M. Chagama
A Perspective on Developing
growth oriented Forest Industry
SMEs Business Incubator
Forest & Forest Industries Sector PSOs and Stakeholders Meeting
Dodoma Tanzania, 24 February 2016
M. Chagama
Contents
• Background – Tanzania Forestry and Forest
Industries
• Incubation Concept
• Recommendation – Business & Technology
Incubation
M. Chagama
Background – Tanzania Forestry
and Forest Industries
Forest Sector Investment Areas and
Activities
• Forest Development e.g. Forest Plantation, Woodlots;
• Forest Industry (wood and non wood) i.e. Forest
Harvesting/ Utilisation/ Extraction/ Processing/
Trading e.g. Logging, Sawmilling, Secondary Wood
Processing (e.g. furniture, EWP, joinery, etc), Production
of Biomass energy, Exports, Pulp & Paper, Poles.
• Forest Outputs: Logs, Timber/ Lumber, Fuel wood,
Biomass Energy, value addition, etc.
• Forest Outcomes: Forex, Incomes, Tax Revenues,
Jobs, Water, Energy, Climate, etc.
• Forestry and Wood Processing Investment is done by:
Government, Private Sector (Foreign/Local), FBOs/
CBOs, Local Communities.
Key Issues Affecting the Industry
• Huge misuse of forest resources as recovery is as low as 22% and
limited production of small timber sizes including 1” boards, short
and narrow timbers which are ideal for most value additions
productions.
• Training from FTI and FITI is highly relevant but very few
graduates from FITI i.e. only average 15-20 graduates per year while
there are over 1000 private sawmilling businesses (Sao Hill 600).
Many FITI graduate will migrate to other fields or go on with further
education mostly in other fields including enrollment to FTI
diploma courses.
• Value addition training generally lacking. VETA Centre offers
training in Carpentry and joinery, however specialized training is
needed especially in finger jointing, timber drying, grading, panels
production & installation, EWP manufacturing, glue lamination of
wood, biomass production (wood briquette, electricity, boilers
heating, etc), dry milling, etc. Some of these need wood science
background and few have this.
• Limited utilization of waste products (over 70% of logs wasted as
slabs, off-cuts & sawdust).
Key Issues Affecting the Industry
• Proper utilization of logs requires change of attitude i.e. for
owner/managers to value everything from the wood.
• Refreshers course not available and should be regular mainly
for Work safety and new technology e.g. carbide tipped
circular saw blades use and maintenance, logging equipment
operations, etc.
• Graduates from FITI needs at least 6 months on the job
training to be given tasks to use/operate expensive
equipments.
• Quality Enrolment at FTI and FITI lacking i.e. most students
see these institutions as last resort after failing to enroll in
other institutions.
• Industry and Market information not easily available
• Limited use of business development services incl. business
planning, access to finance facilitation, etc.
• Many small sawmill operators not committed to the industry
as profits obtained in sawmilling are diverted to other
businesses and very little re-investments for expansion and
diversification are made.
KEY FINDINGS - SAW MILLING INDUSTRY SITUATION
Poor Profitability
• There are noted low profitability or profits retentions in sawmilling industry
resulting in limited investment in modern equipment and in value addition
business. Below are some general reasons observed for poor profitability of
observed saw milling SMEs.
• Quality of raw material (shape, diameter, and length of the saw log): It is
critical that the profitability starts from the forest, i.e. how well the chain
saw operator has adapted the principals of good de-limbing rules. Logs are
cuts in different shape, diameter, and length without considering products
end use (e.g. construction, furniture & joinery, etc)
• Lack of saw logs at mill site, wood procurement is complicated part of the
production process and it can be hampered by changing weather
conditions. A sustainable raw material procurement, to ensure long term
availability of the required wood supply, requires reliable inventories,
careful plans, trained workers, skilled management, adequate capital and
appropriate machinery and equipment.
Poor Profitability (cont.)
• Lack of efficient utilization of raw material at sawmill: This
depends decisively on the quality (poor) of the work force. For
Instance recovery rates of the sawmilling tend to vary
extensively, depending on how well methods have been
adapted and how accurately the workers have
foreseen the optimal output from each log.
• Poor technology at use: Generally the more valuable material
sawn the more care must be when choosing the right
technology, hardwood sawmills are generally utilizing band
sawmill technology, soft saw mill tend to use relatively
cheaper circular sawmill techniques. (Saw blade kerf) =
amount of saw dust produced.
• Logging methods and transport distances: Poor logging
methods were critical at Saohill forest where chain saws are
used and manual skidding and loading of logs done requiring
costly huge manpower.
• Poor production planning; not used right raw material to suit
orders/customers’ needs.
• Integrated saw mill operation, market for all products that
saw mill produces not done;
▫ Centre boards for big dimensions,
▫ side boards to carpentry use, panels etc,
▫ off cuts and trimmings for chips,
▫ saw dust for briquettes,
▫ bark for compost or heat generation for kilns etc.
Nothing remains and all bring income to saw miller.
Critical Skills and Service Provision
Needs
The critical service and competence areas are based
on management, technical and service needs
in production, marketing, sales, technology and
services provision to forestry and wood based
industries necessary for development and efficient
utilization of wood/forest resources, profitability
and growth. There are critical Competence/
Knowledge Gaps that needs to be addressed and
represents opportunities for service providers and
Incubation (see addendum)
M. Chagama
Incubation Concept
M. Chagama
Business and Technology Incubation
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What is Business Incubation?
Types of Incubators
Critical success factors
Value added by incubators
M. Chagama
Business Incubator
• A traditional business incubator is a
microenvironment with a small management
team that provides physical workspace, shared
office facilities, counselling, information,
training and access to finance and professional
services in one affordable package.
• The main purpose of the incubator is to help
firms survive and grow during the startup period when they are most
vulnerable.
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Incubator -metaphor
• Hatching (from egg to healthy chick)
• Significant movement from one level to another
• Transformation (major)
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Main Types of Incubators
• Full service incubators provide a wide range
of services, such as physical workspace, shared
office facilities, counselling, information, training
and access to finance and professional services in
one affordable package.
• Virtual incubator or incubator without
walls provide all services, except workspace and
office space and each client operates from own
separate premises.
• Managed workspace is basically workspace
and possibly shared office space, without any
significant support services.
M. Chagama
Multi-purpose vs Specialised Incubators
• Multi-purpose incubators admit any type of
business satisfying basic commercial criteria.
• Specialised incubators focus on particular
activities, such as development of a specific
technology, e.g. ICT, BDS, Agriculture, High
tech, biotechnology, etc
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For profit vs developmental
• For profit incubators – a form of business e.g.
Raizcorp, BusyInternet
• Developmental incubator – not for profit
M. Chagama
Critical Success Factors in Incubation
• Competence of incubator management.
Enterprising, skilled, experienced incubator staff and
Board.
• Good governance. Strategic direction, control and
effective stakeholder involvement/credibility
• Selection of incubatees. Motivation, commitment
and ability to develop and use networks and
competencies
• Optimal investment and operating costs at a
level which can be sustained relative to capacity
to sustain initial levels and qualities of services.
M. Chagama
Critical Success Factors in Incubation
• Strong linkages to relevant accessible
expertise. Affordable business support services
include business planning from corporate
organizations, training institutions, associations,
and any other useful institutions and
individuals.
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Opportunities and challenges addressed by
incubators
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Opportunities and Challenges facing startup and nascent businesses
• What opportunities arise from:
▫ Smallness?
▫ Newness?
• What challenges arise from:
▫ Smallness?
▫ Newness?
M. Chagama
Newness and smallness - opportunities
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No baggage of bad image
Flexible
Low cost (competitiveness at that level)
Open to learning
Need not be feared
Not too busy
M. Chagama
Internal barriers
Resource limitations/gaps:
▫ Technical knowledge and skills
▫ Knowledge of SMEs and sector (learning)
▫ Communication skills
▫ Winning proposal writing skills
▫ Networks/social capital
▫ Image
M. Chagama
Internal challenges
Character/behaviour:
▫ Ltd commitment to the activity or career
▫ Ltd commitment to learning and development
▫ Poor standard of product or service quality
▫ Integrity
▫ Time management
▫ Customer service
▫ Personal and business management practice
▫ Arrogance
M. Chagama
External challenges
• Access to information about business opportunities
and terms
• Access to finance
• Access to business premises
• Access to technology
• Compliance with regulatory framework
• Competition from more established local and
foreign operators/manufacturers
M. Chagama
Value added by incubators
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Knowledge, skills habits/practice
Networking (internal and external)
Information, inspiration, role models
Monitoring, coaching,
Premises and facilities that fit proffession
Experience (internship, teaming)
Branding/image
M. Chagama
Recommendation – Business &
Technology Incubation
M. Chagama
CREATE A BUSINESS &
TECHNOLOGY INCUBATOR
Targeting
• Contribute toward efficient and sustainable
utilization and development of Forest Resources
in Tanzania.
• Increased value additions and product
diversification.
M. Chagama
INCUBATOR
Targeting
• Contribute to emergence of consolidated
companies or cluster based enterprises from
hundreds of MSMEs in sawmilling , furniture,
etc and enable tangible production technology
transformation and modernization.
• Improved productivity through co-sharing of
better technology based machinery and
equipments.
• Better access to markets, information and forest
industry best practices through clusters.
M. Chagama
INCUBATOR - TYPE
• an Incubator designed to create a supporting
environment and to focus appropriate assistance
on the incubation of new OR growth woodbased enterprises intending to enter the market
for forestry and wood based productions.
• Its overall purpose is to contribute to the
development of the wood products market,
• achieved by assisting in the launch and growth
of wood based enterprises.
M. Chagama
The Incubator
• The physical incubator can be small, e.g. with only 10 20 tenant units,
• Having the capacity to provide support services for nontenant incubatees also through virtual services.
• With a role as a vehicle for researching and developing
processes involved in market development: the
production of marketable wood products and the
interaction between service providers and small business
clients.
• It is anticipated that the time spent Incubated by
companies under the programme, will form a foundation
for a successful and sustainable venture.
M. Chagama
The Incubator Facilities
The programme has two modes:
• Virtual incubation where a firm is provided with
incubation services while operating in own
premises and
• Full incubation where a firm is given an office
space, workshop and shared facilities in addition
to the virtual incubation services.
M. Chagama
Virtual Incubation
Services offered include:
• Training
• Business planning facilitation
• Networking with professionals, clients and other
stakeholders
• Marketing and sales facilitation
• Counseling and advice
• Exposure to role models / business practitioners
• Quality assurance (feedback on proposals, management
systems and reports)
• Use of information & meeting facilities at preferential rate
• Use of common equipment and machinery for specialised
work at a preferential rate e.g. sawdoctoring
M. Chagama
Full Services Incubator
Services offered include:
• Workshop and Office space - one workshop/office per
company with a total minimum of 50 m2 of floor space,
full furnished and equipped
• Training
• Business planning facilitation
• Networking with markets, professionals, clients and
other stakeholders
• Counseling and advice
• Exposure to role models / business practitioners
• Quality assurance (feedback on proposals, management
systems and reports)
M. Chagama
PHYSICAL RESOURCES - INCUBATOR
LOCATION
• The incubator should be located in a central and
well accessible area and should be a purpose-built
facility
FACILITIES
• Reception area/common office equipment
• Incubator units/workshops/ Store room
• Management offices
• Meeting Room
• Training room
• Resources/raw materials market e.g. wood/timber
yards, equipment & accessories shops, etc
M. Chagama
Addendum
Critical Skills and Service
Provision Needs
Critical Skills and Service Provision Needs
VENEER INDUSTRY
• Sliced veneer production
• Rotary cut veneer operations
• Veneer jointing - splicing
• Edge banding operations
WOOD-BASED PANELS PRODUCTION
• Solid wood panels - edge-glued panels - FJL - finger-joined
laminated panels
• Blockboard
• Plywood
• Oriented Strand Board - OSB
• Particle Board
• Fiberboard - MDF, HDF
• Curved panels
• Veneered panels - surfaced panels - fancy panels - Melamine panels
Critical Skills and Service Provision Needs
WOOD FURNITURE PRODUCTION
• Living room furniture
• Dining room furniture
• Bedroom Furniture
• Wardrobes - Walk in wardrobes
• Hall Furniture
• Entertainment centers
• Kitchen Furniture
• Bathroom Furniture
• Childrens furniture
• Tables
• Chairs
• Bed - Bed Bases
• Upholstered furniture
• Storage
• Bookcases
• Occasional furniture
• Decorative articles
• Rush, rattan Furniture
• Office furniture
• Contract furniture: hotels, flats, restaurants
• Contract furniture: schools, hospitals
• Garden furniture
Critical Skills and Service Provision Needs
OTHER WOOD PRODUCTS MANUFACTURING
• Fences
• Poles - stakes
• Pergolas
• Swimming pools
• Wood utensils - implements - sticks - brooms
• Coffins
• Wood barrels - vats - casks - cooperage
• Firewood
• Wood shavings - saw dust - chips - bark
• Wood pellets
• Manufacture of other products of wood
• Wood briquettes
• Musical instrument manufacturer
• Pulp and paper manufacturer
• Garden products (excl. Furniture)
PALLET - PACKAGING PRODUCTION
• Pallet manufacturing
• Containers - cases - packs - crates
• Food packaging
• Pallet Repair/Pallet recycling
• Moulded pallets
• Pallet/Packaging elements supply
Critical Skills and Service Provision Needs
CARCASSING - FRAMING - ROOF TRUSSES
• Traditional carcassing manufacturing
• Manufacturing of prefabricated trusses
• Manufacturing of glued-laminated construction
timber - glulam
• Laminated veneer lumber - LVL manufacturing
• I-joist manufacturing
WOODEN HOUSES PRODUCTION
• Sheds - huts
• Log houses
• Wooden houses - chalets
• Wooden house framing - structure
Critical Skills and Service Provision Needs
WORKING WITH CONSTRUCTION - BUILDING
INDUSTRY (WOOD BUYERS)
• Contractors
• Architects
• Real Estate Project planners
• Interior design
WOOD & TIMBER TRADE OPERATIONS
• Importers - distributors - merchants - stockists
• Wholesalers
• DIY - retail stores
• Aggregators - group buyers
• Agents - brokers
• Traders/Trading
• Exporters/Exporting
Critical Skills and Service Provision Needs
SERVICE PROVIDERS TRAINING/ SERVICES
• Business Planning & Critical Industrial Management Skills Consulting
/Training
• Training – ToT e.g. EWP production
• Loggers
• Sawing services - Cut-to-size sawing
• Pressure impregnation - autoclave
• Drying services
• Steaming services
• Timber heating - ISMP15 treatment
• Planing services
• Quality inspection - timber grading
• Certification (ISO, FSC, PEFC, ...)
• Shipping - haulage - freight forwarding - logistics
• Financial information - insurance
• Sales agency - distribution - sales representatives
• Marketing - market analysis - studies
• Wood product manufacturing outsourcing
• Research & development laboratories
• Forest maintenance
• Furniture manufacture for others
• Furniture design
• Thermal treatment (high temperature)
Critical Skills and Service Provision Needs
WORKING WITH WOODWORKING MACHINERY
& EQUIPMENT SUPPLIERS
• Machinery - equipment manufacturers
• Dealers - Importers - distributors - resellers
• Used woodworking machinery dealers - Second-hand
machines
• Accessories manufacturers - spare parts
• Maintenance & repair services
• Software for wood professionals (ERP, Accounting, etc)
WORKING WITH SUPPLYING INDUSTRIES
(NON WOOD)
• Surface treatment and finishing products
manufacturers/suppliers
• Hardware - fittings manufacturers/suppliers
M. Chagama
THANK YOU