LDN Fund and LDN TAF Case Study
West Africa experiences large-scale deforestation, often as a result of illegal logging, unsustainable agricultural practices, mining and poor land governance. Ghana has seen a net forest loss of 1,250,000 hectares/ year between 1990 and 2010. The annual cost of land degradation in Ghana is estimated to be US $1.4 billion, or 6% of its GDP. In Sierra Leone, once a much-forested country, only 5% of intact forest is remaining.
In light of these developments, Miro Forestry, an afforestation company that operates forest plantations in Ghana and Sierra Leone, is managing a business that replants degraded lands and offers income opportunities to the communities living in these landscapes. In Ghana, these operations are in the Ashanti district, and in Sierra Leone in the Yoni chiefdom regions where local agricultural production tends to be largely at the subsistence level, with minimal infrastructure, and limited formal employment opportunities.
Since 2010, Miro Forestry has been supported by initial investments from development finance institutions including CDC Group and Finnfund. The company, which employs over 1,000 people across both sites, currently operates on 42,500 hectares of previously low-yielding grasslands and degraded forests, with 3,000 hectares of new plantation expected to be added each year. By operating FSC®-certified forestry plantations that grow commercial timber species through a mosaic structure, combined with the protection and regeneration of indigenous tree species, the area under management is expected to contribute to achieving LDN.
With respect to the land tenure context, Miro Forestry has developed a land access policy that meets international best practices, complies with local legislation and meets the social and cultural needs of the communities on and around the land. In Ghana, compartments of degraded forest reserve land are leased from the Forestry Commission and the Traditional Council (identified as the landowner). The lease agreement formalizes a partnership arrangement between the three parties, assigning specific areas of responsibility and reward to protect both the plantation investment and areas of cultural and natural resource importance through profit-sharing agreements and social investment. The process considers both the environment and the social wellbeing of individuals farming in the compartments that Miro Forestry leases.
In Sierra Leone, Miro Forestry leases land directly from landowners, which is endorsed by the chiefdom council representing the people and the landholding families. This lease agreement also seeks to build partnerships and share roles and responsibilities, with profit-sharing, employment opportunities, and support for social development. As land is leased directly from landowners in this case, Miro ensures that communities have access to a third-party civil society organization to provide support and ensure that free prior and informed consent (FPIC) is secured. Also, participatory and detailed village mapping and social development planning are undertaken as part of the process to reduce the risk of the lease impeding on the communities’ sustainability.
Miro Forestry operates FSC®-certified plantations that are a combination of commercial timber species and conservation areas. It has a small commercial scale sawmill, rotary veneer mill and green charcoal production unit. It is now also in the process of building a plant for the treatment of wooden electricity transmission poles, more drying kilns, expanding the veneer mill to a large-scale ply mill, and an edge glue board facility. Plantation and maintenance costs during this time have been around US $2,300 per hectare, which is globally competitive.
At the same time, the timber market is growing; as also regional demand is projected to continue to outstrip supply, prices are projected to increase. Additional revenue is being sought through certification of Miro Forestry’s plantations to the voluntary carbon standard, allowing for sale of the resulting credits.
With respect to smallholder and community inclusion in the business models, in Sierra Leone, revenue from land leases provides a valuable income to communities. Through a benefit-sharing system for local communities, 20% of standing tree value paid out in Ghana, with a comparable arrangement in Sierra Leone, ensure benefits contribute to landscape community income.
Flow of capital and services
Purpose: The LDN Fund investment in Miro Forestry allows for an expansion of plantation sites in Sierra Leone and Ghana on degraded land.
Type and amount: quasi-equity investment of US $12 million, supporting a total financing round of up to US $54 million.
Duration: The investment lifetime is 11 years, and the LDN Fund is considering a second tranche of the investment specifically for scaling up the planned timber smallholder outgrower scheme.
Miro Forestry operates to high environmental and social standards, following FSC® and IFC performance standards and the VGGT. It is one of the first FSC®-certified plantations in West Africa. Key risks are managed as follows:
The LDN TAF supported the project pre-investment.
- The LDN TAF supported Miro Forestry in developing the initial stages of the smallholder scheme, by establishing a demand-driven project exploring a variety of smallholder models and pilot implementation with a limited number of smallholders (total 74 hectares planted in the two countries). This was accompanied by an SDM analysis showcasing the business potential for engaging with smallholder farmers in the wider landscape, not just for the company but for the smallholders. Based on the insights gained during the pilot, the smallholder scheme will be further refined by Miro Forestry to enable the second tranche investment by the LDN Fund to take place and to allow full-scale implementation of the scheme.
- Following the investment by the LDN Fund, the LDN TAF supported Miro Forestry in developing an LDN baseline to comply with its environmental and social action plan, as well as to practice adaptive management.
Theory of change
42,500 hectares of land will be sustainably managed, contributing to LDN. This includes:
• 7,500 hectares of conservation area as a buffer to protect ecosystems and biodiversity and for conservation purposes;
• 17,200 hectares of commercial timber already planted and 50,000 as landholding.
An increase from ~100 jobs in 2014 to 1,500 jobs in 2019 has already taken place, thereby increasing income and opportunities in the surrounding communities. 33% of household income is currently derived from employment with Miro Forestry. Salaries are approximately 30% higher than the national minimum wage in both countries. A further 1,500 new rural jobs are expected, mostly for people from local communities. When the outgrower scheme is rolled out at scale, it will also provide income generating and alternative livelihood opportunities for local communities.
19% (24% in Ghana) of seasonal workers are women. This is considered high in the industry and Miro Forestry is actively driving a further increase in this percentage.
Sustainable species planting on degraded land surrounding set-aside forest reserves, helping to reduce pressure on remaining natural forests. Conservation of any remaining patches of native forest on the leased area, including active and successful enrichment through replanting campaigns with endemic none commercial trees.
Sequestration of 5 million MtCO2eq and increased resilience to climate change.
Part of Miro’s expansion is planned to be through a smallholder or community outgrower scheme. In general, successful smallholder schemes have been set up in Ghana, but these have primarily been in the palm oil, rubber and cocoa industries. In Sierra Leone, no successful large-scale outgrower schemes have been implemented to date. Particularly in forestry, smallholder growers have been hindered by limited access to markets, and lack of expertise and knowledge, which an outgrower scheme can help overcome.
Key lessons for stakeholders
Designing a suitable, commercially interesting timber outgrower scheme is very context-specific and requires extensive stakeholder engagement, which takes time.
It is essential to have stakeholder buy-in from the outset of the project.
In countries where plantation forestry is not a prevalent industry, there are unique challenges associated with the pioneering nature of the business setup.