In many countries, forest resources represent a significant natural asset that can be used to produce a wide range of economic, environmental and social goods and services. Where they are held by the government on behalf of the nation, they can also be used to generate government revenues to support forestry policy, economic development and other government policies and programmes.
Governments can choose to earn revenues from the management of their forest resources either by directly managing them themselves (e.g. through state-owned forestry companies) or by allowing the private-sector to manage them (e.g. as community forests or forest concessions) in return for the payment of a charge, fee or levy. In many countries, governments choose the latter option as a way of generating government revenues. This allows them to benefit from the perceived greater efficiency of the private-sector in the production of commercial goods and services. It also enables them to concentrate their attention on forestry policy development. However, under such arrangements, governments are presented with two major challenges:
the effective monitoring and control of private-sector forest operations; and
the design and implementation of an appropriate system of forest charges and revenue collection.
This report will deal mainly with the latter of these two issues, although it will touch on the first issue in as much as the forest revenue system can have a considerable impact on the implementation of sustainable forest management.
Forest charges are paid to the government in return for permission to utilise forest resources. The following two main issues have to be addressed when setting forest charges and designing a forest revenue system:
the overall level of charges that the private-sector has to pay; and
the structure of the charging mechanism.
In addition to this, in this particular project, the issue of sharing revenues with local communities has also been raised. This presents a further complication to the forest revenue system in Zambia that will be covered in this report.
In situations where it is possible to use a competitive process (such as an auction or tender) to set the overall level of charges that should be paid, the first issue above is generally not a major problem. However, it is often not possible to use such mechanisms and, in such cases, it becomes necessary for the forest administration to set the level of forest charges. In such situations, forest charges are often set with reference to the economic rent from roundwood production. There has been a long-running debate about whether forest charges in many countries have been set at sufficiently high levels to capture a significant share of the economic rent from roundwood production (see, for example: Repetto and Gillis (1988) for an early review of the level of forest charges in place around the world). Overall, the conclusion of this debate has been that, in most countries, forest charges do not collect a significant share of the economic rent from the production of forest products (i.e. forest charges are nearly always set too low and/or collection is poorly implemented).
The terms of reference for this report (see Annex 1) do not specifically ask for an examination of the level of forest charges currently in place in Zambia. However, a brief explanation of economic rent and its relationship to the level of forest charges is given in Annex 2 and some general observations and suggestions about the current level of charges in place in Zambia are given in Section 4.3.1 and Annex 4 of this report.
In terms of the structure of forest charges, forest charges can be structured in a variety of ways. The main types of forest charge commonly used around the world are as follows:
charges based on the area of forest used (e.g. annual charges based on the area of forest in a forest concession or the area cut);
charges based on the volume of forest products produced and/or transported (e.g. charges per cubic metre of roundwood cut or taken from the forest);
charges based on the value of forest products produced or traded (e.g. charges on the export of forest products – usually set as a percentage of the export value, with a minimum export value);
charges for an activity or service carried-out by the forest administration (e.g. forest concession approval charges; marking and measuring charges; road maintenance charges);
charges for permission to carry-out a specific activity (e.g. a monthly charge for the right to collect fuelwood or hunt in the forest); and
charges levied on the means of production (e.g. an annual charge on the ownership of a chainsaw).
For various reasons, the above charges are often combined in the forest revenue system. More details and explanations of the strengths and weaknesses of each of these different approaches to charging are given in Annex 3 and a comprehensive discussion of the different types of forest charges commonly in use around the world can be found in Gray (1983).
This report presents the results of an appraisal of the forest revenue system currently in place in Zambia. It has been produced to help staff of the Forestry Department of the Ministry of Environment and Natural Resources (MENR) to evaluate the efficiency and effectiveness of the current forest revenue system. In particular, it aims to examine how well the system will meet the objectives of self-financing and revenue sharing as proposed in The Forests Act, 1999 (Government of Zambia, 1999). It also presents some proposals for changes to the forest revenue system, based on experiences gained in other countries in the world.
The remainder of this report is in four main sections. Section two briefly describes some general principles that should be applied to the design of any forest revenue system. The third section describes the legal basis for forest charges in Zambia, as set-out in The Forests Act, 1999. Section four describes and appraises the structure and level of forest charges currently in place in Zambia and section five presents some suggestions for changes to the licensing and forest revenue system. In sections three and four, a description of the current situation is given first, then an appraisal of the strengths and weaknesses of the current system is given at the end of the section.
Annexes to the report give further details and explanation of how forest revenue systems are generally designed and implemented along with more detailed calculations supporting some of the figures quoted in the main text.
