according to the Rome-based FAO. The agency forecast ‘‘a continuing decline in the volume and quality of natural teak.’’

Investment

ETC owns plantations in South Sudan covering 18,640 hectares (46,060 acres), 1,319 hectares of which are under teak, according to its website. Central Equatoria Teak Co., which is also a unit of Maris Capital, holds the rights to three plantations in Lainya County and around the town of Yei, Ferguson said.

ETC has invested $10 million developing the company and is committed to investing an additional $4 million, Ferguson said.

In February, the CETC will hire workers to start thinning plantations, begin work on a nursery for new planting, and break ground on community fund construction projects, Ferguson said. As the company grows, it will invest in infrastructure that is needed in Lainya county and throughout South Sudan, which is one of the world’s poorest countries, according to the World Bank.

‘‘It’s not easy doing business here,” Ferguson said. “But it’s worth it because otherwise trees that have been here since the 1940s will be gone and people living there won’t benefit.”

To contact the reporter on this story: Jared Ferrie in Juba via Nairobi at jferrie1@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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