New Forests Reports Increasing Investment Opportunities in Africa's Timber Sector

Posted on : Friday , 12th July 2024

In order to meet the increasing demand, the investment manager emphasizes the necessity of capital investment in the establishment of sustainable forest plantations and wood processing enterprises.

According to New Forests, a global investment company that specializes in nature-based assets, investors in sustainable forestry are seeing new opportunities to diversify their portfolios as a result of the rising demand for timber products in sub-Saharan Africa.  

The timber industry in the area, according to the Sydney-based firm, has developed into an asset class that has the ability to provide a steady, long-term investment return with little to no link to the performance of other asset classes.  

Compared to other regions, investors now possess fewer forestry assets in Africa. According to Yida Kemoli, who was recently appointed managing director of New Forests Africa, "many of the natural forest timber resources have been depleted and there is a need for capital investment to establish sustainable timber plantations and associated wood processing industries."

The region's growing population and economic expansion have increased demand, which has increased urbanization and raised the need for timber products—the majority of which are derived from within Africa. According to New Forest, Kenya, for instance, currently faces a 2 million unit yearly housing deficit.

The investment management said that the industry was also gaining from the possibility of higher value import substitution, opportunities in the carbon market, and growing demand for a greater variety of wood goods from a gentrifying population in a white paper released in March. The growth of green initiatives that encourage investment in sustainable development outcomes, according to the report, is drawing institutional investors to the industry.

Nairobi-based Kemoli stated that there would be chances for foreign investors seeking to fund sustainable agriculture sectors since the region's forestry sector was expected to continue growing rapidly.

"A major focus of our Africa forestry strategy is giving investors access to sustainable forestry operations with commercial returns, along with an emphasis on conservation and sustainable development outcomes," the speaker stated.  

These days, development financing organizations, pension funds, sovereign wealth funds, family offices, and high-net-worth individuals are typical investors. According to New Forests, they often use specialized investment funds maintained by wood investment management organizations to make investments in both privately held and state-run timber assets.